Eight years ago, if you asked me if I would be proselytizing an economic theory at every opportunity, I would have thought you mad.
But one day in 2015, I was listening to David Waldman’s Kagro in the Morning on Daily Kos Radio, and a woman named “Arliss Bunny” was explaining something called “Modern Monetary Theory.” It was riveting. She explained a new way of looking at the economy, especially how to look at deficits and surpluses. I was skeptical, but fascinated.
I started reading articles by the leaders of MMT — Stephanie Kelton (then at U of MO, KC, now at Stonybrook; Bill Mitchell (Australian economist), Pavlina Tcherneva (at Bard’s Levy Institute) and others. I watched videos, especially Kelton’s. I was hooked. I met Arliss at the 2016 Netroots Nation conference in St. Louis, and we talked about MMT for hours under the Arch.
After that, anyone I had lunch with was almost assured of a conversation about MMT. I became increasingly good at responding to friends’ questions and I’m sure I opened some people’s eyes to it. (Others will never lunch with me again, but that’s another story.)
What is it and why is it important? Let’s start with the importance.
MMT is the key to better lives for millions of Americans and dominance of the Democratic Party if it adopts its premises.
Why? Because this country and the Democrats have been constricted by the false premise that low deficits in and of themselves are an important goal, permitting Republicans to be predators and Democrats suckers, as I showed in Democratic Deficit Obsession: A Surrender to the GOP's Asymmetrical Debt Warfare.
This does not mean there is no limit on spending and we can “print money” without limit (as many mischaracterize MMT). It’s just a different limit: Inflation. Through economic and historical analysis, MMT debunks the idea that deficits cause inflation. Inflation happens because of a lack of real resources — human and natural. You don’t necessarily have to raise taxes or cut other spending to “pay for,” e.g., health care, education, climate measures. You have to assess whether the spending will be inflationary because of the lack of real resources.
Key: Don’t Balance the Budget (Spending = Expenses)
Balance the Economy (Low unemployment and low inflation)
Stephanie Kelton’s The Deficit Myth, PublicAffairs. Kindle Edition, is a best-selling 2020 explanation of MMT, very accessible to the non-economist.
Kelton lists and discusses the deficits that matter much more than the simple calculation of the difference between revenues and spending by the federal government.
The Good Jobs Deficit
The Savings Deficit
The Health-Care Deficit
The Education Deficit
The Infrastructure Deficit
The Climate Deficit
The Democracy Deficit
Of the last, Kelton wrote: (p. 257)
It’s the deficit between the few and the many; between the powerful and the powerless; between those with voice and those without.
Curing the Democracy Deficit lies at the heart of solving the other deficits. This has become dramatically apparent since the publication of The Deficit Myth in 2020.
A video by Kelton, Top Ten Things to Know about the Economy is below.
Love this Peter! So concise and informative and uplifting. More of this please!