In an Op-Ed in the New York Times, Stephanie Kelton – perhaps now the most famous proponent of Modern Monetary Theory – argues that the way the public thinks about budget deficits is mostly wrong. She writes
Should we invest a trillion dollars in our crumbling infrastructure, offer Medicare for All or pass the biggest tax cut in the country’s history?
Propose any of these, and the first question on everyone’s lips will be, “How are you going to pay for it?” The reason is simple: Lawmakers are obsessed with avoiding an increase in the deficit.
Most readers will find this a stunning claim and with good reason. Over the last 40 years the budget deficit has waxed and waned, largely in response to the state of the economy. It’s only general trend has been to grow larger.
Recently, however, Republican’s have indeed fretted over whether their Obamacare Repeal or Tax Reform Proposals will be deficit neutral. As, Kelton writes
Politicians of both parties should stop using the deficit as a guide to public policy. Instead, they should be advancing legislation aimed at raising living standards and delivering the public investments in education, technology and infrastructure that are critical for long-term prosperity.
Right now, anything ambitious requires a score from the Congressional Budget Office. A “bad” score — one that adds to projected budget deficits — can easily doom good legislation because lawmakers are told that their math doesn’t add up. And that’s a problem.
CBO scores may doom legislation, not because lawmakers fear being reprimanded on their arithmetic, but because deficit-neutral budgetary changes are immune to the 60-vote threshold otherwise necessary to carry major legislation through the US Senate. It is precisely because 60 Senators cannot agree on how to raise American living standards that the budget deficit is practical concern at all.
Proponents of Modern Monetary Theory make too much of political invectives against piling up debt. As GOP congressman Mark Walker lamented, what politicians really mean is that they just don’t like the proposal under consideration.
“It’s a great talking point when you have an administration that’s Democrat-led,” said Representative Mark Walker, Republican of North Carolina and the chairman of the Republican Study Committee, a group of about 150 conservative House members. “It’s a little different now that Republicans have both houses and the administration.”
Likewise, if the public came to embrace deficits this would do little to change, the nature of the debate. Rather than accusing one another of irresponsibly passing on bills to the next generation, politicians would simply claim that proposals they didn’t like squandered the potential economic benefits of the budget deficit on useless boondoggles or tax cuts for the rich.