{"id":10127,"date":"2020-06-10T23:43:29","date_gmt":"2020-06-11T06:43:29","guid":{"rendered":"https:\/\/worldcampaign.net\/?p=10127"},"modified":"2020-06-11T05:20:04","modified_gmt":"2020-06-11T12:20:04","slug":"post2-91","status":"publish","type":"post","link":"https:\/\/worldcampaign.net\/?p=10127","title":{"rendered":"“\u201cLearn To Love Trillion Dollar Deficits\u201d, The New York Times"},"content":{"rendered":"

By Stephanie Kelton,\u00a0<\/span>Dr. Kelton, an economist, is the author of \u201cThe Deficit Myth.\u201d, Opinion, June 9, 2020<\/p>\n

Our country\u2019s myth about federal debt, explained.<\/em><\/p>\n

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Last week, a bipartisan group<\/a> of 60 members of the U.S. House of Representatives sent a letter to congressional leadership, raising concerns about mounting debt and deficits that have come as a result of the federal government\u2019s response to the coronavirus pandemic. \u201cWe cannot ignore the pressing issue of the national debt,\u201d they wrote. The letter warned of \u201cirreparable damage to our country\u201d if nothing is done to stem the tide of red ink. Senator Mike Enzi, Republican of Wyoming, chairman of the Senate Budget Committee, echoed<\/a> their concerns.<\/p>\n

It\u2019s an ominous sign for the smaller businesses and millions of unemployed Americans whose survival may very well depend on continued government support in this crisis. While these Democratic and Republican lawmakers stopped short of calling for immediate austerity measures, their remarks demonstrate that they have fallen prey to what I call the deficit myth: that our nation\u2019s debt and deficits are on an unsustainable path and that we need to develop a plan to fix the problem.<\/p>\n

As a proponent of what\u2019s called Modern Monetary Theory<\/a> and as a former chief economist for the Democrats on the Senate Budget Committee, intimately familiar with how public finance actually works, I am not worried about the recent multitrillion-dollar surge in spending.<\/p>\n

But there was a time when it would have rattled me too.<\/p>\n

I understand the deficit myth because in the early part of my career in economics I, too, bought into the conventional way of thinking. I was taught that the federal government should manage its finances in ways that resemble good old-fashioned household budgeting, that it should hold spending in line with revenues and avoid adding debt whenever possible.<\/p>\n

Prime Minister Margaret Thatcher of Britain \u2014 President Ronald Reagan\u2019s partner in the conservative revolution of the late 20th century \u2014 captured these sentiments in a seminal speech in 1983, declaring that \u201cthe state has no source of money other than the money people earn themselves. If the state wishes to spend more, it can only do so by borrowing your savings or by taxing you more.\u201d<\/p>\n<\/div>\n<\/div>\n

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That thinking sounds reasonable to people, including me when I first absorbed it. But Mrs. Thatcher\u2019s articulation of the deficit myth concealed a crucial reality: the monetary power of a currency-issuing government. Governments in nations that maintain control of their own currencies \u2014 like Japan, Britain and the United States, and unlike Greece, Spain and Italy \u2014 can increase spending without needing to raise taxes or borrow currency from other countries or investors. That doesn\u2019t mean they can spend without limit, but it does mean they don\u2019t need to worry about \u201cfinding the money,\u201d as many politicians state, when they wish to spend more. Politics aside, the only economic constraints currency-issuing states face are inflation and the availability of labor and other material resources in the real economy.<\/p>\n

It is true that in a bygone era, the U.S. government didn\u2019t have full control of its currency. That\u2019s because the U.S. dollar was convertible into gold, which forced the federal government to constrain its spending to protect the stock of its gold reserves. But President Richard Nixon famously ended the gold standard in August 1971<\/a>, freeing the government to take full advantage of its currency-issuing powers. And yet, roughly a half-century later, top political leaders in the United States still talk as Ms. Thatcher did and legislate as though we, the taxpayers, are the ultimate source of the government\u2019s money.<\/p>\n

In 1997, during my early training as a professional economist, someone shared a little book titled \u201cSoft Currency Economics<\/a>\u201d with me. Its author, Warren Mosler<\/a>, a successful Wall Street investor, argued that when it came to money, debt and taxes, our politicians (and most economists) were getting almost everything wrong. I read it and wasn\u2019t convinced. One of Mr. Mosler\u2019s claims was that the money the government collects isn\u2019t directly used to pay its bills. I had studied economics with world-renowned economists at Cambridge University, and none of my professors had ever said anything like that.<\/p>\n

In 1998, I visited Mr. Mosler at his home in West Palm Beach, Fla., where I spent hours listening to him explain his thinking. He began by referring to the U.S. dollar as \u201ca simple public monopoly.\u201d Since the U.S. government is the sole issuer of the currency, he said, it was silly to think of Uncle Sam as needing to get dollars from the rest of us.<\/p>\n

My head spun. Then he told me a story: Mr. Mosler had a beautiful beachfront property and all the luxuries of life anyone could hope to enjoy. He also had a family that included two teenagers, who resisted doing household chores. Mr. Mosler wanted the yard mowed, the beds made, the dishes done, the cars washed and so on. To encourage them to help out, he promised to compensate them by paying for their labor with his business cards. Nothing much got done.<\/p>\n<\/div>\n<\/div>\n

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\u201cWhy would we work for your business cards? They\u2019re not worth anything!\u201d they told him. So Mr. Mosler changed tactics. Instead of offering to compensate them for volunteering to pitch in around the house, he demanded a payment of 30 of his business cards, each month, with some chores worth more than others. Failure to pay would result in a loss of privileges: no more TV, use of the swimming pool or shopping trips to the mall.<\/p>\n

Mr. Mosler had essentially imposed a tax that could be paid only with his own monogrammed paper. And he was prepared to enforce it. Now the cards were worth something. Before long, the kids were scurrying around, tidying up their bedrooms, the kitchen and the yard \u2014 working to maintain the lifestyle they wanted.<\/p>\n<\/div>\n