by Mitch Kokai
Senior Political Analyst, John Locke Foundation
[B]oth the Left and Right have discovered a magic money tree in the form of a concept known as Modern Monetary Theory (MMT), an idea prominently promulgated by Bernie Sanders’s chief economic adviser, Stephanie Kelton, that is now being used to argue that lawmakers shouldn’t worry about the size of the national debt.
MMT essentially says that the government’s capacity to finance its debt is limitless. Since the U.S. government is the sole printer of dollars, it faces no binding revenue constraint because more dollars can always be printed. Therefore, the theory goes, the national debt is mostly a harmful fiction preventing us from having nice things such as “free college” or “free health care.” Yes, there might be a slight danger of inflation, but MMT advocates contend this can easily be contained through policies such as a $15 per hour job guarantee to stabilize wages.
Count me as skeptical.
Modern Monetary Theory might ordinarily be thought of as having a comfortable home on the loony left, but it is increasingly slipping into the discourse on the populist right. Recently, for example, John Carney, the chief economic writer at Breitbart, not only embraced MMT but argued that Republicans were better suited to implement it since deficits have historically grown larger under Republican presidents than under the “austerian Dems.” And while it is difficult to picture President Trump spending his “executive time” pouring over tracts on monetary policy, there is more than a little MMT to his suggestion to former chief economic advisor Gary Cohn, reported in Bob Woodward’s new book, that we should “just run the presses — print money.”