Tuesday, March 26, 2019

What, me worry?


Should we worry about "the deficit"? Well, what do you mean by "worry"?

Let me ask a similar question: should you worry about the natural gas forced-air heater in your home?

Could the heater burn down your house or kill everyone inside from carbon monoxide poisoning? Well, yeah? I guess? It does happen, but it happens only when you have a pretty serious malfunction in the heater.

If you run the heater non-stop and keep your house at 90°F (32°C), you're going to run up a hell of a gas bill. Perhaps not the best idea, but that's not a reason to worry about your bill if you maintain a more reasonable temperature.

When I hear scholars of Monetary Monetary Theory* argue that "we shouldn't worry about the deficit," I read their arguments in the same sense that we shouldn't worry that the heater might kill us all. I mean, yeah, we should kinda worry, we should make sure our monetary institutions aren't seriously defective. But they're not seriously defective, at least not in the United States. Most importantly, we have effective tax collection institutions: the IRS, state and local governments, etc. They're perhaps not as efficient as we might like, but they're a long way from the dysfunctional institutions in Austria or Zimbabwe. As long as we can credibly collect taxes, deficits won't kill us all.

*I have not studied MMT academically. Any errors here are my own.

Similarly, yes, I suppose we miiiiight run the deficit so high that it would impose substantial economic hardship. But I read MMT scholars as saying that the present deficit is way too low; it seems misplaced to argue by analogy that it would be too expensive to heat the house to 90°F when it's snowing outside and the temperature inside is in the low 50s and dropping fast.

There may be some legitimate bad faith in mainstream economists' polemics against MMT, that MMT ignores real dangers of deficit spending. However, I think a big part of what's going on is that economists tend to internalize blindness to a fundamental political problem: that the capitalist ruling class will destroy the economy rather than give up power. That's the lesson from Venezuela: the capitalist ruling class — theirs and ours — destroyed the economy rather than let poor children have milk. Chavez's failure was not what what he tried, it was that he failed — perhaps from his own hubris or incompetence, or because success was impossible — to defend Venezuela from the capitalists.

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