| ||||||||||||||||||||||||
2023/04/29 Funny Moneyさんのツイート Up on YouTube now with our first big episode with special guest @StephanieKelton!
Ep 1. The MMT Lens with Special Guest Stephanie Kelton (FULL EPISODE)
They'll be coming on in a second here where we think about these Angry Birds. A correlation or an analogy here might be with the term ‘Deficit Hawks’. So we think about this little red bird here like a deficit hawk. Well, this is what they tell us. Right. And they act like zombies. They say there's a fine line between the government being solvent or insolvent or many of its programs. If it gets too high, if the debt gets too high, things are going to go wild, creditors are going to go weary, people are going to take their money elsewhere. It's going to downgrade us. Jess, what about some other things? Greece? Oh, yeah. You could end up like Greece, unable to pay your bills. There are all sorts of things people talk about related to default, and I'm just glad we have Stephanie on to break all of this down. I really like the zombie Angry Birds. Birds are really important to us because we talk about the owls and the hawks. The hawks are people who have very strong views about the deficit. I think of people like Larry Summers then we have The Owls, which are a bit more wise, would show us a different way of doing things. We may have lost Andres, so I'm going to go ahead and tell us a little bit about our guest that we're really lucky to have coming on. We got Charlie on my visual here. I still hear you. I thought you were a goner. Now I'm here. I'm here. Let's introduce our guest. Let's bring Stephanie in and maybe Andres will come back later in the podcast, if we're lucky. So Stephanie Kelton, my personal hero, professor of economics and public policy at Stony Brook University, notably the author of The Deficit Myth, The New York Times bestseller Modern Monetary Theory and the Birth of the People's Economy. Professor Kelton has worked both in academia and in policy. She served as the chief economist on the U.S. Senate Budget Committee in 2015 as a senior advisor to the Bernie Sanders presidential campaign. She's a regular commentator on national radio and broadcast television. She's the co-host on Market Watchers Weekly podcast, which is the Best New Ideas In Money. It's a great podcast. She also publishes a Substack newsletter, The Lens. Welcome, Stephanie. It's so good to have you on. Thank you both. It is really, really fun to be with you first episode. So congratulations. I can't wait to see what you're going to do with this podcast. We couldn't think of a better guest. You had to be. Super nice of you. Let's Do you want to start? Sorry, Go ahead. No, I'm just happy that we're doing this and so blessed that Stephanie's here with us. So it's exciting what we're all going to be able to do together. I want to start at the very beginning. It's a good place to start. Stephanie, what is the federal deficit? Okay, It's the difference between two numbers like this thing that you hear. You see headlines, media hand-wringing, this word that's like omnipresent. Right? And at the end of the day, it boils down to this rather benign thing. It's literally the difference between two numbers. One of the numbers is, you know, how many dollars the government puts out there each year. So we call that outlays. If you go to the Congressional Budget Report, you look up the tables, it'll say total outlays, and it will give you a number. And those outlays could be for things like military spending, health care, infrastructure and all that. So think of dollars flowing out of government. That's one number. The other number is total revenue. That's mostly through taxation. So it's how much the government collects in personal income tax, corporate income tax, payroll tax, not so how much comes in each year. So the difference between what goes out and what comes in. So if outlays are greater than receipts, then revenues, then we record on the ledger a deficit. So putting really simple numbers to it, you guys, if the government outlays are 100 and revenues are 90, then we call that a deficit and we record somewhere that the government has run a deficit. Somebody writes minus ten on the books. Okay. So it is that's the definition. That's what we're talking about. But what we forget and it's really, really important and you would think somebody would take the trouble to mention this is that if the government puts out more than it takes away from us, that it's really just making a deposit. So if it puts 100 in and only takes 90 out, what it's really doing is depositing $10 into some other part of the economy. In other words, the government's deficit is always matched dollar for dollar by a financial surplus. On the other side of every deficit lies a surplus of equal size that goes into some other part of the economy. So when people get very upset at the notion that the government has done this awful thing called running a fiscal deficit, what they really failed to recognize, and it's partly due to the economics profession, which doesn't do a good job informing people, journalist pundits, talking heads on TV. What people don't realize is that the government's deficit is a financial contribution to some other part of the economy. So in a financial sense, every deficit is good for someone. The question is, you know, for whom? What are those deficits being used to accomplish and who's on the other side of that windfall? Where are those dollars going? Who has them now? So a lot of people think of the word deficit and they imagine their own household budget. If I take out a credit card and I spend a bunch of money on it's money I don't have, I have to pay that money back. Now, you make this great distinction that the government is not a household. We have a fiat currency. The US government is a currency issuer. I love that You say their red ink is our black ink to describe that a lot of people hear deficit and assume debt and moreover they assume foreign debt like we've taken out a credit card with the Bank of China. Can you make the distinction for everyone? Because it's unfortunately a super common one between foreign debt and the national deficit? Yeah, Even, you know, journalists and pundits and members of Congress will sometimes conflate the deficit and the debt. And I have to tell you, Jessica, I think I wish we didn't use either of these words. I think both are poor words to use to describe what's really happening. So I would prefer to just use the term net spending for the outcome. Whatever the difference between outlays and revenues is each year, we just call it net spending. Sometimes it's positive, sometimes it's negative. The debt so called is the cumulative right. The running total of all of the prior instances where the government engaged in net spending of a plus or minus kind. So let me give you an example. If the government puts in 100 and takes out 90, we've already established that we call that a fiscal deficit. We right minus ten. Now, if they do that year after year after year after year, we'll have a different number. We'll add up all those minus tens, and that will give us what we refer to as the so-called national debt. What happens is that each year the government's budget happens to end in a deficit. The government sells treasuries. These are financial instruments that are available to the rest of us, including to China. People who have dollars can trade those dollars in for what I think amounts to a just another kind of dollar. Right. It's an interest bearing US dollar called a government bond, a U.S. treasury. And so China has access to that market. You and I have access to that market, other investors, pension funds and the like. And it's the total outstanding stock of U.S. Treasuries that we call the national debt. And that word is so loaded, right, because people hear the word debt and they think, oh, my God, I know if I took on trillions of dollars of debt, it would be the end of the world for me personally. But the federal government, as you just said, doesn't have a budget that operates like a household. This thing called the debt is not akin to personal debt. It doesn't work like when we take on personal debt. If you got yourself in a pickle with credit card debt, you've got to find dollars to repay your creditor, Visa, MasterCard, whoever. When the federal government sells treasuries, what is it obligated to pay at the end of the day, U.S. dollars to bondholders? Well, where do U.S. dollars come from? Well, it turns out the U.S. government is the issuer of the U.S. dollar. So it's a very different beast when we talk about debt for a household versus this thing that we unfortunately call debt for the federal government, what it really is is just a financial asset for the rest of us. It's part of our wealth, part of our savings. If you're lucky to get lucky enough to own some of these congratulations. Right. This is a safe financial instrument that pays you interest. But for the benefit of parting with your dollars for some period of time. That's a great distinction. And so when we think about the deficit being the difference between these two numbers, we think about the debt being these treasuries. Right. Both of those are coming from the federal government. One thing that helped me when I first started learning about this is a visual that really kind of brings in this paradigm shift. And one of the classic ones for those that are learning this perspective, this lens into public budgets is this classic sectoral balances image. Can you tell us a little bit about this image and what it's what it's showing us?
8:09They'll be coming on in a second here where we think about these Angry Birds.
8:15A correlation or an analogy here might be with the term ‘Deficit Hawks’. So we think about this little red bird here like a deficit hawk.
8:22Well, this is what they tell us. Right. And they act like zombies. They say there's a fine line between the government
8:28being solvent or insolvent or many of its programs. If it gets too high, if the debt gets too high,
8:35things are going to go wild, creditors are going to go weary, people are going to take their money elsewhere.
8:42It's going to downgrade us. Jess, what about some other things? Greece? Oh, yeah.
8:48You could end up like Greece, unable to pay your bills. There are all sorts of things people talk about related to default,
8:55and I'm just glad we have Stephanie on to break all of this down. I really like the zombie Angry Birds.
9:03Birds are really important to us because we talk about the owls and the hawks. The hawks are people who have very strong views about the deficit.
9:12I think of people like Larry Summers then we have The Owls, which are a bit more wise, would show us a different way
9:18of doing things. We may have lost Andres, so I'm going to go ahead
9:26and tell us a little bit about our guest that we're really lucky to have coming on.
9:31We got Charlie on my visual here. I still hear you. I thought you were a goner.
9:36Now I'm here. I'm here. Let's introduce our guest. Let's bring Stephanie in and maybe Andres
9:43will come back later in the podcast, if we're lucky. So Stephanie Kelton, my personal hero, professor
9:50of economics and public policy at Stony Brook University, notably the author of The Deficit Myth, The New York Times bestseller
9:59Modern Monetary Theory and the Birth of the People's Economy. Professor Kelton has worked both in academia and in policy.
10:07She served as the chief economist on the U.S. Senate Budget Committee in 2015
10:13as a senior advisor to the Bernie Sanders presidential campaign. She's a regular commentator on national radio and broadcast television.
10:21She's the co-host on Market Watchers Weekly podcast, which is the Best New Ideas In Money.
10:27It's a great podcast. She also publishes a Substack newsletter, The Lens.
10:32Welcome, Stephanie. It's so good to have you on. Thank you both. It is really, really fun to be with you first episode.
10:41So congratulations. I can't wait to see what you're going to do with this podcast. We couldn't think of a better guest.
10:47You had to be. Super nice of you. Let's Do you want to start?
10:53Sorry, Go ahead. No, I'm just happy that we're doing this and so blessed that Stephanie's here with us.
10:59So it's exciting what we're all going to be able to do together. I want to start at the very beginning.
11:05It's a good place to start. Stephanie, what is the federal deficit?
11:13Okay, It's the difference between two numbers like this thing that you hear.
11:19You see headlines, media hand-wringing, this word that's like omnipresent.
11:25Right? And at the end of the day, it boils down to this rather benign thing.
11:31It's literally the difference between two numbers. One of the numbers is,
11:36you know, how many dollars the government puts out there each year. So we call that outlays.
11:43If you go to the Congressional Budget Report, you look up the tables, it'll say total outlays, and it will give you a number.
11:49And those outlays could be for things like military spending, health care, infrastructure and all that. So think of dollars flowing out of government.
11:57That's one number. The other number is total revenue. That's mostly through taxation.
12:03So it's how much the government collects in personal income tax, corporate income tax, payroll tax, not so how much comes in each year.
12:12So the difference between what goes out and what comes in. So if outlays are greater than receipts, then revenues,
12:21then we record on the ledger a deficit. So putting really simple numbers to it, you guys, if the government outlays are
12:31100 and revenues are 90, then we call that a deficit
12:36and we record somewhere that the government has run a deficit. Somebody writes minus ten on the books.
12:43Okay. So it is that's the definition. That's what we're talking about. But what we forget and it's really, really important and you would think
12:52somebody would take the trouble to mention this is that if the government puts out
12:57more than it takes away from us, that it's really just making a deposit. So if it puts 100 in and only takes 90 out,
13:05what it's really doing is depositing $10 into some other part of the economy.
13:12In other words, the government's deficit is always matched dollar for dollar by a financial surplus.
13:19On the other side of every deficit lies a surplus of equal size
13:25that goes into some other part of the economy. So when people get very upset at the notion that the government has done
13:32this awful thing called running a fiscal deficit, what they really failed to recognize, and it's partly due
13:41to the economics profession, which doesn't do a good job informing people, journalist pundits, talking heads on TV.
13:48What people don't realize is that the government's deficit is a financial contribution to some other part of the economy.
13:56So in a financial sense, every deficit is good for someone.
14:02The question is, you know, for whom? What are those deficits being used to accomplish and who's on the other side of that windfall?
14:09Where are those dollars going? Who has them now? So a lot of people think of the word deficit and they imagine
14:16their own household budget. If I take out a credit card and I spend a bunch of money on it's money
14:23I don't have, I have to pay that money back. Now, you make this great distinction that the government is not a household.
14:31We have a fiat currency. The US government is a currency issuer. I love that You say their red ink is our black ink to describe that
14:40a lot of people hear deficit and assume debt and moreover they assume
14:46foreign debt like we've taken out a credit card with the Bank of China. Can you make the distinction for everyone?
14:53Because it's unfortunately a super common one between foreign debt and the national deficit?
14:59Yeah, Even, you know, journalists and pundits and members of Congress will sometimes conflate the deficit and the debt.
15:06And I have to tell you, Jessica, I think I wish we didn't use either of these words. I think both are poor
15:14words to use to describe what's really happening. So I would prefer to just use the term net spending for the outcome.
15:24Whatever the difference between outlays and revenues is each year, we just call it net spending.
15:29Sometimes it's positive, sometimes it's negative. The debt so called is the cumulative right.
15:38The running total of all of the prior instances
15:43where the government engaged in net spending of a plus or minus kind. So let me give you an example.
15:50If the government puts in 100 and takes out 90, we've already established that we call that a fiscal deficit.
15:57We right minus ten. Now, if they do that year after year after year after year,
16:02we'll have a different number. We'll add up all those minus tens, and that will give us what we refer to
16:08as the so-called national debt. What happens is that each year the government's budget happens
16:14to end in a deficit. The government sells treasuries.
16:19These are financial instruments that are available to the rest of us, including to China.
16:25People who have dollars can trade those dollars in for what I think amounts to a just another kind of dollar.
16:33Right. It's an interest bearing US dollar called a government bond, a U.S.
16:38treasury. And so China has access to that market. You and I have access to that market, other investors, pension funds
16:46and the like. And it's the total outstanding stock of U.S.
16:52Treasuries that we call the national debt. And that word is so loaded, right, because people hear the word debt
17:00and they think, oh, my God, I know if I took on trillions of dollars of debt, it would be the end of the world for me personally.
17:08But the federal government, as you just said, doesn't have a budget that operates like a household.
17:13This thing called the debt is not akin to personal debt. It doesn't work like when we take on personal debt.
17:20If you got yourself in a pickle with credit card debt, you've got to find dollars to repay your creditor, Visa, MasterCard, whoever.
17:28When the federal government sells treasuries, what is it obligated to pay at the end of the day, U.S.
17:35dollars to bondholders? Well, where do U.S. dollars come from? Well, it turns out the U.S.
17:41government is the issuer of the U.S. dollar. So it's a very different beast
17:48when we talk about debt for a household versus this thing that we unfortunately call debt for the federal government,
17:55what it really is is just a financial asset for the rest of us. It's part of our wealth, part of our savings.
18:01If you're lucky to get lucky enough to own some of these congratulations. Right. This is a safe financial instrument that pays you interest.
18:13But for the benefit of parting with your dollars for some period of time.
18:20That's a great distinction. And so when we think about the deficit being the difference between these two numbers, we think about the debt being these treasuries.
18:30Right. Both of those are coming from the federal government. One thing that helped me when I first started learning about
18:36this is a visual that really kind of brings in this paradigm shift. And one of the classic ones for those that are learning this perspective,
18:45this lens into public budgets is this classic sectoral balances image.
18:50Can you tell us a little bit about this image and what it's what it's showing us?
29:21So I want to turn to the debt ceiling crisis. How they've made all of us
29:27afraid of this looming scenario where what's going to happen if we raise the debt limit, Have we ever done that before?
29:35Many, many times over 70 times since 1960. Can you talk a little bit about just the debt limit crisis and how you see it?
29:46Well, sure. I see it as a as a crisis of its own making, Right.
29:52It's political theater, but this time it's gotten to the point that, you know, people are starting to, I think, take very seriously
30:02the possibility that you might well have enough people in Congress who think that this is, you know, actually some sort of innocent
30:11or benign game that you can just refuse to raise the debt limit and nothing terribly bad will happen.
30:20I, I don't know how to explain it. You know, we've been here before where it started to feel pretty serious.
30:27And I think in your intro, you had some references to what did you show a video clip that referenced, you know, downgrading and that's
30:37the zombie. Yeah, yeah, yeah, yeah. They'll downgrade the debt. Well, that happened before. Okay.
30:43That happened after the housing bubble burst from the financial crisis. We toyed around.
30:50We members of Congress toyed around with the idea of not raising the debt
30:55ceiling limit in a timely enough fashion and risking a potential default.
31:00And Standard and Poor's downgraded U.S. Treasuries from a triple-A rating, which is the highest
31:06that you can have to one notch below. And, you know, yesterday I was teaching my graduate students
31:12here at Stony Brook, and I showed a video of a clip, a video clip of some of the conversations that were going on around that time.
31:20And one of the people who spoke was Warren Buffett, who's, of course, billionaire investor Berkshire Hathaway and so forth.
31:27And Warren Buffett was saying, how on earth is S&P downgrading U.S.
31:34Treasuries? This makes no sense whatsoever. And he said, these are his words, not mine. He said the US government can print money.
31:42What do they think there's going to be a point at which, you know, you have to make interest
31:47in principal payments to bondholders and you don't know where to get the money. I mean, he's saying this is insane, it's our currency.
31:54And he said, you know, they asked him, do you disagree then with the downgrade? He said, of course, he said in here in Omaha,
32:02because, you know, Berkshire in Omaha, Nebraska, said the U.S. treasuries would have a AAAA rating.
32:10There is no reason to question the validity of the of the U.S.
32:16government so-called debt, as we've referred to it. So lawmakers should recognize this.
32:21I think they know it, Jessica. I don't think there's confusion about this. I think that they know that there's
32:28always that they always have the ability to pay. I heard one member of the House on television the other morning
32:36say who is a Republican from Arkansas and he said these were his exact words.
32:43He said the debt ceiling is an anachronism financially. But he said but the reason I like it And then he went on to explain that
32:54the reason he likes it is because it presents these moments where you can use the debt limit as leverage
33:02to try to extract the kinds of things you were just talking about. Make people go try to find extra hours in order to get their SNAP benefits,
33:11make people jump through extra hoops and and hurdles and, you know, get an opportunity maybe to take a whack
33:18at Social Security and Medicare or something else, you know, get your pound of flesh in exchange for doing something that did
33:27the job, did not even have to do because we shouldn't have the damn thing. We're one of maybe two countries in the world that even has a debt limit. So
33:37but here we are. Here we are. It's almost as if a construct in a sense of knowledge
33:43and a sense of truth that everybody, the public kind of internalizes is has a very effective political tool to win the kinds of things that that those
33:53that want to privatize, that those that want some kind of market fundamentalist economy to function, use very effectively.
34:01And speaking of that leverage, one of the things we hear over and over again is that if the GOP, many Democrats,
34:10quite frankly, will sometimes argue that if we're going to raise the debt ceiling, then we'll only do it because we will cut it from somewhere else.
34:18Social Security up all the time here. Right. They say it's going to go broke.
34:25It's you know, there's no way that it's going to stay solvent. And so we got to find a way to privatize it or cut funding.
34:32We actually have a quick clip. Mike, can we can we get that up of one that you've used as well many times.
34:43So having personal retirement accounts is another way of making a future retiree benefits more secure for their retirement.
34:51And also, do you believe that personal retirement accounts as a component to a system of solvency does help improve solvency?
34:59Because when you have a personal retirement account policy, it's accompanied with a benefit offset with that feature in place.
35:05Do you believe that personal retirement accounts can help us achieve solvency for the system and make those future retiree benefits more secure?
35:12Well, I wouldn't say that the pay as you go benefits are
35:17insecure in the sense that, oh, well,
35:23there's nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question,
35:30how do you set up a system which assures that the real assets
35:36are created, which those benefits are employed to purchase?
35:42So it's not a question of security, it's a question of the structure
35:47of a financial system which assures that the real resources are created for retirement as distinct from the cash.
35:56The cash itself. It's nice to have, but it's got to be in the context of the real resources
36:05being created at the time those benefits are paid
36:10so that you can purchase real resources with the benefits, which of course a cash.
36:22So we're hearing about personal retirement accounts. Give us give us a sense of what's going on at that hearing in that video.
36:31So it's funny because I also showed that clip in my class yesterday, my graduate students, and we deconstructed.
36:38And so I'm well-equipped to do it again here. It's one of my favorites because, you know, Alan Greenspan, just to be clear,
36:46so everybody who's watching knows that that was Congressman Paul Ryan, right.
36:51Who became speaker of the House and former Fed Chair Alan Greenspan.
36:56So you would think maybe Alan Greenspan would know a little something about the monetary system and where money comes from,
37:03given the nature of the Federal Reserve. And it turns out he gave what I think was just about the perfect answer to this question, not,
37:11however, the answer that Paul Ryan desperately wanted, because Ryan was trying to toss him a softball and just reel in that.
37:18Right. You heard him use the term personal retirement accounts at least four times I counted.
37:24And that's all he wanted. He wanted affirmation from Alan Greenspan that Social Security is in trouble,
37:30that it would make sense to move today gradually toward a system of personal retirement accounts.
37:37That's code for privatizing Social Security. And so don't you agree with me, Chairman Greenspan,
37:44that it's time to begin to take these steps? That's question. And instead of agreeing, Alan Greenspan simply leans
37:51into the microphone and begins by taking off the table the question of affordability just takes it right off, he said.
38:01I wouldn't say that there's anything problematic with the system the way it's set up today.
38:06He said, and I quote, There's nothing to prevent the federal government from creating as much money as it wants and paying it to someone full stop.
38:17So what he's saying is you have benefits that are promised to future
38:22retirees, their dependents and the disabled. You're worried that you're not going to have the money
38:28to pay those benefits when they come due? Don't worry. This is Greenspan. Don't worry. The money is the easy part.
38:34The cash itself is is the easy part. Then he goes on to say, The really important part.
38:40He said, The question is how do you set up a system which assures that the real assets
38:47are created, which those benefits are employed to purchase? Now, what does that mean?
38:52It means how do you know that when you mail those checks out, or more appropriately, when you digitally credit
39:00people's accounts and they have their Social Security benefits, how do you know in ten, 20, 30 years time that they're going to be able
39:08to turn around and spend that money into an economy that is productive enough,
39:14that is producing enough goods and services of the right mix, that they can buy things without having to compete
39:22with everyone else for a shrinking supply of real goods and services. Therefore, driving up wait for it inflation
39:31because that is public enemy number one for every central banker. And so what Greenspan was really doing was just explaining to Paul Ryan
39:40that it's inflation you have to watch out for not running out of money, not, you know, a trust fund that goes to zero.
39:48That's easy to deal with. It's inflation that we should be focused on
39:54right. And, you know, as we're deconstructing and unpacking the way MMT presents public budgets,
40:03something that's also key and that I hear about a lot is this notion of like doing MMT or going out and doing some kind of trick.
40:12Can you talk about how spending actually works on a regular basis? Right, it’s not like
40:17we're going to do something new or different, but rather what is already happening, what we spend
40:24right? So, look, this project got started in the mid 1990s,
40:31so MMT started as an effort
40:36to provide a better explanation, right? A better description of the monetary system that we have today,
40:44which I think you mentioned earlier, fiat currency floating exchange rate. We're not on a gold standard.
40:49It's not a fixed exchange rate world. We have floating exchange rates and fiat currencies and we should start by recognizing that.
40:57So what is the monetary system we have? And then what are the mechanics, the monetary, the plumbing, Right.
41:03Of the financial system? How does it work? So MMT was, you know, from the very beginning about trying
41:12to provide an accurate description of how it all works. So you don't quote unquote, do MMT?
41:20It's a description. And so with that, I call it a lens or others call it a lens as well.
41:27With that lens, right. And a clearer picture of how
41:33the monetary system is set up and the mechanics of government spending. What do we see when we look through that lens?
41:39So, you know, it's pretty I think, again, COVID gives us such a nice example
41:45because, you know, March of 2020 COVID hits in earnest in the US, and what is Congress do?
41:53There are a couple of small bills initially, but then the big fiscal package is passed in March of 2020, and that's the CARES Act,
42:01and that is Congress coming together and writing a bill. The legislation is the set of instructions and think of it as a set of instructions
42:12that is going to the government's bank, to the Federal Reserve. The Fed is the government's fiscal agent.
42:18And that bill said we get ready, right, because we're drafting a $2.2 trillion bill.
42:24We are going to have a payroll protection program. So there's going to be money that's going to go to
42:31small business is to help try to keep workers on payroll. We're going to send checks to people.
42:36So there's going to be a 1200 dollars check that goes to most people in this country. We're going to enhance the unemployment benefits.
42:45And so we're going to provide $600 a week to unemployed people.
42:50And you know, that that money is going to go out and so on and so forth. And so Congress is committing to the spending
42:58with the passage of the legislation and the appropriations. The commitment is there.
43:04And the rest is really, you know, just behind the scenes, the crediting of the of the relevant bank accounts.
43:11Congress committed the money. Now it's the Fed's job with the rest of the banking system
43:17to carry out on behalf of the U.S. Treasury those payments.
43:22So you start to see, you know, bank accounts get credit that the unemployed have $600 a week and somebody gets their 1200 dollar check
43:31and so, you know, the way that it works is really as simple as understanding
43:38that banks are changing numbers in people's accounts. When the government spends, the numbers get changed up.
43:46When we pay the government, let's say we pay taxes, the numbers are being changed down in our account.
43:52So that's how it works in the modern era. It's just, you know,
43:58most of it is accomplished using nothing more than a computer keyboard, and we are debiting and crediting the relevant accounts.
44:06So is it safe for me to say that tax is and bonds
44:12don't actually finance the government? Is it safe for you to say, well, it's accurate for you to say
44:24Somebody might not like that. But you you're leveling with them.
44:30It's just like I'm sort of kidding. Obviously I'm kidding. But yeah, we. Want to avoid Twitter battle.
44:36Like, it's an uncomfortable thing for people to hear, right? Because for a lot of people, there's sort of some pride
44:43associated with paying your federal income tax. And you'll sometimes hear, you know, because I did my part for
44:51keeping the country safe or helping to fund, you know, health care and education and and so on and so forth.
44:58And you got groups out there that, you know, try to tell people feel good
45:03about paying your federal tax because it's helping them, you know, finance all of these different programs that benefit people in one way or another.
45:13So some people don't want to hear that. Basically, you know, it's just somebody is hitting the delete key
45:21and taking numbers out of your account, but the government doesn't actually get anything right. Warren Mosler has said, I think many times over the years there's
45:29no gold coin that drops into a bucket somewhere in the in the Treasury.
45:34It's just subtracting something from our accounts, but it doesn't enrich the federal government, it doesn't enhance their capacity to spend.
45:43They're not better able to afford things because they collected $100 from one of us.
45:51It's just, you know, it's subtracted away from us. And that is
45:57not always a comfortable thing for people to hear. But it is it is correct.
46:03Another one of the light bulb moments that I had following your work and reading the book is that instead of framing
46:09fiscal policy and public budgets as your tax first so that you can spend, you invert that
46:16and you say the way it actually works is you spend and then you tax. Can you talk about then the purpose of taxation
46:24because some people kind of go, then why? Why is anybody paying taxes? You know, the metaphors are talking about you don't need taxes,
46:29but in fact it plays this huge role in how we understand budgets. So there's a sort of an origin story where you could use the tax
46:39and if you know, if you're really interested or if your listeners are really interested in this stuff,
46:44for the most part, don't read. Economists read. It's the work of historians and sociologists, anthropologists
46:50and numismatists and others. If you want to get really deep in this stuff and trace, you know,
46:56how have taxes and other kinds of fees and fines and obligations and the formation of a legal and court system, how has that
47:06been used to introduce currencies like to start a currency from scratch?
47:12Something like a tax is a very good way to monetize
47:18and otherwise, you know, non money using society. And so you say what is the purpose of the tax?
47:25One answer is that it could be one way to start up a currency from scratch, that's thousands of years ago.
47:35So now let's move into the more modern era. Well, why do we why else do we have taxes?
47:41Well, I just told you that when I pay my taxes, their dollars are deleted from my bank account.
47:47I don't have them. Once they're taken away from me, they're not available to me. I can't chase after goods and services with them.
47:54They're not mine to spend any longer. So one thing that taxes do is to reduce the purchasing power
48:02of the rest of us so that we have less money to spend. So you can imagine that an important
48:09purpose of doing that would be to allow the government to spend into the economy
48:15to do infrastructure and health care and education and all kinds of other things without creating an inflation problem.
48:22So there's a sort of a balancing where the government can spend dollars into the economy, mobilize resources, hire people,
48:31contract with sellers and so forth, but take down the number of dollars the rest of us
48:38have to spend into the economy so that there are some space for the government to safely spend without creating inflation problem.
48:46You can say, you know, look at the distribution of wealth and income in this country today.
48:52It looks a lot like it did in the 1920s, the sort of Gilded Age. It's It's gotten to the point where we have concerns about,
49:02you know, how our economy functions, how our democracy functions. We're going to use the tax system to remove some of the dollars
49:13that are in the hands of the people at the very, very top to try to reduce the disparities right in in wealth and income distribution.
49:22And so taxes are very good for that purpose. You could say we're going to use the tax code to create incentives or disincentives.
49:31The Biden administration has been doing that to try to get people to put heat pumps in their homes and buy electric vehicles
49:38and get businesses to invest in green tech and manufacturing and so forth.
49:45Or you can use it. You know, as a stick rather than a carrot and say, I know we're going to tax bads.
49:53We're going to have people propose things that are financial transactions, tax or raising the gas tax or carbon tax,
50:01you know, all kinds of things to discourage certain behavior. So lots of lots of different
50:08important uses for taxes. Yeah, I think
50:14people are thinking about taxes right now, many having just filed. But people are also thinking about inflation right now.
50:20And that's something that a lot of people say, oh, well, we did. MMT and the government has spent too much money
50:26with the CARES Act and the American Rescue Plan. And I a lot of people don't connect the necessity
50:34of economic stimulus in times of downturn and just get the sticker shock of how much money
50:41we're putting into the economy and say, well, that must be or the inflation's from too many dollars or chasing too few goods.
50:48We've put too many dollars into the economy and therefore devalued the dollar. People have made a lot of extrapolations.
50:55Can you say a little about what actually caused recent inflation? We could do a
51:00whole we could do a whole nother hour, Jessica, for people who
51:07maybe didn't pay close attention to all of this, which is most people during this period, you know, when the pandemic initially started
51:17with falling prices in all kinds of areas of the economy, you know, some outright deflation, where prices are just falling
51:26rapidly. And then when prices started to increase in the early phase, we saw it in kind of unusual places.
51:35Used cars was one of the early places where we saw this uptick in headline inflation rates.
51:42We said, where is that coming from? And you look into the numbers and you see that
51:47there's something happening with used car prices. And we said, what's going on there? Well, we could understand that because, you know, we sort of work backwards
51:57and said, well, we didn't know if we were going to have a vaccine or how quickly we might have a vaccine and a bunch of car rental companies
52:05sold off their fleets because they didn't think people were ever going to travel and want to rent cars again.
52:10And so those cars got sold off and then all of a sudden we had trouble
52:15producing semiconductors that are needed to manufacture new cars. And then when the economy started to recover more quickly
52:22than a lot of people anticipated, people wanted to buy cars and travel again and so forth where you couldn't get a new car off the assembly line
52:30because you didn't have the chips you needed. So people turned to used cars and the car companies were rental
52:37companies were trying to buy back some of the cars to restock, and everybody was competing for used cars and prices went high.
52:44And then over time, we just started to see, you know, the inflation being driven by something different.
52:52This month and something different this month. And, you know, we shifted our spending patterns away from services to goods.
53:00And we remember, you know, the TV images of all the ships trying to get in to the ports and unload cargo.
53:07And so goods prices went up. We had, you know, freight and trucking and you couldn't get containers.
53:13And so people heard a lot about supply chains and bottlenecks. And Chairman Powell, Jerome Powell used to come out every time
53:22the Fed would meet, and he'd say, you know, well, we see inflation. And the reason we are not deciding to raise interest rates today
53:29is because we think most of the inflation is coming from supply shocks
53:35and bottlenecks and COVID related disruptions and our tool,
53:40the interest rate, is really designed to work on the demand side of the economy.
53:45So for that reason, we decided not to raise interest rates today, and he would explain that.
53:50So for a period of time and then, you know, as the months passed and the
53:58analysis sort of shifted away from, well, it's all supply side or almost all supply side,
54:05people started to say, well, is coming now broadening and other parts of the economy. And the Fed, of course, started
54:11raising interest rates and then you had economists like Isabella Weber who came out and dared to suggest that,
54:19you know, companies might just be taking advantage of the inflationary moment
54:24where, you know, consumers are primed to expect to pay more for everything.
54:29And so companies will be able to not just pass on their own rising costs to consumers,
54:37but to tack on a little bit extra and fatten their profit margins. And so I know people have looked the Federal Reserve,
54:45San Francisco, New York Fed, Moody's, the European Central Bank, all kinds of people are trying to do these sort of autopsies.
54:52Now, where you look at the inflation that we have lingering with us today and say how much of it can we trace to Russia, Ukraine,
55:01how much of it can we trace to any excess fiscal, you know, money that people still have because of stimulus checks or whatever?
55:10How much of it is still related to COVID pandemics, supply chain sort of things?
55:15And the answer I'm giving you a long answer because it's not an easy question to answer.
55:21And depending on who you ask, you'll get a very different answer. Some of the analysis says very little, if any of it
55:30that we sticking around with us today is due to excess demand or the fiscal stimulus stuff,
55:37that it's almost all other things other people will find different,
55:43different ways to attach weights to those different things. So it's a little bit of probably everything.
55:51And that's what I also think is so critical because many economists and other pundits
55:57will dismiss MMT perspective by saying at the end of the day, it's still about inflation so that you should listen to us
56:04and they're not, you know, Stephanie Kelton and other people, they're not saying anything new. But what's really important is that there's
56:11a fundamentally different understanding. And I think you've just laid it out about what we mean by inflation.
56:16It's not just too much money, too little. It's about resources. It's about politics.
56:21It's about, you know, sometimes people taking advantage of of costs and prices and getting extra.
56:27It's about, you know, what are we producing and do we have the infrastructure for it? So many things. A crisis, A pandemic. Right.
56:34And I feel like you're working. MMT opens up that conversation in a way we are not used to
56:40when we talk about inflation. Well, thank you.
56:45Okay. So as we're kind of winding down something that we all wanted to hear from you about
56:52is so when you've spoken on different panels, you've sometimes talked about a light bulb moment that you've had when you first got your career going
57:02and when you were looking at this stuff that you didn't necessarily just go into grad school as an MMTer
57:07or as somebody that believed these things, you did the work, you went in and looked at the empirical evidence, right?
57:14Can you tell us about what that process was like for you and when you came to kind of,
57:21oh, the aha moment that this is actually how spending works, this is how public budgets work?
57:27Sure. I mean, I was fortunate, I'll say, to have done my undergraduate
57:33in an economics department where, you know, I studied money in banking under a monetarist and I studied the history of economic thought under
57:44someone I think who identified as a Marxist and everything in between. Neoclassical economists, Keynesian types.
57:50So I really had exposure to so many different theoretical schools of thought when I was an undergrad.
57:57So after I graduated from undergrad, I was going to start my graduate training at Cambridge University.
58:05I finished my undergrad in December. Cambridge was going to start in October the following year, so I had a nice period of time and my parents said, Well, you should get a job.
58:16And one of my undergrad professors, the one that had taught me history of economic thought, said You should go to the University of Denver and you should study with Randy Wray.
58:26And given the options, you should imagine what I what I decided to do. I went to Denver.
58:32And so, you know, Randy had been a student. Both of John Henry is who I was just referring to, but also of Hyman Minsky.
58:40And so I got to Denver and Randy had me reading Minsky. I was reading Stabilizing an Unstable Economy.
58:46I'm pointing because it's on the shelf behind me with Randy. And it was kind of like a dress rehearsal for graduate school, right?
58:54I took all these classes. I wrote the exams. They were kind enough to grade them. I didn't pay any tuition.
58:59And then off I went to Cambridge. So I had read a lot of post Keynesian
59:06literature, a lot endogenous money, all this kind of stuff. So my head was filled with all of these, you know, important works.
59:15Before I got to Cambridge. And then Warren Mosler comes on the scene.
59:20This is like 1996, right? And so there's this email, not email Internet chat thing.
59:29And Warren Mosler got involved and was talking to people like Randy and Bill Mitchell and others, and Warren's the guy who was putting forward
59:38these ideas and they just ran so counter, even though I'd had some heterodox
59:44economics in my training I hadn't heard anything like this, you know, the idea that the sequencing was wrong,
59:51The government spends first and economists had all this sort of stuff backwards about what taxes were for and bond sales. And
59:59I started just kind of listening on that list, serve and paying attention and writing back to Randy.
1:00:05And then I got a fellowship from Cambridge to go to the Levy Economics Institute, start working on a dissertation the following year.
1:00:13And Randy was there and Randy was working on his book Understanding Modern Money, which was his first MMT book.
1:00:21And so I start reading Warren more closely and talking to Randy, and I was just shaking my head.
1:00:28I said, I just don't think it's right. I don't. And Randy said to me, If you think he's wrong,
1:00:35you should write it up, because he would want to know that he's wrong. I mean, that's what he said to me. He would want to know.
1:00:41So, you know, write it up. And I said, okay. So I dig in, right?
1:00:46I start talking to people at Treasury and Fed. I start all this reading, and I'm working through
1:00:52all of the operational details and I thought, surely, you know, Warren just took a took the easy way somewhere he was leaving something important out.
1:01:02And if I put it all together and I really careful way I would arrive at a different place.
1:01:08And so I spent months working on what became the first two peer reviewed articles that I published.
1:01:15And to my, I think, great surprise, I ended up writing this paper
1:01:20and arriving at the same conclusions that Warren had arrived. And it was only by forcing myself to go through that exercise
1:01:29to try to find where he'd gone, you know, where is he wrong? Where is he wrong? Because it just nagged at me
1:01:35that I couldn't find out why he was wrong, but it felt wrong. And in the end, I just had to,
1:01:42you know, lay down my fiddle and recognize that I'd been b he was right.
1:01:50This is truly one of my favorite stories in the world that this is how it all went down, because we all encountered these people
1:01:58on Twitter or wherever that try and make a case against these ideas, against the lens of MMT
1:02:08without actually grappling with what we really say. Instead, you know, coming up with something else.
1:02:14Well, what you're saying is this and it's not at all what we're saying. So the fact that you actually dug in and wrote
1:02:20an entire paper, it just says so much about who you are as a person. And I think we have this idea that the, you know, the very smart
1:02:29thought leaders in our society are people that have this gift. But you put the work in and you're terribly curious.
1:02:36I think that's really what sets great thinkers apart, is people who have that curiosity.
1:02:41And now we have all of your work as our great gift from you,
1:02:47that's going to influence policy for many years to come. I always tell people ten years time from now,
1:02:54people will be reading the deficit myth and say, How could we have been doing it any other way?
1:03:00It's truly the next step. In iteration and in economics. And just being in graduate school, I had so many questions coming out.
1:03:08There's something missing. This doesn't go so far as to address the problems of our time
1:03:13and we're getting things wrong and nobody's trying to ask the right questions or arrive at some answers.
1:03:19And then I found your work afterwards. And now here we are. And I'm so grateful you came on and spoke with us.
1:03:25And I want to tell everyone that's listening. If you haven't read The Deficit Math, you don't have to have
1:03:32a background in public policy or economics to get a lot out of it. And then the weekly podcast, Best New Ideas and Money and of course, the Substack The Lens.
1:03:40Is there anything else you want to plug. Stephanie No, thank you. That's so kind of you.
1:03:46Thank. Any words for the youth of the world. Listen.
1:03:52This is why I do what I do because that's where the energy is and that's where the change
1:04:00is going to come and so, you know, young people don't take for granted
1:04:08that what you hear from the mainstream press is correct.
1:04:13Don't even take for granted that what you hear from your political representatives is correct, especially on issues that are this important.
1:04:22I mean, we have climate to deal with. And if we are going to allow ourselves to be trapped and hamstrung by these,
1:04:30you know, outmoded of thinking about money and deficits and debt and taxes, and we're going to try to proceed
1:04:39with this history, this heroic challenge that's before us, which is to deal with the imminent threat of climate change.
1:04:46And we think that somehow we're going to do this on a shoestring or we're going to do this in a deficit neutral way and we're going
1:04:52to, quote unquote, pay for it. I'm extremely worried and scared
1:04:59for what that future is going to look like for billions of people around the world. So we got to get this right
1:05:08so much. Yeah, I do. There's hope. All right.
1:05:13Thank you so much for coming. You, Stephanie. All right. Take care you both. Congrats again on the show.
1:05:20Thank you. Okay. Bye bye. So we have another exciting guest next week.
1:05:28We do agree. And I really feel like this was just such a perfect
1:05:34start to. Yes, it's down the rabbit hole. So we're going to have Crypto's New Villain next to.
1:05:42Yeah. Continue to unpack this this ongoing conversation about the economy and.
1:05:48We got everybody up to speed. What is MMT? How do you look at all of this stuff? We covered a lot and now we get to get into, I don't know, some villain.
1:05:58Yeah. I love that one. And they tried to make him look so scary and evil. He still looks perfectly kind
1:06:06to colorize this photo when they, when they posted Rohan to make him look truly
1:06:13like I don't know people see crypto as like menacing the monetary system, the fiscal policy.
1:06:20It's not being run in the interests of the people. The answer is this thing called cryptocurrency. And Rohan shows up and he's like, No, you are wrong.
1:06:28And he has a great accent and I'm so excited. Yeah, Shout out Australia.
1:06:34Yes, that's just a great reason to make people listen next week. So the question that comes up for for me, right, is
1:06:44we just learned all this great stuff step by step almost. Right. Which is so valuable.
1:06:50Why do you think people and public officials and others are not following this framework at the moment.
1:06:59Okay. So I, I agree with Stephanie's answer to this question, that they know.
1:07:07Right. And I think they know for a few different reasons.
1:07:13They know that what they're selling to the American people is a lie. Because when you have so many lobbyists, so many people who have money
1:07:22invested in stock and are lobbying on behalf of companies and industries, they have this incentive
1:07:31to to make things worse for working people, right, to make wages lower, to make our benefits at work lower, to make us work harder and longer.
1:07:40And I think members of Congress know. That. When that's their motivation, if they want A to happen,
1:07:48B has to be the thing that's good for working people, right? And so if they have to tell people, all right,
1:07:56we need to do a they have to also lie by saying, oh, this is the thing that's good for working people.
1:08:02Like they know these things don't add up, don't make sense. And so when you're paid by these huge corporate nations
1:08:12to do something, you probably know you're selling out your constituents. And I think that that's really where they get a lot of their information from.
1:08:19Unfortunately, I don't think they're consuming podcasts. I don't think they're reading policy papers. I don't think they have backgrounds in economics.
1:08:25And I'm not saying to be a good representative for people, you do, but you should listen to the who have studied these things
1:08:33and you should try to understand the system that you're governing within. And unfortunately, I don't think they do.
1:08:40And I think they know they're being deceptive. But I don't think they know to what degree maybe
1:08:45I think they do it because many of them are perfectly comfortable taking checks
1:08:51from lobbyists, perfectly comfortable ensuring that there are huge returns
1:08:56for the shareholders. I'm sure they have share in many companies. I think it's something like 83% of members of Congress
1:09:03have money invested in stock. And so really, I think that's why I think it's not like
1:09:10they want us to, I don't know, be in the dark and uninformed for a reason other than
1:09:17the current system benefits them financially. Yeah I think that's a that's a huge part of it.
1:09:23And additionally, you know, I would add that in addition to kind of the cynicism, the corruption in many ways
1:09:32the perverse incentives of wanting to continue to enrich yourself, if you have a lot of the wealth and power, there's also the role of what counts
1:09:41as expertise to legitimize many of these perspectives as as true.
1:09:47And so the public feels like they don't have any choice, because here you have Larry Summers or whoever else that has this degree from Harvard or whatever.
1:09:55And they're telling us that we're going to run out of money that we needed, that wages are too high and there's nothing we can do because the experts say so.
1:10:02So there's this, like really interesting challenge I think we face to you contest
1:10:10and rethink who counts as experts, where really is the expertise,
1:10:17How do we actually produce knowledge in the best interest of everybody?
1:10:23And there's this kind of cultural force, I feel, in that
1:10:30internalizing this scarcity, austerity based worldview about politics, policy
1:10:37just kind of like legitimizes this hierarchical system that we have and many people get intimidated into accepting
1:10:45this is true and others benefit from it as well, right? In addition to politicians.
1:10:50Yeah, I think that's 1,000% true. And when people hear about this approach to how we should do policy,
1:10:58how we should manage the monetary system differently and do fiscal policy differently, it's like, well, if you have this recipe
1:11:05for how we can fund things without causing inflation, like, well, why?
1:11:11Why are the other economists saying they disagree? And there's a perspective in economics of a good economy
1:11:17is when business is well, when we're producing many things for a certain amount of money, GDP is high, right?
1:11:24That means what's the total dollar value of products and services for producing?
1:11:29How much revenue are companies bringing in? How are CEOs doing up?
1:11:35Are profits looking like that? Doesn't tell me anything about is a person meeting their material wants
1:11:43and needs, which at the end of the day, isn't that the purpose of the economy? When we break it down, why did we establish an economic system?
1:11:50Adam Smith Theorizing that human beings work together and evolve to become the dominant species on the planet
1:11:56because we work together to meet our collective needs. We've gotten so far from that today,
1:12:03and it's just like it's very obvious to me that the economists that get the high salaries that get published a lot
1:12:10are those that are viewing the economy from the perspective of a good economy is when business is doing well for people who own businesses and have stock in them.
1:12:20That is a very different kind of analysis, priority wise from how you and I would look at it, which how are people doing?
1:12:28Are they meeting their material, wants and needs? It's really the difference between trickle down economics to kind of simplify it, right.
1:12:34Like some people really do believe that if we allow to concentrate at the top and for people to do really well if like with no limit,
1:12:43right, no boundary on how wealthy and powerful you can get, that's the goal. And that will improve things for everybody versus I think, a different
1:12:51view that we share, that we have a much more robust set of standards and we're looking at like, hey, are people not going bankrupt
1:12:59because they're in an accident and they got sick? Hey, does everybody get to live
1:13:04the opportunity to seek higher education and expand their mind? Not because, you know, they're going to fill in some corporate spot,
1:13:11but because like that creates a well-educated civil society, right? Like, there's just so, so much more to identifying
1:13:20whether we are living in a good society and culture or not. And I'm excited just to go through
1:13:29every episode and break this down to look at the history of how this dominant perspective came to be and everything
1:13:37that's getting hidden from us and to talk to all these other experts. Yeah, I have this terrible ache, an itch to cover every single thing
1:13:47in every single episode, but I know it will all slowly happen
1:13:52and then people will be able to listen to the whole series and get all of the things. But understand, I will always be trying to address
1:14:00every little thing in the episode. But we're not.
1:14:05We're not going to keep you here for many, many hours of their lives, which it would take. But the last thing I want to say
1:14:12is there are just like three myths that people have about MMT that we can just like, quickly debunk.
1:14:18We already talked about it's not that we think, you know, no taxes should happen.
1:14:24Stephanie, describe the tool taxing the rich is necessary not for the purpose that the government requires the revenue but for the purpose that,
1:14:30you know, it's bad for society, bad for democracy. We also have a lot of people say, oh, my tears are giving us
1:14:36a huge excuse to give tons of money to the military. Oh, we can we can afford it, so we should do it.
1:14:44Those are two completely different. Just because the government has the power to spend, does it mean
1:14:49we think that they should spend as they currently are? Yeah. The other is not.
1:14:55That's how I like to say it, right? Like it's not a fixed thing. We're like, Oh, we can spend, we can spend way more than we think we can.
1:15:00Therefore it has to go to the military. As Stephanie explained, these are political questions.
1:15:06We have to get involved and decide where do we want the spending to go, where do we want the deficits to go.
1:15:11Right? Absolutely. I think with the last one, which I don't, it comes from progressives.
1:15:18I'm not sure why, but that the dollar has value because the United States has had an imperial project and because
1:15:27of the value we've given the dollar through forcing other countries to handle business in our currency or because we extract
1:15:34resources and exploit labor elsewhere, that's absolutely not the case. We touched on a little bit.
1:15:40What gives the dollar value is the demand for the currency produced by taxes. Also,
1:15:46people value living in this society. They want to be here and taxes are a part of living in it, but also the total goods and services within our economic system, our ability
1:15:56to put real productive resources to use and produce things of value. Because at the end of the day, dollars represent things in value.
1:16:02It doesn't have to do with anything beyond our economic system.
1:16:08Here, a currency can have value. Japan's experiencing deflation despite not being a terrible imperial power right now.
1:16:15And for all our listeners, you know, my promise to you is that we will spend an episode specifically covering these international questions
1:16:24as a as a colleague and friend of mine likes to say, you know, the the dollar's power and the United States military is like all of that
1:16:31framing, right. Is in effect. But the consequence that we're looking for. Right. And so we want to
1:16:36we want to detangle that and look at trade and look at all these other more broader perspectives.
1:16:42And we will talk about that. And that's why this is going to be awesome. It's true. It's true.
1:16:47And now we'll see you with Rohan Grey. Next week, we are going to release a bonus episode.
1:16:53Oh, sorry. Two weeks. Two weeks. Unless you want to if you want to do this every. Every day. No, tomorrow. Rohan's coming.
1:17:01Up, but we are releasing a bonus episode of us being silly soon of Andres
1:17:06being photoshopped into different things and we'll chat about some other news. Yeah, there's a new sheriff in town.
1:17:12Her name is Ka Burbank. Oh, yeah, I do look like the sheriff, except I'm on the side of the villain in this case.
1:17:18Yeah, So you can see what that's about in two, two weeks. All right. See all them?
Yeah, So what it's showing you, I'm going to just take one quick step back and say something else about the debt, so-called, which I think it's important to say when I said it's the cumulative total. So what we want to recognize is that those are all of the dollars that the government has spent into the economy over the history of the country’s existence and not taxed back. So that's what it is, right? It's the dollars that have been spent by government and not taxed back. It's really just part of the broader U.S. money supply. Those treasuries are really interest bearing dollars. They circulate, they function in many ways like money. So when you look at this graph, what do you see? All right. This is a graph. It's actual data. Nobody made this up. Okay? This is real historical data going back to the 1950s, early 1950s. And what the graph does is to break the economy into three big chunks. We could disaggregate it further, but this makes the point pretty clearly and nicely. One chunk here that you see depicted in blue is the U.S. private sector. That's all the households and all the businesses in the U.S. economy, our private sector. What you see depicted in red here is the government sector. That's federal, state and local. That's government here in the U.S. And then there's everything else, which is what's outside of the US that's shown in green, and that's the rest of the world. So what the graph shows you is how dollars flow in and out of sectors over time. So if a sector, if one part of the economy experiences net outflows, in other words, it pays out more dollars than come in during that period of time, you're going to see that sector below zero. It's going to have a deficit. If a sector is receiving more dollars than it is paying out, it's going to have a surplus as you're going to see it above zero there. So the graph is neat and tidy and it may strike people who are watching this that, you know, wow, they're kind of a mirror of one another. And that's an important part of the story because every payment that flows out of one sector has to go somewhere, right? And it has to be received by some other sector. So any deficit has to result in, as we said earlier, a surplus in some other part of the economy. And so everything has to net to zero. Another striking feature, remember, this goes back to the early 1950s so that you notice the government is almost always in red. Government is almost always the one in the deficit position, whereas the private sector is almost always above zero with a surplus and we don't have the time, I don't think, to get into the whole rest of the world and trade imbalances and why that changes over time. But the important point here is that those government deficits are the thing that is producing the surpluses that you see above zero. So if you just look, let's see how far back this goes. There you go. So you have the Covid spending, right? Those enormous deficits that were run to try to support the economy through the pandemic and so forth. And people really got concerned at the size of the government's deficit during that period. But if you look at this in the context of the whole picture, not just what's happening to the government's budget, but look up, right, look what's happening to everybody else, and you'll see that those government deficits were instrumental in keeping the private sector afloat. Right. So you can see that big spike in the private sector's financial surplus in that period. While those surpluses were made possible by virtue of the government outlays greater than receipts. So the government's deficit is producing those surpluses. And I think what's really key that you mentioned is that this is not a fixed thing, but rather it's up for grabs. Right. That that deficit could be going to one place to the most wealthy, the most powerful to the military, whatever, or it could be going to the things we need to improve quality of life and and improve the standard of living for working people, for communities of color, historically marginalized communities, whoever that may be. Right. Like, it's a political question of where those deficits go. And I think that's so vital to understand. Andres, you’re right for sure. And just to be clear, in the pandemic, they went to both places, right? They went to both. It wasn't as if Congress said, well, we're going to have to respond to this. You know, health crisis and this economic crisis. And so we're going to make a commitment to with the CARES Act, $2.2 trillion in March of 2020. They didn't say, I guess it's time to finally cut the military budget because we're going to have to, you know, commit a lot of money to supporting the economy because of the pandemic and the economic fallout and so forth. Now, they continued to fund and even more generously so when the defense reauthorization Act comes up, they put more money into the military and supported the economy with, you know, fiscal package after fiscal package, after fiscal package, some 5 trillion, even more than 5 trillion in the span of about 12 months time. Yeah. So, I mean, you know, that really kind of for the organizers and people in politics listening right like that just shows that it's up for grabs And like some like AOC and some other public officials say these budgets are in many ways moral documents that say, you know, what do we want to prioritize? Something that I hear all the time is and sadly, sometimes from liberal or progressive leaning people, is kind of boasting about the late 90s and the Clinton surpluses. As we finally had a surplus, we finally balanced the budget. What's the problem with that framing in that discussion? And you know, the implications for what happened to our economy largely influenced by that surplus. Yeah. So well, let's talk about what actually generated those surpluses because, you know, you're right there. There is a narrative out there that goes something like Democrats and Republicans work together in a bipartisan way to cut spending and increase taxes. And that produced the surpluses. And we had the first balanced budget in my lifetime. And wasn't that a great achievement? What a badge of honor. Democrats are the true party of fiscal responsibility. You know, this is just not historically accurate. This is not where those surpluses came from. I think it's important to reckon with what really generated those fiscal surpluses. And the reality is that it was a stock market bubble. That's where the surpluses come from. And if you've got, you know, progressives who are operating under the impression that this was generated in some other way, they really ought to take a look at Dean Baker's work, because, you know, Dean's a very good economist, I think widely respected among progressive circles. And Dean has banged this drum for now over a decade, to be sure. And he's written about the Clinton surpluses. So just Google Dean Baker and the Clinton surpluses. I've written about this over the years as well. Wynne Godley, Randy Wray, all of us had lots to say about the Clinton surpluses and whether they were a good thing or whether, in fact, they were being generated on the backs of the private sector, which, you know, who had an unsustainable stock market bubble that fueled people, took profits. And so there were capital gains taxes that came flooding in and that moved the budget into surplus. And then you had the start of a financial housing bubble on the backs of the stock market bubble, which kept the U.S. private sector spending in excess of its income for a period of time. People could look at the economy and a lot of people did and said, Wow, this is a Goldilocks economy. Look at this. Right? Low unemployment, low inflation, high growth. This is the greatest thing in the world. But under the surface, if they had been looking at this chart that you have on the screen, they would have seen the leverage in the private sector and where that momentum was coming from and it was private sector deficits that were always going to turn out to be unsustainable. It's really important, I think, that that people know this because there's so much potential in it and it changes how you view the entire economic system and the government right. To know that, okay, the money has to come from somewhere. The deficit is a record of where the money's come from. If we completely eliminate deficits everywhere, there would effectively be no more money. Need money to make money. That's what people always say. And in MMT, it's sort of said in another way, you need dollars as this tool to put real productive resources to use to pay workers, to buy land, machinery, tools, all of these things. And where we put the money matters. It affects our economy, it affects our lives in that way. And there's a lot of beautiful potential with what we do with that. But they frame it like it's this terrifying nightmare. They show us the national debt clock, which is an amazing image. We have a photo of it and they try and make everyone terrified, almost as if they're looking at their account, seeing how much they're in the negative, thinking about, oh my gosh, how are we ever going to pay this back?
So I want to turn to the debt ceiling crisis. How they've made all of us afraid of this looming scenario where what's going to happen if we raise the debt limit, Have we ever done that before? Many, many times over 70 times since 1960. Can you talk a little bit about just the debt limit crisis and how you see it? Well, sure. I see it as a as a crisis of its own making, Right. It's political theater, but this time it's gotten to the point that, you know, people are starting to, I think, take very seriously the possibility that you might well have enough people in Congress who think that this is, you know, actually some sort of innocent or benign game that you can just refuse to raise the debt limit and nothing terribly bad will happen. I, I don't know how to explain it. You know, we've been here before where it started to feel pretty serious. And I think in your intro, you had some references to what did you show a video clip that referenced, you know, downgrading and that's the zombie. Yeah, yeah, yeah, yeah. They'll downgrade the debt. Well, that happened before. Okay. That happened after the housing bubble burst from the financial crisis. We toyed around. We members of Congress toyed around with the idea of not raising the debt ceiling limit in a timely enough fashion and risking a potential default. And Standard and Poor's downgraded U.S. Treasuries from a triple-A rating, which is the highest that you can have to one notch below. And, you know, yesterday I was teaching my graduate students here at Stony Brook, and I showed a video of a clip, a video clip of some of the conversations that were going on around that time. And one of the people who spoke was Warren Buffett, who's, of course, billionaire investor Berkshire Hathaway and so forth. And Warren Buffett was saying, how on earth is S&P downgrading U.S. Treasuries? This makes no sense whatsoever. And he said, these are his words, not mine. He said the US government can print money. What do they think there's going to be a point at which, you know, you have to make interest in principal payments to bondholders and you don't know where to get the money. I mean, he's saying this is insane, it's our currency. And he said, you know, they asked him, do you disagree then with the downgrade? He said, of course, he said in here in Omaha, because, you know, Berkshire in Omaha, Nebraska, said the U.S. treasuries would have a AAAA rating. There is no reason to question the validity of the of the U.S. government so-called debt, as we've referred to it. So lawmakers should recognize this. I think they know it, Jessica. I don't think there's confusion about this. I think that they know that there's always that they always have the ability to pay. I heard one member of the House on television the other morning say who is a Republican from Arkansas and he said these were his exact words. He said the debt ceiling is an anachronism financially. But he said but the reason I like it And then he went on to explain that the reason he likes it is because it presents these moments where you can use the debt limit as leverage to try to extract the kinds of things you were just talking about. Make people go try to find extra hours in order to get their SNAP benefits, make people jump through extra hoops and and hurdles and, you know, get an opportunity maybe to take a whack at Social Security and Medicare or something else, you know, get your pound of flesh in exchange for doing something that did the job, did not even have to do because we shouldn't have the damn thing. We're one of maybe two countries in the world that even has a debt limit. So but here we are. Here we are. It's almost as if a construct in a sense of knowledge and a sense of truth that everybody, the public kind of internalizes is has a very effective political tool to win the kinds of things that that those that want to privatize, that those that want some kind of market fundamentalist economy to function, use very effectively. And speaking of that leverage, one of the things we hear over and over again is that if the GOP, many Democrats, quite frankly, will sometimes argue that if we're going to raise the debt ceiling, then we'll only do it because we will cut it from somewhere else. Social Security up all the time here. Right. They say it's going to go broke. It's you know, there's no way that it's going to stay solvent. And so we got to find a way to privatize it or cut funding. We actually have a quick clip. Mike, can we can we get that up of one that you've used as well many times. So having personal retirement accounts is another way of making a future retiree benefits more secure for their retirement. And also, do you believe that personal retirement accounts as a component to a system of solvency does help improve solvency? Because when you have a personal retirement account policy, it's accompanied with a benefit offset with that feature in place. Do you believe that personal retirement accounts can help us achieve solvency for the system and make those future retiree benefits more secure? Well, I wouldn't say that the pay as you go benefits are insecure in the sense that, oh, well, there's nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question, how do you set up a system which assures that the real assets are created, which those benefits are employed to purchase? So it's not a question of security, it's a question of the structure of a financial system which assures that the real resources are created for retirement as distinct from the cash. The cash itself. It's nice to have, but it's got to be in the context of the real resources being created at the time those benefits are paid so that you can purchase real resources with the benefits, which of course a cash. So we're hearing about personal retirement accounts. Give us give us a sense of what's going on at that hearing in that video. So it's funny because I also showed that clip in my class yesterday, my graduate students, and we deconstructed. And so I'm well-equipped to do it again here. It's one of my favorites because, you know, Alan Greenspan, just to be clear, so everybody who's watching knows that that was Congressman Paul Ryan, right. Who became speaker of the House and former Fed Chair Alan Greenspan. So you would think maybe Alan Greenspan would know a little something about the monetary system and where money comes from, given the nature of the Federal Reserve. And it turns out he gave what I think was just about the perfect answer to this question, not, however, the answer that Paul Ryan desperately wanted, because Ryan was trying to toss him a softball and just reel in that. Right. You heard him use the term personal retirement accounts at least four times I counted. And that's all he wanted. He wanted affirmation from Alan Greenspan that Social Security is in trouble, that it would make sense to move today gradually toward a system of personal retirement accounts. That's code for privatizing Social Security. And so don't you agree with me, Chairman Greenspan, that it's time to begin to take these steps? That's question. And instead of agreeing, Alan Greenspan simply leans into the microphone and begins by taking off the table the question of affordability just takes it right off, he said. I wouldn't say that there's anything problematic with the system the way it's set up today. He said, and I quote, There's nothing to prevent the federal government from creating as much money as it wants and paying it to someone full stop. So what he's saying is you have benefits that are promised to future retirees, their dependents and the disabled. You're worried that you're not going to have the money to pay those benefits when they come due? Don't worry. This is Greenspan. Don't worry. The money is the easy part. The cash itself is is the easy part. Then he goes on to say, The really important part. He said, The question is how do you set up a system which assures that the real assets are created, which those benefits are employed to purchase? Now, what does that mean? It means how do you know that when you mail those checks out, or more appropriately, when you digitally credit people's accounts and they have their Social Security benefits, how do you know in ten, 20, 30 years time that they're going to be able to turn around and spend that money into an economy that is productive enough, that is producing enough goods and services of the right mix, that they can buy things without having to compete with everyone else for a shrinking supply of real goods and services. Therefore, driving up wait for it inflation because that is public enemy number one for every central banker. And so what Greenspan was really doing was just explaining to Paul Ryan that it's inflation you have to watch out for not running out of money, not, you know, a trust fund that goes to zero. That's easy to deal with. It's inflation that we should be focused on right. And, you know, as we're deconstructing and unpacking the way MMT presents public budgets, something that's also key and that I hear about a lot is this notion of like doing MMT or going out and doing some kind of trick. Can you talk about how spending actually works on a regular basis? Right, it’s not like we're going to do something new or different, but rather what is already happening, what we spend right? So, look, this project got started in the mid 1990s, so MMT started as an effort to provide a better explanation, right? A better description of the monetary system that we have today, which I think you mentioned earlier, fiat currency floating exchange rate. We're not on a gold standard. It's not a fixed exchange rate world. We have floating exchange rates and fiat currencies and we should start by recognizing that. So what is the monetary system we have? And then what are the mechanics, the monetary, the plumbing, Right. Of the financial system? How does it work? So MMT was, you know, from the very beginning about trying to provide an accurate description of how it all works. So you don't quote unquote, do MMT? It's a description. And so with that, I call it a lens or others call it a lens as well. With that lens, right. And a clearer picture of how the monetary system is set up and the mechanics of government spending. What do we see when we look through that lens? So, you know, it's pretty I think, again, COVID gives us such a nice example because, you know, March of 2020 COVID hits in earnest in the US, and what is Congress do? There are a couple of small bills initially, but then the big fiscal package is passed in March of 2020, and that's the CARES Act, and that is Congress coming together and writing a bill. The legislation is the set of instructions and think of it as a set of instructions that is going to the government's bank, to the Federal Reserve. The Fed is the government's fiscal agent. And that bill said we get ready, right, because we're drafting a $2.2 trillion bill. We are going to have a payroll protection program. So there's going to be money that's going to go to small business is to help try to keep workers on payroll. We're going to send checks to people. So there's going to be a 1200 dollars check that goes to most people in this country. We're going to enhance the unemployment benefits. And so we're going to provide $600 a week to unemployed people. And you know, that that money is going to go out and so on and so forth. And so Congress is committing to the spending with the passage of the legislation and the appropriations. The commitment is there. And the rest is really, you know, just behind the scenes, the crediting of the of the relevant bank accounts. Congress committed the money. Now it's the Fed's job with the rest of the banking system to carry out on behalf of the U.S. Treasury those payments. So you start to see, you know, bank accounts get credit that the unemployed have $600 a week and somebody gets their 1200 dollar check and so, you know, the way that it works is really as simple as understanding that banks are changing numbers in people's accounts. When the government spends, the numbers get changed up. When we pay the government, let's say we pay taxes, the numbers are being changed down in our account. So that's how it works in the modern era. It's just, you know, most of it is accomplished using nothing more than a computer keyboard, and we are debiting and crediting the relevant accounts. So is it safe for me to say that tax is and bonds don't actually finance the government? Is it safe for you to say, well, it's accurate for you to say Somebody might not like that. But you you're leveling with them. It's just like I'm sort of kidding. Obviously I'm kidding. But yeah, we. Want to avoid Twitter battle. Like, it's an uncomfortable thing for people to hear, right? Because for a lot of people, there's sort of some pride associated with paying your federal income tax. And you'll sometimes hear, you know, because I did my part for keeping the country safe or helping to fund, you know, health care and education and and so on and so forth. And you got groups out there that, you know, try to tell people feel good about paying your federal tax because it's helping them, you know, finance all of these different programs that benefit people in one way or another. So some people don't want to hear that. Basically, you know, it's just somebody is hitting the delete key and taking numbers out of your account, but the government doesn't actually get anything right. Warren Mosler has said, I think many times over the years there's no gold coin that drops into a bucket somewhere in the in the Treasury. It's just subtracting something from our accounts, but it doesn't enrich the federal government, it doesn't enhance their capacity to spend. They're not better able to afford things because they collected $100 from one of us. It's just, you know, it's subtracted away from us. And that is not always a comfortable thing for people to hear. But it is it is correct. Another one of the light bulb moments that I had following your work and reading the book is that instead of framing fiscal policy and public budgets as your tax first so that you can spend, you invert that and you say the way it actually works is you spend and then you tax. Can you talk about then the purpose of taxation because some people kind of go, then why? Why is anybody paying taxes? You know, the metaphors are talking about you don't need taxes, but in fact it plays this huge role in how we understand budgets. So there's a sort of an origin story where you could use the tax and if you know, if you're really interested or if your listeners are really interested in this stuff, for the most part, don't read. Economists read. It's the work of historians and sociologists, anthropologists and numismatists and others. If you want to get really deep in this stuff and trace, you know, how have taxes and other kinds of fees and fines and obligations and the formation of a legal and court system, how has that been used to introduce currencies like to start a currency from scratch? Something like a tax is a very good way to monetize and otherwise, you know, non money using society. And so you say what is the purpose of the tax? One answer is that it could be one way to start up a currency from scratch, that's thousands of years ago. So now let's move into the more modern era. Well, why do we why else do we have taxes? Well, I just told you that when I pay my taxes, their dollars are deleted from my bank account. I don't have them. Once they're taken away from me, they're not available to me. I can't chase after goods and services with them. They're not mine to spend any longer. So one thing that taxes do is to reduce the purchasing power of the rest of us so that we have less money to spend. So you can imagine that an important purpose of doing that would be to allow the government to spend into the economy to do infrastructure and health care and education and all kinds of other things without creating an inflation problem. So there's a sort of a balancing where the government can spend dollars into the economy, mobilize resources, hire people, contract with sellers and so forth, but take down the number of dollars the rest of us have to spend into the economy so that there are some space for the government to safely spend without creating inflation problem. You can say, you know, look at the distribution of wealth and income in this country today. It looks a lot like it did in the 1920s, the sort of Gilded Age. It's It's gotten to the point where we have concerns about, you know, how our economy functions, how our democracy functions. We're going to use the tax system to remove some of the dollars that are in the hands of the people at the very, very top to try to reduce the disparities right in in wealth and income distribution. And so taxes are very good for that purpose. You could say we're going to use the tax code to create incentives or disincentives. The Biden administration has been doing that to try to get people to put heat pumps in their homes and buy electric vehicles and get businesses to invest in green tech and manufacturing and so forth. Or you can use it. You know, as a stick rather than a carrot and say, I know we're going to tax bads. We're going to have people propose things that are financial transactions, tax or raising the gas tax or carbon tax, you know, all kinds of things to discourage certain behavior. So lots of lots of different important uses for taxes. Yeah, I think people are thinking about taxes right now, many having just filed. But people are also thinking about inflation right now. And that's something that a lot of people say, oh, well, we did. MMT and the government has spent too much money with the CARES Act and the American Rescue Plan. And I a lot of people don't connect the necessity of economic stimulus in times of downturn and just get the sticker shock of how much money we're putting into the economy and say, well, that must be or the inflation's from too many dollars or chasing too few goods. We've put too many dollars into the economy and therefore devalued the dollar. People have made a lot of extrapolations. Can you say a little about what actually caused recent inflation? We could do a whole we could do a whole nother hour, Jessica, for people who maybe didn't pay close attention to all of this, which is most people during this period, you know, when the pandemic initially started with falling prices in all kinds of areas of the economy, you know, some outright deflation, where prices are just falling rapidly. And then when prices started to increase in the early phase, we saw it in kind of unusual places. Used cars was one of the early places where we saw this uptick in headline inflation rates. We said, where is that coming from? And you look into the numbers and you see that there's something happening with used car prices. And we said, what's going on there? Well, we could understand that because, you know, we sort of work backwards and said, well, we didn't know if we were going to have a vaccine or how quickly we might have a vaccine and a bunch of car rental companies sold off their fleets because they didn't think people were ever going to travel and want to rent cars again. And so those cars got sold off and then all of a sudden we had trouble producing semiconductors that are needed to manufacture new cars. And then when the economy started to recover more quickly than a lot of people anticipated, people wanted to buy cars and travel again and so forth where you couldn't get a new car off the assembly line because you didn't have the chips you needed. So people turned to used cars and the car companies were rental companies were trying to buy back some of the cars to restock, and everybody was competing for used cars and prices went high. And then over time, we just started to see, you know, the inflation being driven by something different. This month and something different this month. And, you know, we shifted our spending patterns away from services to goods. And we remember, you know, the TV images of all the ships trying to get in to the ports and unload cargo. And so goods prices went up. We had, you know, freight and trucking and you couldn't get containers. And so people heard a lot about supply chains and bottlenecks. And Chairman Powell, Jerome Powell used to come out every time the Fed would meet, and he'd say, you know, well, we see inflation. And the reason we are not deciding to raise interest rates today is because we think most of the inflation is coming from supply shocks and bottlenecks and COVID related disruptions and our tool, the interest rate, is really designed to work on the demand side of the economy. So for that reason, we decided not to raise interest rates today, and he would explain that. So for a period of time and then, you know, as the months passed and the analysis sort of shifted away from, well, it's all supply side or almost all supply side, people started to say, well, is coming now broadening and other parts of the economy. And the Fed, of course, started raising interest rates and then you had economists like Isabella Weber who came out and dared to suggest that, you know, companies might just be taking advantage of the inflationary moment where, you know, consumers are primed to expect to pay more for everything. And so companies will be able to not just pass on their own rising costs to consumers, but to tack on a little bit extra and fatten their profit margins. And so I know people have looked the Federal Reserve, San Francisco, New York Fed, Moody's, the European Central Bank, all kinds of people are trying to do these sort of autopsies. Now, where you look at the inflation that we have lingering with us today and say how much of it can we trace to Russia, Ukraine, how much of it can we trace to any excess fiscal, you know, money that people still have because of stimulus checks or whatever? How much of it is still related to COVID pandemics, supply chain sort of things? And the answer I'm giving you a long answer because it's not an easy question to answer. And depending on who you ask, you'll get a very different answer. Some of the analysis says very little, if any of it that we sticking around with us today is due to excess demand or the fiscal stimulus stuff, that it's almost all other things other people will find different, different ways to attach weights to those different things. So it's a little bit of probably everything. And that's what I also think is so critical because many economists and other pundits will dismiss MMT perspective by saying at the end of the day, it's still about inflation so that you should listen to us and they're not, you know, Stephanie Kelton and other people, they're not saying anything new. But what's really important is that there's a fundamentally different understanding. And I think you've just laid it out about what we mean by inflation. It's not just too much money, too little. It's about resources. It's about politics. It's about, you know, sometimes people taking advantage of of costs and prices and getting extra. It's about, you know, what are we producing and do we have the infrastructure for it? So many things. A crisis, A pandemic. Right. And I feel like you're working. MMT opens up that conversation in a way we are not used to when we talk about inflation. Well, thank you. Okay. So as we're kind of winding down something that we all wanted to hear from you about is so when you've spoken on different panels, you've sometimes talked about a light bulb moment that you've had when you first got your career going and when you were looking at this stuff that you didn't necessarily just go into grad school as an MMTer or as somebody that believed these things, you did the work, you went in and looked at the empirical evidence, right? Can you tell us about what that process was like for you and when you came to kind of, oh, the aha moment that this is actually how spending works, this is how public budgets work? Sure. I mean, I was fortunate, I'll say, to have done my undergraduate in an economics department where, you know, I studied money in banking under a monetarist and I studied the history of economic thought under someone I think who identified as a Marxist and everything in between. Neoclassical economists, Keynesian types. So I really had exposure to so many different theoretical schools of thought when I was an undergrad. So after I graduated from undergrad, I was going to start my graduate training at Cambridge University. I finished my undergrad in December. Cambridge was going to start in October the following year, so I had a nice period of time and my parents said, Well, you should get a job. And one of my undergrad professors, the one that had taught me history of economic thought, said You should go to the University of Denver and you should study with Randy Wray. And given the options, you should imagine what I what I decided to do. I went to Denver. And so, you know, Randy had been a student. Both of John Henry is who I was just referring to, but also of Hyman Minsky. And so I got to Denver and Randy had me reading Minsky. I was reading Stabilizing an Unstable Economy. I'm pointing because it's on the shelf behind me with Randy. And it was kind of like a dress rehearsal for graduate school, right? I took all these classes. I wrote the exams. They were kind enough to grade them. I didn't pay any tuition. And then off I went to Cambridge. So I had read a lot of post Keynesian literature, a lot endogenous money, all this kind of stuff. So my head was filled with all of these, you know, important works. Before I got to Cambridge. And then Warren Mosler comes on the scene. This is like 1996, right? And so there's this email, not email Internet chat thing. And Warren Mosler got involved and was talking to people like Randy and Bill Mitchell and others, and Warren's the guy who was putting forward these ideas and they just ran so counter, even though I'd had some heterodox economics in my training I hadn't heard anything like this, you know, the idea that the sequencing was wrong, The government spends first and economists had all this sort of stuff backwards about what taxes were for and bond sales. And I started just kind of listening on that list, serve and paying attention and writing back to Randy. And then I got a fellowship from Cambridge to go to the Levy Economics Institute, start working on a dissertation the following year. And Randy was there and Randy was working on his book Understanding Modern Money, which was his first MMT book. And so I start reading Warren more closely and talking to Randy, and I was just shaking my head. I said, I just don't think it's right. I don't. And Randy said to me, If you think he's wrong, you should write it up, because he would want to know that he's wrong. I mean, that's what he said to me. He would want to know. So, you know, write it up. And I said, okay. So I dig in, right? I start talking to people at Treasury and Fed. I start all this reading, and I'm working through all of the operational details and I thought, surely, you know, Warren just took a took the easy way somewhere he was leaving something important out. And if I put it all together and I really careful way I would arrive at a different place. And so I spent months working on what became the first two peer reviewed articles that I published. And to my, I think, great surprise, I ended up writing this paper and arriving at the same conclusions that Warren had arrived. And it was only by forcing myself to go through that exercise to try to find where he'd gone, you know, where is he wrong? Where is he wrong? Because it just nagged at me that I couldn't find out why he was wrong, but it felt wrong. And in the end, I just had to, you know, lay down my fiddle and recognize that I'd been b he was right. This is truly one of my favorite stories in the world that this is how it all went down, because we all encountered these people on Twitter or wherever that try and make a case against these ideas, against the lens of MMT without actually grappling with what we really say. Instead, you know, coming up with something else. Well, what you're saying is this and it's not at all what we're saying. So the fact that you actually dug in and wrote an entire paper, it just says so much about who you are as a person. And I think we have this idea that the, you know, the very smart thought leaders in our society are people that have this gift. But you put the work in and you're terribly curious. I think that's really what sets great thinkers apart, is people who have that curiosity. And now we have all of your work as our great gift from you, that's going to influence policy for many years to come. I always tell people ten years time from now, people will be reading the deficit myth and say, How could we have been doing it any other way? It's truly the next step. In iteration and in economics. And just being in graduate school, I had so many questions coming out. There's something missing. This doesn't go so far as to address the problems of our time and we're getting things wrong and nobody's trying to ask the right questions or arrive at some answers. And then I found your work afterwards. And now here we are. And I'm so grateful you came on and spoke with us. And I want to tell everyone that's listening. If you haven't read The Deficit Math, you don't have to have a background in public policy or economics to get a lot out of it. And then the weekly podcast, Best New Ideas and Money and of course, the Substack The Lens. Is there anything else you want to plug. Stephanie No, thank you. That's so kind of you. Thank. Any words for the youth of the world. Listen. This is why I do what I do because that's where the energy is and that's where the change is going to come and so, you know, young people don't take for granted that what you hear from the mainstream press is correct. Don't even take for granted that what you hear from your political representatives is correct, especially on issues that are this important. I mean, we have climate to deal with. And if we are going to allow ourselves to be trapped and hamstrung by these, you know, outmoded of thinking about money and deficits and debt and taxes, and we're going to try to proceed with this history, this heroic challenge that's before us, which is to deal with the imminent threat of climate change. And we think that somehow we're going to do this on a shoestring or we're going to do this in a deficit neutral way and we're going to, quote unquote, pay for it. I'm extremely worried and scared for what that future is going to look like for billions of people around the world. So we got to get this right so much. Yeah, I do. There's hope. All right. Thank you so much for coming. You, Stephanie. All right. Take care you both. Congrats again on the show. Thank you. Okay. Bye bye. So we have another exciting guest next week. We do agree. And I really feel like this was just such a perfect start to. Yes, it's down the rabbit hole. So we're going to have Crypto's New Villain next to. Yeah. Continue to unpack this this ongoing conversation about the economy and. We got everybody up to speed. What is MMT? How do you look at all of this stuff? We covered a lot and now we get to get into, I don't know, some villain. Yeah. I love that one. And they tried to make him look so scary and evil. He still looks perfectly kind to colorize this photo when they, when they posted Rohan to make him look truly like I don't know people see crypto as like menacing the monetary system, the fiscal policy. It's not being run in the interests of the people. The answer is this thing called cryptocurrency. And Rohan shows up and he's like, No, you are wrong. And he has a great accent and I'm so excited. Yeah, Shout out Australia. Yes, that's just a great reason to make people listen next week. So the question that comes up for for me, right, is we just learned all this great stuff step by step almost. Right. Which is so valuable. Why do you think people and public officials and others are not following this framework at the moment. Okay. So I, I agree with Stephanie's answer to this question, that they know. Right. And I think they know for a few different reasons. They know that what they're selling to the American people is a lie. Because when you have so many lobbyists, so many people who have money invested in stock and are lobbying on behalf of companies and industries, they have this incentive to to make things worse for working people, right, to make wages lower, to make our benefits at work lower, to make us work harder and longer. And I think members of Congress know. That. When that's their motivation, if they want A to happen, B has to be the thing that's good for working people, right? And so if they have to tell people, all right, we need to do a they have to also lie by saying, oh, this is the thing that's good for working people. Like they know these things don't add up, don't make sense. And so when you're paid by these huge corporate nations to do something, you probably know you're selling out your constituents. And I think that that's really where they get a lot of their information from. Unfortunately, I don't think they're consuming podcasts. I don't think they're reading policy papers. I don't think they have backgrounds in economics. And I'm not saying to be a good representative for people, you do, but you should listen to the who have studied these things and you should try to understand the system that you're governing within. And unfortunately, I don't think they do. And I think they know they're being deceptive. But I don't think they know to what degree maybe I think they do it because many of them are perfectly comfortable taking checks from lobbyists, perfectly comfortable ensuring that there are huge returns for the shareholders. I'm sure they have share in many companies. I think it's something like 83% of members of Congress have money invested in stock. And so really, I think that's why I think it's not like they want us to, I don't know, be in the dark and uninformed for a reason other than the current system benefits them financially. Yeah I think that's a that's a huge part of it. And additionally, you know, I would add that in addition to kind of the cynicism, the corruption in many ways the perverse incentives of wanting to continue to enrich yourself, if you have a lot of the wealth and power, there's also the role of what counts as expertise to legitimize many of these perspectives as as true. And so the public feels like they don't have any choice, because here you have Larry Summers or whoever else that has this degree from Harvard or whatever. And they're telling us that we're going to run out of money that we needed, that wages are too high and there's nothing we can do because the experts say so. So there's this, like really interesting challenge I think we face to you contest and rethink who counts as experts, where really is the expertise, How do we actually produce knowledge in the best interest of everybody? And there's this kind of cultural force, I feel, in that internalizing this scarcity, austerity based worldview about politics, policy just kind of like legitimizes this hierarchical system that we have and many people get intimidated into accepting this is true and others benefit from it as well, right? In addition to politicians. Yeah, I think that's 1,000% true. And when people hear about this approach to how we should do policy, how we should manage the monetary system differently and do fiscal policy differently, it's like, well, if you have this recipe for how we can fund things without causing inflation, like, well, why? Why are the other economists saying they disagree? And there's a perspective in economics of a good economy is when business is well, when we're producing many things for a certain amount of money, GDP is high, right? That means what's the total dollar value of products and services for producing? How much revenue are companies bringing in? How are CEOs doing up? Are profits looking like that? Doesn't tell me anything about is a person meeting their material wants and needs, which at the end of the day, isn't that the purpose of the economy? When we break it down, why did we establish an economic system? Adam Smith Theorizing that human beings work together and evolve to become the dominant species on the planet because we work together to meet our collective needs. We've gotten so far from that today, and it's just like it's very obvious to me that the economists that get the high salaries that get published a lot are those that are viewing the economy from the perspective of a good economy is when business is doing well for people who own businesses and have stock in them. That is a very different kind of analysis, priority wise from how you and I would look at it, which how are people doing? Are they meeting their material, wants and needs? It's really the difference between trickle down economics to kind of simplify it, right. Like some people really do believe that if we allow to concentrate at the top and for people to do really well if like with no limit, right, no boundary on how wealthy and powerful you can get, that's the goal. And that will improve things for everybody versus I think, a different view that we share, that we have a much more robust set of standards and we're looking at like, hey, are people not going bankrupt because they're in an accident and they got sick? Hey, does everybody get to live the opportunity to seek higher education and expand their mind? Not because, you know, they're going to fill in some corporate spot, but because like that creates a well-educated civil society, right? Like, there's just so, so much more to identifying whether we are living in a good society and culture or not. And I'm excited just to go through every episode and break this down to look at the history of how this dominant perspective came to be and everything that's getting hidden from us and to talk to all these other experts. Yeah, I have this terrible ache, an itch to cover every single thing in every single episode, but I know it will all slowly happen and then people will be able to listen to the whole series and get all of the things. But understand, I will always be trying to address every little thing in the episode. But we're not. We're not going to keep you here for many, many hours of their lives, which it would take. But the last thing I want to say is there are just like three myths that people have about MMT that we can just like, quickly debunk. We already talked about it's not that we think, you know, no taxes should happen. Stephanie, describe the tool taxing the rich is necessary not for the purpose that the government requires the revenue but for the purpose that, you know, it's bad for society, bad for democracy. We also have a lot of people say, oh, my tears are giving us a huge excuse to give tons of money to the military. Oh, we can we can afford it, so we should do it. Those are two completely different. Just because the government has the power to spend, does it mean we think that they should spend as they currently are? Yeah. The other is not. That's how I like to say it, right? Like it's not a fixed thing. We're like, Oh, we can spend, we can spend way more than we think we can. Therefore it has to go to the military. As Stephanie explained, these are political questions. We have to get involved and decide where do we want the spending to go, where do we want the deficits to go. Right? Absolutely. I think with the last one, which I don't, it comes from progressives. I'm not sure why, but that the dollar has value because the United States has had an imperial project and because of the value we've given the dollar through forcing other countries to handle business in our currency or because we extract resources and exploit labor elsewhere, that's absolutely not the case. We touched on a little bit. What gives the dollar value is the demand for the currency produced by taxes. Also, people value living in this society. They want to be here and taxes are a part of living in it, but also the total goods and services within our economic system, our ability to put real productive resources to use and produce things of value. Because at the end of the day, dollars represent things in value. It doesn't have to do with anything beyond our economic system. Here, a currency can have value. Japan's experiencing deflation despite not being a terrible imperial power right now. And for all our listeners, you know, my promise to you is that we will spend an episode specifically covering these international questions as a as a colleague and friend of mine likes to say, you know, the the dollar's power and the United States military is like all of that framing, right. Is in effect. But the consequence that we're looking for. Right. And so we want to we want to detangle that and look at trade and look at all these other more broader perspectives. And we will talk about that. And that's why this is going to be awesome. It's true. It's true. And now we'll see you with Rohan Grey. Next week, we are going to release a bonus episode. Oh, sorry. Two weeks. Two weeks. Unless you want to if you want to do this every. Every day. No, tomorrow. Rohan's coming. Up, but we are releasing a bonus episode of us being silly soon of Andres being photoshopped into different things and we'll chat about some other news. Yeah, there's a new sheriff in town. Her name is Ka Burbank. Oh, yeah, I do look like the sheriff, except I'm on the side of the villain in this case. Yeah, So you can see what that's about in two, two weeks. All right. See all them?
0:08Hello and Welcome to Funny Money.
0:14This is the show where we talk about the economy from a progressive and a heterodox perspective. My name is Andres Bernal, and I'm here with my co-host, Jessica Burbank, a.k.a..
0:24How are you doing? That's not what I heard the podcast is about. I heard it was about the economy, how it works, and how it can work better.
0:31That's correct. That's right. Yes, that's right. Jessica, how are you doing? I heard you've become a mother recently to a new puppy.
0:39I got that dog in me and I got the dog beside me as well. I'm doing all right. I'm worried.
0:45You know, I'm worried the U.S. government is going to run out of money. That's what I keep hearing.
0:50That's right. That's the word on the street. So we're very excited for this. First episode and getting it going.
0:57And one of the things that's really cool about it is we're going to start this conversation about the economy
1:05from one of the most important things that happens, and that is questions about government budgets and all the controversy
1:13and debate around that that's happening that's relevant to our lives right now.
1:19So what do you say we start with a little video clip? Well, Kevin McCarthy. Hello, Kevin McCarthy.
1:25Trigger warning. Trigger warning. Republic. GOP Trigger warning. You know,
1:31if you gave your child a credit card and they kept maxing it out to the limit,
1:36you wouldn't blindly just raise the limit. You'd change their behavior.
1:42That exact same thing is true with our national debt.
1:48We need to lower inflation, reduce our dependance on China
1:54and lift Americans out of poverty. America has a $31 trillion debt
2:02and Washington is on the clock. Jess, what are your what are your initial reactions or your thoughts?
2:10It keeps me up at night knowing that people who are in Congress have no idea how our economy works.
2:17It's terrifying. It's either that or they know and they're intentionally misleading everyone. And I'm not sure which is worse.
2:24And this seems to occupy a major fundamental part about how
2:29we can even talk about policy solutions and what we can do.
2:36And so I think it's critical that before we let on our guest and get this conversation rolling, we do a little bit of a setup
2:45about how we're going to approach this, introduce some concepts on all of this and all of these things.
2:52And one of the first ones is this idea of fiscal policy. Right. We hear about all these things.
2:58They can be confusing. There's words that are thrown around. But when we think about fiscal policy, what comes to your mind, Jessica?
3:06Well, Andres, what comes to my mind is government spending and expenditure. Right. Yeah. Yeah.
3:14We learned this. If you go to an MPA program, most of the time, this is what you're going to learn. If you're studying economics, if you're studying political science,
3:23you hear about fiscal policy and, and the the approach is government spending and taxing.
3:30But of course, the common framing is that the government collects some revenue and then they spend it.
3:38And so we're here to kind of introduce another way of thinking about this
3:43from an alternative perspective or a heterodox perspective we can think about here MMT or Modern Monetary Theory,
3:51which kind of turns this on its head and introduces the idea that, wait a second, the government actually doesn't function like a household
3:58because they're the ones that are creating and designating what the currency is.
4:04And so from this perspective, we're going to start to unpack this today with our guest.
4:10So rather than thinking that the government is this House that needs to borrow money, that needs to find money,
4:16we're going to unpack and deconstruct how it actually works. So you excited about that? Just yes, we have this this terrible problem.
4:24Enter hero Stephanie Kelton. That's right. Enter hero Stephanie Kelton.
4:30So the debate is all around the this default, this debt crisis.
4:35What do we do about this debt ceiling? It's everywhere. They're debating it in terms of,
4:42you know, if they're going to allow the GOP that's controlling the House right now, if it's going to allow for the debt ceiling to be raised,
4:50we're going to have to tighten the belt. Right. Cut some things. Yeah. Yeah. We're going to start budgeting.
4:55Uncle Sam's going to come to all of our houses, knock on our doors, flip us upside down, hold us by our ankles and shake us so all the money falls out of our pockets.
5:03That's what's going to happen. Because according to them, it's the only way to do it. Right. And they saw in the McCarthy video,
5:09it would be irresponsible to do it any other way. They're lying. It's a lie.
5:15It is. Not many. For many of us progressives, and I think what's a little heartbreaking sometimes is, you know, you see people with the best of intentions
5:25that truly desire a transformational change that are organizing, that are doing great work, but for many reasons,
5:32have not been introduced to any other way to think about this. And so we end up kind of implicitly falling into this framing,
5:41and we're all trying to find ways to beat them on their own terms, on the terms of austerity.
5:47And so there's huge implications for this default that's going to affect so many people's lives.
5:55Anything that comes to your mind, Jessica, when we think about what happens with this default. I just think about how it's all theatrics.
6:02That's an excuse for more austerity. So when we say the word austerity, if you haven't heard it before,
6:07it's this push to cut social programs that really help people and benefit people's lives.
6:13And these are things that we all work hard to provide by being participators in the U.S. economy, not just people who pay taxes to the American government.
6:23We work really hard for Social Security. We work really hard to have food security, to have snap benefits.
6:29And it always seems to be the case that instead of saying, hey, the Department of Defense hasn't passed an audit in five years
6:37and we're giving them $842 billion. But what is McCarthy worried about?
6:42What is he pushing for cuts in this bill? He's saying, oh, let's actually strengthen the requirements, make it more strict
6:50and less attainable for hungry families to get access to SNAP benefits. All the while the Fed is running this monetary policy of let's
6:57raise interest rates with the end goal of making more people unemployed. What is the restrictive policy you need now?
7:03Have a job and be working for a certain amount of hours per week to get SNAP benefits that is a terrible proposition
7:11they’re really pushing a policy platform to make working people more desperate.
7:17And the consequence of that is you'll take a job for a lower wage, you'll work more hours just to meet your most basic needs.
7:24Who benefits at the end of the day are corporations. So what comes to mind is if we don't address this,
7:32many, many people will be going hungry and suffering. It's that serious. It's a zero sum game.
7:39We're all caught in like this zero sum game. And we think about, oh, maybe let's get some more public goods,
7:46maybe let's get health care as a public right, as a human right. You know, forget about it because it's too expensive because of these debt
7:56fixations and worries. Let's get into that. We have a slide up here thinking about, like, the ways that they make excuses.
8:03Mike, can we pull that up? So this is actually a slide from our guest.
0:08Hello and Welcome to Funny Money.
0:14This is the show where we talk about the economy from a progressive and a heterodox perspective. My name is Andres Bernal, and I'm here with my co-host, Jessica Burbank, a.k.a..
0:24How are you doing? That's not what I heard the podcast is about. I heard it was about the economy, how it works, and how it can work better.
0:31That's correct. That's right. Yes, that's right. Jessica, how are you doing? I heard you've become a mother recently to a new puppy.
0:39I got that dog in me and I got the dog beside me as well. I'm doing all right. I'm worried.
0:45You know, I'm worried the U.S. government is going to run out of money. That's what I keep hearing.
0:50That's right. That's the word on the street. So we're very excited for this. First episode and getting it going.
0:57And one of the things that's really cool about it is we're going to start this conversation about the economy
1:05from one of the most important things that happens, and that is questions about government budgets and all the controversy
1:13and debate around that that's happening that's relevant to our lives right now.
1:19So what do you say we start with a little video clip? Well, Kevin McCarthy. Hello, Kevin McCarthy.
1:25Trigger warning. Trigger warning. Republic. GOP Trigger warning. You know,
1:31if you gave your child a credit card and they kept maxing it out to the limit,
1:36you wouldn't blindly just raise the limit. You'd change their behavior.
1:42That exact same thing is true with our national debt.
1:48We need to lower inflation, reduce our dependance on China
1:54and lift Americans out of poverty. America has a $31 trillion debt
2:02and Washington is on the clock. Jess, what are your what are your initial reactions or your thoughts?
2:10It keeps me up at night knowing that people who are in Congress have no idea how our economy works.
2:17It's terrifying. It's either that or they know and they're intentionally misleading everyone. And I'm not sure which is worse.
2:24And this seems to occupy a major fundamental part about how
2:29we can even talk about policy solutions and what we can do.
2:36And so I think it's critical that before we let on our guest and get this conversation rolling, we do a little bit of a setup
2:45about how we're going to approach this, introduce some concepts on all of this and all of these things.
2:52And one of the first ones is this idea of fiscal policy. Right. We hear about all these things.
2:58They can be confusing. There's words that are thrown around. But when we think about fiscal policy, what comes to your mind, Jessica?
3:06Well, Andres, what comes to my mind is government spending and expenditure. Right. Yeah. Yeah.
3:14We learned this. If you go to an MPA program, most of the time, this is what you're going to learn. If you're studying economics, if you're studying political science,
3:23you hear about fiscal policy and, and the the approach is government spending and taxing.
3:30But of course, the common framing is that the government collects some revenue and then they spend it.
3:38And so we're here to kind of introduce another way of thinking about this
3:43from an alternative perspective or a heterodox perspective we can think about here MMT or Modern Monetary Theory,
3:51which kind of turns this on its head and introduces the idea that, wait a second, the government actually doesn't function like a household
3:58because they're the ones that are creating and designating what the currency is.
4:04And so from this perspective, we're going to start to unpack this today with our guest.
4:10So rather than thinking that the government is this House that needs to borrow money, that needs to find money,
4:16we're going to unpack and deconstruct how it actually works. So you excited about that? Just yes, we have this this terrible problem.
4:24Enter hero Stephanie Kelton. That's right. Enter hero Stephanie Kelton.
4:30So the debate is all around the this default, this debt crisis.
4:35What do we do about this debt ceiling? It's everywhere. They're debating it in terms of,
4:42you know, if they're going to allow the GOP that's controlling the House right now, if it's going to allow for the debt ceiling to be raised,
4:50we're going to have to tighten the belt. Right. Cut some things. Yeah. Yeah. We're going to start budgeting.
4:55Uncle Sam's going to come to all of our houses, knock on our doors, flip us upside down, hold us by our ankles and shake us so all the money falls out of our pockets.
5:03That's what's going to happen. Because according to them, it's the only way to do it. Right. And they saw in the McCarthy video,
5:09it would be irresponsible to do it any other way. They're lying. It's a lie.
5:15It is. Not many. For many of us progressives, and I think what's a little heartbreaking sometimes is, you know, you see people with the best of intentions
5:25that truly desire a transformational change that are organizing, that are doing great work, but for many reasons,
5:32have not been introduced to any other way to think about this. And so we end up kind of implicitly falling into this framing,
5:41and we're all trying to find ways to beat them on their own terms, on the terms of austerity.
5:47And so there's huge implications for this default that's going to affect so many people's lives.
5:55Anything that comes to your mind, Jessica, when we think about what happens with this default. I just think about how it's all theatrics.
6:02That's an excuse for more austerity. So when we say the word austerity, if you haven't heard it before,
6:07it's this push to cut social programs that really help people and benefit people's lives.
6:13And these are things that we all work hard to provide by being participators in the U.S. economy, not just people who pay taxes to the American government.
6:23We work really hard for Social Security. We work really hard to have food security, to have snap benefits.
6:29And it always seems to be the case that instead of saying, hey, the Department of Defense hasn't passed an audit in five years
6:37and we're giving them $842 billion. But what is McCarthy worried about?
6:42What is he pushing for cuts in this bill? He's saying, oh, let's actually strengthen the requirements, make it more strict
6:50and less attainable for hungry families to get access to SNAP benefits. All the while the Fed is running this monetary policy of let's
6:57raise interest rates with the end goal of making more people unemployed. What is the restrictive policy you need now?
7:03Have a job and be working for a certain amount of hours per week to get SNAP benefits that is a terrible proposition
7:11they’re really pushing a policy platform to make working people more desperate.
7:17And the consequence of that is you'll take a job for a lower wage, you'll work more hours just to meet your most basic needs.
7:24Who benefits at the end of the day are corporations. So what comes to mind is if we don't address this,
7:32many, many people will be going hungry and suffering. It's that serious. It's a zero sum game.
7:39We're all caught in like this zero sum game. And we think about, oh, maybe let's get some more public goods,
7:46maybe let's get health care as a public right, as a human right. You know, forget about it because it's too expensive because of these debt
7:56fixations and worries. Let's get into that. We have a slide up here thinking about, like, the ways that they make excuses.
8:03Mike, can we pull that up? So this is actually a slide from our guest.
8:09They'll be coming on in a second here where we think about these Angry Birds.
8:15A correlation or an analogy here might be with the term ‘Deficit Hawks’. So we think about this little red bird here like a deficit hawk.
8:22Well, this is what they tell us. Right. And they act like zombies. They say there's a fine line between the government
8:28being solvent or insolvent or many of its programs. If it gets too high, if the debt gets too high,
8:35things are going to go wild, creditors are going to go weary, people are going to take their money elsewhere.
8:42It's going to downgrade us. Jess, what about some other things? Greece? Oh, yeah.
8:48You could end up like Greece, unable to pay your bills. There are all sorts of things people talk about related to default,
8:55and I'm just glad we have Stephanie on to break all of this down. I really like the zombie Angry Birds.
9:03Birds are really important to us because we talk about the owls and the hawks. The hawks are people who have very strong views about the deficit.
9:12I think of people like Larry Summers then we have The Owls, which are a bit more wise, would show us a different way
9:18of doing things. We may have lost Andres, so I'm going to go ahead
9:26and tell us a little bit about our guest that we're really lucky to have coming on.
9:31We got Charlie on my visual here. I still hear you. I thought you were a goner.
9:36Now I'm here. I'm here. Let's introduce our guest. Let's bring Stephanie in and maybe Andres
9:43will come back later in the podcast, if we're lucky. So Stephanie Kelton, my personal hero, professor
9:50of economics and public policy at Stony Brook University, notably the author of The Deficit Myth, The New York Times bestseller
9:59Modern Monetary Theory and the Birth of the People's Economy. Professor Kelton has worked both in academia and in policy.
10:07She served as the chief economist on the U.S. Senate Budget Committee in 2015
10:13as a senior advisor to the Bernie Sanders presidential campaign. She's a regular commentator on national radio and broadcast television.
10:21She's the co-host on Market Watchers Weekly podcast, which is the Best New Ideas In Money.
10:27It's a great podcast. She also publishes a Substack newsletter, The Lens.
10:32Welcome, Stephanie. It's so good to have you on. Thank you both. It is really, really fun to be with you first episode.
10:41So congratulations. I can't wait to see what you're going to do with this podcast. We couldn't think of a better guest.
10:47You had to be. Super nice of you. Let's Do you want to start?
10:53Sorry, Go ahead. No, I'm just happy that we're doing this and so blessed that Stephanie's here with us.
10:59So it's exciting what we're all going to be able to do together. I want to start at the very beginning.
11:05It's a good place to start. Stephanie, what is the federal deficit?
11:13Okay, It's the difference between two numbers like this thing that you hear.
11:19You see headlines, media hand-wringing, this word that's like omnipresent.
11:25Right? And at the end of the day, it boils down to this rather benign thing.
11:31It's literally the difference between two numbers. One of the numbers is,
11:36you know, how many dollars the government puts out there each year. So we call that outlays.
11:43If you go to the Congressional Budget Report, you look up the tables, it'll say total outlays, and it will give you a number.
11:49And those outlays could be for things like military spending, health care, infrastructure and all that. So think of dollars flowing out of government.
11:57That's one number. The other number is total revenue. That's mostly through taxation.
12:03So it's how much the government collects in personal income tax, corporate income tax, payroll tax, not so how much comes in each year.
12:12So the difference between what goes out and what comes in. So if outlays are greater than receipts, then revenues,
12:21then we record on the ledger a deficit. So putting really simple numbers to it, you guys, if the government outlays are
12:31100 and revenues are 90, then we call that a deficit
12:36and we record somewhere that the government has run a deficit. Somebody writes minus ten on the books.
12:43Okay. So it is that's the definition. That's what we're talking about. But what we forget and it's really, really important and you would think
12:52somebody would take the trouble to mention this is that if the government puts out
12:57more than it takes away from us, that it's really just making a deposit. So if it puts 100 in and only takes 90 out,
13:05what it's really doing is depositing $10 into some other part of the economy.
13:12In other words, the government's deficit is always matched dollar for dollar by a financial surplus.
13:19On the other side of every deficit lies a surplus of equal size
13:25that goes into some other part of the economy. So when people get very upset at the notion that the government has done
13:32this awful thing called running a fiscal deficit, what they really failed to recognize, and it's partly due
13:41to the economics profession, which doesn't do a good job informing people, journalist pundits, talking heads on TV.
13:48What people don't realize is that the government's deficit is a financial contribution to some other part of the economy.
13:56So in a financial sense, every deficit is good for someone.
14:02The question is, you know, for whom? What are those deficits being used to accomplish and who's on the other side of that windfall?
14:09Where are those dollars going? Who has them now? So a lot of people think of the word deficit and they imagine
14:16their own household budget. If I take out a credit card and I spend a bunch of money on it's money
14:23I don't have, I have to pay that money back. Now, you make this great distinction that the government is not a household.
14:31We have a fiat currency. The US government is a currency issuer. I love that You say their red ink is our black ink to describe that
14:40a lot of people hear deficit and assume debt and moreover they assume
14:46foreign debt like we've taken out a credit card with the Bank of China. Can you make the distinction for everyone?
14:53Because it's unfortunately a super common one between foreign debt and the national deficit?
14:59Yeah, Even, you know, journalists and pundits and members of Congress will sometimes conflate the deficit and the debt.
15:06And I have to tell you, Jessica, I think I wish we didn't use either of these words. I think both are poor
15:14words to use to describe what's really happening. So I would prefer to just use the term net spending for the outcome.
15:24Whatever the difference between outlays and revenues is each year, we just call it net spending.
15:29Sometimes it's positive, sometimes it's negative. The debt so called is the cumulative right.
15:38The running total of all of the prior instances
15:43where the government engaged in net spending of a plus or minus kind. So let me give you an example.
15:50If the government puts in 100 and takes out 90, we've already established that we call that a fiscal deficit.
15:57We right minus ten. Now, if they do that year after year after year after year,
16:02we'll have a different number. We'll add up all those minus tens, and that will give us what we refer to
16:08as the so-called national debt. What happens is that each year the government's budget happens
16:14to end in a deficit. The government sells treasuries.
16:19These are financial instruments that are available to the rest of us, including to China.
16:25People who have dollars can trade those dollars in for what I think amounts to a just another kind of dollar.
16:33Right. It's an interest bearing US dollar called a government bond, a U.S.
16:38treasury. And so China has access to that market. You and I have access to that market, other investors, pension funds
16:46and the like. And it's the total outstanding stock of U.S.
16:52Treasuries that we call the national debt. And that word is so loaded, right, because people hear the word debt
17:00and they think, oh, my God, I know if I took on trillions of dollars of debt, it would be the end of the world for me personally.
17:08But the federal government, as you just said, doesn't have a budget that operates like a household.
17:13This thing called the debt is not akin to personal debt. It doesn't work like when we take on personal debt.
17:20If you got yourself in a pickle with credit card debt, you've got to find dollars to repay your creditor, Visa, MasterCard, whoever.
17:28When the federal government sells treasuries, what is it obligated to pay at the end of the day, U.S.
17:35dollars to bondholders? Well, where do U.S. dollars come from? Well, it turns out the U.S.
17:41government is the issuer of the U.S. dollar. So it's a very different beast
17:48when we talk about debt for a household versus this thing that we unfortunately call debt for the federal government,
17:55what it really is is just a financial asset for the rest of us. It's part of our wealth, part of our savings.
18:01If you're lucky to get lucky enough to own some of these congratulations. Right. This is a safe financial instrument that pays you interest.
18:13But for the benefit of parting with your dollars for some period of time.
18:20That's a great distinction. And so when we think about the deficit being the difference between these two numbers, we think about the debt being these treasuries.
18:30Right. Both of those are coming from the federal government. One thing that helped me when I first started learning about
18:36this is a visual that really kind of brings in this paradigm shift. And one of the classic ones for those that are learning this perspective,
18:45this lens into public budgets is this classic sectoral balances image.
18:50Can you tell us a little bit about this image and what it's what it's showing us?
Yeah, So what it's showing you,
18:59I'm going to just take one quick step back and say something else about the debt, so-called, which I think it's important to say when I said it's the cumulative total.
19:08So what we want to recognize is that those are all of the dollars that the government has spent into the economy over
19:17the history of the country’s existence and not taxed back.
19:23So that's what it is, right? It's the dollars that have been spent by government and not taxed back.
19:28It's really just part of the broader U.S. money supply. Those treasuries are really interest bearing dollars.
19:34They circulate, they function in many ways like money. So when you look at this graph, what do you see?
19:41All right. This is a graph. It's actual data. Nobody made this up. Okay? This is real historical data going back to the 1950s, early 1950s.
19:50And what the graph does is to break the economy into three big chunks.
19:56We could disaggregate it further, but this makes the point pretty clearly and nicely.
20:02One chunk here that you see depicted in blue is the U.S. private sector.
20:07That's all the households and all the businesses in the U.S. economy, our private sector.
20:13What you see depicted in red here is the government sector. That's federal, state and local.
20:19That's government here in the U.S. And then there's everything else, which is what's outside of the US
20:25that's shown in green, and that's the rest of the world. So what the graph shows you is
20:33how dollars flow in and out of sectors over time.
20:40So if a sector, if one part of the economy experiences net outflows, in other words, it pays out more dollars than come in during
20:50that period of time, you're going to see that sector below zero. It's going to have a deficit.
20:56If a sector is receiving more dollars than it is paying out, it's going to have a surplus as you're going to see it above zero there.
21:04So the graph is neat and tidy and it may strike people who are watching this that, you know, wow, they're kind of a mirror of one another.
21:13And that's an important part of the story because every payment that flows out of one sector has to go somewhere, right?
21:21And it has to be received by some other sector. So any deficit has to result
21:29in, as we said earlier, a surplus in some other part of the economy. And so everything has to net to zero.
21:36Another striking feature, remember, this goes back to the early 1950s so that you notice the government is almost always in red.
21:43Government is almost always the one in the deficit position, whereas the private sector is almost always above zero with a surplus
21:52and we don't have the time, I don't think, to get into the whole rest of the world and trade imbalances and why that changes over time.
21:59But the important point here is that those government deficits
22:05are the thing that is producing the surpluses that you see above zero.
22:11So if you just look, let's see how far back this goes. There you go. So you have the Covid spending, right?
22:18Those enormous deficits that were run to try to support the economy through the pandemic and so forth.
22:25And people really got concerned at the size of the government's deficit during that period.
22:31But if you look at this in the context of the whole picture, not just what's happening to the government's budget,
22:39but look up, right, look what's happening to everybody else, and you'll see that those government deficits were instrumental
22:47in keeping the private sector afloat. Right. So you can see that big spike
22:52in the private sector's financial surplus in that period. While those surpluses were made possible by virtue of the government
23:00outlays greater than receipts. So the government's deficit is producing those surpluses.
23:07And I think what's really key that you mentioned is that this is not a fixed thing, but rather it's up for grabs.
23:15Right. That that deficit could be going to one place to the most wealthy, the most powerful to the military, whatever, or it could be going
23:24to the things we need to improve quality of life and and improve the standard of living for working people, for communities
23:32of color, historically marginalized communities, whoever that may be. Right. Like, it's a political question of where those deficits go.
23:38And I think that's so vital to understand. Andres, you’re right for sure. And just to be clear, in the pandemic, they went to both places, right?
23:49They went to both. It wasn't as if Congress said, well, we're going to have to respond to this.
23:56You know, health crisis and this economic crisis. And so we're going to make a commitment to with the CARES
24:02Act, $2.2 trillion in March of 2020. They didn't say, I guess it's time
24:08to finally cut the military budget because we're going to have to, you know, commit a lot of money to supporting the economy
24:15because of the pandemic and the economic fallout and so forth. Now, they continued to fund and even more generously
24:23so when the defense reauthorization Act comes up, they put more money into the military
24:28and supported the economy with, you know, fiscal package
24:33after fiscal package, after fiscal package, some 5 trillion, even more than 5 trillion in the span of about
24:4212 months time. Yeah. So, I mean, you know, that really kind of for the organizers and people in politics
24:49listening right like that just shows that it's up for grabs And like some like AOC and some other public officials say these budgets are in many ways
24:56moral documents that say, you know, what do we want to prioritize? Something that I hear all the time is and sadly,
25:05sometimes from liberal or progressive leaning people, is kind of boasting about the late 90s and the Clinton surpluses.
25:14As we finally had a surplus, we finally balanced the budget. What's the problem with that framing in that discussion?
25:22And you know, the implications for what happened to our economy largely influenced by that surplus.
25:32Yeah. So well, let's talk about what actually generated those surpluses because, you know, you're right there.
25:39There is a narrative out there that goes something like Democrats and Republicans
25:45work together in a bipartisan way to cut spending and increase taxes.
25:50And that produced the surpluses. And we had the first balanced budget in my lifetime.
25:56And wasn't that a great achievement? What a badge of honor. Democrats are the true party of fiscal responsibility.
26:04You know, this is just not historically accurate. This is not where those surpluses came from.
26:10I think it's important to reckon with what really generated those fiscal surpluses.
26:17And the reality is that it was a stock market bubble. That's where the surpluses come from.
26:22And if you've got, you know, progressives who are
26:28operating under the impression that this was generated in some other way, they really ought to take a look at Dean Baker's work, because,
26:36you know, Dean's a very good economist, I think widely respected among progressive circles.
26:41And Dean has banged this drum for now over a decade, to be sure.
26:47And he's written about the Clinton surpluses. So just Google Dean Baker and the Clinton surpluses.
26:53I've written about this over the years as well. Wynne Godley, Randy Wray, all of us had lots to say about the Clinton surpluses
27:01and whether they were a good thing or whether, in fact, they were being generated on the backs
27:08of the private sector, which, you know, who had an unsustainable stock market
27:14bubble that fueled people, took profits. And so there were capital gains taxes that came flooding in and that moved the budget into surplus.
27:23And then you had the start of a financial housing bubble on the backs of the stock market bubble, which kept the U.S.
27:31private sector spending in excess of its income for a period of time. People could look at the economy and a lot of people did
27:38and said, Wow, this is a Goldilocks economy. Look at this. Right? Low unemployment, low inflation, high growth.
27:45This is the greatest thing in the world. But under the surface, if they had been looking at this chart
27:50that you have on the screen, they would have seen the leverage in the private sector and where
27:56that momentum was coming from and it was private sector deficits that were always going to turn out to be unsustainable.
28:07It's really important, I think, that that people know this because there's so much potential in it and it changes
28:13how you view the entire economic system and the government right. To know that, okay, the money has to come from somewhere.
28:22The deficit is a record of where the money's come from. If we completely eliminate deficits everywhere,
28:29there would effectively be no more money. Need money to make money. That's what people always say.
28:36And in MMT, it's sort of said in another way, you need dollars as this tool to put real productive resources
28:44to use to pay workers, to buy land, machinery, tools, all of these things.
28:49And where we put the money matters. It affects our economy, it affects our lives in that way.
28:54And there's a lot of beautiful potential with what we do with that. But they frame it like it's this terrifying nightmare.
29:02They show us the national debt clock, which is an amazing image. We have a photo of it and they try and make everyone terrified,
29:11almost as if they're looking at their account, seeing how much they're in the negative, thinking about, oh my gosh, how are we ever going to pay this back?
18:59I'm going to just take one quick step back and say something else about the debt, so-called, which I think it's important to say when I said it's the cumulative total.
19:08So what we want to recognize is that those are all of the dollars that the government has spent into the economy over
19:17the history of the country’s existence and not taxed back.
19:23So that's what it is, right? It's the dollars that have been spent by government and not taxed back.
19:28It's really just part of the broader U.S. money supply. Those treasuries are really interest bearing dollars.
19:34They circulate, they function in many ways like money. So when you look at this graph, what do you see?
19:41All right. This is a graph. It's actual data. Nobody made this up. Okay? This is real historical data going back to the 1950s, early 1950s.
19:50And what the graph does is to break the economy into three big chunks.
19:56We could disaggregate it further, but this makes the point pretty clearly and nicely.
20:02One chunk here that you see depicted in blue is the U.S. private sector.
20:07That's all the households and all the businesses in the U.S. economy, our private sector.
20:13What you see depicted in red here is the government sector. That's federal, state and local.
20:19That's government here in the U.S. And then there's everything else, which is what's outside of the US
20:25that's shown in green, and that's the rest of the world. So what the graph shows you is
20:33how dollars flow in and out of sectors over time.
20:40So if a sector, if one part of the economy experiences net outflows, in other words, it pays out more dollars than come in during
20:50that period of time, you're going to see that sector below zero. It's going to have a deficit.
20:56If a sector is receiving more dollars than it is paying out, it's going to have a surplus as you're going to see it above zero there.
21:04So the graph is neat and tidy and it may strike people who are watching this that, you know, wow, they're kind of a mirror of one another.
21:13And that's an important part of the story because every payment that flows out of one sector has to go somewhere, right?
21:21And it has to be received by some other sector. So any deficit has to result
21:29in, as we said earlier, a surplus in some other part of the economy. And so everything has to net to zero.
21:36Another striking feature, remember, this goes back to the early 1950s so that you notice the government is almost always in red.
21:43Government is almost always the one in the deficit position, whereas the private sector is almost always above zero with a surplus
21:52and we don't have the time, I don't think, to get into the whole rest of the world and trade imbalances and why that changes over time.
21:59But the important point here is that those government deficits
22:05are the thing that is producing the surpluses that you see above zero.
22:11So if you just look, let's see how far back this goes. There you go. So you have the Covid spending, right?
22:18Those enormous deficits that were run to try to support the economy through the pandemic and so forth.
22:25And people really got concerned at the size of the government's deficit during that period.
22:31But if you look at this in the context of the whole picture, not just what's happening to the government's budget,
22:39but look up, right, look what's happening to everybody else, and you'll see that those government deficits were instrumental
22:47in keeping the private sector afloat. Right. So you can see that big spike
22:52in the private sector's financial surplus in that period. While those surpluses were made possible by virtue of the government
23:00outlays greater than receipts. So the government's deficit is producing those surpluses.
23:07And I think what's really key that you mentioned is that this is not a fixed thing, but rather it's up for grabs.
23:15Right. That that deficit could be going to one place to the most wealthy, the most powerful to the military, whatever, or it could be going
23:24to the things we need to improve quality of life and and improve the standard of living for working people, for communities
23:32of color, historically marginalized communities, whoever that may be. Right. Like, it's a political question of where those deficits go.
23:38And I think that's so vital to understand. Andres, you’re right for sure. And just to be clear, in the pandemic, they went to both places, right?
23:49They went to both. It wasn't as if Congress said, well, we're going to have to respond to this.
23:56You know, health crisis and this economic crisis. And so we're going to make a commitment to with the CARES
24:02Act, $2.2 trillion in March of 2020. They didn't say, I guess it's time
24:08to finally cut the military budget because we're going to have to, you know, commit a lot of money to supporting the economy
24:15because of the pandemic and the economic fallout and so forth. Now, they continued to fund and even more generously
24:23so when the defense reauthorization Act comes up, they put more money into the military
24:28and supported the economy with, you know, fiscal package
24:33after fiscal package, after fiscal package, some 5 trillion, even more than 5 trillion in the span of about
24:4212 months time. Yeah. So, I mean, you know, that really kind of for the organizers and people in politics
24:49listening right like that just shows that it's up for grabs And like some like AOC and some other public officials say these budgets are in many ways
24:56moral documents that say, you know, what do we want to prioritize? Something that I hear all the time is and sadly,
25:05sometimes from liberal or progressive leaning people, is kind of boasting about the late 90s and the Clinton surpluses.
25:14As we finally had a surplus, we finally balanced the budget. What's the problem with that framing in that discussion?
25:22And you know, the implications for what happened to our economy largely influenced by that surplus.
25:32Yeah. So well, let's talk about what actually generated those surpluses because, you know, you're right there.
25:39There is a narrative out there that goes something like Democrats and Republicans
25:45work together in a bipartisan way to cut spending and increase taxes.
25:50And that produced the surpluses. And we had the first balanced budget in my lifetime.
25:56And wasn't that a great achievement? What a badge of honor. Democrats are the true party of fiscal responsibility.
26:04You know, this is just not historically accurate. This is not where those surpluses came from.
26:10I think it's important to reckon with what really generated those fiscal surpluses.
26:17And the reality is that it was a stock market bubble. That's where the surpluses come from.
26:22And if you've got, you know, progressives who are
26:28operating under the impression that this was generated in some other way, they really ought to take a look at Dean Baker's work, because,
26:36you know, Dean's a very good economist, I think widely respected among progressive circles.
26:41And Dean has banged this drum for now over a decade, to be sure.
26:47And he's written about the Clinton surpluses. So just Google Dean Baker and the Clinton surpluses.
26:53I've written about this over the years as well. Wynne Godley, Randy Wray, all of us had lots to say about the Clinton surpluses
27:01and whether they were a good thing or whether, in fact, they were being generated on the backs
27:08of the private sector, which, you know, who had an unsustainable stock market
27:14bubble that fueled people, took profits. And so there were capital gains taxes that came flooding in and that moved the budget into surplus.
27:23And then you had the start of a financial housing bubble on the backs of the stock market bubble, which kept the U.S.
27:31private sector spending in excess of its income for a period of time. People could look at the economy and a lot of people did
27:38and said, Wow, this is a Goldilocks economy. Look at this. Right? Low unemployment, low inflation, high growth.
27:45This is the greatest thing in the world. But under the surface, if they had been looking at this chart
27:50that you have on the screen, they would have seen the leverage in the private sector and where
27:56that momentum was coming from and it was private sector deficits that were always going to turn out to be unsustainable.
28:07It's really important, I think, that that people know this because there's so much potential in it and it changes
28:13how you view the entire economic system and the government right. To know that, okay, the money has to come from somewhere.
28:22The deficit is a record of where the money's come from. If we completely eliminate deficits everywhere,
28:29there would effectively be no more money. Need money to make money. That's what people always say.
28:36And in MMT, it's sort of said in another way, you need dollars as this tool to put real productive resources
28:44to use to pay workers, to buy land, machinery, tools, all of these things.
28:49And where we put the money matters. It affects our economy, it affects our lives in that way.
28:54And there's a lot of beautiful potential with what we do with that. But they frame it like it's this terrifying nightmare.
29:02They show us the national debt clock, which is an amazing image. We have a photo of it and they try and make everyone terrified,
29:11almost as if they're looking at their account, seeing how much they're in the negative, thinking about, oh my gosh, how are we ever going to pay this back?
29:21So I want to turn to the debt ceiling crisis. How they've made all of us
29:27afraid of this looming scenario where what's going to happen if we raise the debt limit, Have we ever done that before?
29:35Many, many times over 70 times since 1960. Can you talk a little bit about just the debt limit crisis and how you see it?
29:46Well, sure. I see it as a as a crisis of its own making, Right.
29:52It's political theater, but this time it's gotten to the point that, you know, people are starting to, I think, take very seriously
30:02the possibility that you might well have enough people in Congress who think that this is, you know, actually some sort of innocent
30:11or benign game that you can just refuse to raise the debt limit and nothing terribly bad will happen.
30:20I, I don't know how to explain it. You know, we've been here before where it started to feel pretty serious.
30:27And I think in your intro, you had some references to what did you show a video clip that referenced, you know, downgrading and that's
30:37the zombie. Yeah, yeah, yeah, yeah. They'll downgrade the debt. Well, that happened before. Okay.
30:43That happened after the housing bubble burst from the financial crisis. We toyed around.
30:50We members of Congress toyed around with the idea of not raising the debt
30:55ceiling limit in a timely enough fashion and risking a potential default.
31:00And Standard and Poor's downgraded U.S. Treasuries from a triple-A rating, which is the highest
31:06that you can have to one notch below. And, you know, yesterday I was teaching my graduate students
31:12here at Stony Brook, and I showed a video of a clip, a video clip of some of the conversations that were going on around that time.
31:20And one of the people who spoke was Warren Buffett, who's, of course, billionaire investor Berkshire Hathaway and so forth.
31:27And Warren Buffett was saying, how on earth is S&P downgrading U.S.
31:34Treasuries? This makes no sense whatsoever. And he said, these are his words, not mine. He said the US government can print money.
31:42What do they think there's going to be a point at which, you know, you have to make interest
31:47in principal payments to bondholders and you don't know where to get the money. I mean, he's saying this is insane, it's our currency.
31:54And he said, you know, they asked him, do you disagree then with the downgrade? He said, of course, he said in here in Omaha,
32:02because, you know, Berkshire in Omaha, Nebraska, said the U.S. treasuries would have a AAAA rating.
32:10There is no reason to question the validity of the of the U.S.
32:16government so-called debt, as we've referred to it. So lawmakers should recognize this.
32:21I think they know it, Jessica. I don't think there's confusion about this. I think that they know that there's
32:28always that they always have the ability to pay. I heard one member of the House on television the other morning
32:36say who is a Republican from Arkansas and he said these were his exact words.
32:43He said the debt ceiling is an anachronism financially. But he said but the reason I like it And then he went on to explain that
32:54the reason he likes it is because it presents these moments where you can use the debt limit as leverage
33:02to try to extract the kinds of things you were just talking about. Make people go try to find extra hours in order to get their SNAP benefits,
33:11make people jump through extra hoops and and hurdles and, you know, get an opportunity maybe to take a whack
33:18at Social Security and Medicare or something else, you know, get your pound of flesh in exchange for doing something that did
33:27the job, did not even have to do because we shouldn't have the damn thing. We're one of maybe two countries in the world that even has a debt limit. So
33:37but here we are. Here we are. It's almost as if a construct in a sense of knowledge
33:43and a sense of truth that everybody, the public kind of internalizes is has a very effective political tool to win the kinds of things that that those
33:53that want to privatize, that those that want some kind of market fundamentalist economy to function, use very effectively.
34:01And speaking of that leverage, one of the things we hear over and over again is that if the GOP, many Democrats,
34:10quite frankly, will sometimes argue that if we're going to raise the debt ceiling, then we'll only do it because we will cut it from somewhere else.
34:18Social Security up all the time here. Right. They say it's going to go broke.
34:25It's you know, there's no way that it's going to stay solvent. And so we got to find a way to privatize it or cut funding.
34:32We actually have a quick clip. Mike, can we can we get that up of one that you've used as well many times.
34:43So having personal retirement accounts is another way of making a future retiree benefits more secure for their retirement.
34:51And also, do you believe that personal retirement accounts as a component to a system of solvency does help improve solvency?
34:59Because when you have a personal retirement account policy, it's accompanied with a benefit offset with that feature in place.
35:05Do you believe that personal retirement accounts can help us achieve solvency for the system and make those future retiree benefits more secure?
35:12Well, I wouldn't say that the pay as you go benefits are
35:17insecure in the sense that, oh, well,
35:23there's nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question,
35:30how do you set up a system which assures that the real assets
35:36are created, which those benefits are employed to purchase?
35:42So it's not a question of security, it's a question of the structure
35:47of a financial system which assures that the real resources are created for retirement as distinct from the cash.
35:56The cash itself. It's nice to have, but it's got to be in the context of the real resources
36:05being created at the time those benefits are paid
36:10so that you can purchase real resources with the benefits, which of course a cash.
36:22So we're hearing about personal retirement accounts. Give us give us a sense of what's going on at that hearing in that video.
36:31So it's funny because I also showed that clip in my class yesterday, my graduate students, and we deconstructed.
36:38And so I'm well-equipped to do it again here. It's one of my favorites because, you know, Alan Greenspan, just to be clear,
36:46so everybody who's watching knows that that was Congressman Paul Ryan, right.
36:51Who became speaker of the House and former Fed Chair Alan Greenspan.
36:56So you would think maybe Alan Greenspan would know a little something about the monetary system and where money comes from,
37:03given the nature of the Federal Reserve. And it turns out he gave what I think was just about the perfect answer to this question, not,
37:11however, the answer that Paul Ryan desperately wanted, because Ryan was trying to toss him a softball and just reel in that.
37:18Right. You heard him use the term personal retirement accounts at least four times I counted.
37:24And that's all he wanted. He wanted affirmation from Alan Greenspan that Social Security is in trouble,
37:30that it would make sense to move today gradually toward a system of personal retirement accounts.
37:37That's code for privatizing Social Security. And so don't you agree with me, Chairman Greenspan,
37:44that it's time to begin to take these steps? That's question. And instead of agreeing, Alan Greenspan simply leans
37:51into the microphone and begins by taking off the table the question of affordability just takes it right off, he said.
38:01I wouldn't say that there's anything problematic with the system the way it's set up today.
38:06He said, and I quote, There's nothing to prevent the federal government from creating as much money as it wants and paying it to someone full stop.
38:17So what he's saying is you have benefits that are promised to future
38:22retirees, their dependents and the disabled. You're worried that you're not going to have the money
38:28to pay those benefits when they come due? Don't worry. This is Greenspan. Don't worry. The money is the easy part.
38:34The cash itself is is the easy part. Then he goes on to say, The really important part.
38:40He said, The question is how do you set up a system which assures that the real assets
38:47are created, which those benefits are employed to purchase? Now, what does that mean?
38:52It means how do you know that when you mail those checks out, or more appropriately, when you digitally credit
39:00people's accounts and they have their Social Security benefits, how do you know in ten, 20, 30 years time that they're going to be able
39:08to turn around and spend that money into an economy that is productive enough,
39:14that is producing enough goods and services of the right mix, that they can buy things without having to compete
39:22with everyone else for a shrinking supply of real goods and services. Therefore, driving up wait for it inflation
39:31because that is public enemy number one for every central banker. And so what Greenspan was really doing was just explaining to Paul Ryan
39:40that it's inflation you have to watch out for not running out of money, not, you know, a trust fund that goes to zero.
39:48That's easy to deal with. It's inflation that we should be focused on
39:54right. And, you know, as we're deconstructing and unpacking the way MMT presents public budgets,
40:03something that's also key and that I hear about a lot is this notion of like doing MMT or going out and doing some kind of trick.
40:12Can you talk about how spending actually works on a regular basis? Right, it’s not like
40:17we're going to do something new or different, but rather what is already happening, what we spend
40:24right? So, look, this project got started in the mid 1990s,
40:31so MMT started as an effort
40:36to provide a better explanation, right? A better description of the monetary system that we have today,
40:44which I think you mentioned earlier, fiat currency floating exchange rate. We're not on a gold standard.
40:49It's not a fixed exchange rate world. We have floating exchange rates and fiat currencies and we should start by recognizing that.
40:57So what is the monetary system we have? And then what are the mechanics, the monetary, the plumbing, Right.
41:03Of the financial system? How does it work? So MMT was, you know, from the very beginning about trying
41:12to provide an accurate description of how it all works. So you don't quote unquote, do MMT?
41:20It's a description. And so with that, I call it a lens or others call it a lens as well.
41:27With that lens, right. And a clearer picture of how
41:33the monetary system is set up and the mechanics of government spending. What do we see when we look through that lens?
41:39So, you know, it's pretty I think, again, COVID gives us such a nice example
41:45because, you know, March of 2020 COVID hits in earnest in the US, and what is Congress do?
41:53There are a couple of small bills initially, but then the big fiscal package is passed in March of 2020, and that's the CARES Act,
42:01and that is Congress coming together and writing a bill. The legislation is the set of instructions and think of it as a set of instructions
42:12that is going to the government's bank, to the Federal Reserve. The Fed is the government's fiscal agent.
42:18And that bill said we get ready, right, because we're drafting a $2.2 trillion bill.
42:24We are going to have a payroll protection program. So there's going to be money that's going to go to
42:31small business is to help try to keep workers on payroll. We're going to send checks to people.
42:36So there's going to be a 1200 dollars check that goes to most people in this country. We're going to enhance the unemployment benefits.
42:45And so we're going to provide $600 a week to unemployed people.
42:50And you know, that that money is going to go out and so on and so forth. And so Congress is committing to the spending
42:58with the passage of the legislation and the appropriations. The commitment is there.
43:04And the rest is really, you know, just behind the scenes, the crediting of the of the relevant bank accounts.
43:11Congress committed the money. Now it's the Fed's job with the rest of the banking system
43:17to carry out on behalf of the U.S. Treasury those payments.
43:22So you start to see, you know, bank accounts get credit that the unemployed have $600 a week and somebody gets their 1200 dollar check
43:31and so, you know, the way that it works is really as simple as understanding
43:38that banks are changing numbers in people's accounts. When the government spends, the numbers get changed up.
43:46When we pay the government, let's say we pay taxes, the numbers are being changed down in our account.
43:52So that's how it works in the modern era. It's just, you know,
43:58most of it is accomplished using nothing more than a computer keyboard, and we are debiting and crediting the relevant accounts.
44:06So is it safe for me to say that tax is and bonds
44:12don't actually finance the government? Is it safe for you to say, well, it's accurate for you to say
44:24Somebody might not like that. But you you're leveling with them.
44:30It's just like I'm sort of kidding. Obviously I'm kidding. But yeah, we. Want to avoid Twitter battle.
44:36Like, it's an uncomfortable thing for people to hear, right? Because for a lot of people, there's sort of some pride
44:43associated with paying your federal income tax. And you'll sometimes hear, you know, because I did my part for
44:51keeping the country safe or helping to fund, you know, health care and education and and so on and so forth.
44:58And you got groups out there that, you know, try to tell people feel good
45:03about paying your federal tax because it's helping them, you know, finance all of these different programs that benefit people in one way or another.
45:13So some people don't want to hear that. Basically, you know, it's just somebody is hitting the delete key
45:21and taking numbers out of your account, but the government doesn't actually get anything right. Warren Mosler has said, I think many times over the years there's
45:29no gold coin that drops into a bucket somewhere in the in the Treasury.
45:34It's just subtracting something from our accounts, but it doesn't enrich the federal government, it doesn't enhance their capacity to spend.
45:43They're not better able to afford things because they collected $100 from one of us.
45:51It's just, you know, it's subtracted away from us. And that is
45:57not always a comfortable thing for people to hear. But it is it is correct.
46:03Another one of the light bulb moments that I had following your work and reading the book is that instead of framing
46:09fiscal policy and public budgets as your tax first so that you can spend, you invert that
46:16and you say the way it actually works is you spend and then you tax. Can you talk about then the purpose of taxation
46:24because some people kind of go, then why? Why is anybody paying taxes? You know, the metaphors are talking about you don't need taxes,
46:29but in fact it plays this huge role in how we understand budgets. So there's a sort of an origin story where you could use the tax
46:39and if you know, if you're really interested or if your listeners are really interested in this stuff,
46:44for the most part, don't read. Economists read. It's the work of historians and sociologists, anthropologists
46:50and numismatists and others. If you want to get really deep in this stuff and trace, you know,
46:56how have taxes and other kinds of fees and fines and obligations and the formation of a legal and court system, how has that
47:06been used to introduce currencies like to start a currency from scratch?
47:12Something like a tax is a very good way to monetize
47:18and otherwise, you know, non money using society. And so you say what is the purpose of the tax?
47:25One answer is that it could be one way to start up a currency from scratch, that's thousands of years ago.
47:35So now let's move into the more modern era. Well, why do we why else do we have taxes?
47:41Well, I just told you that when I pay my taxes, their dollars are deleted from my bank account.
47:47I don't have them. Once they're taken away from me, they're not available to me. I can't chase after goods and services with them.
47:54They're not mine to spend any longer. So one thing that taxes do is to reduce the purchasing power
48:02of the rest of us so that we have less money to spend. So you can imagine that an important
48:09purpose of doing that would be to allow the government to spend into the economy
48:15to do infrastructure and health care and education and all kinds of other things without creating an inflation problem.
48:22So there's a sort of a balancing where the government can spend dollars into the economy, mobilize resources, hire people,
48:31contract with sellers and so forth, but take down the number of dollars the rest of us
48:38have to spend into the economy so that there are some space for the government to safely spend without creating inflation problem.
48:46You can say, you know, look at the distribution of wealth and income in this country today.
48:52It looks a lot like it did in the 1920s, the sort of Gilded Age. It's It's gotten to the point where we have concerns about,
49:02you know, how our economy functions, how our democracy functions. We're going to use the tax system to remove some of the dollars
49:13that are in the hands of the people at the very, very top to try to reduce the disparities right in in wealth and income distribution.
49:22And so taxes are very good for that purpose. You could say we're going to use the tax code to create incentives or disincentives.
49:31The Biden administration has been doing that to try to get people to put heat pumps in their homes and buy electric vehicles
49:38and get businesses to invest in green tech and manufacturing and so forth.
49:45Or you can use it. You know, as a stick rather than a carrot and say, I know we're going to tax bads.
49:53We're going to have people propose things that are financial transactions, tax or raising the gas tax or carbon tax,
50:01you know, all kinds of things to discourage certain behavior. So lots of lots of different
50:08important uses for taxes. Yeah, I think
50:14people are thinking about taxes right now, many having just filed. But people are also thinking about inflation right now.
50:20And that's something that a lot of people say, oh, well, we did. MMT and the government has spent too much money
50:26with the CARES Act and the American Rescue Plan. And I a lot of people don't connect the necessity
50:34of economic stimulus in times of downturn and just get the sticker shock of how much money
50:41we're putting into the economy and say, well, that must be or the inflation's from too many dollars or chasing too few goods.
50:48We've put too many dollars into the economy and therefore devalued the dollar. People have made a lot of extrapolations.
50:55Can you say a little about what actually caused recent inflation? We could do a
51:00whole we could do a whole nother hour, Jessica, for people who
51:07maybe didn't pay close attention to all of this, which is most people during this period, you know, when the pandemic initially started
51:17with falling prices in all kinds of areas of the economy, you know, some outright deflation, where prices are just falling
51:26rapidly. And then when prices started to increase in the early phase, we saw it in kind of unusual places.
51:35Used cars was one of the early places where we saw this uptick in headline inflation rates.
51:42We said, where is that coming from? And you look into the numbers and you see that
51:47there's something happening with used car prices. And we said, what's going on there? Well, we could understand that because, you know, we sort of work backwards
51:57and said, well, we didn't know if we were going to have a vaccine or how quickly we might have a vaccine and a bunch of car rental companies
52:05sold off their fleets because they didn't think people were ever going to travel and want to rent cars again.
52:10And so those cars got sold off and then all of a sudden we had trouble
52:15producing semiconductors that are needed to manufacture new cars. And then when the economy started to recover more quickly
52:22than a lot of people anticipated, people wanted to buy cars and travel again and so forth where you couldn't get a new car off the assembly line
52:30because you didn't have the chips you needed. So people turned to used cars and the car companies were rental
52:37companies were trying to buy back some of the cars to restock, and everybody was competing for used cars and prices went high.
52:44And then over time, we just started to see, you know, the inflation being driven by something different.
52:52This month and something different this month. And, you know, we shifted our spending patterns away from services to goods.
53:00And we remember, you know, the TV images of all the ships trying to get in to the ports and unload cargo.
53:07And so goods prices went up. We had, you know, freight and trucking and you couldn't get containers.
53:13And so people heard a lot about supply chains and bottlenecks. And Chairman Powell, Jerome Powell used to come out every time
53:22the Fed would meet, and he'd say, you know, well, we see inflation. And the reason we are not deciding to raise interest rates today
53:29is because we think most of the inflation is coming from supply shocks
53:35and bottlenecks and COVID related disruptions and our tool,
53:40the interest rate, is really designed to work on the demand side of the economy.
53:45So for that reason, we decided not to raise interest rates today, and he would explain that.
53:50So for a period of time and then, you know, as the months passed and the
53:58analysis sort of shifted away from, well, it's all supply side or almost all supply side,
54:05people started to say, well, is coming now broadening and other parts of the economy. And the Fed, of course, started
54:11raising interest rates and then you had economists like Isabella Weber who came out and dared to suggest that,
54:19you know, companies might just be taking advantage of the inflationary moment
54:24where, you know, consumers are primed to expect to pay more for everything.
54:29And so companies will be able to not just pass on their own rising costs to consumers,
54:37but to tack on a little bit extra and fatten their profit margins. And so I know people have looked the Federal Reserve,
54:45San Francisco, New York Fed, Moody's, the European Central Bank, all kinds of people are trying to do these sort of autopsies.
54:52Now, where you look at the inflation that we have lingering with us today and say how much of it can we trace to Russia, Ukraine,
55:01how much of it can we trace to any excess fiscal, you know, money that people still have because of stimulus checks or whatever?
55:10How much of it is still related to COVID pandemics, supply chain sort of things?
55:15And the answer I'm giving you a long answer because it's not an easy question to answer.
55:21And depending on who you ask, you'll get a very different answer. Some of the analysis says very little, if any of it
55:30that we sticking around with us today is due to excess demand or the fiscal stimulus stuff,
55:37that it's almost all other things other people will find different,
55:43different ways to attach weights to those different things. So it's a little bit of probably everything.
55:51And that's what I also think is so critical because many economists and other pundits
55:57will dismiss MMT perspective by saying at the end of the day, it's still about inflation so that you should listen to us
56:04and they're not, you know, Stephanie Kelton and other people, they're not saying anything new. But what's really important is that there's
56:11a fundamentally different understanding. And I think you've just laid it out about what we mean by inflation.
56:16It's not just too much money, too little. It's about resources. It's about politics.
56:21It's about, you know, sometimes people taking advantage of of costs and prices and getting extra.
56:27It's about, you know, what are we producing and do we have the infrastructure for it? So many things. A crisis, A pandemic. Right.
56:34And I feel like you're working. MMT opens up that conversation in a way we are not used to
56:40when we talk about inflation. Well, thank you.
56:45Okay. So as we're kind of winding down something that we all wanted to hear from you about
56:52is so when you've spoken on different panels, you've sometimes talked about a light bulb moment that you've had when you first got your career going
57:02and when you were looking at this stuff that you didn't necessarily just go into grad school as an MMTer
57:07or as somebody that believed these things, you did the work, you went in and looked at the empirical evidence, right?
57:14Can you tell us about what that process was like for you and when you came to kind of,
57:21oh, the aha moment that this is actually how spending works, this is how public budgets work?
57:27Sure. I mean, I was fortunate, I'll say, to have done my undergraduate
57:33in an economics department where, you know, I studied money in banking under a monetarist and I studied the history of economic thought under
57:44someone I think who identified as a Marxist and everything in between. Neoclassical economists, Keynesian types.
57:50So I really had exposure to so many different theoretical schools of thought when I was an undergrad.
57:57So after I graduated from undergrad, I was going to start my graduate training at Cambridge University.
58:05I finished my undergrad in December. Cambridge was going to start in October the following year, so I had a nice period of time and my parents said, Well, you should get a job.
58:16And one of my undergrad professors, the one that had taught me history of economic thought, said You should go to the University of Denver and you should study with Randy Wray.
58:26And given the options, you should imagine what I what I decided to do. I went to Denver.
58:32And so, you know, Randy had been a student. Both of John Henry is who I was just referring to, but also of Hyman Minsky.
58:40And so I got to Denver and Randy had me reading Minsky. I was reading Stabilizing an Unstable Economy.
58:46I'm pointing because it's on the shelf behind me with Randy. And it was kind of like a dress rehearsal for graduate school, right?
58:54I took all these classes. I wrote the exams. They were kind enough to grade them. I didn't pay any tuition.
58:59And then off I went to Cambridge. So I had read a lot of post Keynesian
59:06literature, a lot endogenous money, all this kind of stuff. So my head was filled with all of these, you know, important works.
59:15Before I got to Cambridge. And then Warren Mosler comes on the scene.
59:20This is like 1996, right? And so there's this email, not email Internet chat thing.
59:29And Warren Mosler got involved and was talking to people like Randy and Bill Mitchell and others, and Warren's the guy who was putting forward
59:38these ideas and they just ran so counter, even though I'd had some heterodox
59:44economics in my training I hadn't heard anything like this, you know, the idea that the sequencing was wrong,
59:51The government spends first and economists had all this sort of stuff backwards about what taxes were for and bond sales. And
59:59I started just kind of listening on that list, serve and paying attention and writing back to Randy.
1:00:05And then I got a fellowship from Cambridge to go to the Levy Economics Institute, start working on a dissertation the following year.
1:00:13And Randy was there and Randy was working on his book Understanding Modern Money, which was his first MMT book.
1:00:21And so I start reading Warren more closely and talking to Randy, and I was just shaking my head.
1:00:28I said, I just don't think it's right. I don't. And Randy said to me, If you think he's wrong,
1:00:35you should write it up, because he would want to know that he's wrong. I mean, that's what he said to me. He would want to know.
1:00:41So, you know, write it up. And I said, okay. So I dig in, right?
1:00:46I start talking to people at Treasury and Fed. I start all this reading, and I'm working through
1:00:52all of the operational details and I thought, surely, you know, Warren just took a took the easy way somewhere he was leaving something important out.
1:01:02And if I put it all together and I really careful way I would arrive at a different place.
1:01:08And so I spent months working on what became the first two peer reviewed articles that I published.
1:01:15And to my, I think, great surprise, I ended up writing this paper
1:01:20and arriving at the same conclusions that Warren had arrived. And it was only by forcing myself to go through that exercise
1:01:29to try to find where he'd gone, you know, where is he wrong? Where is he wrong? Because it just nagged at me
1:01:35that I couldn't find out why he was wrong, but it felt wrong. And in the end, I just had to,
1:01:42you know, lay down my fiddle and recognize that I'd been b he was right.
1:01:50This is truly one of my favorite stories in the world that this is how it all went down, because we all encountered these people
1:01:58on Twitter or wherever that try and make a case against these ideas, against the lens of MMT
1:02:08without actually grappling with what we really say. Instead, you know, coming up with something else.
1:02:14Well, what you're saying is this and it's not at all what we're saying. So the fact that you actually dug in and wrote
1:02:20an entire paper, it just says so much about who you are as a person. And I think we have this idea that the, you know, the very smart
1:02:29thought leaders in our society are people that have this gift. But you put the work in and you're terribly curious.
1:02:36I think that's really what sets great thinkers apart, is people who have that curiosity.
1:02:41And now we have all of your work as our great gift from you,
1:02:47that's going to influence policy for many years to come. I always tell people ten years time from now,
1:02:54people will be reading the deficit myth and say, How could we have been doing it any other way?
1:03:00It's truly the next step. In iteration and in economics. And just being in graduate school, I had so many questions coming out.
1:03:08There's something missing. This doesn't go so far as to address the problems of our time
1:03:13and we're getting things wrong and nobody's trying to ask the right questions or arrive at some answers.
1:03:19And then I found your work afterwards. And now here we are. And I'm so grateful you came on and spoke with us.
1:03:25And I want to tell everyone that's listening. If you haven't read The Deficit Math, you don't have to have
1:03:32a background in public policy or economics to get a lot out of it. And then the weekly podcast, Best New Ideas and Money and of course, the Substack The Lens.
1:03:40Is there anything else you want to plug. Stephanie No, thank you. That's so kind of you.
1:03:46Thank. Any words for the youth of the world. Listen.
1:03:52This is why I do what I do because that's where the energy is and that's where the change
1:04:00is going to come and so, you know, young people don't take for granted
1:04:08that what you hear from the mainstream press is correct.
1:04:13Don't even take for granted that what you hear from your political representatives is correct, especially on issues that are this important.
1:04:22I mean, we have climate to deal with. And if we are going to allow ourselves to be trapped and hamstrung by these,
1:04:30you know, outmoded of thinking about money and deficits and debt and taxes, and we're going to try to proceed
1:04:39with this history, this heroic challenge that's before us, which is to deal with the imminent threat of climate change.
1:04:46And we think that somehow we're going to do this on a shoestring or we're going to do this in a deficit neutral way and we're going
1:04:52to, quote unquote, pay for it. I'm extremely worried and scared
1:04:59for what that future is going to look like for billions of people around the world. So we got to get this right
1:05:08so much. Yeah, I do. There's hope. All right.
1:05:13Thank you so much for coming. You, Stephanie. All right. Take care you both. Congrats again on the show.
1:05:20Thank you. Okay. Bye bye. So we have another exciting guest next week.
1:05:28We do agree. And I really feel like this was just such a perfect
1:05:34start to. Yes, it's down the rabbit hole. So we're going to have Crypto's New Villain next to.
1:05:42Yeah. Continue to unpack this this ongoing conversation about the economy and.
1:05:48We got everybody up to speed. What is MMT? How do you look at all of this stuff? We covered a lot and now we get to get into, I don't know, some villain.
1:05:58Yeah. I love that one. And they tried to make him look so scary and evil. He still looks perfectly kind
1:06:06to colorize this photo when they, when they posted Rohan to make him look truly
1:06:13like I don't know people see crypto as like menacing the monetary system, the fiscal policy.
1:06:20It's not being run in the interests of the people. The answer is this thing called cryptocurrency. And Rohan shows up and he's like, No, you are wrong.
1:06:28And he has a great accent and I'm so excited. Yeah, Shout out Australia.
1:06:34Yes, that's just a great reason to make people listen next week. So the question that comes up for for me, right, is
1:06:44we just learned all this great stuff step by step almost. Right. Which is so valuable.
1:06:50Why do you think people and public officials and others are not following this framework at the moment.
1:06:59Okay. So I, I agree with Stephanie's answer to this question, that they know.
1:07:07Right. And I think they know for a few different reasons.
1:07:13They know that what they're selling to the American people is a lie. Because when you have so many lobbyists, so many people who have money
1:07:22invested in stock and are lobbying on behalf of companies and industries, they have this incentive
1:07:31to to make things worse for working people, right, to make wages lower, to make our benefits at work lower, to make us work harder and longer.
1:07:40And I think members of Congress know. That. When that's their motivation, if they want A to happen,
1:07:48B has to be the thing that's good for working people, right? And so if they have to tell people, all right,
1:07:56we need to do a they have to also lie by saying, oh, this is the thing that's good for working people.
1:08:02Like they know these things don't add up, don't make sense. And so when you're paid by these huge corporate nations
1:08:12to do something, you probably know you're selling out your constituents. And I think that that's really where they get a lot of their information from.
1:08:19Unfortunately, I don't think they're consuming podcasts. I don't think they're reading policy papers. I don't think they have backgrounds in economics.
1:08:25And I'm not saying to be a good representative for people, you do, but you should listen to the who have studied these things
1:08:33and you should try to understand the system that you're governing within. And unfortunately, I don't think they do.
1:08:40And I think they know they're being deceptive. But I don't think they know to what degree maybe
1:08:45I think they do it because many of them are perfectly comfortable taking checks
1:08:51from lobbyists, perfectly comfortable ensuring that there are huge returns
1:08:56for the shareholders. I'm sure they have share in many companies. I think it's something like 83% of members of Congress
1:09:03have money invested in stock. And so really, I think that's why I think it's not like
1:09:10they want us to, I don't know, be in the dark and uninformed for a reason other than
1:09:17the current system benefits them financially. Yeah I think that's a that's a huge part of it.
1:09:23And additionally, you know, I would add that in addition to kind of the cynicism, the corruption in many ways
1:09:32the perverse incentives of wanting to continue to enrich yourself, if you have a lot of the wealth and power, there's also the role of what counts
1:09:41as expertise to legitimize many of these perspectives as as true.
1:09:47And so the public feels like they don't have any choice, because here you have Larry Summers or whoever else that has this degree from Harvard or whatever.
1:09:55And they're telling us that we're going to run out of money that we needed, that wages are too high and there's nothing we can do because the experts say so.
1:10:02So there's this, like really interesting challenge I think we face to you contest
1:10:10and rethink who counts as experts, where really is the expertise,
1:10:17How do we actually produce knowledge in the best interest of everybody?
1:10:23And there's this kind of cultural force, I feel, in that
1:10:30internalizing this scarcity, austerity based worldview about politics, policy
1:10:37just kind of like legitimizes this hierarchical system that we have and many people get intimidated into accepting
1:10:45this is true and others benefit from it as well, right? In addition to politicians.
1:10:50Yeah, I think that's 1,000% true. And when people hear about this approach to how we should do policy,
1:10:58how we should manage the monetary system differently and do fiscal policy differently, it's like, well, if you have this recipe
1:11:05for how we can fund things without causing inflation, like, well, why?
1:11:11Why are the other economists saying they disagree? And there's a perspective in economics of a good economy
1:11:17is when business is well, when we're producing many things for a certain amount of money, GDP is high, right?
1:11:24That means what's the total dollar value of products and services for producing?
1:11:29How much revenue are companies bringing in? How are CEOs doing up?
1:11:35Are profits looking like that? Doesn't tell me anything about is a person meeting their material wants
1:11:43and needs, which at the end of the day, isn't that the purpose of the economy? When we break it down, why did we establish an economic system?
1:11:50Adam Smith Theorizing that human beings work together and evolve to become the dominant species on the planet
1:11:56because we work together to meet our collective needs. We've gotten so far from that today,
1:12:03and it's just like it's very obvious to me that the economists that get the high salaries that get published a lot
1:12:10are those that are viewing the economy from the perspective of a good economy is when business is doing well for people who own businesses and have stock in them.
1:12:20That is a very different kind of analysis, priority wise from how you and I would look at it, which how are people doing?
1:12:28Are they meeting their material, wants and needs? It's really the difference between trickle down economics to kind of simplify it, right.
1:12:34Like some people really do believe that if we allow to concentrate at the top and for people to do really well if like with no limit,
1:12:43right, no boundary on how wealthy and powerful you can get, that's the goal. And that will improve things for everybody versus I think, a different
1:12:51view that we share, that we have a much more robust set of standards and we're looking at like, hey, are people not going bankrupt
1:12:59because they're in an accident and they got sick? Hey, does everybody get to live
1:13:04the opportunity to seek higher education and expand their mind? Not because, you know, they're going to fill in some corporate spot,
1:13:11but because like that creates a well-educated civil society, right? Like, there's just so, so much more to identifying
1:13:20whether we are living in a good society and culture or not. And I'm excited just to go through
1:13:29every episode and break this down to look at the history of how this dominant perspective came to be and everything
1:13:37that's getting hidden from us and to talk to all these other experts. Yeah, I have this terrible ache, an itch to cover every single thing
1:13:47in every single episode, but I know it will all slowly happen
1:13:52and then people will be able to listen to the whole series and get all of the things. But understand, I will always be trying to address
1:14:00every little thing in the episode. But we're not.
1:14:05We're not going to keep you here for many, many hours of their lives, which it would take. But the last thing I want to say
1:14:12is there are just like three myths that people have about MMT that we can just like, quickly debunk.
1:14:18We already talked about it's not that we think, you know, no taxes should happen.
1:14:24Stephanie, describe the tool taxing the rich is necessary not for the purpose that the government requires the revenue but for the purpose that,
1:14:30you know, it's bad for society, bad for democracy. We also have a lot of people say, oh, my tears are giving us
1:14:36a huge excuse to give tons of money to the military. Oh, we can we can afford it, so we should do it.
1:14:44Those are two completely different. Just because the government has the power to spend, does it mean
1:14:49we think that they should spend as they currently are? Yeah. The other is not.
1:14:55That's how I like to say it, right? Like it's not a fixed thing. We're like, Oh, we can spend, we can spend way more than we think we can.
1:15:00Therefore it has to go to the military. As Stephanie explained, these are political questions.
1:15:06We have to get involved and decide where do we want the spending to go, where do we want the deficits to go.
1:15:11Right? Absolutely. I think with the last one, which I don't, it comes from progressives.
1:15:18I'm not sure why, but that the dollar has value because the United States has had an imperial project and because
1:15:27of the value we've given the dollar through forcing other countries to handle business in our currency or because we extract
1:15:34resources and exploit labor elsewhere, that's absolutely not the case. We touched on a little bit.
1:15:40What gives the dollar value is the demand for the currency produced by taxes. Also,
1:15:46people value living in this society. They want to be here and taxes are a part of living in it, but also the total goods and services within our economic system, our ability
1:15:56to put real productive resources to use and produce things of value. Because at the end of the day, dollars represent things in value.
1:16:02It doesn't have to do with anything beyond our economic system.
1:16:08Here, a currency can have value. Japan's experiencing deflation despite not being a terrible imperial power right now.
1:16:15And for all our listeners, you know, my promise to you is that we will spend an episode specifically covering these international questions
1:16:24as a as a colleague and friend of mine likes to say, you know, the the dollar's power and the United States military is like all of that
1:16:31framing, right. Is in effect. But the consequence that we're looking for. Right. And so we want to
1:16:36we want to detangle that and look at trade and look at all these other more broader perspectives.
1:16:42And we will talk about that. And that's why this is going to be awesome. It's true. It's true.
1:16:47And now we'll see you with Rohan Grey. Next week, we are going to release a bonus episode.
1:16:53Oh, sorry. Two weeks. Two weeks. Unless you want to if you want to do this every. Every day. No, tomorrow. Rohan's coming.
1:17:01Up, but we are releasing a bonus episode of us being silly soon of Andres
1:17:06being photoshopped into different things and we'll chat about some other news. Yeah, there's a new sheriff in town.
1:17:12Her name is Ka Burbank. Oh, yeah, I do look like the sheriff, except I'm on the side of the villain in this case.
1:17:18Yeah, So you can see what that's about in two, two weeks. All right. See all them?
0 件のコメント:
コメントを投稿