By L. Randall Wray
MMT continues to inflame hysterical attacks. Who would have thought that it would take MMT to bring together everyone from the crazy right to the insular left to unite in common cause against an obscure theory of money and government finance? The attacks seem to be so concerted and coordinated that one starts to think there just might be a conspiracy behind them. But why?
Bill Black’s recent column The Day Orthodox Economists Lost Their Minds and Integrity exposes the dishonesty of MMT’s critics on shocking display in a newly released poll of mainstreamer economists on two questions that supposedly are based on MMT’s teachings.
The poll was put together by the Chicago Booth School of Business whose motto goes like this: “Since 1898, we have produced ideas and leaders that shape the world of business. Today, we empower bold thinkers and inquisitive minds to dig deeper, discover more, and shape the future.”
No they don’t. They design surveys to quash “bold thinkers” and “inquisitive minds”. Their poll is just plain troll.
Here’s how they decided to take a troll poll:
“We decided to put the ideas to our US panel of economic experts by asking them whether they agreed or disagreed with the following statements, and if so how strongly and with what degree of confidence:
(a) Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt.
(b) Countries that borrow in their own currency can finance as much real government spending as they want by creating money.”
As Bill argued in his piece, you will not find an economist anywhere on the planet who would agree with these statements. The MMT position, in fact, is precisely the opposite to what has been posed by Booth.
Given the questions, the results were a foregone conclusion:
“Of our 42 experts, 38 participated in this survey. On the first statement, only 1 expressed no opinion, 15 disagreed and 22 strongly disagreed. On the second statement, 3 expressed no opinion, 11 disagreed and 24 strongly disagreed.”
Now, to be sure, these “experts” consist mostly of a rogue’s gallery of the clueless. Still, surprisingly, many who disagreed with the statements offered commentary that any MMTer would agree with, or at least be sympathetic with. These responses were not featured in the highlighted results, but it is worthwhile to take a quick look at them.
Thaler on Q2: I don’t like this question. I guess it is true in some sense, but surely inflation looms at some point.
Shimmer on Q1: The real value of the money supply is bounded above. At some point, this must create inflation.
Samuelson on Q1: Deficits can be financed by creating money, but still have disadvantages as well as advantages that should be carefully considered.
And on Q2: Creating money can finance a great deal of spending, but incidents of hyperinflation, collapse and other crises indicate there are limits.
Nordhaus on Q1: Obviously, they should worry. However, the open economy issues are less pressing, particularly with flexible exchange rates.
And on Q2: At some point hyperinflation would break it all apart. However, this is an irrelevant question in an open world.
Maskin on Q1: Printing money causes its own problems, e.g., the risk of inflation
And on Q2: There will come a point where the currency is so debased that further spending becomes difficult if not impossible.
Kashyap on Q1: Money financing yields some seigniorage, but also inflation and the inflation has costs and there are limits to seigniorage capacity
Judd on Q2: Friedman wrote a book “There’s No Such Thing As a Free Lunch.” He also meant road or bridge or army or school or ANYTHING!
Hart on Q1: This kind of behavior can quickly lead to inflation or even hyperinflation once the economy is close to full capacity.
Fair on Q1: Surely inflation might be a problem.
Eichengreen on Q1: The “not worry” phrase in the question is a bit vague admittedly.
Edlin on Q1: Less worry is not the same as no worry
And on Q2: There are limits to capacity and no limits to wants.
Duffle on Q2: If this were true, each such country could finance the purchase of all of the world’s output, which is obviously impossible.
You will note that this substantial subset of the surveyed mainstreamers explain that they disagree with the questions on the basis that unbridled spending would exhaust the supply of available resources and thus cause inflation. This has always been MMT’s point, too. Their disagreement is not with MMT but rather with a proposal to spend without limit—which has never been an MMT proposal.
It is also interesting that Nordhaus agrees with the MMT position that floating the currency increases policy space, while Judd goes on a tear about free lunches (ignoring the fact that employing previously unemployed capacity is indeed a free lunch).
So if the questions had been stated correctly it looks like many of the mainstreamers would have agreed with the MMT position.
As Bill argues, the poll was designed merely to smear MMT, not to actually survey opinions on what MMT actually says. This was recognized even by St. Louis Federal Reserve Bank Vice President Adolfatto, who wrote:
Was any MMT proponent included in the survey? Don’t be ridiculous, of course not (there were a couple from MIT though–perhaps they thought this was close enough). How would a typical MMT proponent have answered these two questions? I am sure that most would have answered in the exact same way as other economists. If this is the case, then why does Chicago Booth preface the survey with MMT? There are many possibilities, none of which are attractive for Chicago Booth.
Digging a little deeper, it is quite interesting that the Booth school credited the assistance of someone named Steve Klenow at Stanford University, who helped provide links to critics of MMT. And credited the London School of Economics for providing expert PR assistance from a Mr Romesh VAITILINGAM, Press and Public Relations – Support, http://cep.lse.ac.uk/_new/staff/person.asp?id=2359.
Wait. They hired a PR assistant? Stanford and LSE? A Northern Atlantic Alliance to attack MMT?
So there is real money in this campaign to discredit MMT? I had wondered why, after 25 years of laboring in the wilderness, suddenly all the knives have come out. Krugman cannot talk about anything else but MMT. Everyone from Summers to Powell, from Henwood to Epstein, has to join ranks to attack a theory created by half a dozen economists?
And they’ve all adopted the Trump tactic of lies, lies, and more lies? A sheer coincidence? Or a carefully coordinated strategy?
Make no mistake about it, as Bernie would say. This isn’t about MMT. And it isn’t, mostly, about Bernie, either. They are after Alexandria Ocasio-Cortez.
Just look at every report in the media on MMT—it will include her name. Google her name and you get MMT. She’s the real danger, not us. She must be stopped. They will spare no expense, use any lie, go to any extreme.
For decades the neoliberals have used the threat of taxes to stop any progressive movement in its tracks. “How you gonna pay for it?” killed every proposal that came from the left.
It is a foregone conclusion that if you link anything that would benefit the public to a tax hike, it will never make it out of committee. The official left uses this tactic as a “go away and leave me alone” strategy: see, we’ve really been working hard for progressive policy but we just can’t get those rich people to line up and tax themselves to pay for it. Selfish bastards. But money grows on rich people and they don’t want to pay for all the goodies we’d like to get to help the poor. So they’ll just have to stay poor a bit longer. Uncle Sam is broke.
But tax cuts for the rich? Oh, sure, why not. Something might trickle down. Campaign contributions, probably. Keep those coming.
AOC has cut through all that. We don’t need their stinking money. We’ve got MMT.
But let’s tax them anyway. They are too rich.
A double whammy against the comfortably privileged. We don’t need you. We’re passing the Green New Deal. We’re saving the environment. Jobs for All. Raising incomes of most people. And reducing yours. We don’t need the rich so we’re taking away your riches. We’ve got Uncle Sam’s purse.
AOC brought the right and the official left together. Make no mistake about it. They’ll spend billions, even hundreds of billions to stop all this “nonsense”, this “garbage”, this “crazy” theory.
Last time around the DNC decided they preferred Trump over Bernie. This time they’re going to put their money on Biden and Beto.
Better Trump than Red remains the DNC strategy.
Old serial loser Uncle Joe with his checkered past and petroleum lubed Beto who cannot stake out a position on Coke vs Pepsi out of fear of offending someone. Trump’s going to chew up and spit out Biden, then use Boy Toy Beto to wipe up the mess on his mouth.
Humanity cannot afford another 4 years of Trump. Nor 4 years of Biden. Delaying the Green New Deal by four more years virtually assures failure to reverse the worst effects of climate change.
The attitude of elites has always been Apres Moi Le Deluge. If they cannot have it all, bring on the deluge.
Make no mistake about it—this is not just a Koch attitude. Even Buffet—who never misses an opportunity to beg for a larger tax liability (knowing it ain’t going to happen, of course)—prefers the deluge and joined the attack on MMT. I mean AOC.
We have to approach this Green New Deal as the real MEOW. (As opposed to Jimmy Carter’s baby kitten meow.) Roosevelt’s New Deal was only a half measure. Even its best innovation—Social Security—is weighed down by the ball and chain of a payroll tax. Much of the rest of the New Deal didn’t even survive for a generation. “Paying for it” was a big part of the problem. Fear of offending the sensibilities of Southern Democrats was another. Opposition of the AMA to universal healthcare was a third.
It was only WWII that freed the government’s budget on the necessary scale. This was justified on the basis that there was no alternative—global subjugation to Nazis, or spending on an unprecedented scale. We chose survival. We learned that “taxes for revenue are obsolete” (as Ruml put it). And we came out of WWII stronger and richer than ever before.
The task ahead of us is bigger. The stakes are bigger. The future of humanity lies in the balance. Half measures will not do. It will take all of our available resources—and then some—to win this battle. The experts (and I’m not one of them) say we’ve got most of the technology we need. We’ve got unused resources to put to use. We can shift others from destructive uses to be engaged in constructive endeavors. We can mobilize the population for greater effort with the promise of greater equality and a shared but sustainable prosperity.
First we have to shake off the neoliberals who’ve been destroying our country and our world for more than two generations. They began in 1974 with the argument that an overspending government caused inflation. Too much regulation and coddling of unions caused unemployment and slow growth. In reality, OPEC caused both of our high inflation periods (early and late 1970s), and the adoption of austerity to fight oil price hikes slowed growth and led to unemployment.
The correct policy then—and now—is conservation and conversion to alternative energy sources. Instead we got then—and now—austerity and ramped-up dependence on climate-killing carbon.
Neoliberals want to continue with the same-old same-old. More austerity. More reliance on markets (carbon trading—that is, using the price system to try to resolve a problem created by the price system). More half measures. More meow.
MMT teaches that we can afford the real MEOW. If we tackle climate change as the moral equivalent of war, and if this really does take us to and beyond full employment of resources, we can adopt measures to counter inflation pressure. No one has a vested interest in high inflation—in spite of what the inflation worriers want you to believe. We can work together—as we did in WWII—to put all our resources into the effort without stoking inflation.
Affordability is not the question. MMT shows how to pay for it. There is some danger of inflation—not because of the manner in which the GND will be financed but because of potential pressure on resources. Knowing that that is the real danger, we can formulate a strategy to prevent it.
I saw in some commentary a plea for a simple statement of the main principles of MMT. Let’s try this.
The great J. Fagg Foster said “Whatever is technologically possible is financially feasible”—a line I’ve often used.
If you think about it, there’s really no other reason to have a financial system. If you know how to build houses but your financial system can’t find a way to make them affordable, then you have to replace it with one that will.
MMT claims that we’ve got all the financial wherewithal we need already in the hands of our sovereign government to afford whatever is technologically possible.
We don’t need to go hat-in-hand to rich folks to get them to pay for it.
We don’t have to beggar our grandkids to pay for it.
We don’t have to borrow from China to pay for it.
We don’t have to get the Fed to “print money” to pay for it.
All we need to do is to remove the self-imposed constraints, the myths, and the misplaced morality.
Then budget for it. Approve the budget. And spend.
No new spending process is required. Follow the normal procedures that the Fed and Treasury have developed.
That’s how you pay for it.