I’m sure you’ve heard about Modern Monetary Theory (MMT) by now. Presidents and members of Congress have always been addicted to spending; but now, they have intellectual air cover in the form of the callow analytics of MMT. Biden may or may not understand what MMT is, but it doesn’t matter. The point is, it’s here.

MMT says that a currency issuer, such as the U.S., can never go broke because it can simply print money to pay off the debt (provided the borrowings are in the same currency as the printed money). And, taxation isn’t to raise revenue for the government, but rather to regulate aggregate demand. MMT is now the law of the land in the form of extreme deficit spending. With MMT, there’s a complete disregard for the size of the deficit or whether spending is paid for with taxes. 

History tells us that opportunities for a government to spend more without taxing more have been pursued for centuries… remember the Weimar Republic? Is MMT’s claim that a government can borrow in its own currency and spend more — by just printing more money — without crowding out private sector activity just another effort to justify more government spending? Is MMT another group chant in the church of the progressives that ‘This time will be different ‘?

To many, MMT’s arguments do not add up. Both the excitement and motivation for MMT seems to reflect the desire to promote a political agenda, without the hard analysis of its pros and cons — its costs and benefits. In this sense, MMT might as easily stand for ‘magic money tree ’.