The national debt is either a big scary number you believe is going to burden future generations if we don’t get our spending under control — or you don’t think about it very much. Whatever your personal relationship with the federal government’s ever-increasing debt, that it is ballooning seemingly out of control actually does affect you … but not in the way you might think.
In “The Deficit Myth,” Stephanie Kelton explains how politicians toss the national debt from one side of the aisle to the other as a bargaining tool to advocate for cutting the essential programs and social supports that keep millions of Americans, including children, single women who are heads of their households and people with disabilities, out of absolute poverty.
While “The Deficit Myth” may seem like an economics book — and there were parts I had to reread to understand — this is actually the ultimate social work text; as a current MSW student myself, I want to see this book on the curriculum of either our required policy or poverty and inequality courses.
Kelton proposes a jobs program, advocates for Social Security, Medicare and Medicaid — and that we actually fund them in perpetuity — and explains how the government’s debt is actually the public’s surplus. I was skeptical when I heard the book’s premise that our government doesn’t actually have to balance its budget the way a household does. The government can never run out of money because it’s a currency issuer: It alone has the power to create dollars whenever it wants. It’s a common sentiment that printing large amounts of money is a bad thing because it causes inflation. There has been a lot of hand-wringing lately due to the now three COVID-19 relief packages Congress has passed, which have triggered the printing of trillions of dollars. Forty percent of all U.S. dollars currently in existence have been printed in the last year; conventional economics would portend massive increases in prices or inflation, possibly to the point of hyperinflation.
But, as Kelton explains with Modern Monetary Theory (MMT), the existence of dollars by themselves does not cause inflation. Overspending, either on the government’s or the private sector’s part, does. I had to reread the chapters where Kelton explains how and why this is so, but taking the time to understand MMT is completely worth it. She’s clear: MMT does not give the government a license to print however much money it wants whenever it wants; she’s advocating for spending based on our values rather than our budget.
Since Uncle Sam has the legal authority to create U.S. dollars (indeed, he is the only one with that power), MMT frees us from the false constraints of balancing the federal government’s budget the way individual households and even cities and states must. Acknowledging the differences between how a currency-issuing government relates to money and how a private citizen does allows us to have conversations about what we value rather than argue about cutting budgets of vital programs due to an ultimately imaginary lack of funding.
This theory sounded wild to me at first, and I admittedly still have some questions about it, such as how well it will hold up if/when the U.S. dollar is no longer the world’s reserve currency, as many fiscal and economic experts and lay speculators alike predict will happen soon.
But the U.S. military actually already approaches its budget through an MMT lens: Fiscal increases are easily approved, without always knowing where the money will come from. In “The Deficit Myth,” Kelton is simply suggesting that we apply the same process to other types of spending and start having conversations about what we value about those programs rather than where the money will come from.
MMT is not new or that obscure a theory — even Alan Greenspan has made comments that reveal an MMT philosophy — but it was new to me and the friend who recommended it to me. I can’t help but wonder if our ignorance of it is by design. MMT is absolutely worth considering and trying to understand: If it’s viable, and if enough people can figure it out, MMT has the power to transform the fiscal and political climate in this country and address some of the most significant issues our country has wrestled with since its start.
Read more of the Mar. 31 - Apr. 6, 2021 issue.