Tag Archives: deficits

Explaining Why Federal Deficits Are Needed

By Thornton (Tip) Parker

Most MMT advocates probably took months to get comfortable with it.  But like a personal computer, one need not understand its innards to use its power.  The great power of MMT is its lesson that the federal government can create new dollars by running deficits to do things that should be done.  But the lesson is counterintuitive and will be rejected by voters unless it can be explained convincingly in a few minutes.  This paper offers five nuggets for explaining it quickly. NEP readers are asked to suggest ways to make the explanation simpler and better.

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Most Americans believe the federal government is like a family or business that must live within its income.  On the surface, that makes sense and the reasons why it is wrong are complex.  Here are five nuggets, or simple ways to explain why it is wrong to voters who will never be economists.  They show why federal deficits are necessary.  They can be adapted and used as appropriate. Continue reading

Turn That Frown Upside Down

(Updated – slides added)

Stephanie Kelton’s keynote address to the students, faculty, and visitors at Augustana College’s (Sioux Falls, SD) Undergraduate Research Symposium on Saturday, April 12, 2014 at 10am. Stephanie begins at 2:40. The topic of the keynote is Debt and Deficits in the Modern Economy. The slides are available below the video.

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Slapping Trillions of Obligations Into the Diapers of the Next Generation

By Stephanie Kelton

I get a huge volume of e-mail, but I don’t get the kind of hostile stuff that guys like Joe Weisenthal and Paul Krugman sometimes joke about.  I got one today, though, and boy is this guy steaming over my MMT coloring book!  Here’s the message:

It’s hard not to sympathize with a guy like this.  He apparently has kids, and he’s scared to death that his children and grandchildren will suffer real harm because Washington won’t get its fiscal house in order.  And why wouldn‘t he think that?  I mean, really.  Politicians on both sides of the aisle have spent decades labeling the government’s finances a “fiscal train wreck” that will leave future generations with a “crushing burden of debt.”  The mainstream media hypes these fears on a daily basis, and even NPR appears to be shilling for the debt scolds.

So it’s no wonder a guy like this is blasting me. He had probably never before encountered anything that rejects, so forcefully, the entire compilation of debt and deficit tropes.

He doesn’t strike me as a particularly open-minded guy, but I think I’ll send him this list of suggested readings anyhow.  Maybe he hasn’t finished his holiday shopping.

Recommended Inoculation

Freedom From Debt by Frank Newman

7 Deadly Innocent Frauds of Economic Policy by Warren Mosler

Understanding Modern Money by L. Randall Wray

Also these short articles:

Does Debt Matter? by Robert Skidelsky

Balanced Budgets and Depressions by Frederick Thayer

* I did bother to reproduce, by the way.  These are my little burdens of joy.  Both will find copies of the coloring book in their stockings on Christmas morning.


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Rotten Title, Great Summary of My Talks on MMT

By Stephanie Kelton

As much as I dislike the title of this article from Advisor Perspectives, the essay itself is a good overview of the talks I’ve been giving at national, regional and chapter meetings of the Financial Planning Association (FPA) over the past year-and-a-half. I wasn’t aware that Veras was working on a piece and didn’t see it until it was published (or I would have implored him to change the title!). I wanted to share the piece but only after this word of caution: I would not and did not say, “deficits don’t matter,” as you’ll discover if you read the entire piece. This is a touchy subject for MMTers, who’ve been (wrongly!) accused of taking the position that “deficits don’t matter.” Randy Wray made the MMT position crystal clear years ago, and I told Dan Jamieson the same thing when he interviewed me for a similar piece in Investment News:

InvestmentNews: Are MMT theorists saying deficits don’t matter?

Ms. Kelton: Deficits do matter, but not in the way people think.

So with that flashing neon disclaimer in place, here’s Veras’ article from Advisor Perspectives.

The Reality of Nightmares

By J. D. Alt

In his 12/8 Washington Post column, Ezra Klein says, “Projected deficits are driven by two factors: health-care-costs and old people.” He goes on to suggest, quite logically it seems, that in order to pay for all the health-care services elderly American’s are going to require, tax rates will to have to be raised so high they’ll begin “doing real damage to the economy”, or deficits will “grow to the point that they cause a fiscal crisis.” Continue reading

Pete Peterson Has Won

By Stephanie Kelton

The US is broke. Government deficits are de facto evidence of a government gone wild. We’re careening toward Greece. Entitlements are the root cause of our fiscal woes, and the Chinese are coming for our grandchildren.  How many Americans believe this garbage? My guess? Most of them.

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Myth Drives the Budget Fuss

By Thornton “Tip” Parker

Nearly everyone believes that Uncle Sam is like a family that must get money before it can spend.  But that is not true.  A basic function of any sovereign government is to create and run the country’s money system.  Unlike a family, the US government is sovereign.  It creates money and can never run out.  All the words about America’s financial limits mean nothing.

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Modern Money and Public Purpose 2: Governments Are Not Households

Presentation by Warren Mosler and Stephanie Kelton. Presented at Columbia Law School on September 25, 2012 as part of the Modern Money and Public Purpose series.

Robert J. Samuelson tries to create a moral panic about deficits

By William K. Black

The Washington Post leads the pack when it comes to generating what scientists term a “moral panic” about budget deficits.  As part of that effort they generated the series of myths that Paul Ryan was “serious,” “courageous,” and “expert” about “solving” the “deficit crisis.”  The newspaper’s theme is that anyone who doesn’t fall for their effort to create a moral panic is not “serious” and should be ignored.  The paper runs a column by Robert J. Samuelson that is devoted to generating a moral panic about the deficit.  Like Ryan, his central targets are imposing austerity and cutting Social Security, Medicare, and Medicaid.  Continue reading

These Folks are Soooo Clever . . .

Last week, Reps. Michael Honda, Keith Ellison, Raul Grijalva, Jan Schakowsky, John Conyers, Barbara Lee and Lynn Woolsey stalwarts of the Congressional Progressive Caucus (CPC) begged for mercy from “the Gang of Eight” in a letter.

Here’s what they said and my commentary on their “loser liberalism.” Continue reading