A theory is, in part, a new way of talking about things and embodies new evaluations. Such is true of Modern Monetary Theory. It’s
a gospel that opens a hopeful perspective on how our economy could be governed.
The dominant persuasion emanates from wealthy and powerful cardinals of the
Church of the Free Market – Fundamentalist. Its’ current hell dogma may be
termed “National Debt Terrorism” (NDT.) NDT dogma is that there isn’t enough
money to eliminate poverty, provide living wage jobs, excellent health care,
and secure retirement for all Americans while providing for our “defense.”
Should we try this sinful indulgence, with our already crushing sin – load
of national debt, we will encounter
either bankruptcy or nation - killing inflation.
This dogma deserves scolding! It’s based on unfounded fears
and false analogies. It is parroted by elected Republicans, especially the
Pennywises of the House “Freedom Caucus.”. During the Obama years its
Congressional acolytes passed one ridiculous “spending control” measure after
another, always in the end blowing through their limits. But when federal
budgetary news is reported it is draped like a suffocating blanket, by assumption,
or alluded to in countless news stories. This is as true for news media of
“liberal” as well as “conservative” persuasions. If this new gospel were to be
shouted from rooftops, its’ Apostles
would surely be smeared by the widely broadcast propaganda voices of the
institutes, forums, commissions, councils, established economic “authorities”
and media Debt Scolds. So some degree of stealth in establishing a new gospel
is necessary against this overwhelming propaganda environment.
Nothing in this piece is original theory. Its’ deductive form
has a rhetorical purpose. Much of the wording comes directly from L. Randall
Wray’s Modern Money Theory and pieces
by Stephanie Kelton. My point is to suggest a way to propagate the gospel as a
way of talking, into the ideology and specifically platform of the Democratic
Party without enabling ND terrorists to immediately raise their red flag smears
of “socialism,” “communism,” etc. This way is to start with personal visits to
democratic candidates as soon as campaign seasons for 2018 and 2020 start, to ask whether the candidate accepts
as true, one axiom. This axiom represents a leading idea that could inspire
progressives to join with liberals to win elections and improve economic
conditions and security (thus “economic happiness”) for millions of us.
The idea is simply to use axiomatic, deductive structure
enabling advocates to “spoon feed” MMT to candidates starting from extremely
obvious truths. Does candidate X accept or reject first one proposition, the
axiom, and then its’ manifestly true deductive consequences. So here goes. Ask
the Democratic candidate (repeatedly, if necessary, then publicly) do you
believe the following claim?
Axiom: Governments are currency issuers.
By our constitution the
Congress is the only issuer of legitimate paper money of the United
States. It makes its genuine paper money valuable by requiring holders to pay
taxes in its money.
The first theorem we may
draw from this is:
Our government spending is not limited to taxes
and fees collected.
Theorem Two:
A currency issuer is fundamentally different
from a person, family, or business that cannot issue its own money.
Since government can issue any amount of
money,
Theorem Three:
Our
government can always meet general welfare needs of all its citizens even
without deficit borrowing.
Fact Two: There is no
strong evidence that any wealthy, advanced nation, undestroyed by war or
natural disaster, has ever, through money issuance and spending alone,
experienced fatal, nation destroying hyperinflation. In history there have only been a few documented cases of
hyperinflation among very poor and/or war destroyed nations. Despite $Trillions
extended by the Federal Reserve to bailing out the banks responsible for the
Crash of 2007 – 2009, consumer price inflation has remained below even the
Federal Reserve’s 2% annual goal for a decade.
Fact Three: All
comprehensive, correct accounting is by double entry. In national income
accounting the 2 biggest accounts are the Public (government) account and the
Private account (of all individuals, families, corporations.)
Theorem Four:
For every debt there is (are) corresponding
assets which derive, logically, from the government’s issuance of money.
Abstract all government
issuance of money: There would be neither prices nor monetized assets! Thus a
$19 trillion national debt should not be impressive. The United States has
enormously more in real assets. No one can come to collect any part of them
from you personally nor, given our enormous military superiority could any
combination of nations “collect it” from the U.S.
Definition: A “balanced budget,” in the dominant
rhetoric, exists when government spends no more or less than what it takes in
from taxes and fees.
Theorem Five:
A ‘balanced budget” would mean there was not a single dollar
transferred from the government to the private sector.
A” balance of trade” in a similar over -
simplified sense, is an equally dysfunctional goal.
Since the government is
the issuer of money, not restricted to tax revenue,
Theorem Six:
Government can always avoid any “crowding out”
of funds needed for private investment by interest payments due on the national
debt.
Fact Four: “Taxes drive
money.” (L. Randall Wray) Wray explains that what gives fiat, (un-backed paper)
money value is that the dominant issuer power demands payment of taxes in its
issued money. That demand is the source of fiat money’s value.
Theorem Seven: If
the government issues so much money that excessive inflation begins, it can
reduce that inflation by taxing money out of the economy.
Fact Five: Economist
Stephanie Kelton points out that many Americans think our national government
first collects tax money, (T) and then borrows (AB) any additional money it
needs to spend (S.) This might be symbolized as “TABS.” More realistically,
since the U.S. went off the gold standard in 1971, interest groups push laws
and spending proposals (S.) Once they are approved, the government collects
taxes (T) and borrows via bonds (B) to pay for the spending. This would be
symbolized as “STAB.”
There are many
additional and finer points of Modern Monetary Theory that cannot be covered
here. With such knowledge and attitudes toward management of Americas’ budgets,
it would be easily possible, e.g., to have government as employer of last
resort, providing living wage jobs for all willing to work. Many could be,
e.g., in building needed infrastructure. After all, the false notion that money
for the people’s general welfare is limited to what the IRS collects currently
energizes the Republicans’ malignant dynamic: cut benefits for the Poor because
the Poor are lazy, criminal, non white, whatever.
Could many
progressive voices raised to Democratic Party candidates by insisting that they
commit to this axiom and the few theorems here, give the Democratic candidates
an edge to thrust MMT thinking into moving America toward a much more just and
happier society?
