Pro MMT arguments can’t justify a JG

(Warren, Fellow of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins Krieger School of Arts and Sciences, , Fall)

MMT advocates reject the macro fine‐​tuning of traditional Keynesian analysis. They believe that government should be directly involved continuously over the cycle, by putting in place structural macroeconomic programs that directly manage the labor force, pricing mechanisms, and investment projects, and constantly monitoring financial developments… . But MMT goes beyond full employment policy as it also promotes capital controls for open economies, credit controls, and socialization of investment. Wage rates and interest rate management are also important [Tymoigne and Wray 2013: 44–45]. No wonder Congresswomen Alexandria Ocasio‐​Cortez (D-NY) likes MMT. For all of its fascination with how money is produced (via government spending and bank lending), the programs favored by MMT, such as government guaranteed employment, must be evaluated on their merits in the traditional way. As an aside, I see many potential problems with a government guarantee of employment and would prefer a guaranteed minimum income, which would provide a comprehensive safety net and leave job and other choices to individuals rather than to government administrators of a jobs program. MMT attempts, unsuccessfully in my opinion, to repackage and resurrect the empirically and theoretically discredited Keynesian policies of the 1960s and 70s. A 2019 survey of leading economists showed a unanimous rejection of MMT’s assertions that (1) “Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt,” and (2) “Countries that borrow in their own currency can finance as much real government spending as they want by creating money” (Chicago Booth 2019). MMT is an effort to justify more government spending on programs favored by AOC and her friends with claims of fiscal space that can be liberated by printing money. Its arguments do not add up (Palley 2019). Both the excitement and motivation for MMT seem to reflect the desire to promote a political agenda, without the hard analysis of its pros and cons — its costs and benefits.