Demo­cratic can­di­dates are chan­nel­ing pitches from TV in­fomer­cials

The Buffalo News - - OPINION - Wash­ing­ton Post Writ­ers Group

WASH­ING­TON – A four-word phrase com­mon on late-night tele­vi­sion, ex­claimed by an­nounc­ers giddy about their of­fers: “Buy this kitchen knife that is so sharp it can slice and dice di­a­monds, and we’ll throw in a non­stick fry­ing pan that can dou­ble as a satel­lite dish. BUT WAIT! THERE’S MORE! If you call im­me­di­ately, we’ll in­clude a home­o­pathic cure for sci­at­ica.”

To­day’s Demo­cratic pres­i­den­tial can­di­dates sound like late-night in­fomer­cials: “A Green New Deal! Medi­care-for-all! Repa­ra­tions for some! Free col­lege for the young! In­creased So­cial Se­cu­rity for the el­derly! BUT WAIT! THERE’S MORE! At no ad­di­tional cost, you get Mod­ern Mone­tary The­ory.”

MMT, which sup­pos­edly ban­ishes nit­pick­ing wor­ries about how to pay for things, is the Democrats’ in­tel­lec­tual break­through du jour. Although the the­ory re­mains some­what hazy (or as Democrats say about their un­em­pir­i­cal flights of fancy, MMT is beau­ti­fully “as­pi­ra­tional”), it is this:

The na­tion has fiat money – cur­rency whose is­suer will not con­vert it into some­thing valu­able (e.g., gold) but that the pub­lic ac­cepts is a re­li­able store of value. A gov­ern­ment that con­trols its cur­rency need never run short of it. There­fore (non se­quitur alert) the gov­ern­ment can bor­row and ex­pand the money sup­ply suf­fi­ciently to al­low spend­ing to pro­ceed with­out ref­er­ence to gov­ern­ment rev­enues, as long as in­ter­est rates are, and are apt to re­main, low. In the words of three MMT be­liev­ers (Stephanie Kel­ton, eco­nom­ics pro­fes­sor and for­mer Bernie Sanders cam­paign ad­viser; An­dres Ber­nal, doc­toral stu­dent and ad­viser to Rep. Alexan­dria Oca­sio-Cortez, D-N.Y.; Greg Car­lock, a cli­mate re­searcher): “Any­thing that is tech­ni­cally fea­si­ble is fi­nan­cially af­ford­able.”

Ac­tu­ally, MMT teaches that ev­ery­thing, fea­si­ble or not, is af­ford­able in the sense that gov­ern­ment can al­ways come up with fiat money with which to pay for it. So, it is not just that happy days are here again; it is that never in the long hu­man story of in­tractable scarci­ties have there been days as happy as those that MMT promises.

Two more sober men, both Democrats, are too in­tel­li­gent and ex­pe­ri­enced to have writ­ten what they did re­cently – a month be­fore last week’s an­nounce­ment that the bud­get deficit for Oc­to­ber through Jan­uary was 77 per­cent larger than in those four months a year ear­lier. They wrote a For­eign Af­fairs es­say de­plor­ing what they, and surely they alone, see as Wash­ing­ton’s dan­ger­ous “ob­ses­sion” with bud­get deficits. Lawrence Sum­mers, for­mer trea­sury sec­re­tary and cur­rent Har­vard eco­nom­ics pro­fes­sor, and Ja­son Fur­man, cur­rently at the Har­vard Kennedy School of Gov­ern­ment and for­merly (2013-2017) chair of the White House Coun­cil of Eco­nomic Ad­vis­ers, ar­gue that “the eco­nom­ics of deficits have changed,” for plau­si­ble rea­sons that we shall come to. But first:

In Wash­ing­ton, the be­hav­ioral (as dis­tinct from rhetor­i­cal) “deficit hawk” is not a rara avis, it is ex­tinct. The cur­rent pres­i­dent was elected after promis­ing not to touch the ma­jor en­ti­tle­ments (So­cial Se­cu­rity, Medi­care, Med­i­caid) that are driv­ers of the deficit. When the un­sus­tain­able tra­jec­tory of the en­ti­tle­ments was ex­plained to the cur­rent pres­i­dent, he re­port­edly said, “Yeah, but I won’t be here.” With a nom­i­nal Repub­li­can pres­i­dent and rhetor­i­cal Repub­li­cans run­ning all of Congress un­til 10 weeks ago, the deficit is ap­proach­ing $1 tril­lion with the econ­omy hum­ming, and the na­tional debt head­ing to­ward 100 per­cent of GDP, which it last ex­ceeded in 1946 in the im­me­di­ate af­ter­math of a world war.

So, who is ob­sessed, and how does this ob­ses­sion man­i­fest it­self? Try to name – as Sum­mers and Fur­man do not – one Wash­ing­ton deficit obsessive. The po­lit­i­cal class, which is more united by class in­ter­est than it is di­vided by ide­ol­ogy, has a per­ma­nent in­cen­tive for deficit spend­ing, which bur­dens fu­ture gen­er­a­tions with a sig­nif­i­cant por­tion of the cost of to­day’s con­sump­tion of gov­ern­ment goods and ser­vices.

Sum­mers and Fur­man stop far short of MMT fan­tasy. Good em­piri­cists, they say only this: Be­cause soar­ing deficits have not kin­dled in­fla­tion and the in­ter­est rate on gov­ern­ment bor­row­ing has de­clined and gov­ern­ment bor­row­ing has not crowded out pri­vate bor­row­ing, we can safely have more gov­ern­ment debt than has pre­vi­ously been con­sid­ered pru­dent. Sum­mers’ and Fur­man’s pru­dence, how­ever, might be crowded out by MMT’s in­tox­i­cat­ing ef­fect on their party.

For decades, gov­ern­ing by both par­ties has been a prac­tice in search of a jus­ti­fy­ing the­ory. To­day, MMT ra­tio­nal­izes the Demo­cratic pres­i­den­tial can­di­dates’ bid­ding for pro­gres­sives’ sup­port, mak­ing the bid­ding en­tirely un­in­hib­ited by rev­enue con­sid­er­a­tions. So, to the list of mem­o­rable party slo­gans, from “Tippeca­noe and Tyler Too” to “It’s Morn­ing Again in Amer­ica,” add this: “BUT WAIT! THERE’S MORE!”

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