MMT's Stephanie Kelton wrote an op-ed in the NYT today that should turn heads. "Ho w We Think About the Deficit is Mostly Wrong." - https://www.nytimes.com/2017/10/05/opinion/deficit-tax-cuts-trump.html?module=ArrowsNav&contentCollection=Opinion&action=keypress®ion=FixedLeft&pgtype=article
This is a Modern Monetary Theory introduction written for lay and mass audiences in language almost anyone can understand.
Quoting liberally:
"With their nine-page “framework,” President Trump and congressional Republicans have turned to tax cuts in a bid to get a victory on their policy agenda. Mr. Trump has promised to deliver “the biggest tax cut in the history of our country.”
It achieved a rare feat of bipartisan agreement in Washington — worry from the left and the right about the plan’s potential to increase the deficit......
"Are the proposed tax cuts a huge giveaway to the rich? Most definitely. Will they, as advertised, create a booming economy with benefits that trickle down to everyone else? I don’t think so. Mr. Trump’s plan will widen the country’s already dangerous wealth and income gaps, and because the gains go mostly to those at the very top, the tax cuts won’t do much to promote broad-based consumer spending or overall job growth.
That’s enough to reject the plan. But it would be unwise to oppose tax cuts, or any other federal legislation, simply because they add to the deficit.......
"To see why, we have to look beyond the government’s balance sheet. Think of it this way. Government spending adds new money to the economy, and taxes take some of that money out again. It’s a constant churning of pluses and minuses, and their minuses become our pluses.
When the government spends more than it gets in taxes, a “deficit” is recorded on the government’s books. But that’s only half the story. A little double-entry bookkeeping paints the rest of the picture. Suppose the government spends $100 into the economy but collects just $90 in taxes, leaving behind an extra $10 for someone to hold. That extra $10 gets recorded as a surplus on someone else’s books. That means that the government’s -$10 is always matched by +$10 in some other part of the economy. There is no mismatch and no problem with things adding up. Balance sheets must balance, after all. The government’s deficit is always mirrored by an equivalent surplus in another part of the economy.........
"......because there is so much misunderstanding, Americans are vulnerable to nationalist scare tactics that warn of the perils of relying on foreigners to pay our bills. The truth is, there’s no reason to worry about China (or any other entity) refusing to finance our deficits. In fact, we should think of the government’s spending as self-financing since it pays its bills by sending new money into the economy.
When there’s a deficit, some of that new money can be traded in for a government bond. What’s often missed in the public debate is the fact that the money to buy the bond comes from the deficit spending itself........
"Of course, there are real limits to what can be done. No country can commit to large-scale infrastructure investment unless it has the available labor, machinery, concrete and steel. Trying to spend too much will cause an inflation problem. The trick is to adjust the budget to make efficient use of the people, factories and raw materials we have....."