‘Modern Monetary Theory’ Is a Joke That’s Not Funny
Yes, a government that issues its own currency can pay its bills. But piling up debt for no urgent reason is lunacy.
If you follow the debates over U.S. economic policy, you had probably heard of modern monetary theory well before freshman Democratic Representative Alexandria Ocasio-Cortez spoke favorably about it earlier this month.
If you thought from the start that the whole idea sounded like lunacy, you were right, even if it’s possible to admit some sliver of sympathy for it. So why is MMT, as it is known for short, generating such intense interest now?
Even as just an economic theory, it is not settled or fully developed. This makes engaging with it challenging — even, at times, frustrating.
The bedrock observation of MMT is correct: Any government that issues its own currency can always pay its bills. This observation allows policy makers to show less concern about the budget deficit than is typically the case.
In fact, MMT is growing in prominence precisely because of its relative lackof concern about the size of the deficit. In the years immediately after the Great Recession, which started in December 2007, this aspect of MMT stood in favorable contrast to the position of fiscal-policy centrists and many Republican politicians who called for significant reductions in the deficit at a time of very high unemployment.
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