In our previous Substack post highlighting Dr. Jerome Corsi’s The Little Red Book of Democrat Socialist Lies: The 2020 Presidential Election Edition, we exposed the Left’s assault on successful people of a different worldview: “Tax the Rich!” We now deal with the Left’s “solution” to monetary issues, “Just Print Money.”
Modern Monetary Theory (MMT)
MMT falsely argues that a sovereign government issuing its own fiat currency is not financially constrained like a household — it can create money to fund spending and achieve full employment, with inflation (not solvency) as the primary limit, which can be managed through taxation and other tools. That sounds good in a fantasy world, but in the real world, it ultimately results in disaster. Is that the true purpose?
Unlimited Deficit Spending Funds the Welfare State
“We can pay for it [free college, Medicare for All, and a federal jobs guarantee] by saving costs on expenditures that we’re already doing. We can pay for it by saving money on military spending. We can pay for it by raising taxes on the very rich. We can pay for it with a transaction tax. We can pay for it with deficit spending.”
Rep. Alexandria Ocasio-Cortez (Democrat-NY), emphasis added
BusinessInsider.com, Jan. 7, 2019: “Ocasio-Cortez also said that Modern Monetary Theory, which holds that the government doesn’t need to balance the budget and that budget surpluses actually hurt the economy, ‘absolutely’ needed to be ‘a larger part of our conversation.’”
Both Ocasio-Cortez quotes heading this chapter come from the same source: Eliza Relman, “Alexandria Ocasio-Cortez says the theory that deficit spending is good for the economy should ‘absolutely’ be part of the conversation,”
Democrat socialists increasingly are drawn to a new brand of economics known as “Modern Monetary Theory” (MMT), which argues that deficit spending is good, and actually a stimulus in a world of fiat currencies not backed by gold (or anything else, other than the credit rating of the government printing the currency). In 2016, Bernie Sanders hired MIT economics professor Stephanie Kelton, one of the theory’s main academic proponents, as an advisor to his campaign.
Money Free-for-All
Conservative George Will described MMT as “the Democrats’ intellectual breakthrough du jour” of how to pay for all the free new entitlement programs the party’s 2020 presidential candidates are promising to create for Americans, at no cost to anyone. So, when all taxing schemes fail to produce the needed revenue, the MMT solution is simple: since the dollar is a fiat currency by definition, just keep printing money, regardless of how big the annual deficits turn out to be or how astronomically high the national debt climbs. The deficits will actually stimulate the economy and additions to the national debt will never have to be repaid.
Here is Will’s summary of MMT theory: George Will, “Democratic Candidates Channel Late-Night Infomercials,” National Review, March 10, 2019.
“The nation has fiat money — currency whose issuer will not convert it into something valuable (e.g., gold) but that the public accepts is a reliable store of value. A government that controls its currency need never run short of it. Therefore (non sequitur alert) the government can borrow and expand the money supply sufficiently to allow spending to proceed without reference to government revenues, as long as interest rates are, and are apt to remain, low. In the words of three MMT believers (Stephanie Kelton, economics professor and former Bernie Sanders campaign adviser; Andres Bernal, doctoral student and adviser to Representative Alexandria Ocasio-Cortez (D., N.Y.), and Greg Carlock, a climate researcher): “Anything that is technically feasible is financially affordable.”
MIT economist Stephanie Kelton confirms that Will’s understanding of MMT is correct. In an interview with CNN, Kelton explained MMT as follows:
Few people understand what the national debt is, and most people tend to conflate government deficits with the national debt. So, let’s start by clarifying these terms. The national debt is nothing more than a historical record of all the dollars that were spent by government but not taxed back.
When the government spends more than it collects in the form of taxes (and other payments), we label it ‘deficit spending.’ But that’s only part of the story. To complete the picture, suppose the government spends $100 into the economy but only taxes $90 back out. The result is a surplus equal to $10 that shows up somewhere in the non-government part of the economy. In other words, the government’s ‘red ink’ becomes our ‘black ink.’ Their deficits are our financial surpluses. So, where does the ‘debt’ come into play?
Z. Byron Wolf, “Debt? What debt? At $22 trillion, here’s the argument that the national debt doesn’t matter,” CNN Politics, CNN.com, Jan. 13, 2019:
“Whenever the government runs a deficit, it sells government bonds called U.S. Treasuries. This is usually referred to as ‘borrowing,’ but that’s actually misleading. What’s really happening is that the government is allowing people to trade in their dollars for a bond that pays some interest. A pretty good deal if you happen to be lucky enough to hold some of that $22 trillion.”
George Will concluded that MMT “teaches that everything, feasible or not, is affordable in the sense that government can always come up with fiat money to pay for it.” For hard-left socialists like Bernie Sanders and Alexandria Ocasio-Cortez, MMT signals not just that happy times are here again, but as George Will summarized, “… never in the long human history of intractable scarcities have there been days as happy as those that MMT promises.”
The Truth about U.S. National Debt
Terence P. Jeffrey, “$3,727,014,000,000: Federal Spending Sets Record Through July; Treasury Runs $866,812,000,000 Deficit,” CNSNews.com, Aug. 12, 2019:
“Meanwhile, more traditionally trained economists express concern that the federal government spent a record $3.727 trillion dollars in the first 10 months of fiscal 2019 (October through July), according to Treasury Department statistics. With that amount of record spending, the U.S. government ran a budget deficit of $866,812 billion.”
It took the United States 193 years to accumulate its first trillion dollars of federal debt. We are now spending at a rate where we will add $1 trillion to the federal debt this fiscal year, as well as every fiscal year into the foreseeable future. The Obama administration in eight years nearly doubled the national debt from approximately $10.6 trillion at the end of the George W. Bush administration to $19.9 trillion when Obama left office, with the total approaching $21.5 trillion at the end of fiscal year 2018.
With Social Security and Medicare now accounting for nearly half of the U.S. budget, getting federal spending under control would require a bipartisan resolve to restructure government entitlement and social welfare spending that is unlikely to happen. U.S. politics have entered an era in which the hard-left dominating the Democratic Party has decided to become openly socialist. As a consequence, Democratic Party presidential candidates are required by core constituents to sign onto a host of government programs including free college education and free medical care for all, including non-citizens as well as citizens.
This ends part one of this two part examination of the Left’s fantasy of using the printing press on auto pilot to provide the funding they need to pursue their socialist/communist vision of dark hope and destructive change for America. Come back tomorrow for part two.
Do those dots connect? You decide.
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