{"id":39754,"date":"2019-02-19T06:00:31","date_gmt":"2019-02-19T11:00:31","guid":{"rendered":"https:\/\/admin.patheos.com\/blogs\/geneveith\/?p=39754"},"modified":"2019-02-18T15:00:50","modified_gmt":"2019-02-18T20:00:50","slug":"the-lefts-voodoo-economics-modern-monetary-theory","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/geneveith\/2019\/02\/the-lefts-voodoo-economics-modern-monetary-theory\/","title":{"rendered":"“Modern Monetary Theory”: Deficits Don’t Matter"},"content":{"rendered":"\n<\/head>

\"\"<\/a><\/p>\n

Remember the Republican state of outrage and trepidation when the Obama administration racked up a national debt of $14 trillion?\u00a0 Well, under a Republican Congress and President, we now owe $22 trillion.\u00a0 Not only debt but deficit spending is soaring.\u00a0 This year\u2019s budget deficit will be nearly $1 trillion<\/a>. Democrats are rallying behind programs that would cost at least $4 trillion per year.\u00a0 \u00a0But a new economic theory known as \u201cModern Monetary Theory\u201d is arguing that since government is the entity that creates money\u00a0deficits don\u2019t matter<\/em>.<\/p>\n

\n

First, a paragraph on how bad things have gotten from\u00a0Daniel Horowitz<\/a>:<\/p>\n

It feels like it was yesterday when I was watching the news as a kid with my parents in 1995, listening to Newt Gingrich, during the infamous shutdown fight, warn about the dire consequences of crossing the $5 trillion debt milestone. It feels like it was yesterday when I was writing press releases for candidates in \u201cthe year of the Tea Party\u201d on how Obama and the Pelosi Congress took the debt to $14 trillion in such a short period of time. Now, over eight years into varying degrees of GOP control of Congress and the White House, we have crossed the $22 trillion mark, expanding the debt more rapidly than at any time in our history. Whereas the debt exploded by $5 trillion during Bush\u2019s eight-year tenure, a shocking figure at the time, it has now increased $8 trillion just since Republicans controlled the House in 2011 and by $4 trillion over the past four years, since they controlled at least two of the three political organs of government.<\/p><\/blockquote>\n

Debt, of course, has to do with government bonds.\u00a0 Deficits involve spending more than we take in.\u00a0 They are two different things, but deficits add to our accumulated debt year by year.<\/p>\n

The advocates of \u201cModern Monetary Theory,\u201d such as Bernie Sanders economic advisor Stephanie Kelton, say none of this is a problem.\u00a0 From Victoria Guida, Ocasio-Cortez boosts progressive theory that deficits aren\u2019t so scary:<\/a><\/p>\n

Deficits have long been considered a drag on the economy, diverting private investment into government bonds instead of jobs and technology, and swallowing tax dollars into a mounting pile of interest payments. To avoid these effects, government spending is often framed like business spending: Costs should be offset by revenue.<\/p>\n

But the philosophy that Kelton and others are pushing \u2014 dubbed \u201cmodern monetary theory\u201d \u2014 views it differently. Governments, it says, create money, so they don\u2019t even need to borrow any \u2014 they can spend as much as they like. The only limitation should be the threat of inflation, not insufficient revenue.<\/p>\n

Under this theory, if the government did spend enough to stoke inflation, it would be counteracted not by the Federal Reserve hiking interest rates, as it does today, but by the president and Congress agreeing to raise taxes to pull money out of the system \u2014 assuming they would be willing to take that politically unpopular step. Interest rates would be pegged at a low level.<\/p>\n

[Keep reading. . .]<\/a><\/p><\/blockquote>\n

This economic theory is gaining favor among \u201cprogressives\u201d who want to be able to fund the Green New Deal, though likely big-spending Republicans will also find it attractive.<\/p>\n

But I do not see how the notion that \u201cgovernment creates money\u201d\u2013as opposed to private enterprise producing value symbolized in a medium of exchange\u2013can possibly work.\u00a0 Unless, that is, the government controls the entire economy.\u00a0 In other words, unless we implement socialism.\u00a0 Not Scandinavian style social democracy\u2013read here<\/a> about Sweden\u2019s rejection of budget deficits\u2013but actual, full-on, totalitarian socialism.<\/p>\n

Even under socialist command economies, though, the laws of economics\u2013which are not just theories<\/em> but laws<\/em>\u2013have a way of asserting themselves.\u00a0 \u00a0I once lived for a few weeks with a family in Estonia when it was still a part of the Soviet Union.\u00a0 For all the quota systems in Soviet manufacturing, if a product costs more in resources and labor to produce than it is allowed to be sold for, there will be shortages of that product.\u00a0 Thus, under Communism, there were shortages of practically everything,\u00a0<\/em>and our sightseeing with the family was punctuated by stopping to stand in line when we came across a shop that had something to sell.\u00a0 (\u201cThey have lightbulbs!\u201d)\u00a0 Eventually, the Soviet economy collapsed completely, with Chinese Communism surviving by incorporating free market practices while retaining the totalitarianism.<\/p>\n

The point is, both Democrats and Republicans, in a significant bipartisan consensus, are running up budget deficits at a staggering rate.\u00a0 Is \u201cModern Monetary Theory\u201d an enabling rationalization, or do you think there is something to it?\u00a0 Do you think it will bring on economic collapse or socialism, or\u2013following Marx\u2013a collapse that brings on socialism?\u00a0 Or, since we have lived with deficits for so long and have managed to survive, are deficits no big deal after all?<\/p>\n

\u00a0<\/p>\n

Illustration by A. K. Rockefeller, \u201cAll Debts\u201d via Flickr, Creative Commons License<\/em><\/p><\/div>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

Remember the Republican state of outrage and trepidation when the Obama administration racked up a national debt of $14 trillion?\u00a0 Well, under a Republican Congress and President, we now owe $22 trillion.\u00a0 Not only debt but deficit spending is soaring.\u00a0 This year\u2019s budget deficit will be nearly $1 trillion. Democrats are rallying behind programs that […]<\/p>\n","protected":false},"author":1281,"featured_media":39943,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[824,946,8059,1533,8062],"class_list":["post-39754","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","tag-federal-deficits","tag-government-spending","tag-modern-monetary-theory","tag-national-debt","tag-progressive-economics"],"yoast_head":"\n"Modern Monetary Theory": Deficits Don't Matter<\/title>\n<meta name=\"description\" content=\"As both parties rack up huge budget deficits and national debt, a new economic philosophy called "Modern Monetary Theory" argues that since government makes money, it can spend as much as it wants.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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