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I find that as often as not I agree with Matt Bruenig on policy matters. But those points of agreement can be obscured for me by differences of temperament and politics. Here though I find myself entirely in agreement with him on something called Modern Monetary Theory. You may not even have heard this phrase before. But you should and probably will soon. If you haven’t, you should familiarize yourself with it because it bulks very large in many current debates within the Democratic Party that you have heard about. It’s a big deal. Bruenig aptly describes it as “about using word games to make people believe that the US can have Northern European levels of government spending without Northern European levels of taxation.”
It’s not easy to simply explain what MMT is because it operates at several distinct and not always closely related levels.
At its simplest MMT states that government spending is not funded by taxing money or borrowing it. Taxes serve other purposes but getting money to pay for things is not actually one of them. As one of its top popularizing advocates put it, “Taxing the super rich at 70 or 80 percent is good in itself, because those people have too much money and are screwing up the world with it. But you don’t need it to fund an agenda.” In fact, all government spending, says MMT, is funded by printing money. At a very high level of abstraction there’s a way in which this redefinition of terms makes a certain sense. Indeed, there are elements of MMT that are similar to basic Keynesian economic theory – sort of Keynesianism on steroids or perhaps Keynesianism without a theory of inflation. For a more knowledgable and technical discussion see these two columns (one and two) Paul Krugman wrote on the question of MMT earlier this month. For pro-MMT arguments Stephanie Kelton is probably the most prominent advocate. You can see her arguments at her website.
It’s not easy to simply explain what MMT is because it operates at several distinct and not always closely related levels.
At its simplest MMT states that government spending is not funded by taxing money or borrowing it. Taxes serve other purposes but getting money to pay for things is not actually one of them. As one of its top popularizing advocates put it, “Taxing the super rich at 70 or 80 percent is good in itself, because those people have too much money and are screwing up the world with it. But you don’t need it to fund an agenda.” In fact, all government spending, says MMT, is funded by printing money. At a very high level of abstraction there’s a way in which this redefinition of terms makes a certain sense. Indeed, there are elements of MMT that are similar to basic Keynesian economic theory – sort of Keynesianism on steroids or perhaps Keynesianism without a theory of inflation. For a more knowledgable and technical discussion see these two columns (one and two) Paul Krugman wrote on the question of MMT earlier this month. For pro-MMT arguments Stephanie Kelton is probably the most prominent advocate. You can see her arguments at her website.
