Do deficits matter? A look at modern monetary theory

 Forgive me if I discussed this topic before, but I kind of wanted to look at it in a more current context given my current beliefs.

So, there's a new type of economic paradigm that's been going around the left in recent years, and it has been primarily embraced by the Berniecrats. It's basically called "modern monetary theory." I became aware of it many years ago, back around 2014ish when I was exposed to the book "Seven Deadly Innocent Frauds of Economic Policy" by Warren Mosler. 

Essentially, the policy argues for a new progressive theory on budget deficits, claiming they're not really as bad as the right makes them out to be. The right sees the national debt as this existential crisis that will need to be paid back and threatens to bankrupt us and our children. However, as MMT rightly points out, if a country like the US is sovereign over its currency, it cannot go bankrupt. It is like being the banker in monopoly. If you run out of money, you can always print more.

It is fine, in MMT, to have some level of budget deficits and national debt. It sees taxation as money removed from the economy, and spending as money infused into the economy. Taxation acts as an economic disincentive that slows the economic engine, while spending money and spur development. The point of taxation is to remove money from the economy to stop inflation and keep it relatively stable, as too much money in the economy without an increase in production could cause inflation. But fiscally conservative policies like the right wants that want balanced budgets can be bad, because they remove too much money from the economy. Too much taxation could actually stop growth and lead to recessions. Basically, the central tenet of an MMT economist is that it's okay to spend today if it leads to economic growth tomorrow.

The national debt does not matter, the debt to GDP ratio does. As long as the national debt remains at a reasonable proportion to GDP, it does not matter, because if the GDP grows in the long term, and the debt to GDP ratio remains the same or shrinks, then the economy comes ahead. 

Generally speaking, this theory does have drawbacks, however. For example some people tend to over emphasize government spending and use it to push reckless spending. Obviously if you just spend tons and tons on the economy without taxing, you'll just explode the national debt, and while you'll never go bankrupt, you can cause a lot of inflation and economic instability. This concept of MMT sounds great on paper, but it does tend to not really fundamentally change the economy as much as you think. The national debt does matter it just debunks the conservative idea that any national debt is bad and we should be cutting social services to stop us from having any debt. Obviously some debt is good and we don't need to worry extensively about the debt like the right thinks, but obviously deficits and debt does matter.

Admittedly, a huge reason I decided to look at this, or look at it again if I have, is to see the place it has with my own ideology, and clearly, it does not have a place. Obviously, when I propose policies, I like to pay for my stuff. I've made that clear with my obsession over funding and laffer curves and stuff. We already work at a deficit. Trump exploded the national debt, as many republican presidents do. Despite their crying over the national debt they're the ones promising economic growth outpacing the national debt every time, and every time they fail to deliver and their tax breaks and military spending end up being snake oil. Then they scream at the left about how we cant afford anything because of the debt they accrue. Obviously I don't want to fund my UBI or healthcare via national debt spending. I want to fund it via taxation. 

Even MMT economists like the Sanders' Institute's Stephanie Kelton agrees. Heck, Kelton hates the idea of UBI, another reason why I'm not hardcore on MMT. MMT is still a very jobist ideology. When it wants to promote deficit spending, it does so because it wants to make investments that improve GDP. The way they see it, government programs lead to things. Education spending comes back with a work force able to make more money. And Kelton is huge on jobs programs over UBI, because a jobs program puts an investment into the country in terms of infrastructure, while UBI is just spending. Admittedly it can be argued spending increases the economy too. Yang likes to claim to fund part of his UBI via economic growth, but still, it's best not to play with fire.

The fact is, with my anti work and productivity neutral ideology, I dont see GDP as the end all to well being, and I'm not really interest in continuing this treadmill of work work work. I seek a new ideology, and that means to fund my policies, I seek budget neutrality. I do believe UBI and healthcare reform would expand the economy in a Keynesian way, but I really dont believe in deficit spending to do it.

MMT is an interesting way to look at economics and it has a lot of validity, but it also has a lot of limitations too and has little value in terms of the main programs I want to support. You can't fund a UBI via deficit spending without causing inflation, so I generally prefer not to.