Stephanie Kelton: The story of deficit. Modern monetary explanation and the economy of gathering needs

"The deficit myth" is simply a superb exploration of modern monetary explanation (MMT) by Stephanie Kelton. It completely changes our knowing of how to best deal with key problems, ranging from poorness and inequality to occupation creation, expanding access to healthcare, climate change and building sustainable infrastructure (from the publisher's description).

The Heterodox Economics Publishing home thanks for making the passage available for publication. We encourage you to read the full book.

Weird bumper sticker

Not those who do not know, but those who think they do, are in trouble. Mark Twain

I remember in 2008, erstwhile I crossed a one-hour road to work with Lawrence, Kansas, to Missouri University, Kansas City, where I taught economics, I saw a sticker on the rear bumper of an SUV. It portrayed a somewhat dented man with empty, left-hand pockets. His face had a hard, serious expression. He wore red and white stripes, a dark blue jacket, and an old-fashioned cylinder with the stars on it. It was Uncle Sam[1]. Like the individual driving this car with the sticker, many have believed that our government is broke and the budget is incapable to meet the most crucial problems of our time.

Whether public debate is about health, infrastructure, education or climate change, there is inactive 1 question: but how will you pay for it? The SUV bumper sticker indeed reflected the real frustration and public concern about fiscal issues, and in peculiar the size of the budget deficit. Given how fierce politicians from various parties are speaking about the deficit, it is understandable why everyone is emotional about our government being reckless. After all, if any of us were acting like a government, we'd be bankrupt soon, resembling the painting of our broke Uncle Sam.

But what if the government budget is fundamentally different from the home budget?

What if I show you that threatening a budget deficit has no justification? What if I convinced you that we could have an economy that puts people and the planet first? And that uncovering money to improve the current situation is not a problem?

Santa Copernicus and another scientists following him changed our knowing of the cosmos, proving that the Earth revolves around the Sun, not the another way around. A akin coup is needed in our knowing of the state budget deficit and its relation with the full economy. erstwhile it comes to expanding our welfare, there are more opportunities than we are aware of, but we desperately request to realize the myths that limit us.

After examining in depth the errors behind each of these six myths and undermining them with strong evidence, we will decision to deficits that are of real importance. The real crises we face have nothing to do with budget deficits or social welfare expenditure. The fact that 21% of all children in the US live in poorness – this is simply a real crisis. The fact that infrastructure in our country is being evaluated as a double with a negative – this is simply a crisis[12]. The fact that today's level of social inequality in the U.S. last time was equally advanced during the alleged Gilded Age – this is simply a crisis.

The fact that the average American individual has not seen a real wage increase since the 1970s – this is simply a crisis.

The fact that 44 million Americans and Americans are indebted from student loans totaling $1.7 trillion – this is simply a crisis. The fact that yet we will no longer stand for anything erstwhile we accelerate the climate crisis and erstwhile we destruct life on this planet – that is most likely the biggest crisis of our time.

These are all real crises. The budget deficit is not a crisis.

***

The crime that president Donald Trump committed in 2017, signing a bill reducing taxes, is not that he increased the budget deficit, but that he utilized the deficit to aid financially those who least request this support.

This law has increased social inequality, leading to a concentration of economical and political power in the hands of few. The cognition from the basis of the MMT shows that building a better economy is not dependent on uncovering sources of backing for the objectives we want to achieve. But we can and must taxation the rich. But not due to the fact that without their money we cannot afford to make the essential changes. We should taxation billionaires to reduce inequality in income and wealth distribution and to defend our democracy. However, in seeking to eradicate poorness or to introduce a public employment warrant with decent pay, as Coretta Scott King[13], among another things, did not gotta break down the door to rich safes. We already have the tools we need. Pretending to be dependent on people with immense wealth creates false messages that we request them more than they truly are. Of course, this does not mean that the increase in the deficit does not substance and that you can throw all the precautions into the basket and spend money without borders. The economical explanation that I will discuss in this book advocates greater fiscal work for the government, not less. We should besides give careful consideration to the importance of liable budgeting of real resources. Our misconceptions of the deficit make a large part of the available resources in our economy simply wasted or left unused.

The MMT gives us the strength to imagine a fresh policy and a fresh economy. This explanation poses a challenge to the economical position quo across the political spectrum, questioning the "sound economics" (sound economics), and so gives emergence to specified large interest worldwide among politicians, scientists, central bankers, finance ministers, activists and average people.

Looking through the MMT's prism allows us to see that it is possible to change society, that we can do so, that we can afford to invest in education, wellness care and modern infrastructure.

Unlike the universal communicative of the rarity of MMT resources, it promotes communicative of available opportunities. erstwhile we have overturned the myths that have grown around the deficit, we will be able to see that the budget deficit is actually good for the economy, that it allows fiscal policy to be pursued, for which human needs and public interest are a priority.

We have nothing to lose but the limitations we have imposed on ourselves.

The United States is the most prosperous country in planet history. But even erstwhile the Americans were much poorer, as during the large crisis, we managed to establish a welfare system, establish a minimum wage, electrify agrarian areas, fund housing loans and fund large public works programmes. Like Dorothy of the Wizard of Oz, we must overthrow the myths by which we let ourselves be told that we are completely powerless and that we have no cause.

When this book was going to print, the Covid-19 pandemic hit the economies of the full planet with large power, showing us the strength of reasoning through the MMT prism. full industries are closed. There is an expanding hazard of economical collapse caused by rapidly increasing occupation losses, and unemployment can scope the level we saw during the large crisis. legislature has allocated over $1 trillion to combat the Covid-19 pandemic and the emerging economical crisis. But this time it will take a lot more than a trillion dollars.

The government deficit, which was expected to amount to $1 trillion before the pandemic, would most likely scope over $3 trillion in the next fewer months. If past teaches us anything, I anticipate that the fear of a increasing budget deficit will put force on the introduction of a austerity policy to break that deficit. It would be an unimaginable disaster. Currently, as well as in the coming months, the most fiscally liable strategy for combating the crisis is to increase expenditure and deficits.

The next year will be highly hard for everyone. We will live in increased uncertainty about the virus – at least until the pandemic is full inhibited and the vaccine is widely available. Many of us will experience a hard social and economical situation. There are adequate reasons to be concerned, and there is no request to add 1 more – the state's finances.

This is simply a good time to learn any crucial things about where money comes from and why it is the central government – and only the central government – can emergence to the task and save the economy.

Stephanie Kelton, story of Deficiency. Modern monetary explanation and economy of gathering needs, Heterodox economical Publishing House, 2024, translation by Gratian Bachurewicz and Joanna Bednarek

Footnotes:
[1] Ang. Uncle Sam – a colloquial word for the American national government.
[2] The author in the first does not mention explicite here in Poland. At the same time, as the Republic of Poland has its own sovereign currency, i.e. the Polish zloty is not linked to any another currency or commodity in rigidity, and besides has its own central bank, it meets the criteria set by sovereign currency issuers. The criteria determining the degree of monetary sovereignty of the country afraid are set out in the following footnote.
[3] It is best to think of monetary sovereignty as a spectrum within which any countries enjoy a larger, another smaller and yet another zero degree of monetary sovereignty. Countries with the highest degree of monetary sovereignty are those that make expenditure, collect taxes and owe in their own non-stiff currency (i.e. operate in a variable exchange rate strategy compared to another currencies). A non-replaceable currency means that the State as its issuer does not undertake to exchange it for another currency or commodity (e.g. gold) at a fixed rate. According to this definition, countries specified as the USA, the United Kingdom, Japan, Australia, Canada and even China are sovereign currency issuers. However, countries specified as Ecuador or Panama – unlike
previously mentioned – they do not enjoy monetary sovereignty due to the fact that their monetary systems are virtually exclusively based on the US dollar, i.e. on a abroad currency that these countries do not issue. In turn, countries specified as Venezuela and Argentina, which issue their own currency, but at the same time are heavy in debt in the US dollar, enjoy only limited monetary sovereignty. Nineteen European countries, which have decided to adopt the single currency of the euro, thus depriving themselves of the right to issue their own currency, have completely lost monetary sovereignty. These countries have delegated the right to issue their currency to the European Central Bank.
[4] The phrase “send money to the economy”, economically speaking, is the same as “add money to the economy” and so, in this sense, will be utilized in this book. In the original, it reads ‘spend money into the economy’.
[5] According to the Northwestern Institute for Policy investigation research centre, "over 8 million Americans lost their jobs, nearly 4 million homes were occupied and 2.5 million companies declared bankruptcy". Institute for Policy Research, The large Recession: 10 Years Later, September 27, 2018, https://www.ipr.northwestern.edu/news/2018/great-recession-10-years-later.html.
[6] Ryan Lizza, Inside the Crisis, The fresh Yorker, October 12, 2009,
www.newyorker.com/magazine/2009/10/12/inside-the-crisis.
[7] Ibid.
[8] Joe Weisenthal, Obama: The US Government Is Broke!, Business Insider, May 24, 2009,
www.businessinsider.com/obama-the-us-government-is-broke-2009-5.
[9] CBPP, illustration Book: The Legacy of the large recession, Center on Budget and Policy Priorities,
6 June 2019, https://www.cbpp.org/research/chart-book-the-legacy-of-the-great-recession.
[10] Dean Baker, The Housing Bubble and the large Recession: 10 Years LaterLater, Center for economical and Policy Research, Washington, DC, September 2018, cepr.net/images/stories/reports/housing-bubble-2018-09.pdf.
[11] Eric Levitt, Bernie Sanders Is the Howard Schultz of the Left, Intelligencer, 16 April 2019,
https://nymag.com/intelligencer/2019/04/bernie-sanders-fox-news-town-hall-medicarefor-all-video-centre.html.
[12] In the original, “it is rated D+”, which in the American educational strategy is one
of the lowest ratings possible to get [among others].
[13] American civilian rights activist, wife of Martin Luther King.