I'm not going to pretend — I am pissed off right now. The sweeping gains made by progressives, who’ve launched a years-long insurgent campaign to take hold of the identity and power structures of the Democratic Party, is now under threat from Marxists and Democratic Socialists within the Sanders coalition who have embraced a philosophy of madness.
What I’m talking about is a virus economic theory called “Modern Monetary Theory” (MMT). Its appeal is obvious; it says governments can print money endlessly because it is the government who creates all value through its ability to create and control currency. That’s right, they believe it is not labor, not capitalists, it is the government that is truly the creator of all value in our society. They believe that you can print money with little effect on inflation and they use the disastrous Japanese economy, where 40% of workers have no steady work or pensions, as a shining example of their policies being successfully implemented (as inflation has remained relatively low in Japan even with high spending). They say we can fund the Green New Deal and Medicare-for-all, and a federal job guarantee just by printing more money without raising taxes, and inflation won’t go up radically.
This all sounds crazy on its face to many people — and that’s because it is. As economist Kenneth Rogoff put it (regarding MMT and inflation), “The U.S. is lucky that it can issue debt in dollars, but the printing press is not a panacea. If investors become more reluctant to hold a country’s debt, they probably will not be too thrilled about holding its currency, either. If that country tries to dump a lot of it on the market, inflation will result.” Other prominent economists, with a wide range of political beliefs, have criticized MMT including Lawerence Summers, Max Sawicky, Jerome Powell, Paul Krugman, and Matt Bruenig.
AOC Fan of MMT?
To my deep and unending sorrow, it has been reported that my queen AOC is POSSIBLY supportive, if not a full stop backer of the MMT lie. She is a New York City politician at her core and has already proven her understanding of principles of maneuverability. I hope she sees eventually the fraud that is MMT and realizes it’s not just heterodox economic bullshit akin to its polar opposite — the Austrian school of economics in terms of ivory tower detached madness — but that it could get in the way of a most necessary series of proposed public programs like the Green New Deal and Medicare-for-all.
The MMT Twitter Trolls
I first learned of this lunatic theory while responding to a Bernie Sanders supporter and college professor named Fadhel Kaboub who was linking to a YouTube video in which he explained how a federal job guarantee would be paid for:
Universal Basic Income makes much more sense. Why do you need everyone to have a job in an automated world? Working just to work?— Rory Gilmartin (@rorygilmartin) March 4, 2019
Automation is fine. Let the robots do all the precarious, painful, repetitive, and dangerous work. There is plenty of work that needs to be done by people in the care economy: caring for children, the elderly, the planet... UBI gives you cash with no services. It's a trojan Horse— Fadhel Kaboub (@FadhelKaboub) March 4, 2019
Really? You got any numbers to back up your claim that there's a job waiting for everyone? What if I don't want to work doing providing services. The government is going to say what my job is or I have to choose from a list? I love Bernie, but he doesn't understand the economy...— Rory Gilmartin (@rorygilmartin) March 4, 2019
I looked into MMT some more and found the Twitter pages of some of its leading advocates, mostly MMT economists. Their tweets were essentially vague defenses of MMT which lambasted opponents of MMT for not properly understanding their theory (apparently this bratty behavior has gone back many years as it is referenced in a 2011 article from Krugman). They were also reveling in recent comments made by Jerome Powell and Lawrence Summers who denounced MMT, with MMT proponents claiming these attacks were evidence of MMT’s validity:
My takeaway from the Krugman/Rogoff/Summers critique of #MMT: It's less about MMT (though it's a serious challenge to orthodoxy & reputations). It's about stunting the prospects of an economically/socially transformative #GND & its bold demands for #JobGuarantee, #M4A, etc...— Pavlina R Tcherneva (@ptcherneva) March 5, 2019
The mainstream's insistence (as in @LHSummers latest take on #MMT) that bondholders are the ultimate source of funding for public policies is the definitive trickle-down of our time. Laffer just provided a different justification for growing their wealth and incomes.— Pavlina R Tcherneva (@ptcherneva) March 5, 2019
The only people who will be hurt by MMT are the vested interests who benefit from the preservation of the bankrupt Peter G. Peterson ideology.— Stephanie Kelton (@StephanieKelton) March 5, 2019
Some people (cough, @paulkrugman ) think they found a graph that disputes my point about the relationship between deficits, reserves, and interest rates. Here’s what he’s missing. pic.twitter.com/OWQlmHj9Wk— Stephanie Kelton (@StephanieKelton) March 3, 2019
I’m just hoping Rubin weighs in. Then we’ve got the trifecta. America’s most vaunted champions of sound banking and economic policy. pic.twitter.com/BytH54hiN1— Stephanie Kelton (@StephanieKelton) March 5, 2019
Don't think for a minute that it's a coincidence the big name economists are misrepresenting MMT with straw man sound byte view and never citing/referencing MMT academic literature to support their false statements. It's very deliberate.— Scott Fullwiler (@stf18) March 5, 2019
I couldn’t help but call out these heretics:
Your MMT would lead to rapid inflation which would devastate those in retirement who are living off their savings. Your lunatic theory, if accepted by progressives, would also hurt the chances of #GND of Medicare-for-all ever getting passed. What you are doing is dangerous.— Rory Gilmartin (@rorygilmartin) March 5, 2019
Just keep printing money forever! What could go wrong?— Rory Gilmartin (@rorygilmartin) March 5, 2019
Twitter user "Austerity is Murder" swooped in to defend MMT:
Why would you say something so completely ignorant or utterly devoid of value? Taxation destroys money. Or it "unprints" money. Federal spending creates new money EVERY SINGLE TIME or as the dull say, prints money.— Austerity is Murder (@sdgrumbine) March 6, 2019
The main reasons I don’t like MMT:
Why? I'm curious to know where/how you think Kelton is wrong.— Paul Boxer (@pboxer_rutgers) March 6, 2019
For 1: Why should full employment be the goal if we live in a world that is rapidly automating? Why not just give a UBI? And the whole idea that the government can just tax and spend infinitely and that hyperinflation can be controlled is insane.— Rory Gilmartin (@rorygilmartin) March 6, 2019
I completely reject the idea that government alone creates wealth. Laborers and capitalists can create wealth where none existed before. Just because you issue currency and have control over it, doesn't mean new wealth isn't created through successful ventures.— Rory Gilmartin (@rorygilmartin) March 6, 2019
MMT would lead to a society controlled by bureaucrats - an authoritarian state like the USSR, where wheeler-dealer types on councils would decide outcomes. Right now it's that capitalists who have that power, and reform is necessary. But it's still better than totalitarianism.— Rory Gilmartin (@rorygilmartin) March 6, 2019
Enemy at the Gates
The coming storm of Republican media vitriol will center on a fundamental rejection of socialist policies. And you better believe Republican pundits will salivate from the mouth when they learn about the mythology that is MMT. One Fox News segment and Breitbart blog post after another will explain and expose it, using simple logic any person who has ever had a career outside of academia would easily understand — a government can not spend money endlessly without experiencing serious negative repercussions. Practical progressives will reject it on its face. And Clinton Democrats will use it as another way to condemn Bernie Sanders and progressives who they undyingly resent for perceived slights progressives committed against Hillary Clinton, some stemming from as long ago as 2015.
We must not give enemies of the Green New Deal and Medicare-for-all legislation fuel to destroy our emerging progressive vision. We must rely on sanity and propose a clear plan to pay for these new programs, and raising taxes and reducing military funding should be at the core of such a plan. In the closing remarks of his piece dismantling MMT, Doug Henwood summed up the dangers of embracing MMT, “It would be sad to see the socialist left, which looks stronger than it has in decades, fall for this snake oil. It’s a phantasm, a late-imperial fever dream, not a serious economic policy.”
Images Via Wikipedia and Twitter (Warren Mosler, Pavlina R. Tcherneva, Stephanie Kelton, and L. Randall Wray pictured)
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