[freefaler]

> Obviously incorrect, since a company can pay their workers and make a loss.

It's not incorrect, it's a simplified model. For debt to occur this capital should be generated somehow. It's true that you can finance a business by getting the profit from some other entity that has generated the profit. So it's not wrong to assume that the money hasn't just appeared out of thin air to fund the salaries. No profitable business no capital to invest.

> Unfortunately, voters and governments don't actually have to make economic sense over periods of many years.

No matter how long the stupidity lasts that doesn't mean that this model is incorrect. No profits = no taxes in the grand scheme of things.