May 20, 2019

MMT and the Green New Deal: Where is the snag? (I)

Comment on Randall Wray on ‘How To Pay For The War’

Blog-Reference

MMT claims to be a theory, i.e. a materially/formally consistent mental representation of reality, and NOT a policy.#0 Accordingly, MMT is, as a matter of principle, compatible with any policy: “Consequently, the message from the MMT camp to all those campaigning on progressive … economic issues is that MMT macro is complementary, is something to be added and should prove a boost to whatever the specific issue, e.g., GND, happens to be.”#1

This is correct, MMTers jump on any bandwagon from unemployment to healthcare to a Pony-for-every-American to the Green New Deal.#2 MMTers have a solution to almost all social/economic problems and it consists of deficit-spending/money-creation.#3

The first schizophrenic fact of the matter is, though, that MMTers present themselves as real Progressives ― in contradistinction to the debilitated old Left ― who fight hard for the cause of WeThePeople. The second schizophrenic fact is that MMTers are not so much social activists but agenda pushers for the Oligarchy. On closer inspection, MMT is neither a scientific theory nor a social program but a political fraud.

The first thing to note is that MMTers always mix up Employment Theory and Allocation Theory and Monetary Theory. For the purpose of analysis, these issues have to be treated separately.

Since Keynes, most economists agree that unemployment can be reduced by government deficit spending. However, most economists do not know the macroeconomic Profit Law which entails Public Deficit = Private Profit. By consequence, to fight unemployment with deficit-spending/money-creation means to feed the Oligarchy.#4

Let us assume for a moment that the employment problem has been solved and turn to the question of allocation. So, what is now the answer to the question of how will you pay for the Green New Deal?

The answer is pretty obvious: shift the money from the military budget to the environmental protection budget. This has two effects, (i) because the military is the greater polluter compared to the average household, CO2 emissions and other negative environmental impacts go down immediately as a result, and (ii), neither tax increases nor additional deficit-spending/money-creation is necessary. A quite ordinary re-allocation of the existing budget is sufficient for the implementation of a Green New Deal program.

So, the answer of MMTers that a Green New Deal can be realized at any time by deficit spending is a bit misleading.#5, #6 As a matter of principle, any New Green Deal can be realized with a balanced budget. But in the MMT scheme of things, a balanced budget is something for the Swabian housewife and permanent deficit spending is the prerogative of a Sovereign State.

The point is that MMTers are not so much interested in how the government’s budget is allocated but that the government runs a deficit because it is the deficit as such that produces the macroeconomic profit for the Oligarchy.#7 From a higher standpoint, it is a matter of economic indifference whether a deficit stems from military or environmental spending. This is the reason why MMTers jump on any popular social movement with the well-received message that money is not a problem for a sovereign government because the money-issuer cannot go bankrupt. This is true, of course, but only obfuscates the economic fact that MMT policy amounts to stealth taxation of WeThePeople and a free lunch for the Oligarchy.

Real Progressives would answer the question How are you going to pay for a GND? with Simple, by re-allocating the budget. Phony Progressives answer with Simple, by telling the Central Bank to digitally create some extra money on the government’s account.

MMT is NOT science but political agenda pushing in a social cloak. MMT and GND together are the dream team for a financial coup of mind-blowing proportions in the tradition of John Law.#8

Egmont Kakarot-Handtke


#0 “MMT should not been seen as a regime that you ‘apply’ or ‘switch to’ or ‘introduce’. As I have noted regularly, MMT is rather a lens which allows us to see the true (intrinsic) workings of the fiat monetary system. … The point is that MMT is agnostic about policy bar its preference for an employment buffer rather than an unemployment buffer to discipline inflation. … In general, it makes no sense to talk about an “MMT-type prescription” or an “MMT solution”. To make that MMT understanding operational in a policy context, a value system or ideology must be introduced. MMT is not intrinsically ‘Left-leaning’.” (Bill Mitchell)
#1 Twitter David Merrill Message from the MMT camp
#2 MMT: If you’ve got a problem, I don’t care what it is, let me help
#3 Twitter William J. Luther, MMT in a nutshell
#4 Keynes, Lerner, MMT, Trump, etc. and exploding profit
#5 How counterfeiters save America with an extra profit and make WeThePeople pay for it
#6 How to pay for the war and to be bamboozled by economists
#7 MMT and the promotion of Wall Street socialism
#8 Wikipedia John Law (economist)

Related 'Full employment through the price mechanism' and 'Economics debate ― just another variant of hardcore wrestling' and 'MMT Progressives: stupid or corrupt or both?'. For the full-spectrum refutation of MMT see cross-references MMT.

Immediately following MMT and the Green New Deal: Where is the snag? (II).

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