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?
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.
Hmm. Seems to me that a central part of the MMT message is that the requirement that the federal government's books be "balanced" is simply and solely an operational constraint, which persists only because nearly everyone seems to think that this wholly arbitrary constraint is necessary to prevent all sorts of bad things from happening. Seems unfair to say that this is being overlooked. Maybe I'm missing something.
"Nearly everyone" or you could restrict to financial markets gurus - they truly believe bank are the only money generators, hence governments must obviously" borrow form the private banks. Banks just decided voluntarily to stick Benjamin Franklin and the Tsy Secretary signature on the paper they emit? LOL It's sheer misinformation.
But the insiders, the staffers, who actually control monetary operations at the FED know everything Dr Kelton does. They are perhaps chicken sh1t weaklings afraid to speak up about what they do to "the people"? Afraid to lose their job? Afraid they'll cause a global "run on the dollar" LOL (which I believe is their actual main false psychology).
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.
Keep the faith. Biden continues to push through incredible legislation despite the fear mongering. The opposition can only say he’s old. They miss the fact that he learns, embodies tough and savvy and promotes MMT thinking through his actions. Agreed it’s not helpful for him to include statements that his legislation is “paid” for but it’s legislation nonetheless.
I agree that Biden has done great stuff. But much of the legislation you're probably referring to makes large sums of money available to private, profit-making corporation: Even the so-called "fiscal conservatives". are reluctant to complain about spending that could be directed to business interests in their home states. Or, they may complain, but they'll quickly take credit for any subsidies that are awarded to firms operating in their districts (all the while condemning awards made outside of their home states as fiscally unsound).
The problem arises with funding for social welfare programs -- everything from big ticket items like Social Security, Medicare, and Medicaid to funding for drug treatment, low-income housing, and child care. This is the sort of spending that routinely gives rise to that stunningly inane question "But how will we pay for it?" and to whining about how we're going broke and hyperinflation is just around the corner and the debt is unsustainable. It's precisely with respect to these programs where Democrats simply refuse to step-up and speak the truth. Instead, they wind up buying into the misguided premise that such spending is revenue-constrained and meeting objections to that spending with hare-brained, ill-considered proposals for "taxing the rich." This is the real problem.
Tough not to agree with you, so I will not. I can only say these things take time...and of course that really sucks. Keep the faith. No matter how long it takes.
Perhaps. But the two parties we've got are themselves seriously divided internally, making it seem like each could, at any moment, splinter into multiple parties, each hating the other. I mean, Manchin and Sanders are somehow members of the same party. And even freaks like Marjorie Taylor Greene and Lauren Boebert can barely keep themselves from throwing hands at each other.
In any event, now is not a good time to be thinking about creating new parties (unless they are far right parties that would draw support away from whichever hideous zombie the Republicans choose to run for President).
We have that in Canada and it leads to strategic voting not more fulsome debate. If you have more than one party you must have proportional representation.
You have to have a policy program that directly benefits everyone. Abstractions, even correct ones don't accomplish real change. On the other hand, a policy of a 50% Discount/Rebate at retail sale that directly benefits every individual and commercial agent, resolves economics' deepest problems, ends inflation forever, is easily understood by doing simple math and integrates the self interests of opposing political constituencies cold be irresistible.
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.
Greece, as I am sure you know, no longer has its own currency - hence its 'debt crisis'. Whereas Japan, with its own currency, does not have a 'debt crisis'.
Whut?? The quantity of dollars is theoretically infinite. Is there a single person anywhere in the universe who thinks we should create an infinite quantity of dollars (whatever that might possibly mean)? Did you actually bother to read the article to which you've appended your profoundly weird comment?
"the minute we only print currency, those holding it will realize it is worthless "
Do you really think that if the US government created, say, one trillion dollars, that no one in the world--anywhere--would want them anymore? If you woke up tomorrow and saw in the news that the government had created one trillion dollars, would you really withdraw all your money and burn it?
No. If we began creating currency, to pay for things, essentially on demand, holders realizing the currency has potentially unlimited quantity would devalue its worth. Think Weimar Germany. We would default by inflation.
All currency is essentially worthless. Its only "value" is that it is a measure of value the way that inches measure length. It temporarily holds value while transactions of assets and liabilities take place thereby settling accounts.
You hit it on the head. Currency not backed by some value is worthless. Bankruptcy happens gradually, then suddenly. Like it or not we have $31 trillion in debt outstanding. Our creditors. The English recently discovered, suddenly, when a budget came out that ramped their deficit, that investors had fled their long term debt. The English have “ fiat” currency. Their long end crashed 30% in two days. Their new PM had to resign. It can happen. I imagine the Japanese are next. Gradually for now, then....
$USD is "backed" by over 700 military bases, its armed forces, police, prisons and judicial system.
The only "faith" required of you is to believe that the US Federal government intends to continue collecting taxes and ruthlessly punishing counterfeiters.
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!”
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!
Oh crap! Why am I only finding out about this group now? I live in West Lafayette, and would love to get involved, but I'm moving with my family to Delaware in two weeks.
I'm gonna give you some money for this project. And I wish you the best of luck dealing with the profoundly awful politics of this profoundly screwed up state. If that abominable cretin Mike Braun winds up as governor, as seems likely, y'all are gonna have your hands full.
Good luck with that. However, I would put to you that the bottom line with virtually all politicians is: What is going to get me re-elected. And reading a book that even though it is true, is abstract, not easily understood and doesn't directly, immediately and obviously impact their personal self interest...is not going to move them.
Conversely, a 50% gifted discount to the price of virtully everything a person buys which means that it doubles their purchasing power, transforms erosive inflation into beneficial price and asset deflation and if you're a business person potentially doubles the demand for all of your goods and services...is a total winner for almost everyone...which makes it an election winning issue THAT BOTH SIDES OF THE AISLE WILL NOT BE ABLE TO RESIST. IN OTHER WORDS ITS POLITICALLY INTEGRATIVE.
We did something comparable in Canada and the MPs never received them. It is far better to arrange for a delegation and conversation presenting the book to each representative and senator in person in order to get a commitment to read it. Then follow up.
It is also more important to utilize the concept of the Overton window with the public so that at every meeting the issues gets raised.
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.
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.
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?
I respond to people on twitter pointing this out with links to Stephanie's and Wray's videos.
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.
Hmm. Seems to me that a central part of the MMT message is that the requirement that the federal government's books be "balanced" is simply and solely an operational constraint, which persists only because nearly everyone seems to think that this wholly arbitrary constraint is necessary to prevent all sorts of bad things from happening. Seems unfair to say that this is being overlooked. Maybe I'm missing something.
"Nearly everyone" or you could restrict to financial markets gurus - they truly believe bank are the only money generators, hence governments must obviously" borrow form the private banks. Banks just decided voluntarily to stick Benjamin Franklin and the Tsy Secretary signature on the paper they emit? LOL It's sheer misinformation.
But the insiders, the staffers, who actually control monetary operations at the FED know everything Dr Kelton does. They are perhaps chicken sh1t weaklings afraid to speak up about what they do to "the people"? Afraid to lose their job? Afraid they'll cause a global "run on the dollar" LOL (which I believe is their actual main false psychology).
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.’"
She is Thelma leading you, Louise, off a cliff
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.
Keep the faith. Biden continues to push through incredible legislation despite the fear mongering. The opposition can only say he’s old. They miss the fact that he learns, embodies tough and savvy and promotes MMT thinking through his actions. Agreed it’s not helpful for him to include statements that his legislation is “paid” for but it’s legislation nonetheless.
I agree that Biden has done great stuff. But much of the legislation you're probably referring to makes large sums of money available to private, profit-making corporation: Even the so-called "fiscal conservatives". are reluctant to complain about spending that could be directed to business interests in their home states. Or, they may complain, but they'll quickly take credit for any subsidies that are awarded to firms operating in their districts (all the while condemning awards made outside of their home states as fiscally unsound).
The problem arises with funding for social welfare programs -- everything from big ticket items like Social Security, Medicare, and Medicaid to funding for drug treatment, low-income housing, and child care. This is the sort of spending that routinely gives rise to that stunningly inane question "But how will we pay for it?" and to whining about how we're going broke and hyperinflation is just around the corner and the debt is unsustainable. It's precisely with respect to these programs where Democrats simply refuse to step-up and speak the truth. Instead, they wind up buying into the misguided premise that such spending is revenue-constrained and meeting objections to that spending with hare-brained, ill-considered proposals for "taxing the rich." This is the real problem.
Tough not to agree with you, so I will not. I can only say these things take time...and of course that really sucks. Keep the faith. No matter how long it takes.
I'm not sure they need to "speak" the truth, as much as they need to govern with the truth in mind. Biden seems to be doing that.
Need I point out that having more than two political parties would allow for a more fulsome debate.
Perhaps. But the two parties we've got are themselves seriously divided internally, making it seem like each could, at any moment, splinter into multiple parties, each hating the other. I mean, Manchin and Sanders are somehow members of the same party. And even freaks like Marjorie Taylor Greene and Lauren Boebert can barely keep themselves from throwing hands at each other.
In any event, now is not a good time to be thinking about creating new parties (unless they are far right parties that would draw support away from whichever hideous zombie the Republicans choose to run for President).
We have that in Canada and it leads to strategic voting not more fulsome debate. If you have more than one party you must have proportional representation.
Yes, that would have been my next comment. I taking it one step at a time
Exactly.
You have to have a policy program that directly benefits everyone. Abstractions, even correct ones don't accomplish real change. On the other hand, a policy of a 50% Discount/Rebate at retail sale that directly benefits every individual and commercial agent, resolves economics' deepest problems, ends inflation forever, is easily understood by doing simple math and integrates the self interests of opposing political constituencies cold be irresistible.
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.
Greece, as I am sure you know, no longer has its own currency - hence its 'debt crisis'. Whereas Japan, with its own currency, does not have a 'debt crisis'.
Whut?? The quantity of dollars is theoretically infinite. Is there a single person anywhere in the universe who thinks we should create an infinite quantity of dollars (whatever that might possibly mean)? Did you actually bother to read the article to which you've appended your profoundly weird comment?
"the minute we only print currency, those holding it will realize it is worthless "
Do you really think that if the US government created, say, one trillion dollars, that no one in the world--anywhere--would want them anymore? If you woke up tomorrow and saw in the news that the government had created one trillion dollars, would you really withdraw all your money and burn it?
No. If we began creating currency, to pay for things, essentially on demand, holders realizing the currency has potentially unlimited quantity would devalue its worth. Think Weimar Germany. We would default by inflation.
I think you are treating currency like it is a commodity. It is an abstract token of temporary value.
All currency is essentially worthless. Its only "value" is that it is a measure of value the way that inches measure length. It temporarily holds value while transactions of assets and liabilities take place thereby settling accounts.
You hit it on the head. Currency not backed by some value is worthless. Bankruptcy happens gradually, then suddenly. Like it or not we have $31 trillion in debt outstanding. Our creditors. The English recently discovered, suddenly, when a budget came out that ramped their deficit, that investors had fled their long term debt. The English have “ fiat” currency. Their long end crashed 30% in two days. Their new PM had to resign. It can happen. I imagine the Japanese are next. Gradually for now, then....
$USD is "backed" by over 700 military bases, its armed forces, police, prisons and judicial system.
The only "faith" required of you is to believe that the US Federal government intends to continue collecting taxes and ruthlessly punishing counterfeiters.
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.
This is the salient point.
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!
Oh crap! Why am I only finding out about this group now? I live in West Lafayette, and would love to get involved, but I'm moving with my family to Delaware in two weeks.
I'm gonna give you some money for this project. And I wish you the best of luck dealing with the profoundly awful politics of this profoundly screwed up state. If that abominable cretin Mike Braun winds up as governor, as seems likely, y'all are gonna have your hands full.
Thank you, VCA! We appreciate the donation! Mike Braun is a trip and a half. You won’t miss that nonsense. Hope all goes well in Delaware!
Good luck with that. However, I would put to you that the bottom line with virtually all politicians is: What is going to get me re-elected. And reading a book that even though it is true, is abstract, not easily understood and doesn't directly, immediately and obviously impact their personal self interest...is not going to move them.
Conversely, a 50% gifted discount to the price of virtully everything a person buys which means that it doubles their purchasing power, transforms erosive inflation into beneficial price and asset deflation and if you're a business person potentially doubles the demand for all of your goods and services...is a total winner for almost everyone...which makes it an election winning issue THAT BOTH SIDES OF THE AISLE WILL NOT BE ABLE TO RESIST. IN OTHER WORDS ITS POLITICALLY INTEGRATIVE.
We did something comparable in Canada and the MPs never received them. It is far better to arrange for a delegation and conversation presenting the book to each representative and senator in person in order to get a commitment to read it. Then follow up.
It is also more important to utilize the concept of the Overton window with the public so that at every meeting the issues gets raised.
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.
*is
The Times passage you quote could have been written by AI.
Does it matter, ?
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.
Why are my comments disappearing?