-by Geoff Coventry The Emergence of Modern Money Theory (MMT)There is a profound shift going on in the arena of economics. It will have a significant impact across a whole spectrum of society as it takes root. A fresh perspective on the role of our nation’s currency is set to reshape public policy and government budget debates. If you are not yet familiar with Modern Money Theory (MMT), it is time you get up to speed. A good place to start is with the work of Stephanie Kelton. Her recent New York Times piece How We Think About The Deficit Is Mostly Wrong provides an excellent introduction to this shift in thinking.As we seek to elect and educate candidates to office that can make a difference, we also have to get the voting public up to speed. Candidates need a base of voter support to keep them in office as they begin to challenge the status quo. We want you to be aware of some of these efforts so you can learn, share, and help widen the influence of these ideas.A New Public Education ResourceThe web site www.modernmoneybasics.com has recently launched as one such educational vehicle, along with a short YouTube video (above) that is a great intro for those with short attention spans! The Modern Money Basics Facts page provides an easy-to-understand, question-and-answer visual guide designed for those without any economics background. We have designed this site for the population segment generally in the Millennials’ age-range, although anyone with an open mind will quickly grasp the main ideas. While MMT is first a simple description of how our monetary system works, we have also sought to frame the information in a positive way that focuses on how to better use our nation’s sovereign currency for public purpose.Changing Old HabitsNo matter which side of the political aisle you sit, MMT challenges our current perceptions and offers new ways to approach old problems. Progressives too must learn to avoid falling into the trap of framing tax reforms and policy proposals in ways that reinforce the narrative that our government is fiscally constrained. It is not, and never will be. As the ancient saying goes, new wine needs new wineskins or both will be lost. We cannot frame progressive policies in neoliberal economic language. The Democratic Party has spent several decades trying and the results are evident in the resulting gross inequity, systemic unemployment, and abandoned communities across our nation.As an example, once we understand that raising taxes to address extreme wealth inequality does not give our government any more spending power than what it already possesses, we can separate important policies like universal health services and college education from the tough tax policy battles designed to reduce the influence of billionaires over our political process. Funds for public needs do not have to be dependent on passing difficult tax legislation, so separating these fights can be politically useful.Ending “Pay Fors”Whatever Congress authorizes is “affordable.” Our government issues a sovereign currency and is therefore “self-financing.” The Treasury and Federal Reserve coordinate to make all payments that Congress authorizes, no matter what levels of taxes are collected.We must reframe fiscal policy debates away from the false narrative of a scarce money supply. This narrative forms the basis for the argument that Social Security and Medicare, among other government programs, are unaffordable. As Alan Greenspan tried to explain to a very disappointed Paul Ryan, “there is nothing to prevent the Federal Government from creating as much money as it wants and paying it to somebody.” There is no unfunded liability crisis.We cannot give in to the temptation to link tax reforms that address inequities in our economy to the sustainability of important government programs.
• Firstly, it is economically inaccurate to state that federal taxes fund government spending. The government spends by crediting bank accounts, and taxes can only remove currency that prior government payments added. Taxes cannot be a source of funds. • Secondly, we should vigorously defend programs such as Social Security from attacks simply because a government that issues its own currency will never be insolvent. Congress should simply approve a permanent living wage to senior citizens and authorize Treasury to make all payments as they become due, irrespective of taxes received or trust account balances. This is, of course, exactly how we pay for our wars. • Finally, linking government programs and investments to a specific tax source leaves those programs subject to unnecessary cuts when tax receipts inevitably fall during recessions. Why would we want to link essential purpose services to business cycles?
It is time to end the “pay for” mentality. We must break the bad habit of pairing all of the government’s public investments with a tax, or of linking payments for government programs to the need for a more equitable tax code. They are two separate aspects of government policy, each to be debated on their own merits. This allows us to reframe the conversation on each issue back to how they best serve the public.Reframe the DebateThis is how we shift the discussion. A proper understanding of modern money provides firm footing to progressives pressing for public investments that raise living standards for the poor, reversing plutocratic trends, or restoring our vital ecosystems.The Republican “Tax Scam” was wrong not because it created a larger government deficit-- something that is neither good nor bad in and of itself-- but because it gave a massive handout of our public currency to the extremely wealthy, worsening an already excessively inequitable distribution of wealth, and doing nothing to create a more sustainable, shared prosperity.Now, as Republicans seek to use the enlarged deficit to attack Social Security and Medicare, our response must be to expose their entire false premise-- that larger deficits create unsustainable programs-- and insisting on increasing these programs to meet the needs of all Americans. We don’t need tax increases to do so.Our government is not constrained financially like a household. The deficit is not our primary guide for government budget and tax reform discussions. Progressives can have a compelling tax policy message that will reduce inequality and lead to a more prosperous economy for all. We also have a powerful message that our government can already afford to pay incomes to senior citizens, raise wages for its workers, cover the costs of health care, and forgive student loans.Take care to reframe the debate over fiscal policy the right way. If you need help understanding how our modern monetary system works, check out Modern Money Basics. Together, we can shift our national conversation in a more positive direction and inspire hope in a better economy for all.Stephanie Kelton introduced me to Geoff Coventry recently. He is a serial entrepreneur and a member of the Patriotic Millionaires, a group dedicated to ending the destabilizing concentration of wealth and power in America. Geoff is involved in efforts to establish the ideas behind Modern Money Theory as the dominant framework to guide public policy in order to create a more sustainable and shared prosperity. Geoff is co-founder and COO of Tradewind Energy, Inc., a wind and solar energy development business he helped start in 2002. Prior to this position, Geoff was a co-founder and vice president of NetSales, Inc. Geoff runs modernmoneybasics.com and also blogs for patrioticmillionaires.org. -Howie