Thank you for this post. The article does a good job of summarizing Stephanie Kelton's new book The Deficit Myth. Kelton's job now, as she sees it, is to get knowledge of the MMT theories out into the public sphere and to influence reporters and opinion writers to cease asking the question: "But how are you going to pay for it?"
The way we think of our budget as the same as a household budget is extremely incorrect. The only real obstacle to bold govt programs is political will, thats it
For any government expenditure that isn’t automatic (like interest expenses or welfare programs), the House and Senate debate and then pass bills that require spending. For example, in 2017 the Senate happily voted 89–9 to pass a 1,215-page bill called the National Defense Authorization Act. It authorized $737 billion in spending. Once this bill passed, the Department of Defense could enter into contracts with weapons manufacturers like Raytheon. As soon as the ink dries, the U.S. Treasury instructs its bank, the Federal Reserve, to go into its computers and mark up Raytheon’s bank account. Money enters its account and it begins paying its workers, suppliers, and its CEO Thomas Kennedy’s $1 million salary.
The important thing here is that the Federal Reserve does not dip its hand into a pot of “tax dollars” to pay military contractors, nor is it required to check some mythical account where tax dollars live before it wires the money. In fact, that account doesn’t exist. As former Federal Reserve Chairman Ben Bernanke once noted, when the government pays for things, it is “not taxpayer money. We simply use the computer to mark up the size of the account.” Alan Greenspan, Bernanke’s libertarian predecessor at the Fed further clarified, “There’s nothing to prevent the federal government from creating as much money as it wants and paying it to someone.” The implication is that if Congress can pass a bill that requires some form of spending, the Federal Reserve can and will spend that money without limit, as is the case with the military. This directly contradicts ideas about government money espoused by leading politicians. The most prominent example was in 2009, when a C-SPAN host asked President Barack Obama, “At one point do we run out of money?” to which he responded, “Well, we are out of money now.” These statements are mutually exclusive; only one can prevail. So who is right?
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