Some of them told me they understood that waving the wand entailed eliminating the entire U.S. But they hated the very same securities when they considered them obligations of the federal government.Įventually, I’d point out that I had asked two versions of the same question. Treasuries, as long as they thought of them as financial assets held by the private sector. Eventually, everyone would decide against waving the wand. Would you wave it?” The question drew puzzled looks.

Then, I’d ask a seemingly different question: “Suppose that wand had the power to rid the world of U.S. Then I’d ask, “Would you wave the wand?” Without hesitation, they all wanted the debt gone. I’d start by asking them to imagine that they had discovered a magic wand with the power to eliminate the entire national debt with one flick of the wrist. One of the most eye-opening things I learned came from a game I would play with members of the committee (or their staffers). I looked for ways to help the committee without reinforcing myths and misunderstandings about our nation’s finances. When I met with the members of the committee for the first time, no one was rude, but I could sense that there was reticence about expanding the deficit aviary. Most of the senators on the committee had never heard of MMT. Read this excerpt with an open mind, and you may just begin to doubt the “common sense” of fiscal prudence.Īs word spread that I would be heading to the nation’s capital to advise the Democrats, journalists fired off articles with headlines like “Sanders Hires Deficit Owl.” I had coined that term in 2010, as a way to distinguish the views held by modern monetary theory (MMT) economists like me from those of the more deficit-anxious birds.

Indeed, while the terminology is different, one can make the case that MMT builds on fundamental precepts of Keynesian economics seasoned with a dash of Milton Friedman’s provocations. But as Stephanie Kelton, an economics professor at the State University of New York at Stony Brook and the most visible (and persuasive) advocate of MMT, makes strikingly clear in The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, much of what underpins the theory is widely accepted by mainstream economists - if not mainstream politicians and the public.

It’s certainly been used that way by the political left, much as supply-side economics has been used by the right to justify tax cuts for the one percent. If you think Modern Monetary Theory is a rationale for ignoring federal budget deficits and spending whatever’s necessary to fund an ambitious progressive agenda - everything from tuition-free college to Medicare-for-All - you’re correct, in part.

Stephanie kelton the deficit myth