No one ever asks, “How do you plan to pay for it?” when it’s weapons and war. Funny, that. Deficits are of little concern except for investments in our economy.
A friend whose career was in banking regulation has serious doubts about Modern Monetary Theory (MMT). Last I heard in his podcast, Nick Hanauer had his doubts that MMT was right. But he was sure our current economic models are wrong.
Pretty sure Manchin is working with those current models. $3.5 trillion is too much, but he cannot say why. Inflation is “running rampant,” whatever rampant means. “Shouldn’t we be prepared” for geopolitical challenges going forward, he asks? But when they arise, would he ask how we pay for those challenges?
“When the government spends more than it taxes away from us, it makes a financial contribution to some other part of the economy,” says MMT economist Stephanie Kelton. “Their red ink is our black ink. When you look at it this way, it becomes clear that every deficit is good for someone. The question is, For whom?”
By injecting money into the economy with the touch of a computer keyboard in 2020, the U.S. had its shortest recession in U.S. history, Kelton argues. And that’s a bad thing? The real limit on spending, she argues, is inflation.
“Instead of asking, How will we pay for it? we should be asking, How will we resource it?” Kelton argues. So long as we do not outstrip our ability to resource our spending, we can keep inflation in check.
“Kitchen table” economists may think that’s crazy talk. Like time running slower the closer one travels to the speed of light.