George Will, a great wordsmith, sells newspapers. But his column in the Journal on March 14, which dismisses MMT (Modern Monetary Theory) as a late-night commercial hoax, exposes his economic naiveté. Will and the economists he quotes, Summers and Furman, are members of an old boys club, which includes Paul Krugman. That self-aggrandizing club has been slow to grasp the essence of MMT.
MMT represents an economic model to replace the so-called Neoliberal model that over the past half-century has resulted in massive shifts in wealth to the rich at the expense of the poor and not-so-rich. Indeed, the disappearing middle class has been well documented.
The Neoliberal model obsesses about national deficits and debts, which it misunderstands. And, through its adherents’ inexorable influence on our Congress, it extracts tax benefits for the rich. The model promises investments by the rich will cause trickle-down wealth for everyone. That has not worked out well anywhere!
MMT recognizes the power of a state-issued, sovereign, fiat currency. Federal spending creates money in the economy, while taxes, in effect, destroy money. We call the difference between spending and taxes a deficit, and deficits accumulated over time we call the national debt.