There are perks for septuagenarians hiding from the terror of COVID-19. My wife and I have eluded the virus, but we’ve, also, saved money. We used to fill up the car’s gas tank weekly. Now we visit the neighborhood Shell or Holiday station once a month. We’ve, also, stopped going to malls — preferring to shop online and have things delivered — or go and pick them up. Restaurant dining is a memory. Now we order and do takeout.
I’m retired from the 9-5 drill, and thank goodness. I write and do research, and, while I dearly miss my travels to the Minnesota Historical Society and University of Minnesota libraries and specialty bookstores, I can find just about everything I need on the internet. This self-imposed hibernation has been in effect for the past four months. Marcia and I miss the socialization and friends, but we don’t feel isolated, or deprived.
Marcia has a 99% rule that says whatever we’re doing, 99% of the population in our age and income group is doing — which is fine for us. Not so for the thousands who lost jobs, businesses, incomes and health insurance and face eviction or loss of their homes.
This is a consumption economy that runs on money — no money, no consumption, no business, no jobs. Everything shuts down — state and local governments and school systems, included.
We’re in the worst labor market on record. Over 1.4 million people filed for unemployment benefits last week. The Sunday Star Tribune carried the headline, “Minnesota Families Face a Financial Cliff.” Meanwhile, the White House, Treasury Secretary Mnuchin, and Republican senators dither over a relief package — claiming unemployment benefits disincentivize work. A federal moratorium on evictions expires this Friday.
And what if all the chaos and suffering is for naught?
My dad was a conservative and a Republican. He turned 21 in 1931 and voted for Herbert Hoover. He was proud of it and reminded me whenever I said nice things about FDR and the New Deal, or spouted, what he called, “liberal notions.” Dad thought Roosevelt was a rascal, and the New Deal was a fraud or, worse, Socialism. I have a photograph of him in a family album mocking a WPA sign in Como Park. He was furious when President Nixon took us off the gold standard in 1971.
Dad came to mind as I was reading a new title that arrived this week. He would have been apoplectic.
The book is the “Deficit Myth.” The author, Stephanie Kelton, is professor of economics and public policy at Stony Brook University, New York. Kelton is the former chief economist on the U.S. Senate Budget Committee and an advocate for “modern monetary theory,” which argues that deficits are meaningless and concerns about spending — all federal spending — are irrelevant because the federal government creates and controls the money supply. (I can hear Dad now.)
Kelton’s point, and modern monetary theory, is that the federal government is a currency “issuer,” not a currency “user.” Currency users: (spenders) individuals, businesses, banks, state and local governments, unlike the Fed, must have a source of money, or credit, before they can spend. You and I need to “earn” money, or “borrow” it, before we can buy goods and services. The Federal Reserve can spend money into existence by electronically crediting banks with new dollars. It literally creates money and manages the supply, and inflation, through taxes and US Treasury notes.
The federal government can never go broke, nor can it saddle future generations with debt, because there is no debt. It’s a myth. Increasing the deficit doesn’t make future generations poorer, and reducing deficits won’t make them any richer. “Mortgaging our future” is yet one more instance of not understanding — or willfully misconstruing for political purposes — how sovereign currencies actually work.
Then there’s the idea that government spending (borrowing) crowds out private investment and growth. Modern monetary theory says it can’t, because the government isn’t borrowing. Rather, it’s “creating” the money that it spends. And what about Social Security and Medicare and Medicaid and other so-called entitlements? Same story and for the same reasons.
The book runs to 267 pages. It’s a good read, but, if this was 1965, I’d never share it with Dad. He’d be in the ER in cardiac arrest. I was the same during the Reagan Era when he was extolling tax cuts, the Laffer Curve and trickle-down economics. We agreed to disagree.
Modern monetary theory and its advocates have been around since the 60s. I can recall debates about it in my college economics classes. It comes with risks and concerns, particularly managing demand and inflation in a political environment. It sounds like a free lunch, but it’s not.
What we face, today, has nothing to do with deficits or entitlements — not when economic inequality is at a level not seen since the Gilded Age. Not when, according to the “Washington Post,” the wealthiest 1% of the population controls 40% of the nation’s wealth. Not when the typical American worker has seen no real wage growth since the 1970s. Not when 44 million Americans are saddled with $1.7 trillion in student debt—and not when our consumption is destroying the environment and the planet.
These are the issues that would worry my dad, as they worry me. They should worry all of us.