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We Are All MMTers Now

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Posted on 02 April 2020 Written by John Furlan Stimulus Bill is a Historic Paradigm ShiftThe U.S has potentially entered the Age of Modern Monetary Theory (MMT) with the deficit-busting stimulus bill, which would follow the two previous political/economic paradigm shifts, the Age of FDR/Keynes from 1932 to 1980, and the Age of Reagan/Friedman from 1980 to 2008. It’s just that most Americans haven’t even heard of MMT yet, but that could change very quickly if Sanders starts mentioning it, see further below.Please share this article - Go to very top of page, right hand side, for social media buttons.The bill has finally, once and for all, busted “The Deficit Myth," the title of a forthcoming book in June of a leading MMTer, Stephanie Kelton. With the bill, the key political debate

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posted on 02 April 2020

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Stimulus Bill is a Historic Paradigm Shift

The U.S has potentially entered the Age of Modern Monetary Theory (MMT) with the deficit-busting stimulus bill, which would follow the two previous political/economic paradigm shifts, the Age of FDR/Keynes from 1932 to 1980, and the Age of Reagan/Friedman from 1980 to 2008. It’s just that most Americans haven’t even heard of MMT yet, but that could change very quickly if Sanders starts mentioning it, see further below.

We Are All MMTers Now


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The bill has finally, once and for all, busted “The Deficit Myth," the title of a forthcoming book in June of a leading MMTer, Stephanie Kelton. With the bill, the key political debate has now dramatically shifted, literally almost over night, from which government programs can we “pay for," to use her term, to which programs are absolutely necessary in the national interest, both short- and long-term.



[3/27 update: Historians please note, the Age of MMT may have officially begun today, only time will tell if the political situation can shift in its favor, as at his presser Trump said on combined huge Fed liquidity injections plus stimulus bill : “It’s our money. It’s our currency. We can handle it." Sounds like he’s read Stephanie Kelton. I hope Sanders now uses this huge political opening Trump just gave him and runs with it.-jf]



[3/27 update: Kelton has an article today on The Intercept titled “As Congress Pushes a $2 Trillion Stimulus Package, the “How Will You Pay For It?" Question Is Tossed in the Trash." It discusses the same issues as my article, much more clearly, from an economist’s perspective, which she is. My article is written more from a political and historical one. I have regretted that her views were not taken up by Sanders during the “debates," but it might not be too late for him to change history, even if almost all pundits have counted him out for the nomination, the political situation is extremely fluid, witness Biden’s resurrection by the Democratic establishment a few weeks ago, and stranger things have happened, e.g. Trump’s election in 2016, which very few pundits saw coming. I think Sanders should assemble ASAP a team of economists, perhaps led by Kelton, maybe James Galbraith, Dean Baker, Gabriel Zucman, but also perhaps including some more mainstream ones that MMTers are not fond of but who are not fans of Biden, to advise him, something I’ve felt he should have done all along, especially when he had so much political momentum. It’s still not too late to do so.-jf]



MMT always needed a wartime-like crisis to have a chance at becoming the hegemonic political/economic ideology in the U.S., historically such massive paradigm shifts do, as the 1930s Great Depression produced FDR/Keynes and the 1970s stagflation and Iran crisis produced Reagan/Friedman.

Some emergency that most Americans would feel that there was NO other alternative but for the government to massively respond, regardless of deficits. It turns out it was Covid-19.


"Covid-19 ... might eventually be seen as a key turning point in American history."


Many progressives have long pinned their hopes that climate change would fill that emergency crisis catalyst role, but that wasn’t working politically because it moves far too slowly and less visibly, especially compared with a highly contagious virus now, or financial panic in the 2008 Great Financial Crisis (GFC). Covid-19 has now provided that emergency crisis, despite the deep misfortune, it might eventually be seen as a key turning point in American history.

This possible huge paradigm shift has arrived because of practical politicians, specifically Trump, McConnell, Schumer and Pelosi, average age 75, cutting deals in their deficit-busting stimulus bill for their respective constituencies, under the impetus of the emergency of the Covid-19 crisis.

None of these mainstream politicians of course give a hoot about MMT, per se, nor probably have read any of it (AOC may have), they have neither the time nor interest. Just as I’m sure FDR, the consummate practical politician, developed his hodge-podge of “Keynesian" practical, pragmatic New Deal programs without Keynes and never read Keynes’ “General Theory," whom if I recall he dismissed as a mathematician after they met.


"None of these mainstream politicians of course give a hoot about MMT"


As Keynes once said, “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back."

My title is a play on the famous quote attributed to Richard Nixon in 1971, “We are all Keynesians now," which ironically came from Friedman and was used by Nixon at the end of the Bretton Woods era that year and the 1970s crackup of Keynesian hegemony. Kelton’s new book is now likely to become the seminal popularization for the Age of MMT, as Friedman’s 1962 “Capitalsm and Freedom" did for the Age of Reagan nearly twenty years later.

I won’t discuss the details of the stimulus bill here, there’s much available in the media, e.g. this 3/25 article by Eric Levitz at New York magazine. Kelton expressed some preliminary skepticism about the bill, without having had a chance to study the actual language yet, in her March 24 interview with Brad Friedman, Kelton is on from 28:00 to 51:00, I urge you to listen if you have the time, but not before you read her KEY March 21 NYT op-ed discussed below.



[3/26 update: Please read today’s NYT editorial titled “Why Is America Choosing Mass Unemployment?" Subtitle, “European countries are paying to preserve jobs during the coronavirus crisis. Sadly for American workers, the United States is charting its own path."



[Update: Also this 3/28 NYT article, “The Nordic Way to Economic Rescue," subtitle “In the face of the pandemic, Denmark is effectively nationalizing private payrolls, in contrast to the patchwork American system," which quotes another MMT economist, Pavlina Tcherneva. And this 3/25 article on BusinessInsider titled, “The US is helping people after they’ve lost their jobs in the coronavirus pandemic. Here’s how 3 European countries are helping workers keep them instead." To put these articles in perspective, see “Money Is Not the Reason the U.S. Is Not Following the Danish Model," by economist Dean Baker



[3/27 update: I just saw on C-Span AOC tearing into the bill in an impassioned one-minute floor speech as “the largest corporate bailout with as few strings as possible in American history. Shameful." My main point here remains that the bill has finally busted, once and for all, the “deficit myth," so that the key issue to be debated is now which government programs have been and will be enacted, not how they are “paid for."-jf]



[3/28 update: For a scathing critique of the bill, see Marshall Auerback’s “The Coronavirus Stimulus Bill Is a $2 Trillion Slush Fund for Washington Cronies." His concluding sentence:

“Unfortunately, there does not appear to be an FDR ready to lead us in this acute moment of need."

If so, then however you may feel about his critique, unless/until such a political leader has enough popular support, as FDR did in two landslide elections in 1932 - 36, only AFTER three years of the Great Depression, timing is everything, we are nowhere near that yet, nor may we get there, given what the Fed has learned to do since then, as it has been doing in spades right now, as it did in the 2008 Great Financial Crisis (GFC), and what this bill now does compared to the GFC, then this bill is what the American people get right now. It was rushed through Congress as an emergency because Trump previously had done such a horrendous job on testing and tracing. Both Sanders and Warren voted for the bill, called the CARES Act, which passed the Senate 96 - 0, Romney and Paul did not vote, and without a recorded vote in the House. Should the two “progressives" have voted Nay, abstained, or put up a stronger floor fight, given the current political situation, as Sanders has put it? Going forward, is it too late for Sanders to dramatically change that political situation, which the primaries have shown is extremely difficult, or has that opportunity been once again lost, along with his political momentum?-jf]



Key point: the Age of MMT would be the ideological resolution of the 2008 - 20 Neoliberal Crisis, not the Covid-19 emergency, per se, which may provide the catalyst, IF and only IF, a huge IF, some national politician seizes that opportunity, as FDR did in 1932 and Reagan did in 1980, both of whom implemented ideas and political agendas that had been building up for decades, just as have progressive ideas and MMT.

Right now the only national politician who appears as a possible candidate to to seize that opportunity is Sanders, whether or not he gets the nomination, which most pundits consider impossible. Sanders realizes that the stimulus bill reflects a monumental change in political environment from the 2008 GFC, he has said that the current bill is much better than the bank bailouts back then, which he voted against.


"MMT would be the ideological resolution of the 2008 - 20 Neoliberal Crisis, not the Covid-19 emergency"


So now he must move forward with his program, finally freed from the “how will you pay for it" badgering of his opponents and moderators during the Democratic “debates," as Kelton has noted. The current political/economic situation is extremely fluid, almost anything might happen, including a once-every-40-years major political/economic paradigm shift

If Sanders does so, he may still have the very belated chance to lead the historic paradigm shift, even if he doesn’t get the nomination, should he choose in the next Democratic debate in April, using the stimulus bill as the consummate opportunity.

To do so, what Sanders must emphasize from this day on should be based on what Kelton wrote in her March 21 New York Times op-ed, which - because of the stimulus bill - is BY FAR the single most important thing you MUST read this week, other than articles on Covid-19 safety. Here are her last three paragraphs:

“The degree to which Congress’ relief efforts actually reach working families depends upon how effectively lawmakers of good will can fend off the various industry interest groups that will attempt to eat up as much of the allotments as they can. Congress shouldn’t just settle for short-term band-aids to patch holes in our health care infrastructure and our social safety nets. It can and should use this opportunity to make ambitious, lasting improvements.

The large deficits in the likely oncoming recession - and they will be large whether the result of government action or inaction - should be calmly accepted. There is no risk of a Greek-style debt crisis because, unlike the Greeks, whose currency is the euro, the U.S. government maintains control of a sovereign currency, the most powerful one on earth. We are not going to “run out of money," as President Obama once declared during the Great Recession.

This is as good a moment as any for the American people to learn where money comes from and why the federal government, and only the federal government, has the means to step up and save the economy. Congress has all the firepower it needs. It just needs to send instructions to the Fed - and the money will go out."

As an economics professor, in her op-ed Kelton expertly gives the teaching lesson of comparing what the Fed has just done with their massive liquidity injections for the banks with what the federal government must now do for the American people, it is a brilliant heuristic device.


"Sanders ... may still have the very belated chance to lead the historic paradigm shift, even if he doesn’t get the nomination"


Should Sanders take my advice here, which is a follow-up to that which I gave in my March 14 article before the last debate, then Kelton’s op-ed and his April Democratic debate could be a historic turning point, even if he doesn’t get the nomination, he will have dramatically changed the political/economic debate forever, for the better. He would go down in history for doing that, so at this point, what does he have to lose by doing so?

For now, the 2020 election still has the possibility of being like the previous paradigm shift elections in 1980 - 84 and 1932 - 36 (also 1896). If so, it will ultimately produce a resolution to the 2008 - 20 Neoliberal Crisis, which was overly prolonged by Obama not seizing the moment in 2008 with a very inadequate stimulus bill with no follow-up, choosing instead to bank his political capital on Obamacare and Dodd-Frank.

If Sanders doesn’t now rise to the occasion provided by the stimulus bill, then AOC, who is supporting Sanders but can’t run for President until 2024, when she turns 35, has already tried. AOC first rescued MMT from being an obscure academic discipline when she paired it with her Green New Deal (GND) in early 2019 (shown in the big spike for MMT mentions in Google Trends).

AOC has a popular new vido clip, I’ll try to find the link, part of which introduces the Kelton interview I referenced above, which she also refers to in her segment, about how this has never been about how government programs are going to be paid for, but rather the political will to enact them.

That is absolutely 100% correct, though I would substitute the term political power for political will, because it is ultimately always about power, something both the GOP for decades and revolutionaries have always known, but not Democrats and academics. (Joe Stiglitz has Power in the title of his recent book, hopefully finally a change.)

But where AOC is wrong is on which programs the American people will feel it is absolutely imperative to support, right now. In her video clip AOC evokes the homeless crisis in NYC, which she represents and which is indeed a crisis, but not one that the majority of the American people currently feel is a top priority, as she does. And of course there is her GND, which again the majority of American people do not view as a crisis, yet.

Most Americans feel healthcare is in crisis, even before Covid-19, and so many would support Medicare for All, which Sanders no longer has to “pay for." Same for the education crisis and free college tuition, which he also no longer has to “pay for." A jobs for all program. And so on.

MMT, which says it is a description of how the world actually works, is NOT mainly about how to fund these programs, it should be about WHAT programs to implement, and HOW, which is a political issue, a government fiscal issue, not a monetary issue, per se.


"Most Americans feel healthcare is in crisis, even before Covid-19"


To paraphrase another leading MMTer, I can’t find the exact quote, MMT is NOT about the money, it is about all the useful things you can do with the money. So the REAL issue is what are those programs, that’s what the national debate must now immediately shift to.

The GOP actually got that long before the Dems, when in a huge historic irony it switched roles with the Dems as the Eisenhower party of “fiscal responsibility." So starting with Reagan and right through to the second Bush and Trump, under the cover of supposedly balancing the budget, small government and austerity, the GOP has always increased the deficit and debt for their priorities, tax cuts for the wealthy and corporations, and huge spending for the military.

Hopefully with the stimulus bill the Dems have now finally gotten it also. So then the real debate finally can and must begin on what that government spending should really be for.

Besides Kelton, there are many other MMT “academic crbblers," Keynes’ term above, who have toiled away in relative obscurity since the mid-1990s. I also look forward to the follow-up book later this year by Bill Mitchell and Thomas Fazi, to their 2017 “Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World."


"the GOP has always increased the deficit and debt for their priorities"


An excellent journalist popularizer of MMT views, which he seems to have internalized without always explicitly labeling it as such, is Bloomberg’s Joe Weisenthal, an extremely prolific and very influential tweeter, aka @TheStalwartTwo others on Twitter with MMT-type tweets that interested non-economists like me can understand are @Mauerback and @rohangrey.



[Update: I’ve just seen this 3/25 Bloomberg article, for a different, very good take on what I’ve covered in this article. - jf]



I said I’m not an epidemiologist in my March 27 article on Covid-19, nor am I an economist. But I’m not commenting here on MMT economic theory, per se. I haven’t gotten and won’t get into the academic debate over deficits, inflation, real resource constraints and bottlenecks, etc.. I’ll leave that to the bona fide economists, just as I defer to the views of the real epidemiologists on Covid-19.

Rather I’ll just say to MMTers, you have effectively won the economists’ ideological battle, but much more importantly you must now win the political war, be gracious winners, your time has come, embrace it and optimize it, be like the collegial and politically savvy Kelton. Make friends and allies, for the common good.


"MMTers, you have effectively won the economists’ ideological battle..."


Even with the Keynesians you love to criticize on Twitter, Krugman, Furman, Summers, Blanchard, Mankiw, etc. all of whom have capitulated on “fiscal space" over the past few years, with Krugman acknowledging the contribution of Abba Lerner’s “functional finance," a precursor to MMT in WW II.


"...but much more importantly you must now win the political war"


Even with Bill Gates, whom I strongly praised in my March 27 article on Covid-19 but has said in the past of MMT, “That is some crazy talk." But it actually just happened with the stimulus bill.

Again, you need all the allies you can get on the programs you care about, e.g. MFA. An MMT revolution is potentially now happening right under everyone’s nose. It is a consummate American revolution, in the tradition of Hamilton doing what’s in the national interest.

It is not Danish “democratic socialism," as suitable as that may be for small Nordic countries, so Sanders, AOC and others should finally drop that label, and fully embrace MMT.

With the stimulus bill, the Age of MMT may now have just begun, provided Sanders takes advantage of this historic opportunity. I hope he does, for the good of the country, and the world, both of which desperately need great leadership, right now.

Make America and World Awesome, MAWA.


An earlier version of this article appeared on Medium, 25 March 2020.


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