MMT Explained to Mums

By Paolo Rossi Barnard

Intro.

The post that follows poses as an example of how the huge complexities of MMT and its political and historical contexts could be divulged to the ordinary folks out there. We named it “MMT explained to mums”, precisely for that reason. This effort is of no small importance, since we at NEP recognize that without a growing popular support for our vision of how economies should be run, we may never gather enough steam to push MMT through the barriers of Power Politics. The actual writer of this post is Italian journalist and MMT supporter Paolo Rossi Barnard. Of course this is not definitive, and we invite both our bloggers and our readers to make comments and contributions to this essential communication effort. We all know that millions of people and families out there are needlessly suffering right now for the insanity of the present economic dogmas. They must be told that there is a life saving, job saving, even nation saving alternative to the present system; it’s called MMT and it’s authoritative, but it’s being denied to them by a tiny elite of power brokers. Ordinary folks must at least know this, because, as Noam Chomsky once remarked, “When people know of injustice, sooner or later they organize to stop it. They always did.”

MMT Explained to Mums

This could change your welfare and your kids’ like nothing before. It concerns what government could have really done for you with jobs, housing, income, schooling, health. It tells you why it never did, and how you could turn things around. It’s tremendously important today for all of us, the ordinary folks.
We are not wasting your time with ludicrous theories. What follows is authoritative, it was born of high academic research. We made it simple for you to read.

One more thing: we are not politicians, we are neither the Left nor the Right. We just believe that folks should be told what’s really wrong with the economy, which means their livelihood. Truth works with the American people.

Ask yourself: What’s the government for?

The obvious answer is to run the country, ok. Anything else? Yes, government should be there first and foremost to look after its people as youths, then workers and then seniors by providing good schooling, good jobs and good welfare whenever people lack them for any reason.This is what government ought to really be about.

Does the government do it?

No. We still have rampant unemployment, underemployment, poor health care for millions and lack of good education for scores of kids and many other ills.
Could the government do it? Can it afford it?

Yes, easily, we’ll explain why.

So, why has the government never done it?

Because private corporations, big banks and the extremely wealthy knew that if government used its monetary powers (the US dollar) to look after us, the people, they would have lost. Lost what? The bigger slice of national wealth with its privileges, and also millions of insecure workers as cheap labor for their profits. Finally, they would have lost control over politics. So they organized a web of lobbies, big media, and above all a host of economic ideas that took over government and stopped it from spending for us. This way they increased their slice of the pie, but they also prevented the pie from growing, kind of they killed the goose that lays the golden eggs, and so the general US wealth pie in the end got even smaller. It’s been happening for the last 40 years. This is no conspiracy, it’s simply the reality of Power Politics in America and elsewhere, too. We are saying to you: unemployment and lack of welfare need not have existed at all in modern America. They were used as a policy tool to prevent citizens from controlling too large a share of the national wealth and political power with the help of their government. Just think: if the majority of us are stuck in a life-long struggle for subsistence, we can’t even begin to think of ruling or controlling anything. We become class B citizens, we don’t count. We don’t count at all. Do you understand now why the powerful always told us that Big Government is bad? Sure, it’s bad for them.

Here’s what government could have done instead, what it could still do.

First, the government could employ at a living salary every single American out of work, and all those working on minimum wages. It has all the money in the world to do so, because our government owns the US dollar and it can pay any wage anywhere it wants to (simple explanation below). You may ask: wouldn’t this add to big national debt? No, not at all, simply because a larger and better paid American workforce would create a lot of new production, new infrastructure, new investment and new services, that is, more American wealth in its pockets and into the government’s coffers. It’s a government expenditure that would end up largely paying for itself and benefiting all. No need for panic about big debt.

Second, government could pay for adequate welfare for all Americans, that is to say universal health coverage, good schooling, social care for the needy and the elderly, and good pension schemes. Again, there would be no big debt in D.C., because it would again make us all better workers, better students, less needy seniors. In a nutshell: we would be an even more competitive nation that creates wealth instead of wasting it on immense social problems. And a society where a sense of common security substitutes pain and fear, which means less social ills, less family disintegration, less crime.

Sounds good, right? But does the government really have all these dollars to spend on us?

A very simple answer. Ask yourself: who gives the US government its dollars? Is it us? Can we citizens print dollars? No. Can businesses print dollars? No. Can banks print dollars? No. Citizens, businesses and banks can only use already existing dollars. Don’t be fooled: when you read of a business having made a fortune, all that’s happened in reality is that a mass of already existing dollars has simply shifted from lots of places or pockets into that business’ coffers. In some cases new dollars are created by private people, but they are always offset by some sort of equally private debt somewhere, so again no net money has come into existence. And when our government sells its bonds and someone buys them, the same applies: already existing dollars move from one place to another. So, who is it that creates new net dollars then? Only our government can. It does it at the Treasury and at the Fed. Think of it this way: government creates dollars by putting its signatures to pieces of paper (notes/bonds) or to electronic money transfers. Can it ever run out of its own signatures? Does it need to borrow them from someone else? Does it need to tax people to get back those signatures that it can just create? No, of course not. So to recap: government creates US dollars anew, never has to borrow them, cannot run out of them, doesn’t need to tax anyone to get them. And so it can use its dollars to do anything it wants, like employ all of us, educate all of us, treat all of us, look after all of us. And don’t forget: this form of government expense ends up largely paying for itself, because of the virtuous circle of new net national wealth it creates. And this requires no super taxes at all. Actually, it all works precisely in this way if the government gives us more dollars than it takes away through taxation. It also beats inflation thanks to all the new things that will be produced and as long as the government stops increasing its spending (plus dollar creation) as we get full employment.

So, you may ask: then what’s all this frenzy about national debt and the deficit?

Debt and deficits are the normal way to run an economy, they have always existed in American history and have never made us broke. Panic about them is largely a ploy concocted by the corporate elites, their economists and their big media. Remember: they had to prevent government and its citizens from acquiring too large a slice of the national wealth. So, among other things, they worked out a brilliant catch phrase: the government’s budget works just like your family’s, so to be ok the government has to earn more than it spends and never spend more than it earns. They said that just as your family debt is bad news, so is government’s. They turned this into mainstream economics through their people sitting as professors in all major universities and often as government top advisers. Sounds reasonable, right? Yes it does, so much so that we all fell for it and the government started worrying so much about debt and the deficit that it stopped the deficit spending that would have made us all live better. And the consequences were disastrous. But wait: do you remember that government creates its own dollars at will? Can any family in America do that? Of course not, period. So how can government and families have the same budget rules? Your family debt has to be repaid by you finding dollars somewhere else, usually through hard work. You don’t grow greenbacks in your garden. And if you fail to find them then you are in big trouble. So yes, you ought to be very careful about debts and deficits. None of this ever applies to the government, because as we said to get dollars it has to turn only to ITSELF and creates them out of thin air at the Treasury and the Fed. Think: if you could just create the dollars you need to pay back your debts, would you ever worry about debts and deficits? Ok, you got it. That’s precisely why all this frenzy about US government debt and deficit is just a plain lie, concocted by the corporate elite to achieve their goals. And look: the richest America we have ever known, that is, the American Dream emerging from World War II, had massive deficits and yet we became a world Super Power that spilled its wealth all over Europe as well. So much for this deficit hysteria. In fact it has been created to allow the conservatives to eliminate those social programs that benefit average Americans. You must understand that this is not a Republican vs Democrat issue – both sides have teamed up to cut programs that help you in order to favor their fat cat Wall Street friends, who think they’ll be better off if you are poorer and unemployed.

In conlcusion.

Do you realize what you have just read? Yes, unemployment and underemployment need not exist in our country. Yes, universal welfare is possible. And yes, all this would come out of government deficit spending with no problem whatsoever. Actually, in the long run it would even make America richer. Think of all the suffering that the present system creates instead, today spreading to millions of decent families all over the country. And what for? Just to ensure that some tiny super wealthy elite could control the majority of our common wealth. Outrageous.

Here’s what you can do to claim back what ought to be yours. Anyone can.

First, we can provide simple to understand primers to further explain to you why the above is truly possible, and we’ll give you all the authoritative academic sources for it in case you want them. Then the immediate thing for you to do is to challenge your Representative with a simple letter and/or email to tell him/her “My family and I are for Full Employment, Price Stability and for Good Deficits for the people, as proposed by senior economists here (NEP url). Do discuss them in Congress, it’s vital for us ordinary Americans. Otherwise you can forget our vote”.

So to recap: Americans and American families were made to suffer needlessly for decades out of greed of the few and out of ignorance of politicians, and things are getting worse by the day. It’s time to stop them. Let’s get the government to do its proper job.