The Gospel of Modern Monetary Theory

 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?