A comfort to many a politician has lately arrived in Stephenie Kelton’s book THE DEFICIT MYTH.

From the cover:

Stephanie Kelton's brilliant exploration of modern monetary theory (MMT) dramatically changes our understanding of how we can best deal with crucial issues ranging from poverty and inequality to creating jobs, expanding health care coverage, climate change, and building resilient infrastructure. Any ambitious proposal, however, inevitably runs into the buzz saw of how to find the money to pay for it, rooted in myths about deficits that are hobbling us as a country.

 

Kelton busts through the myths that prevent us from taking action: that the federal government should budget like a household, that deficits will harm the next generation, crowd out private investment, and undermine long-term growth, and that entitlements are propelling us toward a grave fiscal crisis.

 

MMT, as Kelton shows, shifts the terrain from narrow budgetary questions to one of broader economic and social benefits. With its important new ways of understanding money, taxes, and the critical role of deficit spending, MMT redefines how to responsibly use our resources so that we can maximize our potential as a society. MMT gives us the power to imagine a new politics and a new economy and move from a narrative of scarcity to one of opportunity.

 

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Thanks, Jeff for pointing out this article by Tim Robinson, and thank you, Sam, for the commentary.

Sam, you stated that the government has no assets of its own. I’ve often seen this mentioned, and I have some open questions about the proposition.

Should we think of a corporation as having no assets of its own? And if we think of a company providing soft drinks as having assets, why not think of government providing defense as having assets?

The Swedish power company Vattenfall is owned by that government: should we think of it as a government asset?

The federal lands in the US are owned by the government: shouldn’t we regard those as government assets?

It would seem sensible offhand to think of the government of the Soviet Union as having its own assets, such as what the Russian government sold off after the collapse of the Union.

If you or anyone else here have any thoughts on these questions, I’d like to know them, however tenative. 

I don't think the basic tenet of the article is that wealth can be created out of thin air, rather than most people are already spending all their money, and the productive businesses are forced to spend more and more of their own resources on marketing fighting over their slice of the pie rather than making the pie bigger.  I do think it's probably true that most money spent on marketing is largely "wasted" in the sense that it does not grow the economy.  I'm not saying that I think this article is correct, but I thought that was an interesting way of formulating things.

I think what needs to also be stated is that everyone is essentially spending all their money if you include capital investments as well as spending on consumer goods and services.  You have the bottom 78% or whatever spending almost all their money on consumer goods while the top 22% or whatever spending increasing amounts of their wealth on capital goods via investing.  So the top 22% can increase their wealth over time at a faster rate than everyone else, thus getting concentration of wealth.  It is certainly immoral to rob those who have accumulated wealth in order to redistribute it, but would doing so really cause an increase in the growth rate of the economy?  It would cause an increase in the sector of the economy that provides consumer goods, but shrink the sector of the economy providing whatever else those who were taxed were spending their money on, which is largely capital goods which are needed to grow the economy.  So I think the thesis is ultimately wrong, however attractive the idea of reducing overall spend on marketing is.