Courtesy of state.businessinsider.com
If voters are to understand the Democratic debates in the next election, they will need to understand a “new economics” that is beloved by the political left: Modern Monetary Theory, affectionately known as MMT. I think of it as Money Magic Trick. And it isn’t new. The theory has been around since the 1940s.
MMT proposes that a government needn’t limit the amount of debt it incurs because it can print more money to pay off its obligations. That’s why those who cling to this theory believe our country, with its existing $22 trillion debt, can afford to add another $32 trillion over the next ten years to pay for universal healthcare . Of course, they will subtract $182 trillion from that amount by hiking taxes on the superrich over the same period of time. But that leaves a $72 trillion deficit.
That’s where the printing press comes in. Under MMT, the only constraint on spending and printing is that the government must avoid using up “too much of the nation’s productivity capacity, which would result in high inflation.”(“Tax Driver,” by Peter Coy and Katia Dmitrieva, Bloombergbusinnesweek, Jan 21, 2019, pg. 49.)
What that last sentence means is a blank to me. Others feel it is a formula for an endless free lunch. Some call it Democratic Socialism. That may account for results produced by a recent Gallup poll. According to it, 57% of Democrats have a positive view of socialism and only 47% favor capitalism. (Ibid pg. 48)
A person should always be open to fresh ideas — though as I say, this one isn’t fresh. Even so, it’s easy to get excited about a theory before we understand the details. Look at all those apps we accept, unread, merely because we want the product.
I’m not suggesting MMT has no merit. I’m suggesting I don’t understand it well enough to salivate every time Bernie Sanders points to the sky or Alexandra Ocasio-Cortez opens her mouth. The demand for change from the far left is persistent. But, change is why folks voted for Donald Trump. Goals are important, but how we achieve them is important, too.
Fortunately, the woman once thought “too old” to lead as Speaker of the House, has laid down some ground rules about fiscal proposals under her leadership. All spending bills must be accompanied by spending cuts. For some reason, that notion allows me to breathe easier. It’s the kind of kitchen table economics most of us understand. I accept budgets at the government level get more complicated than housekeeping mathematics. But I like Pelosi’s beginning point. After that, we can think about firing up the printing presses.
