Tuesday, January 19, 2016
Priorities in Spending: A Challenge of MMT Economists
L. Randall Wray writes
"...the sovereign government’s debt is the non-government’s asset. Indeed, the outstanding US Federal Government Debt is (identically) our (nongovernment) net financial (dollar) wealth...they argue that the irrational fear of government debt is what constrains our government spending...Hence the conceit is that if we found another way—printing debt-free money—to finance spending without issuing more debt, Congress would jump at the chance to spend more." [Source]
One of the ideas I most admire of the MMT crowd is that they do get away from the idea that government is limited by the same economic laws as individuals. Government borrowing and spending money is a very different thing that my borrowing or spending and ultimately the nature of this borrowing and spending is tied-up in the governments ability to compel others to pay taxes in their currency and their ability to create more of this currency without limit other than those self-imposed.
Wray hits on a common objection of conservative-minded people. They do not want to lift the veil for all to see that government doesn't have to tax tomorrow's citizen so to pay for today's government debt. It seems that the idea of government cash injections is to create demand so that there may be full employment and general prosperity. The problem is, the government happens to like funding things that are already in high demand, especially healthcare and education. There is little attraction to government funding street performers, shoe repair, or internet blogging. If the public were to look at such spending proposals, they'd protest "This is a waste of our money!" And perhaps it would be. It seems the challenge is to create a demand that then sustains itself. No easy task.