Why? Well. Nothing wrong with the theory of Modern Money Theory, he admits.
“It’s not actually that I disagree very much with the economics that is being laid out in MMT: indeed, I’m terribly tempted to agree that they’re actually correct in much of what they say.”
He admits that MMT is right on budgets:
“It’s most certainly not obvious that MMT proponents are all barking mad or anything. Jamie Galbraith (who I’ve had one or two very limited interactions with) is certainly a reasonable guy. And his insistence that a budget surplus, despite the ribbing he gets about it, is in fact economically contractionary doesn’t seem to have anything wrong with it. Budget deficits are fiscally expansive, a surplus is fiscally contractionary, if there’s any one statement at the heart of Keynesianism that’s it.”
And it is right on money:
“And their basic outline about money creation is true as far as I can see. If you’re a country with your own central bank you can print as much money as you like.”
And really nothing wrong with the policy, either. No, it is all politics.
What he’s afraid of is that if politicians understood that they cannot run out of money, they’d spend like they cannot run out of money. And off we’d go to Weimar and Zimbabwe land.
It is the same line that Paul Samuelson took, when he argued that the job of an economist is to lie. Or, better, to preach the old time religion and superstition. Put real fear into the politicians and the voters they represent.
Government is just like a household, you know. Careful, Gov, you’ll run out of money. You’ll have to go hat-in-hand to Bond Vigilantes when you run out. Uncle Sam will have to go to the Salvation Army for a cup of soup.
It is the same old fear mongering by someone who does not trust the democratic process and does not understand budgeting.
The way we ensure that policymakers don’t run up the spending to create hyperinflation is by subjecting them to the budgeting process, and then holding the administrative branch to approved budgets. It isn’t religion, superstition, or fear mongering that forestalls accelerating inflation. It is accountability.
And where-O-where do our blogging pundits get the idea that all politicians always and everywhere are pushing for hyperinflation? I see exactly the opposite.
(cross-posted from EconoMonitor)