The theory tells us that what is important is not money, but the real productive capacity of the economy. MMT offers an important lens during COVID-19. Taxes are not required to pay for government. Taxes are a means of ensuring that the economy creates goods and services to buy (how individuals and companies pay their taxes) and to redistribute income. Spending comes first taxation comes later. The government prints money (actually conjures digital money into existence) to pay for everything it does. The idea that the government collects taxes to fund its operations. As long as inflation is kept in check, year-to-year budget deficits and accumulated debt matter little. The only limitation on government spending is inflation, a situation where too few dollars are chasing too few real goods and services. The metaphor of household budgeting that we use to guide spending, that we should not spend more than we earn, should not be applied to a nation with a sovereign currency. From an MMT lens, what matters is not debt, but inflation.Īs a currency issuer, the U.S. Kelton, a leading Modern Monetary Theory (MMT) theorist, tells us that when it comes to government spending, both liberals and conservatives worry about the wrong things. On the first two points, The Deficit Myth is genuinely mind-blowing. In that case, you should read The Deficit Myth.Īnd third, if you want to learn how to make a big persuasive book-length argument, you should read The Deficit Myth. Second, suppose you want to arm yourself with a theoretical framework to argue for more federal investment in higher education (or COVID-19 relief) or any other public good (Green New Deal, anyone?). There are three reasons why you might consider taking the time to read this book.įirst, if you are worried about the federal budget deficit ( $3.7 trillion) or total public debt ( $26.6 trillion), you should read The Deficit Myth. Senate Budget Committee, makes in The Deficit Myth? Will the recommendations of two Inside Higher Ed bloggers inspire you to read The Deficit Myth?Īre you a candidate to engage with the arguments that Stephanie Kelton, professor of economics and public policy at Stony Brook University and former chief economist on the U.S. I doubt Matt will get a cut of the money I spent buying (downloading) the book, but he should. There is a direct line from Matt’s riffing on The Deficit Myth in his June 15 piece ' A Productive Mashup' to my buying and reading (well, listening) to the book. The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy by Stephanie Keltonīefore I talk about The Deficit Myth, I want to credit Matt Reed for the motivation to read the book.

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