Donald Trump Is Right: Deficits Don’t Matter. Sounds a lot like Modern Monetary Theory (MMT), New Republic
“Reagan proved that deficits don’t matter,” Vice President Dick Cheney said when the Bush administration sought a second round of tax cuts in 2003.
Trump later explained that he was merely referring to buying back existing debt at a discount if interest rates went higher, lowering the nominal value.
This is something the U.S. does routinely. But Trump went further when he told CNN on Monday, “This is the United States government… you never have to default because you print the money.”
Trump’s statement sounds a lot like Modern Monetary Theory (MMT), a tenet of economists who believe in de-emphasizing the need for deficit reduction because the U.S. controls its own currency.
Balanced budgets, to MMTers, take money out of the hands of ordinary Americans who can put it to more productive use through job creation and consumer spending.
The deficit only matters once you reach full employment, when overheated consumer demand can lead to inflation.
But we’re nowhere near that point right now, meaning there’s plenty of room for deficits, without any possibility of default.
New Republic 11 May 2016
Trump later explained that he was merely referring to buying back existing debt at a discount if interest rates went higher, lowering the nominal value.
This is something the U.S. does routinely. But Trump went further when he told CNN on Monday, “This is the United States government… you never have to default because you print the money.”
Trump’s statement sounds a lot like Modern Monetary Theory (MMT), a tenet of economists who believe in de-emphasizing the need for deficit reduction because the U.S. controls its own currency.
Balanced budgets, to MMTers, take money out of the hands of ordinary Americans who can put it to more productive use through job creation and consumer spending.
The deficit only matters once you reach full employment, when overheated consumer demand can lead to inflation.
But we’re nowhere near that point right now, meaning there’s plenty of room for deficits, without any possibility of default.
New Republic 11 May 2016
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