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John O'Connell's avatar

Much needed. JG is, of course, the favorite of MMTers.

An important point is that when policy interventions - non-automatic stabilizers - are needed, Congress is not nimble enough to do it in the proper amount at the proper time. The Fed is much more agile. I would give the Fed limited authority to manage two fiscal levers: a low, flat rate tax on all business gross receipts; and a monthy per capita stipend from the Fed to each State and Territory (suggested by Warren Mosler in response to the GFC, but I would make it a permanent feature, sharing a little bit of monetary sovereignty with lower levels of government).

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Vegan Commie Atheist's avatar

I'm a fairly unsophisticated student of economics in general, and MMT in particular, so forgive me if what I'm about to say sounds . . . unsophisticated:

"Deficits" arise when the federal government spends more in a fiscal year than it receives in "revenue" -- taxes and fees. From an MMT perspective, deficits are problematic economically only to the extent that they can lead to inflation. But, politically, they are problematic because, under our current system, they must be financed by "borrowing" from the private sector via the issuance of bonds. In the popular political imagination, "borrowing" means taking on "debt," and "debt" accrued by the federal government is, in the popular political imagination, the deadliest of economic sins: It's irresponsible, it's unsustainable, it puts a damper on private investment, it unfairly burdens our child and grandchildren, and so on.

This is all mostly BS, of course, but it is gospel writ across much of the political spectrum. Even left-leaning Democrats who should surely know better can't talk about federal spending without, in the same breath, swearing allegiance to "fiscal responsibility" and deficit reduction and the best interests of the children and grandchildren and great-grandchildren.

We can talk about the largely salutary nature of "deficits" -- whether arising from automatic stabilizers or fiscal policy. -- until we're blue in the face. But to make that idea politically palatable, we need to either (a) get a lot better at explaining why federal "debt" is not like household debt or, better yet, (b) simply abandon the requirement that deficits be "financed" by bond sales. If we need to drain money from an economy at risk of overheating, do it via taxation and by letting us little people maintain fully insured interest-bearing savings accounts (or term certificates) at the Fed. What looks like governmental "debt" -- the work of Satan --will instead look like private sector "savings," of which no one dares speak ill.

Amirite?? What say you sophicticates?

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