#8 kennedy

for everyone who wants to work? Do people have the health care and education they need? Can our seniors enjoy a dignified retirement? Does every child have enough food, clean drinking water, and a safe place to live? Are we doing everything we can to keep our planet habitable? In short, are we tending to the deficits that matter? MMT teaches us that if we have the real resources we need—that is, if we have the building materials to fix our infrastructure, if we have people who want to become doctors, nurses, and teachers, if we can grow all the food we need—then the money can always be made available to accomplish our goals. That is the beauty of a sovereign currency. Contrary to Margaret Thatcher’s dictum, there is public money, and we should not be wary of embracing it. As former Fed chair Alan Greenspan testified, “There’s nothing to prevent the federal government from creating as much money as it wants and paying it to someone.” His successor, Ben Bernanke, went further, describing how the government actually pays its bills: “It’s not taxpayer money. We simply use the computer to mark up the size of the account.” These are paradigm-shifting observations that should liberate us from the age-old question, How will we pay for it? The truth is, the federal government is already paying all of its bills using nothing more than a keyboard at the New York Federal Reserve. Taxes subtract spending power from the rest of us, but they don’t pay the bills. It’s high time we come to grips with what it means to live in a country where the government is the currency monopolist. No US president should ever again claim that the government has “run out of money,” and no reporter should ever let such a claim go unchallenged. We all deserve to know the truth: a currency-issuing government can afford to buy whatever is for sale in its own unit of account. Uncle Sam’s pockets are never empty. The government’s spending capacity is infinite, but our economy’s productive capacity isn’t. There are limits to what we can and should do. MMT urges us to respect our material and ecological constraints and to ask, How will we resource it? Budgeting through an MMT lens would have us replace the artificial budget constraint that tells us to live within our financial means with inflation constraint that tells us to live within our biological and material means. As we’ve learned, every economy has its own internal speed limit. There is only so much demand that can be placed on our material resources—our workers, factories, machinery, and raw materials—before we push things too far. Once an economy reaches its full employment potential, any additional spending—whether it comes from the government, the domestic private sector (US households and businesses), or the rest of the world (foreign demand for our exports)—carries inflation risk. The good news is that because we chronically run our economy below its maximum speed limit, there’s almost always room to rev up spending without risking an acceleration in inflation. And that’s what matters. 
  There was a time when our political leaders had this figured out. For example, President John F. Kennedy sought the expertise of Nobel Prize–winning economist James Tobin, who served as an adviser to Kennedy’s 1960 presidential campaign and then as a member of the president’s Council of Economic Advisers. Tobin recalls JFK asking, “Is there any limit to the deficit? I know of course about the political limits.… But is there any economic limit?” When Tobin confessed that “the only limit is really inflation,” the president replied, “That’s right, isn’t it? The deficit can be any size, the debt can be any size, provided they don’t cause inflation. Everything else is just talk.” 45 

45. Council of Economic Advisers: Walter Heller, Kermit Gordon, James Tobin, Gardner Ackley, and Paul Samuelson, recorded interview by Joseph Pechman, August 1, 1964, John F. Kennedy Library Oral History Program, www.jfklibrary.org/ sites/ default/ files/ archives/ JFKOH/ Council% 20of% 20Economic% 20Advisers/ JFKOH-CEA-01/ JFKOH-CEA-01-TR.pdf.

  Kennedy’s intuition was right. It’s not the size of the debt or deficit that matters. It’s the strain we place on our planet and our productive resources that matters. On May 25, 1961, President Kennedy delivered his moon-shot speech before a joint session of Congress. Before requesting a single dime to fund his ambitious space exploration program, Kennedy assured Congress:

 I believe we possess all the resources and talents necessary. But the facts of the matter are that we have never made the national decisions or marshaled the national resources required for such leadership. We have never specified long-range goals on an urgent time schedule, or managed our resources and our time so as to insure their fulfillment. 46 

Kennedy got it exactly right. Our material resources are scarce and must be managed. Time is

the ultimate scarce resource. No one can squeeze more than twenty-four hours from a day. Human ingenuity is constrained by our existing technological knowledge and capabilities. Our technical capabilities and our material resources are the only things that can limit our possibilities. JFK understood that America would need to develop new technologies to carry out his ambitious space exploration program. Landing a man on the moon and bringing him safely back to earth would require substantial funding to facilitate scientific research and the development of new technologies. Kennedy told Congress that no part of his space exploration program “will be so difficult or so expensive.” And then he asked Congress—and the American people—to support the mission. Let it be clear—and this is a judgment which the Members of the Congress must finally make—let it be clear that I am asking the Congress and the country to accept a firm commitment to a new course of action, a course which will last for many years and carry very heavy costs: 531 million dollars in fiscal ’62—an estimated 7 to 9 billion dollars additional over the next five years. Kennedy made no reference to taxes or taxpayers in his moon-shot speech. To fund the program, he simply asked “the Space Committees of the Congress, and the Appropriating Committees, that you 
will consider the matter carefully.” He knew that Congress had the power to increase the discretionary budget to provide the billions of dollars he was requesting. Consistent with the 
teachings of MMT, Kennedy showed that finding the money was the easy part. The real challenge would come later, as Kennedy explained: This decision demands a major national commitment of scientific and technical manpower, material and facilities, and the possibility of their diversion from other important activities where they are already thinly spread. It means a degree of dedication, organization and discipline which have not always characterized our research and development efforts. It means we cannot afford undue work stoppages, inflated costs of material or talent, wasteful interagency rivalries, or a high turnover of key personnel. To pull off his ambitious agenda, the government would need to command more of the economy’s real resources—more scientists and engineers, more contractors and civil servants, more satellites and spacecraft and fuel boosters, and so on. 

Even though the official unemployment rate stood at 7.1 percent when JFK delivered his famous speech, Kennedy understood that the moon shot might require the government to compete for high-skilled labor and other real resources. To manage the inflation risk, his administration pressured unions and private industry, urging them to keep wage and price increases to a minimum to avoid driving inflation higher. It worked. The economy grew, unemployment fell sharply, and inflation remained below 1.5 percent for the first half of the decade. 47 Eight years after that famous speech, NASA’s Apollo 11 mission safely landed the first human beings on the moon. Today, almost all of us benefit in one way or another from that historic endeavor. As the economist Mariana Mazzucato put it, “the launching of Sputnik in 1957 by the Soviets led to an eruption of panic among US policy makers.” 48 That panic gave rise to a space race that paved the way for the development of many of the things we now take for granted. The personal computer as well as “much of the technology in our smart phones today can be traced back to the Apollo program and related missions.” 49 Can You Imagine a People’s Economy? The challenges we face today are very different from those faced by Kennedy nearly sixty years ago, but no less daunting and surely far more important. To avoid global catastrophe, we need to limit the impacts of climate change and adapt to the degree of warming that is already inevitable. To do this, governments must make investments, in the US and elsewhere, that will dwarf in scale and duration the massive commitment of real resources required for the space program.

It is not melodramatic to regard our immediate future as a fight for survival, and in that sense the right analogy is World War II. In his important book, How to Pay for the War, John Maynard Keynes explained what Kennedy later understood: Coming up with the money is the easy part. The real challenge lies in managing your available resources—labor, equipment, technology, natural resources, and so on—so that inflation does not accelerate. If Kennedy had used the wrong lens, America might never have gone to the moon. If Keynes had used the wrong lens, the British war effort may very well have been too little too late. If our generation continues to use the wrong lens, we will not make the right investments at the scale and pace needed to avert ever-greater social and ecological crises. The good news is that we now have the right lens, and that lens is MMT. A just and more prosperous world—one that combines ecological sustainability with full employment, human well-being, a lower degree of inequality, and excellent public services that meet the needs of all—is within reach. As we collectively expand our understanding of public money and shift our nation’s focus away from an obsession with budget deficits, we can begin to build a better economy, one that works for all of our people. Human imagination is incredibly powerful. Transformational moments in human history have come about when someone or some group of people were able to imagine a world that the rest of us couldn’t see. In many cases, such as with our previous example of Copernicus, the shift was simply one of perspective, but once the shift came, it spawned an explosion of new discoveries and advances. MMT is in one sense a very simple way of seeing the big picture of modern economies from a different perspective, but we should not underestimate the profound change a simple shift in perspective can have. We have let our imaginations become far too limited, and it is holding us back. We have been too restrictive in public policy out of unwarranted fears about numbers recorded in government agency spreadsheets. We have held back progress in science, fought unnecessary wars, kept living standards too low, and lived with less beauty than we could have enjoyed. Austerity is a failure of imagination—a failure to imagine how we can simultaneously improve living standards, invest in our nation’s future, maintain a healthy economy, and manage inflation. Trade wars are a failure of imagination—a failure to imagine how we can simultaneously maintain domestic full employment, help poorer nations sustainably develop, lower our global carbon impact, and continue to enjoy the benefits from trade. Ecological exploitation is a failure of imagination—a failure to imagine how we can simultaneously improve living standards, maintain a prosperous economy, and transition human activity so that we are protecting people and the planet. MMT provides a profound tool kit for all countries to begin to reimagine how they can care for their local populations, preserve treasured cultural identities, rejuvenate unique ecosystems, redevelop sustainable and local agriculture, increase productive capacity, and encourage innovation. Let’s look at one example of how MMT can help us find alternative approaches to improving real outcomes. One of the main challenges facing policy makers in the US and around the world is the transition to sustainable and zero carbon energy production. The transition of our nation’s electric infrastructure has begun, but there is a long way to go to scale up renewable energy, energy storage, and other technologies to replace fossil fuels as the primary means of electricity production. Under the old paradigm, the policy debate is often based on either government mandates or market incentives. A government mandate requiring power companies to generate cleaner forms of electricity could leave ratepayers (households and businesses) saddled with the extra costs. Though market incentives, such as giving tax credits to companies who develop more sustainable energy generation, can potentially stimulate a build-out of alternative energy sources, they can also slow adoption as developers wait for optimal economic conditions. As a result, utilities might wait longer before retiring existing coal plants. How might an MMT-led approach introduce new options into the mix? One possibility might be that the federal government could allow electric utilities to sell to the government at book value any high-emission generator, no matter its age, in order to remove those costs from rates—a bit like the “cash for clunkers” program (Car Allowance Rebate System), which encouraged US residents to trade in their old, less-fuel-efficient vehicles for more-fuel-efficient ones, but aimed at grid decarbonization.

This would free up private capital for a rapid transition to renewable energy and avoid burdening households and businesses with higher costs for electricity due to a change in public policy. The federal government could go further and increase funding for research and development and scaled-up deployment of energy storage technologies. The US could have the lowest electricity costs in the world while rapidly transitioning to 100 percent renewable energy. That’s good for businesses, the environment, and households. And it’s financially affordable for the government. Note that in this example, the government is not taking over but rather is facilitating a public policy outcome via private sector energy markets. There are, of course, many other options. What’s important here is not whether this example is a good idea or not, but that we begin to imagine how the government’s fiscal capacity can help deploy real resources effectively to achieve a clear public policy objective. As we rethink the kind of health care, education, urban planning, scientific research, agriculture, and housing we need for our future, how might our knowledge of MMT shift our focus to the real resources we need and suggest ways where a change in fiscal policy can help? Can you imagine an economy where private enterprise and public investment all combine to raise living standards for everyone? Can you imagine an economy where every rural and urban community has sufficient health, education, and transportation services to meet the needs of the local population? Can you imagine an economy that can measure and continually improve human well-being, not just gross domestic product? Can you imagine an economy where human activity rejuvenates and enriches all ecosystems? Can you imagine an economy where nations trade in ways that enhance living standards and environmental conditions for all parties? Can you imagine an economy comprising of a strong middle class with service-and labor-based occupations that have good wages and benefits? Can you imagine an economy where all are ensured a carefree retirement, with all their food, housing, and health-care needs met? Can you imagine an economy where all manner of research is fully funded, with a steady stream of successful ideas commercialized or rolled out to serve the public? In the United States, where we have an abundance of resources and labor, there is no reason we cannot embark on a policy agenda that results in provisioning our entire population with quality health services, providing each worker with adequate and appropriate advanced education and job training, upgrading our infrastructure to meet the demands of a low-carbon world, and ensuring adequate housing for everyone while redesigning our cities to be clean, beautiful, and nurturing of community spirit. We can be a global force for good, leading the way in decarbonization, providing assistance to countries with real needs, while ensuring our domestic economy thrives and no communities, from small towns to urban neighborhoods, are left behind. With the knowledge of how we can pay for it, it’s now in your hands to imagine and to help build the people’s economy.