Thursday, March 14, 2019

Zero Top US Economists Agree With the Economic Theory Promoted by Alexandria Ocasio-Cortez

Alexandria Ocasio-Cortez, the newly elected socialist House member representative from the Bronx, told Business Insider recently that modern monetary theory, or MMT, should “be a larger part of our conversation” when it comes to funding ambitious policies she’s proposed, such as her “Green New Deal.”

Top MMTer Stephanie Kelton told Marketplace’s Kai Ryssdal that “If you control your own currency and you have bills that are coming due, it means you can always afford to pay the bills on time. You can never go broke, you can never be forced into bankruptcy. You're nothing like a household.”

Because the government controls how many dollars are out in the economy, Kelton says Congress and the president shouldn’t worry about balancing the budget.

There is, of course, the serious problem of price inflation from such a ignore the deficits policy if the debt is monetized.

Kelton dismisses the concern by arguing that taxes can simply be raised as a “release valve.”

But pretty much all economists think her argument is an anfractuous mess.

In the latest survey of 42 of America's top mainstream economists by the University of Chicago Booth School of Business, not a single respondent agreed with the basic aspects of MMT:
  • Thirty-six percent of economists disagreed, and 52% strongly disagreed with the statement, "Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt." (Two percent had no opinion.)
  • Twenty-six percent of economists disagreed, and 57% of economists strongly disagreed with the statement, "Countries that borrow in their own currency can finance as much real government spending as they want by creating money." (Seven percent had no opinion.)

(ht ThisInsider)

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