Thanks to a reader and his comments on this blog for making me think more about modern monetary theory or MMT. Something I heard about but ignored.
According to Stephanie Kelton, a professor of public policy and economics at Stony Brook University, the U.S. government can always afford a new program in financial terms because it can issue currency without taxing or borrowing.
Given this theory you can see why the American left may be on board. Sen Sanders and Rep AOC are fans because it allows them to use the word “free.”
Budgets, debt, deficits, treasury bills, taxes are all irrelevant under MMT and as you may guess, if you don’t need to worry about any of that, all your wants and desires can be fulfilled and no responsibility necessary. Kelton’s theory is we have no money, it’s all the governments.
Kelton was and may still be an advisor to Sanders.
What better way to further an appealing social agenda of government provided just about everything from guaranteed income and jobs to free college and health care then to develop a theory that places no limits on paying for… anything.
If you keep printing money, what about inflation? Not a problem according to Kelton, but if it becomes so, government just taxes the population to curb spending.
Fortunately many more conventional economists on not on board, notably Paul Krugman.
MMT has been suggested as the way to forgive all student loans, all $1.5 trillion. Just print money to do the job without regard to how or why the loans were acquired, no questions asked, no responsibility required.
It would appear first you develop or buy into an ideology and then you develop an economic theory to make it work or appear to do so.