New video posted! The Left Is Wrong On Debt And Deficits (with @wbmosler):
2017 abe. 19
The Left is Wrong On Debt and Deficits
Warren Mosler, father of Modern Monetary Theory, speaking with Steve Grumbine of Real Progressives, discussing how the “headline” leaders of the Left continue to approach government debt and deficits incorrectly. They have erroneously conceded that there is a long-term debt/deficit problem that need to be addressed, but usually simply say that we should do it later. The fact is that this is completely wrong. The US government is monetarily sovereign (meaning it issues its own currency, has a floating exchange rate, and has no foreign-denominated debt), and therefore there’s no such thing as a long-term debt problem. The debt is nothing more than dollars previously spent by government, which have not yet been used to pay taxes. These get converted from reserves (which are basically checking accounts at the Federal Reserve Bank) into Treasury Bonds (which are basically savings accounts at the Federal Reserve Bank), because savers holding them desire to earn interest on them, and government makes a policy choice to accommodate this desire and pay that interest. There is no possibility of government going “bankrupt,” or being unable to spend, or being forced to raise taxes on account of any ratio of outstanding Treasury Bonds to anything else. The only possible problem from deficits is inflation: if government tries to buy more than the economy can produce, then this will only push up prices, causing inflation. So if you want to make the case that there’s a long-term deficit problem, the burden of proof is on YOU to show that there’s an expected future inflation problem. However, all of the inflation forecasts we have today (which include the Federal Reserve and Congressional Budget Office projections, as well as free-market expectations as measured by the price of TIPS) show inflation of no more than 2% out for decades. This means that there is absolutely ZERO evidence that there’s a long-term deficit problem. So if you believe that there is, (and who knows, maybe you’re right) you’ve got to show why all of these inflation forecasts are wrong.