In the big budget fight going on right now in Congress, the Tea Party conservatives rightly point out that $61 Billion in spending cuts is just a drop in the bucket compared to the $1.6 Trillion predicted deficit, and they react with a great deal of moral fervor to the suggestion that they ought to compromise on $33 Billion in cuts in order to avoid shutting down the Government. That moral fervor sounds perfectly reasonable to me as long as one agrees that Government spending causes inflation, that we now have a huge deficit, debt problem in the United States that we must solve, or face national insolvency in the not too distant future, and also if the people afire with moral fervor would also apply that to the issue of the wealthy paying their fair share of taxes.
Neo-liberal believers in the power of the bond markets, the idea that Government money must come from taxing or borrowing, and the need for Government to avoid exploding interest rates on the national debt, can try to oppose tea-partiers by saying that it’s better economics not to cut public spending while unemployment is as high as it is right now; but when you agree with the tea party that we have a long-term deficit/debt problem that can destroy the credit of the United States and its access to the bond markets, you’re then on very thin ice, when you oppose this “small down payment” on coping with a very serious problem that both you and the tea party agree we have.
So, when you’re very committed to austerity to solve the long-term problem, are the neo-liberal deficit doves, all you can do in opposition to the goal of drastically cutting Government sending over a period of years, is to argue about the details of discretionary spending cuts, and to find a place to compromise, rather than simply saying that the current tea party campaign to cut deficit spending is just silly, because there is no deficit/debt problem, and so there is no economic need to cut any Government program whose outcomes are accomplishing public purposes.
A big, big advantage of adopting the MMT approach to economics, is that it provides a political basis for going straight at the tea partiers, Hooverites, Peterson cohorts, and deficit hawks. Michelle Bachmann and Mike Pence may stand up in front of a pitiful tea party rally of 100 people in Washington, DC and thunder about how the United States is about to fall off a fiscal cliff and ruin the lives of our children and grandchildren by imposing an intolerable of burden of debt of $45,000 on each of them; and that to forestall that catastrophe, the Government has to stop spending money we don’t have. But an MMT-informed politician can just come right back and say:
I hate to have to tell you this, but you folks don’t have the slightest idea of what you’re talking about. Where do you think money comes from? It comes from the Federal Government. The Federal Government has the constitutional authority to supply as much money to the private sector as is necessary to see to it that our economy is performing well. The Federal Government cannot run out of money unless silly Congressmen become powerful enough to prevent the Government from spending. Then and only then will we see the financial collapse you tea partiers are afraid of.
If the American public listens to your insanity, and the Government does what you want it to do to avoid a financial crisis, that very thing will cause what you fear most – a collapse in the value of the American currency to happen.
So, I, as someone who does understand that the Government is the source of all American Dollars, and always has the capability to create more simply by spending, hereby pledge that I will not vote for one $1 Dollar in spending cuts to programs on grounds that there is a Government deficit, or that the national debt is something we cannot afford. Since the Government can always add money to the private sector by spending, if it chooses to do so, these are nonsense reasons to vote for cuts, and I was not elected to compromise with, or vote for, nonsense. And I will not allow you to continue to hold the voters I represent hostage to your idiocy and inability to understand our fiat currency system and our national monetary sovereignty.
On the other hand, I will be happy to vote for eliminating programs that worsen the condition of the American people, or that kill people for no reason, or that loot the Treasury for the benefit of a few wealthy people. So, if you tea partiers want to cut out some of those programs, I’ll vote with you.
But otherwise, I’ll vote no on your proposals, and if you and your Republican colleagues continue to try to cut programs that I think a majority of the American public want, and this results in the shutdown of our American Government, then f__k the Republican Party, because it will be on you. You will suffer the wrath of the American people in 2012, and no amount of money or propaganda will protect you from it. You’ll be lucky to escape the fate of the Whigs. Oops! I’ll guess you’ll have to explain who the Whigs were to Bachmann, Palin, and the other tea partiers.
Yes, Modern Monetary Theory (MMT) can be a powerful political weapon against tea partiers, Republicans and deficit hawks in both parties, and also deficit dove Democrats who think the Government can become insolvent. This isn’t a reason to believe in MMT. The only reason to believe in it is if you think it’s the best approach to economics available today.
But, conversely, it is a reason to question other economic approaches. It is a reason to question neo-liberalism. It is a reason to refuse to accept it without thoroughly testing it against the evidence and alternative approaches to neo-liberal economics like MMT. And, if you are a progressive, it also is a reason to take the trouble to learn MMT, and to decide for yourself how it compares to other approaches to economics.
In some of the replies to recent posts criticizing Paul Krugman’s remarks on MMT, some have asked what all the fuss is about. They’ve pointed to the areas of agreement between MMT and Krugman’s brand of deficit dove economics, and have noted that both sides seem to agree that more economic stimulus is necessary now and that measures to contain inflation may be needed later.
This is true, but as I’ve pointed out in previous posts and comments I’ve made on this subject, the fuss is about the difference in the world views of deficit hawks and deficit owls, their analyses of whether a risk of insolvency exists, and whether there’s a long-term deficit/debt problem; what this difference means in terms of how fiscal policy should be managed by the Federal Government, what fiscal sustainability means, what fiscal responsibility means, and also, as I’ve emphasized here the content of political communications and appeals that can be used to advocate for progressive economic policies.
Deficit dovism is all about defense against the modern know-nothings and Hooverites. Deficit owlism or MMT is all about a political offense against them relating to what we ought to about the economy and America’s future.
As a real progressive, I’ll take a good offense, anytime! How about you?
(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).