WorkingPaperNo.1084

MMT:HeuristicsversusParadigmShift?

by

L.RandallWray

LevyEconomicsInstitute

July2025

ThisisaslightlyrevisedversionofthepurposelyprovocativekeynotepresentedattheFDRlibraryfortheLevyInstituteSummerSeminaronMoney,Finance,andPublicPolicy.Referenceshavebeenadded.

TheLevyEconomicsInstituteWorkingPaperCollectionpresentsresearchinprogressbyLevyInstitutescholarsandconferenceparticipants.Thepurposeoftheseriesistodisseminateideastoandelicitcommentsfromacademicsandprofessionals.

LevyEconomicsInstituteofBardCollege,foundedin1986,isanonprofit,nonpartisan,independentlyfundedresearchorganizationdevotedtopublicservice.Throughscholarshipandeconomicresearch,itgeneratesviable,effectivepublicpolicyresponsestoimportanteconomicproblemsthatprofoundlyaffectthequalityoflifeintheUnitedStatesandabroad.

LevyEconomicsInstitute

P.O.Box5000

Annandale-on-Hudson,NY12504-5000

Copyright?LevyEconomicsInstitute2025Allrightsreserved

ISSN1547-366X

Mainstreameconomicsisindisarray.AsFrankHahnremarkedfourdecadesago,“Themost

seriouschallengethattheexistenceofmoneyposestothetheorististhis:thebestdeveloped

modeloftheeconomycannotfindroomforit.”HewasspeakingofGeneralEquilibriumtheory,buthisclaimappliesequallywelltoDynamicStochasticGeneralEquilibriumtheory,whichisusedbyallthemajorcentralbankersoftheworldtomodeltheeconomy.

Letthatsinkin.Ourcentralbankersuseamodeltounderstandtheeconomythathasnomoney,nobanks,andnofinancialsystem.TheQueenofEnglandaskedwhynoneofthemainstreamersforesawtheGlobalFinancialCrisis.Theirfailurewasbakedintotheirmodel.

Remarkably,eveninsidersattheFedrecognizethedismalfailureoforthodoxy.JeremyRudd

beganarecentFedresearchpaper,claiming,“[n]obodythinksclearly,nomatterwhatthey

pretend[…]that’swhypeoplehangonsotighttotheirbeliefsandopinions;becausecomparedtothehaphazardwaythey’rearrivedat,eventhegoofiestopinionseemswonderfullyclear,sane,andself-evident”(Rudd2021).

Hegoesontolistideasthat“‘everyoneknows’tobetruebutthatareactuallyarrant

nonsense”—includingallthemainideasoforthodoxtheory.Theyareallnonsense.Allacceptedasdogma.

ToparaphrasewhatKeynessaidacenturyago,mainstreamtheory’sapplicationisnotonly

limitedtoaspecialcase(i.e.,aneconomythatdoesnotusemoney),butisalsodangerouswhenappliedtothe“factsofexperience”toformulatepolicy.Theevidenceisplaintoseeallaroundus:inaneraofmultiplepandemicsthatthreatenthecontinuedexistenceofhumanlifeonplanetEarth,wearestymiedbyimaginaryconstraintsconcoctedbyeconomists.

Overthepast30years,ModernMoneyTheory(MMT)gotmuchofitright.Itsproponents

foresawthefatalflawsoftheeuro.Theypredictedtheoncomingglobalfinancialcrisisand

warnedthatthepolicyresponsewouldbeinsufficient,sotherecoverywouldtakemuchlonger

thannecessary.AndwhentheCOVID-19pandemichit,theyofferedapolicyresponse—targetedspendingtoaddressproblemswithoutsettingoffinflation.

Inthatlastcrisis,atleastsomepolicymakerslistenedtoMMT.FormerCongressmanJohn

Yarmuth(D-KY),ChairoftheHouseBudgetCommittee,hadembracedMMTandhelpedto

usherthroughtrillionsofdollarsofpandemicreliefwithoutworryingabout“pay-fors.”Ashe

correctlyargued(asquotedinWray2021),“Historically,whatwe’vealwaysdoneissaid,‘Whatcanweaffordtodo?’Andthat’snottherightquestion.Therightquestionis,‘Whatdothe

Americanpeopleneedustodo?’[…]Onceyouansweredthat,thenyousay,‘Howdoyouresourcethatneed?’”

Hewentontoarguethat,astheUSgovernmentissuesitsowncurrency,financeisnevertheproblem.Whatmattersisresourceavailability.

AsMMTpredicted,trillionsofdollarsofdeficitsdidnotcauseinterestratestospike,orthedollartocrash,orattacksbybondvigilantes,anddidnotforcetheUSgovernmenttodefault.

Allthefinancewaskeystroked,allthetreasury’scheckscleared,allthebondsweretaken-up,andthedollarremainedstrong.Thedeepestrecessiononrecordwasreversedwiththefastestrecovery.MMTwasinthenews,again,butthistimeoccasionallywithapositivespin.The

pandemicresponsewasclaimedtobethefirstrealworldexperimentthatappliedMMT.

However,thepandemiclingeredonlongerthanmostexpected—withcontinuedsupplychain

disruptions,newviraloutbreaks,organizedpoliticalresistancetoscience,andprice-gougingbymega-corpswithpricingpower.

Inflationrose.MMTwasblamed.Intruth,thepolicieswerenotwhatweadvocated—spendingwasnotwell-targeted,jobswerenotcreateddirectly,capacitywasnotenhanced.

AsYarmuthwarned,alleyesneedtobefocusedonresources,notonfinance.

Achiefarchitectoftheneoliberalworldorder,LarrySummers,announcedwithfurythathewasoffendedthatthe“newspaperofrecord”woulddevotespacetoMMT:“Iamsorrytoseethe

nytimestakingMMTseriouslyasanintellectualmovement.Itistheequivalentofpublicizingfaddiets,quackcancercuresorcreationisttheories.”

1

JasonFurman—afavoriteofDemocraticadministrations—fumed:“Idon'tthinkMMTmakesanysense.Ialsodon'tthinkit'splayedaroleinshiftingusondeficits.”

2

Andnow,ofcourse,wearebacktothedeficits—twoofthem(tradeandgovernmentbudget),

bothchronic,bothseeminglyintractableproblems.AsIhaveexplained

,3

thetwoareinextricablylinked,althoughnotinthewaythatconventionalanalysisclaims.

IdothinktheyhavebecomeaproblemandIthinkMMTneedstoclearlyaddressthem.Too

oftenMMTproponentshaverespondedtocriticswithsimpleheuristics—alistoftalkingpointsthataremeanttorepresentdescriptionsofreality—freedoftheoryorpolicyrecommendations.

WhileheuristicsareusefulinintroducingMMTtobeginners,theycannotsubstituteforcarefuleconomicanalysis.Wemighthavereliedonthemexcessively.

Letmegivesomeexamplesofproblematicheuristics:

?Taxesdrivemoney

?Governmentspendscurrencyfirst,thentaxesitback

?Importsareabenefit,exportsareacost

?Bondsalesarejustareservedrain

?Governmentsetsthepricelevel

?Floatingexchangeratesmaximizedomesticpolicyspace

?There’snofinancialcrisissogreatthatfiscalpolicycannotresolveit

1

/LHSummers/status/1490424193611141121.Accessed5November2022

.

2JasonFurman:

/jasonfurman/status/1083394281547722752

.TheNewYorkTimesarticlealsostated,“’M.M.T.wasalreadyprettymarginal,’saidJasonFurman,aHarvardeconomist,notingthat,inhisview,mostpolicymakersandprominentacademicsignoreditalready.”(Accessed5November2022.)

3

/publications/ratings-agencies-downgrade-the-dollars-exorbitant-privilege/

Whilethere’sakerneloftruthineach,allarehistorically,theoretically,andpractically

problematic.Eachfollowslogicallyfromcarefullyconstructedassumptions.Nonestrictlyappliestotheeconomyweactuallylivein.

ItisoftensaidthatMMTismainlyadescriptionofthewaythingswork—andthattheoryandpolicycanbeaddedasdesired.I’veevensaid(Wray2024a)thatMMTisforAustrians,too!

Iwanttowalkthatback.Descriptionwithouttheoryisnotpossible.Theorywithoutaparadigmisnotpossible.Weneedaparadigmtoformulatetheory,andatheorytoformulatedescription.Oncewehavegotallthat,onlythenwecantacklepolicy.

BoththeUniversityofMissouri—KansasCityandtheLevyInstitutehaveplayedabigrolein

thedevelopmentofMMTandshareaparadigmthathasshapedourapproach.I’llbrieflyoutlinethebuildingblocks:

?FromMarx,Keynes,Veblen,Minsky:Marx’sM-C-M’;Keynes’sMonetaryTheoryofProduction;andVeblen’sTheoryofBusinessEnterprise.

?FromtheInstitutionalists(VeblenandMinsky):moneyisallboundupwithpower:todogoodandbad;MoneyisthemostimportantinstitutioninCapitalistEconomy

?Fromthe(Post)Keynesians(Keynes,Davidson,andMinsky):moneyanduncertainty;Moneyandcontracts;Holdingmoney“quellsthedisquietude”(asKeynesputit);

Endogenousmoney

?FromtheChartalists(Knapp,Innes,Goodhart,andMinsky):statemoneyandcurrencysovereignty

?FromFunctionalFinance(LernerandMinsky):statemoneyandtheapproachtofiscalandmonetarypolicies

?And,finally,theSectoralBalancesapproach(GodleyandMinsky):focusonbalancesheetsandmacrobalances;balancesdobalance!

TOGETHER:thatisMODERNMONEYTHEORY

AsMinskyusedtosay,ageneraltheoryisuseless.WhileKeynescalledhisrevolutionarybookTheGeneralTheory,Minskyarguedittobeamisnomer—itisatheoryofthecapitalisteconomywheremoneyplaysaspecialrole.

JamesK.GalbraithhasarguedthatKeynespurposefullyborrowedhistitlefromEinsteinashewastryingtodoforeconomicswhatEinsteinhaddoneforphysics.

Buteconomiesarefarmorecomplicatedthanthephysicalworld.Manyheterodoxeconomistsarguethatbiologyisabetteranalogybecausethelivingworldisalwaysevolving—fromapastthatwecansortofunderstandtoanunknowablefuture.ThatbettercaptureswhatKeyneswasdoing—aDarwinianRevolution.

AsMinskyinsisted(Wray2017),capitalismevolves—thereare57varieties—andourtheorymustcontinuallyevolvealongwiththefactsofexperience.

Moneyisatleast5,000yearsold,asDavidGraeber(2012)claimed,anditsrolechanged

significantlyoverthosethousandsofyears.Formostofeconomiclife,moneydidn’tmattermuch—untilmoderncapitalismwasincubatedbytheNewWorld’sslaveryonthebacksofcapturedAfricans.

Allthemoderninstitutionsweassociatewithcapitalismcameoutofslavery—modernfinance,administration,accounting,labordiscipline,policing,andwarfare,aswellasthepeculiarformtakenbyAmericandemocracy(Wray2025a).

Thus,ourtheoryneedstobeinstitution-specific.Ourparadigmismonetaryproduction:unlikeinallpreviouseconomicsystems,thepurposeofproduction—fromtheperspectiveofthosein

control—istostartwithmoneytoendupwithmoremoney.Satisfactionofneedsisnotthegoalofthosewhocontrolcapital.

Weneedacountervailingpower—touseGalbraithian(1956)terminology—toensurethatneedsaremet,whichcanincludegovernment,laborunions,andsocialserviceorganizations.

Governmentincapitalisteconomieshasalwaysservedtwomasters—thecapitalistsandtherestofus.

Lefttoitsowndevices,capitalismishighlyunsustainable—economically,socially,

environmentally,andpolitically.Unliketribalsociety—whichcouldsustainitselfforthousands,maybemillionsofyears—capitalismwouldself-destructwithinagenerationifitwere

abandonedtotheinvisiblehand.

Thatiswhatwesaw,withdepressionafterdepression,onceeverygenerationuntilRoosevelt’sreformsandthecreationofBigGovernmentwithwhatMinskycalledManagerialWelfareStateCapitalismandwhatGalbraithcalledtheNewIndustrialState.

Initsmodernguise—whichwecandateto1870(whatRobertGordonusesasthedateforthe

beginningofthe“specialcentury”)—capitalismhasgonethroughfourorfivestagesaccordingtoMinsky.Thisfinalstage,MoneyManagerCapitalism,hasrunitscourse.Westandattheedgeofacliff,withnobottominsight.

Trumpwantsustojumpoff.

LetmereturntotheheuristicstoexplainwhyIbelievetheypresentobstaclestofurtheradvancesinMMT.Iamonlygoingtotackleahandfulofthemhere—butIthinkthatmanyothersalso

needtobecriticallyassessed.

TaxesDriveMoney.Wehaveoftenusedthemetaphorofthecolonistwhoimposesataxinhisowncurrencyandenforcespaymentwithhisgun.Therearecertainlyhistoricalexamples,in

Africaforexample.

AndweoftenusetheAmericancolonies—thatwouldpasstwobills,oneimposinganewtaxandtheotherauthorizingtheissueofpapercurrency.Allthisistrue.Butmoneyalreadyexisted—

thiscannotbeanoriginsstoryanddoesn’tshedtheproperlightonitsnature.

Moneyhasexistedfor5,000yearsatleast.Asbestaswecandeterminefromhistoricalevidence,itwasinventedasaunitofaccounttomeasuredebts,forinternalrecordkeepinginthetemplesofBabylonia(Hudson2018).Thiswasbeforeevidenceoftaxesormarkets.

Whatdifferencedoesthismake?Thefirstdrawsattentiontoillegitimateforce—theevilcolonizer.Moreimportantly,itemphasizesmoneyassomethingthatexchangeshands:

governmentspendsacurrencythatthencanbeusedtopaytaxes,makepurchasesinmarkets,orhoardforlateruse.

Thesecondemphasizesrecordkeeping,creditsanddebits.Moderngovernmentsdonotspend

physicalcurrency,andtaxpayersuseonlytrivialamounts.MostofitisoutsidetheUS—usedforillegalactivity.Youngpeopletodayhaveneverboughtanythingexceptbyflashingtheirsmart

phone.

AndtheUSgovernmentneverspendscurrency,atleastinAmerica.Washingtonspendscashwhentheyinvadeacountryandwanttopaymercenariesorbribeofficials.

IusedtomakefunofaprominentPostKeynesianwhoobjectedtoMMTbeforearoomfulof

legalhistorians,saying:“IneverthinkoftaxeswhenIacceptaUSdollar—Iacceptdollars

becauseIwanttobuyicecream.”WealllaughedatthesuperficialcritiqueofMMT’sclaimthattaxesdrivemoney.

Butthecomplaintresonateswith99percentofthepopulation—whoneverthinkoftaxesasdrivingtheirdemandformoney.Theywanticecream.Andtheydon’tusecurrencytobuyit.

Weneedtomoveawayfromthinkingaboutmoneyassomethingthatgoesfromhandtohand.

Thebettermetaphoristhebaseballscoreboard,withbanksreplacingtheBabyloniantempleas

thescorekeepers.Moneyisn’tsomethingthatyouhaveordonothave.Itisallaboutkeeping

trackofdebitsandcredits.And,asMinskysaid,anyonecancreatemoney—theproblemistogetitaccepted.Thequestioniswhetherthescorekeeperwillgiveyouacredit.

AsMinskysaid,banksarenotmoneylenders.Theymakepaymentsfortheircustomers.The

“money”iscreatedwhentheymakethepayment.Banksfollowrulestodeterminewhethertheywillmakeapaymentforyou.Andtheytallyupwhatyouowe—justastheDeviltalliesyoursinstodeterminewhetherhetakesyoursoul.

Thecentralbankisthescorekeeperforthescorekeepers,andalsoforthegovernment.Italsofollowsrulesthatdeterminewhenandhowitwillmakepaymentsforbanksandthetreasury.

Moneyisnotsomethingofwhichthegovernment,thecentralbank,banks,oryoucanrunout.AsMatForstatersays,thedollarisliketheinch(orcentimeter)—wecannotrunout.

IwanttoaddressthreeadditionalareaswhereIthinkoverlysimplisticlogicleadsdownthewrongpath—atleastwhenitcomestodevelopinganunderstandingofthewayourformofcapitalismworks.

First,thereistheclaimthatasmonopolysupplierofthecurrency,governmentcansetanyandallprices.Thelogicfollowsfromthetaxes-drive-moneyassumption.Byimposinganobligationonyou,governmentdetermineswhatyoumustgiveuptogetthecurrencytopayyourtax.AsI

haveargued(Wray2024b),thissoundsalotlikethelabortheoryofvalue:ifittakesanhourtoearnadollar,thenthedollarisworthanhouroflabor.

Thisisthemainideabehindthebufferstockapproachtothejobguarantee:governmentcanmaintainabufferstockofworkerspayingabasewagetopreventthewagefromfallingand“selling”labortoprivateemployersatamarkupoverthat.

Byanalogy,governmentcandothesameforeveryotherthingboughtandsold.

Well,whatwouldthatlooklikeintherealworld?Arealmess.PeoplejokeabouttheSovietUnion’sattempttoregulatemarketpricesbutthiswouldbethatonsteroids.

Itiscompletelyinconsistentwithcapitalism.

AndasIhavetriedtomakeclear(Wray2024b),thebasicwage—thewageforordinarylabor—willnotmapdirectlytoprice.Capitalismoperatesaccordingtoalogicthatgenerallytriesto

equalizeratesofprofitandexploitation—notaccordingtothewhimsofagovernmentthatwantstosetallprices.

Thesecondclaim—thatwecanalwayscounterafinancialcrisisbyrampingupfiscalpolicyiswrongforthekindoffinancializedeconomywehadbothinthegildedagebeforetheGreat

Depression(oftencalledFinanceCapitalism)andsincetheunravelingoftheNewDeal

institutions—beginninginthe1970s.ThisMoneyManagerCapitalismstage,witheverythingfinancializedis—tousethemetaphoragain—financeonsteroids.

TheFedspentandlent$29trilliondollarstosaveglobalfinance(Felkerson2011).Thenextfinancialcrisismighttakeevenmore.

Youcouldsay:well,justletthewholedarnedfinancialsystemfail.Therealeconomywillstillbehere.That’swhatwedidintheGreatDepression.AsMinskyusedtosay:yes,theeconomymightrecover,butbywayofhellfirst.

Tobeclear,Idon’tsupportthewaytheFedresponded—itwasamess,muchofitwasillegal,andnoneofWallStreet’scriminalclasswasprosecuted.Themoneymanagerscameroaringbackandrebootedthebubbliciouseconomy.

Butmerelyrampingupafiscalresponse,alone,wouldn’thavesavedourpensionfunds,our

investmentsinourhouses,orouruniversityendowments.Evenexcludingallthefancy

derivativesandothercrazyfinancialproductsthattotaluptothehundredsoftrillionsofdollars,wehavefinancialassetsthatareatleastfivetimesgreaterthantheso-calledrealeconomy.

Wehavetokeepinmindthat,incapitalism,thefinancialismorerealthanthereal.Thisisasystembasedonproducingmoneyvalue,notonedirectedatsatisfyingneeds.

I’dliketochangethat—butweneedtoapproachitsensibly,notbybringingonanotherGreatDepression.

Finally,there’stheMMTdismissalofthetwindeficitsproblem.Sincegovernmentcannotrunoutofmoney,budgetdeficitsaren’taproblem—wemightaswellrunthemup.Withafloatingcurrency,tradedeficitsareasignthatwearewinning:wegetthestuff,theyonlygetdollars.

Trumpsayswearelosing;MMTsayswewin.

Minsky’swritingsduringtheReaganyearsshowedgreatconcernaboutbothdeficits.Thishas

ledsomeMMTproponentstoarguethatMinskycannotbeaguidinglightforMMT.Ihave

discussedMinsky’sviewsonthisintwoLevypublications(Wray2018;2025b).Letmequicklysummarizehispoints.

Creationofalargeandchronictradedeficitmeans—bythesectoralbalancesidentity—thatwewillhavealargeandchronicbudgetdeficit.

Minskywasworriedthatrivalcurrenciescouldsubstituteforthedollar,soitsvaluecouldfall—potentiallyirreversibly—forcingtheFedtokeepinterestrateshigh,whilealsoputtinginflationpressureontheUS.Thecombinationcouldleadtosecularstagnation.

Whatwesaw,however,isthatourtworivals—GermanyandJapan—bothdroppedoutoftherunning.

Germanycommittedsuicidebyjoiningtheeuroandembracingausterity;Japan’sprivatesectorranoutofsteamandstoppedinvesting,inpartbecausethegovernmentalsoembracedausterityinanattempttobalancethebudget.

Inthemeantime,theUSlostitsindustrialadvantage(firsttoGermanyandthentoAsia).Thiswasonlypartiallyduetotrade—ithadmoretodowithfinancializationoftheeconomy—butcontributedtoinequality,theweakeningoflaborunions,andtheriseofneoliberalism.

WedidgetthesecularstagnationthatMinskywarnedof,onlyrelievedbyserialbubbles—asMichaelHudson(2014)said,webecameaBubbles-R-Useconomy.Proppedupbyserial

bailoutsbytheFedandgrowingbudgetdeficits.

Fortwodecades,theFedkeptrateslow,fuelingthebubbles,butsinceCOVID,theFedhaskeptthemhigh.Andthatmeans—asMinskywarned—thatmoreandmoreofgovernment’sspendingisinefficient—goingtointerestandtransferpayments,withmuchofthespendinggoingabroad.

ThejokeisthatUncleSamisnowjustanarmywithawelfaresystemattachedtoit.ContrastalltherecentpresidentswithFDR:hisgovernmentmadeAmericagreat.Hisaccomplishmentsarestillallaroundus.

Reagansuccessfullyconvincedusthatgovernmentisaproblem,notasolution—andthe

Democratshavelargelyreinforcedthatbeliefbydoinglittletonothingtohelptheworkingclass(TchernevaandWray2025).

And,yet,theDOGEtechboyscouldnotfindanywastebecausewehavecreatedthemostefficientwaytorunaninefficientsystem.

AsIsaidearlier,Minskyworriedaboutsecularstagnation.WetemporarilystavedthatoffduringtheClintonyearsandforsometimeafterbyboostingfinance—tothebenefitoftheFIREsector(finance,insurance,andrealestate)andwhatCitigroup(Kapur,Macleod,andSingh2005)calledthenewPlutonomy—thosebillionaireswhohavetakenoverthegovernmentandtheeconomy.

AhandfulofcountiesaroundtheUSboomedwhilemostofthecountrygotleftbehindand

turnedred—asPavlinaTchernevaandIhaveshown(2025)—evenasTrumpandMusktrytoturnthecountryintoabananarepublic,withTrump’sfavorabilityratingsomewherearound40percent,theapprovalratingoftheDemocratsisstuckat27percent.

AmajorexceptiontothestagnationwasSiliconValley:overthepasttwodecades,techisthesectorthatboomedalongsideWallStreet.Interestingly,someoftheearlytechfirmswere

involvedinthepaymentssystem.ThathascomefullcirclewiththesecondcomingofTrump.Thisis,Ithink,thetrueaimofDOGE—tomergethefinancialandtechsectors,tofinancializeourdata.

Wenolongerliveinaworldofproductionofcommoditiesbymeansofcommodities

4

—

including,mostimportantly,laborpower.Capitalismisstilldrivenbythequestfor“more

money”butthemainsourceisnotproductionofcommodities.Thelabortheoryofvaluedoesn’tstrictlyapply:monetarywealthhasbeenfreedfromproduction.Neitherincomenorprofitflowsareimportantforourplutocrats—asinvestigationsbyProPublica(Eisinger,Ernsthausen,and

Kiel2021)haveshown.BillionaireslikeMuskpaynoincometaxesbecausetheyhavenoincome.

DataisnowthemostimportantcommodityintheworldandDOGEhasapparentlydeveloped

thecapacitytomergeallthedatacollectedbythegovernment(includingtheIRS),banks,socialmedia,andtheinsurancesector—especiallyhealthmanagersthatdenyyourclaimsandstartupsthathaveyourDNAandallotherhealthrecords—intoaone-stopshoppingmallforsaletothehighestbidders(Randles2025;Chayka2025).

DOGEgotholdofthepaymentssystemandcanpushtheredstopbuttononanypayment.TheytesteditonNewYorkCity—theyactuallyshutdownpaymentsthatCongressapprovedtohelpwiththecostscreatedbytheclowngovernorofTexaswhobussedimmigrantsanddumpedthemonthecity(Tankus2025).

TheTrumpadministrationhaspaidover$100milliontoPalantir(FrenkelandKrolik2025)to

consolidateallthegovernment’sdataonindividuals,presumablytomakeiteasiertogoafterthemillionsofAmericanswhocouldbeaddedtoanenemieslist.Tousethemetaphoronemore

time:thiscouldbeNixon’senemieslistonsteroids.

4AsSaffraputit.

AmIparanoid?Itisastrangenewworld.Capitalismisasystembasedonexploitation.While

Marxfocusedonexploitationoflabor,capitalismalsoexploitstheenvironment,thefamily,the“others”outsideitssystem.Buttheproponentsoftechforeseeanear-futureinwhichlaborisnolongerneededasAIincreasinglytakesoveralltasks.

Theydon’tneedyourlabor,theyneedyourdata,andmaybeyoureyeballs.

AI’smostimportanttasknowistoaccumulateallthedatainexistence.Whatthen?Itwillknoweverythingweknow;itwillbeabletodoeverythingwecando.AndMMTteachesthatitwillbeabletoaffordtodoso.

Maybeweshouldkeepthatasecret?

ButIdon’twanttoendonthatnote.Letmeconclude.

Conventionalmacroeconomictheory—ofboththeorthodoxand(unfortunately)ofmuchoftheheterodoxvariety—takesanexcessively“highinthesky”view.

Unemploymentiscausedbytoolittlespending.Inflationiscausedbytoomuch.Keepingtaxesaligned—moreorless—withgovernmentspendingensuresitwillnotbeinflationary.The

solutiontoinflationistocutspendingorraisetaxes.

MMTisdangerousbecauseitletsthecatoutofthebag:taxesdonotfinancegovernment

spending.Thisgivespoliticiansalicensetorunupspendingthatwillcauseinflation.Besttokeepthewoolpulledovertheeyesandinsistontax“pay-fors,”orlettheDOGEboysstopthepayments.

MMT’sviewisdifferent.Thecompositionofbothtaxesandspendingmatters,andsotherearetworeasonsthattryingtomatchthemismisguided:(1)governmentdoesn’tneedtherevenue,

and(2)thereisnoreasontobelievethatmatchingthemmeansgovernment’simpactapproachesneutral.

Spendingonunemployedresourcesputsthemtoworkwithlittleinflationaryconsequence.

Spendingonafixedprice-floatingquantitybasisreducesfurthertheinflationarydanger.(ThatiswhattheJobGuaranteedoes.)

Spendingtoincreaseproductivecapacityalsoreducesthedangerofinflation,andcanraisethedangerofdeflation.Clearly,notaxhikesarerequiredinthatcase—wemightneedtaxcutsifproductivecapacitygrowstoexceedwhatcanbesupportedbyspending.

Agoodexampleishealthcare:MedicareforAllwouldcutspendinginhalf—fromover18

percentofGDPtoperhaps9percent,theamounttypicallyspentbyotherrichcountries(WrayandNersisyan2020).Wewouldneedabigtaxcuttooffsetthedisinflationaryimpact.

Likewise,itmatterswhatkindoftaxisimposed.Afinancialtransactionstax,orabillionaire

wealthtax,orataxsurchargeonmillionairesisunlikelytotakeasignificantamountofdemandoutoftheeconomy—nomatterhowmuchrevenuetheyraise—soarenotlikelytoreduce

inflation(WrayandNersisyan2020).

Forgetbillionairetaxestoraiserevenue.Instead,taxbillionairestodestroytheirwealth—imposea120percentwealthtaxtotakeallofit,andsendthemabillfortherest.Incentivizethemtotrytoworktheirwayoutofthedebt.

Ontheotherhand,abroad-basedincomeorconsumptiontaxwillreducedemandsignificantly.

Othermethodscanalsobeusedifdesired:rationing,patrioticsaving,orpostponedconsumption.

AllthisisimportanttosupportatransformativeGreenNewDeal—oranyotherlargescale

governmentinitiative.AsYarmuthinsisted,wen