The government can spend much more money than it currently does, even given a swelling national debt that frequently makes headlines. That's the argument that has put Modern Monetary Theory (MMT) at the center of macroeconomic discourse over the past few years—the idea driving often heated debates between some of the most prominent voices in mainstream economics and the band of rebel academics who have brought MMT to prominence. Alexandria Ocasio-Cortez gave MMT a boost this year, citing it as an idea that should inform some of the spending assumptions behind the Green New Deal and other progressive priorities.
Endorsements like hers have helped MMT take on a profile that seems to surpass the accessibility of some of its theoretical details, but its main tenets can be summed up fairly easily for laypeople: A government that issues its own currency cannot run out of money in any real sense and needn't rely on taxation or budget cuts to make up funding shortfalls. The true limit on spending isn't the numbers on federal balance sheets but inflation, which MMT proponents argue can be managed by taxation and other policy mechanisms. The implications of this are controversial enough that MMT has been the subject of criticism not only from mainstream economists but also voices on the left wary of undermining the case for progressive taxation and wholly abandoning economic consensus on the risk of inflation. Earlier this year, Doug Henwood joined a growing chorus of socialist voices condemning MMT, in an essay in Jacobin that called the theory “snake oil” and “a weak response to decades of anti-tax mania.”
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