Big Money for Big Government: the MMT Debate Continues
Are there any constraints on the power of the federal government to create money? Not the paper and metal money that we lug around in our pockets, but the digital money, the money that exists only as ones and zeros on the electronic storage devices of computers, the money that can be created merely by typing, are there any constraints on creating that kind of money?
Of course, there’s the constraint (one hopes) of “common sense.” Surely the feds would never, say, create $328,993,000M so they could dole out a million bucks to every American for the sake of, you know, equality, fairness, or something. Even the proponents of Modern Monetary Theory, a.k.a. MMT, might balk at that.
In October of 2018, American Thinker ran an article of mine that touched on MMT. Since then, AT has run two more that have dealt with MMT: an article in February by William Sullivan and an article in April by John Horvat. Elsewhere this year, there’s been quite a spate of articles dealing with MMT. The reason for the attention is surely the Democrats’ Big Plans for us, which will cost Big Money. But with MMT money is no object. According to the precepts of MMT, the sky’s the limit when it comes to the creation of new U.S. dollars.
On March 8, the Washington Post ran George Will’s “The Democrats’ late-night pitch for 2020,” and it deals with MMT, “the Democrats’ intellectual breakthrough du jour.” Mr. Will is vexed that just about no one in D.C. takes the federal deficit seriously anymore. Even so, Will writes that “never in the long human story of intractable scarcities have there been days as happy as those that MMT promises.”
On April 4, Vox ran “Modern Monetary Theory, explained” by Dylan Matthews, the blurb for which is: “A very detailed walkthrough of the big new left economic idea.” To give you an idea of how far left Matthews is, he describes Alexandria Ocasio-Cortez’ embrace of MMT as “the most vocal mainstream support MMT had gotten.” (One man’s “mainstream” is another man’s socialist slough.) The article is rather long, but conservatives might read it just to get a bead on how the opposition thinks:
So why, then, does the government tax, under the MMT view? Two big reasons: One, taxation gets people in the country to use the government-issued currency. Because they have to pay income taxes in dollars, Americans have a reason to earn dollars, spend dollars, and otherwise use dollars as opposed to, say, bitcoins or euros. Second, taxes are one tool governments can use to control inflation. They take money out of the economy, which keeps people from bidding up prices.
So, if MMTers miscalculate and create too much money and inflation rears its ugly head, then the feds can just tax back all the new money they’ve pumped into the private sector. One MMTer who takes issue with the orthodoxy that taxation is the way to counter inflation is Stephanie Kelton, former advisor to Bernie Sanders.
On March 4, CNBC ran the nine-minute video “Modern Monetary Theory explained by Stephanie Kelton,” which ends thus: “So, I reject the idea that MMT is about using taxes to fight inflation. That’s a mischaracterization of pretty much everything we’ve written. But people say it all the time.” (Including MMTers.)
On April 22, The Real News ran “Modern Monetary Theory -- A Debate Between Randall Wray and Gerald Epstein,” a four-part video series hosted by Paul Jay. Mr. Wray is one of the leading lights in MMT and Mr. Epstein represents the con side of the debate. If you’d prefer to read, the transcripts of the videos are included. Mr. Jay continued his look at MMT on May 13 with a debate between Wray and Dean Baker. Also, the Mises Institute has posted several articles this year on MMT.
One reason Americans might have qualms about MMT is the Law of Unintended Consequences. Economics isn’t yet a mature science; it’s not a “hard” science, like physics. That’s not to say we should junk economics and the other social sciences; we need them. But economists aren’t very good at predicting, the bottom line for any real science. Remember Nobel laureate Paul Krugman’s dire predictions about the economy if Trump were elected.
The attention focused on MMT is due to the enormous expense of the new programs pushed by the radical new Democrat members of Congress and by the Democrats running for president. Their plans would cost trillions more each year. The Dems’ initiatives include the Green New Deal, Medicare-for-All, reparations for slavery, free college, forgiveness of college debt, increased Social Security benefits, universal basic income, you name it.
The cost of universal basic income would be $3.8 trillion a year if Congress were to adopt Democrat presidential candidate Andrew Yang’s idea of cutting a $1,000 check each month for every citizen. Total federal spending got above that $3.8T figure for the first time in 2016. So UBI alone would double federal spending, and it’s just one of the Dems’ bright ideas.
Taxes aren’t going to provide the cash for all this. Even if the feds confiscated the entire wealth of the One Percent or even the top ten percent, there’s not enough money. Besides, taxes must be kept in abeyance so they can resort to them when inflation picks up. So the Dems plan is to just create the money they need to turn America into a socialist paradise: enter MMT.
For conservatives, a bigger question than whether we can find the money for all the Dems’ new programs is whether they should even be considered in the first place. After all, the programs are a huge expansion of the central government; they’re nothing if not a power grab. We’re talking much, much bigger Big Government than we already have. Democrat solutions are always and everywhere to diminish the individual by consolidating more and more power in government and, of course, to spend more money.
On February 6, the American Institute for Economic Research ran “Why MMT (Ultimately) Doesn’t Matter” by Peter C. Earle who wrote: “Every one of the scores of known cases of hyperinflation dating back over 700 years bears witness to a reckless, breakneck campaign of money creation preceding it.”
If Democrats can’t find some other way to fund their plans than “printing” new money, then their Big Ideas should be rejected, as should their candidacies.
Jon N. Hall of ULTRACON OPINION is a programmer from Kansas City.