Modern Monetary Theory, commonly abbreviated as MMT, is better described as an economic “hot take” than as an earth-shattering idea. Synthesized from a disparate collection of twentieth century economists and philosophers, MMT’s main assertion is that currency exists in infinite supply, so the government can print as much of it as it wants. At least, that’s a starting point.
MMT disagrees with traditional Keynesian economics — the widely-popular school of thought that backs government relief spending — over the extent to which printing money can help. The common quip that traditional economists have with high spending is inflation, which is a drop in the value of the US dollar. MMT’ers disagree, saying that inflation can be preemptively curbed through increased taxes. This disagreement over control of inflation is just the first of many conceptual differences between traditional economics and MMT, both in mainstream and academia.
MMT is an extremely simple idea backed by profoundly complex economics, and for that reason, a stance on the subject may not be suited for the 700-ish-word range of the MoCo Student Op-Ed Section. But although this column won’t deliver any opinions on the merits and disadvantages of MMT, it will include everything about the rise of MMT in the next ten years.
The most well-known advocates of MMT in the US Congress are two of the country’s most recognizable forces for change. Senator Bernie Sanders of Vermont and Representative Alexandria Ocasio-Cortez of New York’s 14th District use MMT to justify ambitious government project proposals, from Medicare-for-All to the Green New Deal. Until recently, their go-to economic theory was ignored by both sides of the aisle, as Republicans labeled the pair as socialist spendthrifts, and moderate Democrats cautiously weighed environmental destruction with economic stagnation. MMT, a foundation for policy change, was nowhere to be found.
The coronavirus pandemic gave new meaning to MMT in more ways than one. Within months of the shutdown, Congress swiftly awarded $500 billion to American households, in a stimulus package that totaled $2 trillion. Though some conservatives questioned whether this package was sustainable, a growing proportion of Americans took on a newly-popular belief: national debt doesn’t matter.
For months, many on the fiscal left hoped that popular sentiment towards high government spending would not be abandoned when the coronavirus stopped haunting the economy. But day-by-day, this wishful thinking has descended closer to a longshot prayer. The HEROES ACT, a $3 trillion relief package passed by the House Democrats in May, has yet to be agreed upon by Senate Republicans. Their counter-offer, a $500 “skinny” bill, has been repeatedly struck down by House Democrats for not having any stimulus checks.
As he makes his eight-week march to the White House, Biden is urging Congress to adopt the HEROES Act, but it’s unclear where he will stand on government spending once put in power. At the beginning of his candidacy, he asserted he would not be adopting Medicare-for-All, instead hoping for improvements to Obamacare. As late as the second presidential debate, he also stated he does not support the Green New Deal, a landmark piece of legislation offered by Ocasio-Cortez and her colleagues.
So even with Trump out of the picture, it’s clear that MMT and its applications will have hurdles in the immediate future. McConnell and the Senate Republicans, who are now almost certain to hold their majority, will be one such hurdle. Biden, who campaigned on being a “President for all Americans,” is not likely to be adopting MMT ideology either.
But in the more distant future, a path does exist for MMT to rise in American politics. It would almost certainly involve a flipped Senate in 2022, which would give Democrats monopoly over the entire Congress and White House. Bare in mind, a congressional sweep is extremely difficult for a President to accomplish in their first mid-terms, especially when they’re adopting a crisis from the past regime. Just take a look at President Obama in 2008, who was himself swept in the Senate and Congress after taking on the worst recession in nearly a century.
But once again, in the best case scenario for Democrats, where they control the House, Senate, and Oval Office in 2022, it is possible for MMT and its applications to take center-stage in American politics. It would have to be eased into the agenda, and Democrats would have to continue mounting UBI-style stimulus checks with a “Debt doesn’t matter” mantra, but by the end of Biden’s first term, a monumental spending measure could be taken— the likes of which haven’t been seen since Roosevelt’s New Deal.
MMT will likely not take over the political economy in the next two years, but it’s something for every American to be acquainted with. As MMT economists gather their arsenal of educational and academic resources for the public, the coming struggle between Biden’s Democrats and McConnell’s Republicans will be over the validity of spending.
Article by Shariar Vaez-Ghaemi of Montgomery Blair High School
Graphic by Khanh Nguyen of Richard Montgomery High School