The editorial board at The New York Times recently published a missive on government ‘debt’ entitled America is Living on Borrowed Money. It began, “The federal debt is as old as the nation, and adding to it is sometimes prudent.” It went on to assert—without evidence—“It’s increasingly unstable.”
As reflected in your book’s title, the idea of “the deficit” that the federal government needs to borrow and tax to finance itself is one of the most pernicious myths out there. What more can we do to get the truth out to people?
The writers are not effectively communicating on how deficits is actually affecting.
Understandably they miss the point since they regurgitate what economists tell,which is being still hotly debated.
You say that the government keystrokes amounts into her accounts. This is true, but it neglects to say that the government waits to keystroke amount into our towns until it has built up sufficient revenue from taxing or bonds and other minor sources. This is an operational constraint, which is not necessary. We could just simply keystroke amounts into our accounts without waiting as we did in 2008 when we bought, or the Fed bought, lots of bad mortgages and put them on its books. This was called an asset swap. It seems to me that MMT conveniently neglects the fact that there really is an operational constraint, by basically saying that we money finance everything without looking at the simultaneous decrease in the revenue account to counterbalance the keystroking.
This is an absolutely vital post. Thanks Stephanie. Your ending is perfect. "Imagine trying to sell “painful” austerity to a population of readers (and voters!) who understood the truth about government ‘debt.’"
Great to hear from you and with perfect clarity. Political discourse using fear seems to work for politicians, media outlets, financial institutions and on and on. I’m so grateful for the MMT perspective you and your mentors deliver. The vail of secrecy has been lifted, revealing the real resources that count...us. FDR always had it right, “the only thing we have to fear is fear itself.” The Lens continues to focus on true priorities. That, to me, remains exciting!
That NYTimes series was one of the most appalling and stunningly inane things I've seen in that paper in ages -- maybe since it went all in on the equally absurd notion that Iraq was preparing to blow us to bits. Just infuriating -- mostly for being so incredibly stupid, and for playing into the hands of the most regressive and idiotic forces in American politics.
What I find most disturbing about all this is that there seems to be no one -- literally -- within the Democratic Party willing to stand up and speak the simple and indisputable truth about the "debt" and the "deficit," often and loudly. It's almost inexplicably bizarre. My best guess is that the mainstream economists on whom the Party largely relies when formulating policy -- people like Paul Krugman -- have devoted so much time and energy to grotesquely mischaracterizing MMT, and then beating their straw man senseless, that the Dems are simply terrified that, if they dare challenge these daft punks, they too will be beaten down and ridiculed mercilessly. What else could it be??
Sadly, the only way in which the message of MMT is likely to reach an audience large enough to matter politically is if via the Democratic Party. I don't see the Party doing anything to make that happen.
The shift to the neoliberal economic paradigm we're currently in was one of the most damaging events in world history. Economists such as yourself give me hope that all is not lost. Thank you!
Please explain what is a sustainable net interest cost as a percentage of federal inflows - believe it has fluctuated
between 6% and 15% during the past 50 years and is now around 10-12%....but a Peterson chat published by Randall Forsyth in his Barron’s column a week or two ago, shows projection of net interest growing to 40% of inflows ...so again, what is a sustainable percentage so inflation does not spiral with this increase
So groovy. We can just print cash and fund things. We are only limited to our imagination as to things we can buy. We got fiat currency. The only problem is we do have debt and the minute we only print currency, those holding it will realize it is worthless given the quantity is infinite. Weimar reimagined.
In the real world our D/GDP is in the danger zone and our deficits make Greece 10 years ago look tame.
Debt phobia is a handy tool for all those who want to limit or decrease the role of government in the economy - including notably our corporate feudal class and the politicians whose careers they finance.
the many dire things that the fiscal hawks said would happen if we did not shrink the debt a decade ago have not come to pass.”
A decade? The fear mongering has been ongoing for more than a century. Funny how people are fine leaving a wrecked environment, homeless crisis, gross income disparity, and so on to future generations, but when it comes to debt: “but what about the children!”
A simple solution to this issue is to stop reading the NYT and other MSM purveyors of fiat news :]
I'm part of an informal study group in Indianapolis, comprised of retired lawyers, doctors, economists, civil servants etc. We're raising money on GoFundMe to send a copy of The Deficit Myth to every member of the U.S. House and Senate. This will cost about $11,000. Here's a link to the GoFundMe page: https://www.gofundme.com/manage/2b8g4-send-the-deficit-myth-to-congress. Any contribution to this effort would be greatly appreciated! Please help us spread the word! Thank you!
When I first read The Deficit Myth 3 years ago, I understood right away, but I intially wanted to stick to what i was taught in macro textbooks. But overtime, i was able to come to my senses and realize that traditional macro lied to us. That in reality, the national debt indeed isn't anything to fear, that it won't burden future generations. That its just the amount of dollars left untaxed by the fed gov sitting as treasuries. That also outdated crap such as NAIRU, Phillips curve and the Taylor rule os just meant to do more austerity. Just like the fear of SS going broke, I used to think like this at one point until the video I saw with Alan greenspan. We also aren't indebited to china at all. We don't owe them money at all, them owning US treasuries just means they are net savers. We've been mislead by so much and that includes friedman and his money supply garbage. This pandemic along with the book taught me that indeed supply side factors can be the primary cause to inflation and that the blunt foolish object such as rate hikes are the wrong policy tool. Poor people don't need to suffer, we can address climate change we have the fiscal space to do so. We cannot run out of dollars, we continue to vote against our own interests because of it. The deficit myth is a must read. It changed my way of thinking of economics and it will for you too.
The Times passage you quote could have been written by AI.
It would be useful to point out who, apart from politicians eager to slash government programs generally, benefits from deficit fetishism. I assume it’s the rentier class, who are terrified of inflation.