Why the Critics of MMT Fail
22 December 2016 | Pago Pago, American Samoa
Professor Watchlist, launched recently, is a project of Turning Point USA. The group’s mission is to “identify, educate, train and organize students to promote the principles of fiscal responsibility, free markets and limited government” by reporting on college professors who teach anything perceived to be wrong, that is, propaganda different from or inconsistent with that position.
In response to learning about that, one conservative reactionary wrote, “Excellent. Maybe they can expose alt-left economics professors, who espouse the lies of MMT. Stephanie Kelton comes to mind.”
The key MMT “lie” often railed against by conservatives is the positive economic assertion, (which is correct), that “In a country with a sovereign fiat currency system and flexible exchange rates, there is no natural government income or budget restraint or any restraint on government expenditures except ultimately that of inflation, so that government revenue from tax collections and bond sales is unrelated to and disconnected from government expenditures.”
This is claimed to be a lie by conservatives and those opposed to MMT. They cite the US as an example of such a country with a fiat currency, saying revenues are tied to expenditures, and in saying they are correct, too. So professors on which side get reported correctly to the Professor’s WatchList? The anti-MMT group, I submit, absolutely contrary to the quoted reactionary above. Here is why.
MMT is describing such an economy operating in its natural state, politically unrestricted and looking only to inherent economic limitations and restrictions. The anti-MMT group is describing the US economy where the political, exogenous restriction that expenditures must equal revenues is superimposed on government by Congress and the Treasury Department, probably because they don’t understand how the economy works and mistakenly think it is subject to an income or budge restraint, like households and businesses are.
So who is mistaken now, the MMT or anti-MMT group?
Arguably neither, but the anti-MMT group is laboring under a false assumption which manifests itself in the politically superimposed requirement -- independently of and exogenous to the economy and how it operates -- that revenues must equal expenditures. If any group gets reported here, it should be the anti-MMT group for not understanding that and not understanding the MMT position.
This is an example of why and how the critiques of the anti-MMT people of MMT are actually based on their misunderstanding of MMT. It is a long, continuing and very tiresome story and ever and always a question of misunderstanding economics.