Blog post by Chuck Lynd
I recently wrote a letter to the Dispatch that was not published. It said in part (the bold italics are added here for emphasis):
The 2+ trillion dollar spending bill puts an end to the myth that Congress has to “pay for” money it appropriates by either raising taxes or cutting the budget from other services – defense, Medicare, etc. Despite warnings from Wall Street economists and politicians from both parties, there is no limit to the number of dollars our government can spend into the economy. We can and should use this power to fight the viral pandemic. We can do so without causing inflation because we have the productive capacity to rebuild our economy.
The good news is we can use this same approach, after defeating COVID-19, to fund comprehensive Green New Deal legislation as proposed by Sanders and Warren. A new breed of MMT (Modern Money Theory) economists are ready, as FDR once did, to invest in Main Street communities and working families.
60-80% of Americans of all political persuasions agree with raising the minimum wage, health care for everyone, investment in jobs, education, affordable housing, green energy, etc. Congress has the power to fully fund this agenda, revitalize our economy, and even reverse global warming in the next decade.
I suspect my letter was not published because this idea that the government can spend money into the economy without having to “pay for” it by raising taxes or cutting other government programs is either confusing, somehow wrong-headed, or judged to be out of the mainstream of economic thinking.
Yes! I had to agree – not the conventional view. So I responded to the Dispatch editorial staff by sending them information about the “new economics” – aka Modern Monetary Theory or MMT for short). I have been learning about MMT for the past several years with the help of Dr. Fadhel Kaboub, a professor of economics at Denison University. Fadhel is a leading MMT thinker and expert on the Green New Deal (GND), the Job Guarantee program that is part of the GND, and HOW TO PAY FOR IT. He is also the president of the Global Institute for Sustainable Prosperity (global-isp.org) and advocates for global GND.
For anyone confused about how the CARES act was funded with several trillion dollars without any discussion of “how to pay for it” then I encourage you to check out these references that I shared with the Dispatch.
As Congress Pushes a $2 Trillion Stimulus Package, the “How Will You Pay For It?” Question Is Tossed in the Trash by Stephanie Kelton
https://theintercept.com/2020/03/27/coronavirus-stimulus-package-spending/
Bernie Sanders’ 2016 economic advisor Stephanie Kelton on Modern Monetary Theory and the 2020 race CNBC interview with Stephanie Kelton
https://www.cnbc.com/2019/03/01/bernie-sanders-economic-advisor-stephanie-kelton-on-mmt-and-2020-race.html Also embedded in the CNBC article is a link to a 5+ minute video interview with Kelton on CNBC
https://www.cnbc.com/video/2019/03/01/stephanie-kelton-on-trump-and-2020.html
You can also visit StephanieKelton.com and read about her forthcoming book (out in June) called The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy. She also posts a number of her articles, including an interesting exchange with Paul Krugman, one on How to Tell When Deficit Spending Crosses the Line, et al
This is a video of a webinar recently given by Fadhel Kaboub.
How to Pay for the Progressive Policy Agenda: COVID-19 Crisis Response, Green New Deal, Medicare for All, and Beyond
https://vimeo.com/399056794
Here is an excerpt from the annotation that describes the focus of his presentation and offers a framing of the MMT perspective. The actual presentation is less than 1 hour, followed by Q&A.
Several Senators and U.S. representatives have already endorsed the Green New Deal and Medicare for all. There are close to 200 candidates running for the US House and Senate who also endorse these policies. They all face the inevitable questions “How are we going to pay for it? Where will the money come from? Who are we going to tax? who are we going to borrow from? Won’t this bankrupt the nation or cause hyperinflation?
The conventional way of framing these questions was completely dismissed by the Federal Reserve Bank when it announced this week that it will inject $1.5 trillion to prop up financial markets as part of its coronavirus-related response to market disruption. Where did that $1.5 trillion come from? it is not tax revenue, and it is not borrowed money.
The conventional wisdom tells us that the progressive policy agenda must be “paid for” via tax revenues or government borrowing (which means eventually higher taxes in the future). In reality, however, the Federal government (unlike states, cities, and municipalities) does not use federal taxes to fund federal programs (we will explain the important roles that Federal taxes play in the economy). In this webinar, you will be introduced to the economic policy framework that explains how the Federal government would pay for such programs without causing inflation, bankrupting the country, or slipping into socialist authoritarianism. We will also explain where the Fed’s coronavirus $1.5 trillion come from.
This framework is called Modern Monetary Theory (or MMT). It has been subject to a lot of unfair criticism by the mainstream of the economics profession to the point that five US Senators introduced a resolution in May 2019 to condemn MMT as dangerous for the country. The purpose of this webinar is to present you with a clear understanding of the MMT approach so you can fairly assess the feasibility and affordability of the progressive agenda and the proper response to a public health crisis like the COVID-19 pandemic.
Finally, this is my own take posted recently on the Columbus Free Press website.Global Pandemic Trumps Climate Crisis https://columbusfreepress.com/article/global-pandemic-trumps-climate-change
If you have questions, feel free to respond, and if I can’t answer them then I will call upon Fadhel Kaboub to help us out.