The American left maintains the constant goal of articulating a better world. This means reshaping the American perspective of what is politically possible, think of the way Bernie Sanders popularized Medicare for All. Given that I've been able to win various people in my life over to the left (or at least to a position sympathetic to left values) with this method I've internalized the goal; I'm constantly on the lookout for policies and projects that can help reimagine the world we live in.
Enter the Deficit Myth by Stephanie Kelton. Kelton's CV is, at its face, conventionally establishment; professor of economics, Chief Economist for the US Senate....Bloomberg contributor. Don't let this fool you, Kelton is here to buck convention and destroy public misconception. Using the lens of Modern Monetary Theory (or MMT), she sets out to dispel what is known as the deficit myth.
The deficit myth is a pervasive view that the government deficit means that the government is so indebted that it is effectively out of money and couldn't possibly spend any more. You don't have to be a political scientist to understand the effects the deficit has on our political discourse. It's used to hand-wring about big, life-altering universal programs, it's used to scare voters into thinking society is on the brink of economic collapse if we don't get some fiscal sensibility, it's used to stage massive political battles on the Hill, some of which are so petty they shut the government down for weeks. Which is all to say the deficit myth is a useful idea to total assholes.
Kelton's telling features 5 core misconceptions the deficit myth is generally used for, each has a chapter devoted to it;
- The US government budget operates like a finite household budget
- We're putting young people on the hook for our national debt
- government debt crowds out private investment
- The trade deficit means we owe countries like China
- Entitlement programs (Medicare, Medicaid, Social Security) are going broke
The main reason the deficit myth, all of the myths mentioned above, are bullshit is, that America prints its own money. It could essentially pay off any number of debts and pay for any number of programs. If it sounds impossible, you're likely thinking about the negative impacts of inflation, but as Kelton adeptly shows, that's a different argument entirely. We should be assessing our economy's ability to take an influx of cash in certain areas rather than if the money is there (because it always will be).
The penultimate chapter "the Deficits that Matter" serves as Kelton's estimation that our economy can absolutely handle large sums of money as long as it's directed to where it counts with programs designed to help reduce the existing deficits that matter (like in education, healthcare, the environment). Whether the programs are "paid for" with tax revenue or whether they're produced via deficit spending doesn't matter so much as getting the money funneled into infrastructure, projects reducing the impacts of climate change, expanded healthcare etc
The Deficit Myth helps us develop policy proposals that will improve our communities, it helps us imagine a better world where we don't handcuff ourselves with arbitrary fiscal constraints. In this regard, it is a very useful book.
Butttttt.........I remain unconvinced by certain aspects of MMT.
The role of taxes - Exploring the politically possible without worry about where the money comes from must be what it's like to oversee the Pentagon budget. Imagine if infrastructure or green energy or education funding bills soared through both houses of congress with the ease that our bloated war budgets do! What would you include in them? These are valuable exercises, but I can't help but feel without the conversation on taxation (MMT suggests that taxes do not in fact fund government spending), you're missing out on, frankly, some of the fun.
To MMT, taxation is used to control inflation or to siphon money out of unuseful places (carbon emissions or offshore accounts). These are useful endeavors, but some of the value in the taxes as a payfor logic is that there is an inhent justice in making corporations and businesses (and even citizens) pay their fair share. I also don't feel like we can abandon taxation as a payfor because - as Kelton herself points out - state and local governments use tax revenues. The continuance of using payfor verbiage isn't to continue to suggest money is finite but rather that it is a public good used to pay for services that we all benefit in.
Doug Henwood has a large piece criticizing MMT, I don't agree with much of it (I think MMT is helping), but I do agree with his position on taxation:
"We have homeless people living on the streets of San Francisco blocks from Twitter and Uber’s headquarters, bridges collapsing, trains derailing, schools falling to bits — the entire structure of private opulence and public squalor, as John Kenneth Galbraith put it long ago, because the public sector is starved for resources. Taxing takes those resources out of private hands and puts them into public ones, with at least the potential for them to be spent on more humane pursuits. Fewer Lamborghinis, more bullet trains. Fewer Hamptons houses, more public housing."
Messaging - Along those same lines taxation is still an important part of the puzzle for how we create a people's economy (the subtitle of the Deficit Myth). Kelton acknowledges that the government needs to tax to control inflation, redistribute wealth, and discourage bad behavior. Except only the first of those seems entirely necessary. No one is suggesting we can just print money consequence free. Yet the idea that we're printing money, doling it out, and then taxing some of it back to incinerate it doesn't have the same messaging power as "the money is used to pay for services" (which again, is still true, since it does in fact pay for local government services).
It's way easier to talk to people about social security and medicare, two successful government programs who have so far mostly withstood efforts to abolish and privatize, when you suggest that they are in fact paying into it. They are! Whether you believe the money is going to partially fund the program or - as MMT suggests - is being removed from the economy, the truth is you're paying for it. The accounting trick of payfor is just easier to explain to people. Matt Bruenig (who is actually quoted positively in the book) gets at the heart of MMT's messaging problems:
"This is a good way to jam up the discourse and confuse people, which can arguably be useful politically, but as a policy matter, it does not add any new insight. It tells you that the correct question is not “how will you pay for this” but rather “how will you offset the inflation that is caused by paying for this with created money since all government spending is created money.” Nonetheless the rephrased question has the same answer as the first one: some combination of taxes and borrowing that will eventually have to be worked out."
Jobs program - I despise the idea of a jobs program and think it is one of the most undertheorized projects to come out of the left. The MMT Job Garuntee (JG) answers one of the striking questions of modern poverty; what do we do with the under/unemployed? MMT: "give them a job". Oh your oil rig laid you off because we're not extracting oil anymore? Here's a job. You're a truck driver and your profession was automated? Here's a job. You get a job, you get a job, you get a job!
The idea is that, somehow, the government can be flexible enough to provide jobs to areas suffering joblessness. There are tons of problems with this idea; no one can articulate what jobs would be ephemeral and useful enough, how long could the jobs theoretically be kept up, some areas have lots of jobs and just not enough qualified people to work them, jobs are hard and require training, etc etc. Which isn't to say I don't agree with a jobs program, similar to, say, the New Deal, that offers jobs to people who can do them especially in times of high private sector unemployment, but a constant jobs guarantee seems impossible and undesirable.
One of the best arguments against it is the population of our unemployed are...not people who would or should be working at all. The better move is to give these people money. This is another from Bruenig's outfit, but the argument seems airtight:
All in all, MMT is useful in its efforts to destroy the traditional deficit myths that plague our ability to use our policy imaginations. If worked out, I think it could provide some pretty compelling answers to the incalcuably stupid, misguided, and bad faith question "hOw ArE yOu GonnA PaY fOr ThAt". But it still has some limits of its own and might complicate certain aspects of the debate that are better left simplified. I'm glad I can keep it in my back pocket, but will avoid keeping it in my front pocket for now.
