Even if the aff doesn’t cause high inflationary effects in the short term, it makes adaption for future inflation impossible

MMT puts countercyclical policy and inflation control in fiscal hands, substantially rewriting the Federal Reserve Act [Kelton (2021, chapter 8)]. Proponents argue that moving interest rates around to fight inflation tends to destabilize financial markets. So, the only remaining tasks for the Fed are banking supervision, financial stability, and maintaining low and stable interest rates.

There are two good arguments for making an operationally independent central bank the first line of attack against recession and inflation. The first is pragmatic. Monetary policy is more nimble than fiscal policy: it can and does react immediately to worrisome incoming data. Hundreds of economists across the Federal Reserve System provide policymakers with theoretical and empirical input. No other American policy institutions devote comparable resources to a rigorous understanding of the economy. Although Congress did act swiftly to pass COVID-relief legislation, the American Recovery and Reinvestment Act in response to the global financial crisis was enacted in January 2009, over a year after the recession started and the Fed had begun to lower interest rates. Many recessions come and go with no congressional action.

Federal Reserve agility permits it to adjust to a changing state of the economy. State contingency brings policy behavior closer to the prescriptions of the optimal policy literature. An optimal policy reaction to higher inflation, for example, depends on the underlying sources of the rising prices. Is inflation due to weak productivity growth, higher production costs, strong demand, or other factors? The answer drives the appropriate policy response.

Automatic stabilizers built into the federal budget also generate responses contingent on economic conditions. In recessions, personal and corporate tax revenues fall, while unemployment insurance outlays and some transfer payments rise. These fiscal adjustments occur with no new legislative actions. But MMT rightly points to the inadequacies of existing stabilizers. Legislative reactions to economic developments, in addition to being poorly timed, tend to be clunky and inflexible. The fiscal response to COVID was spread across six bills enacted between March 2020 and March 2021, which increased spending $4 trillion. Legislation allocates fixed sums to specific targets, and once implemented cannot easily adapt the sums or the targets to changing needs. Some of fiscal policy’s shortcomings could be addressed, but some are intrinsic to a democratic legislative process. The notion that Congress could ever be light enough on its feet to effectively conduct countercyclical policies is dangerously naive.

Controlling inflation takes us to the second argument in favor of maintaining the independent central bank norm. MMT would remove inflation from the Fed’s portfolio to make it the purview of fiscal policy. MMT combats rising inflation with higher taxes. Increased tax bills remove more currency from private hands to temper demand for goods and services. One indisputable fact about elected officials is they have little difficulty cutting taxes but are loath to raise them. It’s one thing for appointed technocrats to order “the punchbowl removed just when the party was really warming up.”7 Now imagine a congressperson telling voters that to stave off inflation, a larger chunk of their income will go to paying taxes. Good economic and political reasons underlie tasking an independent monetary authority with inflation control.