,,iii #aagth ,,congress #ast ,session ,s4 ,,res4 #acf ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,march #be1 #bjba,mr4 ,braun 7for himself1 ,ms4 ,ernst1 and ,mr4 ,tillis7 submitted the following resolution2 which was referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,,resolution ,recognizing the duty of the ,senate to abandon ,modern ,monetary ,theory and recognizing that the acceptance of ,modern ,monetary ,theory would lead to higher deficits and higher inflation4 ,whereas noted economists from across the political spectrum have warned that the implementation of ,modern ,monetary ,theory 7referred to in this preamble as ,,mmt7 would pose a clear danger to the economy of the ,united ,states2 ,whereas1 in ,july #bjai1 ,zach ,moller1 deputy director of the economic program at ,third ,way1 wrote in a memo the problems associated with ,,mmt1 including that-- 7#a7 ,under an ,,mmt regime1 policymakers would need to respond to inflation by doing two of the most unpopular things ever3 raising taxes and cutting spending4 4 4 4 ,we can easily imagine divided government's paralysis to fight inflation3 ,republicans refusing to raise taxes and ,democrats refusing to cut spending42 7#b7 ,,mmt ends our central non-political economic manager and markets trust the ,federal ,reserve and1 as a result1 businesses and individuals have well-anchored inflation expectations4 4 4 4 ,to solve the challenges higher interest rates create1 including a possible interest financing spiral1 ,,mmt generally says that the ,fed will be tasked with keeping interest rates low by making the ,federal government1 through the ,fed1 the consistent 7if not the primary7 purchaser of bonds4 ,this is a different mission for the ,fed than it has now4 ,the ,fed would no longer be tasked with intervening to keep prices stable because it would be too busy buying bonds4 ,bond purchases by the ,fed generally increase inflation4 ,thus1 the ,fed would no longer be an independent manager of the economy42 and 7#c7 ,,mmt destroys foreign confidence in ,america's finances4 4 4 4 ,holders of ,u4,s4 debt 7in the form of treasuries7 expect stability in value1 a return from their investments1 and the ability to be paid back4 ,,mmt blows that up4 ,bondholders would no longer be assured a return on their investment1 and it will no longer be as desirable for our creditors to hold ,u4,s4 debt42 ,whereas1 on ,may #ag1 #bjai1 ,joel ,griffith1 a research fellow at ,the ,heritage ,foundation1 wrote in an article entitled ,the ,absurdity of ,modern ,monetary ,theory the following3 ,there is no free lunch4 ,we will pay either through the visible burden of direct taxation1 the hidden tax of inflation1 or higher borrowing costs 7as the government competes with businesses for available capital74 ,such realities might not make for a great stump speech1 but facing them squarely now can save us a lot of headaches down the road42 ,whereas1 on ,march #be1 #bjai1 ,janet ,yellen1 former ,chair of the ,board of ,governors of the ,federal ,reserve ,system1 disagreed with those individuals promoting ,,mmt who suggest that you don't have to worry about interest-rate payments because the central bank can buy the debt1 stating3 ,that's a very wrong-minded theory because that's how you get hyper-inflation42 ,whereas former ,secretary of the ,treasury and ,director of the ,national ,economic ,council ,lawrence ,h4 ,summers-- 7#a7 on ,march #e1 #bjai1 wrote in an opinion piece in the ,washington ,post entitled ,the left's embrace of modern monetary theory is a recipe for disaster that1 contrary to the claims of modern monetary theorists1 it is not true that governments can simply create new money to pay all liabilities coming due and avoid default4 ,as the experience of any number of emerging markets demonstrates1 past a certain point1 this approach leads to hyperinflation42 and 7#b7 on ,march #d1 #bjai1 said that-- 7,a7 ,,mmt is fallacious at multiple levels2 7,b7 past a certain point1 ,,mmt leads to hyperinflation2 and 7,c7 a policy of relying on a central bank to finance government deficits1 as advocated by ,,mmt theorists1 would likely result in a collapsing exchange rate2 ,whereas1 on ,february #bf1 #bjai1 ,jerome ,powell1 ,chair of the ,board of ,governors of the ,federal ,reserve ,system1 stated3 ,the idea that deficits don't matter for countries that can borrow in their own currency ,i think is just wrong42 ,whereas1 on ,february #bd1 #bjai1 ,matt ,bruenig1 founder of the ,people's ,policy ,project1 wrote in an article entitled ,what's the ,point of ,modern ,monetary ,theory that the real point of ,,mmt seems to be to deploy misleading rhetoric with the goal of deceiving people about the necessity of taxes in a social democratic system4 ,if successful1 these word games might loosen up fiscal and monetary policy a bit in the short term4 ,but insofar as getting government spending permanently up to #ej percent of ,,gdp really will require substantially more taxes in the medium and long term42 ,whereas1 on ,february #ba1 #bjai1 ,doug ,henwood1 a journalist and economic analyst1 wrote in an article in ,jacobin entitled ,modern ,monetary ,theory ,isn't ,helping that ,,mmt's lack of interest in the relationship between money and the real economy causes adherents to overlook the connection between taxing1 spending1 and the allocation of resources2 ,whereas1 on ,january #bh1 #bjai1 in a question and answer session with ,james ,pethokoukis of ,a,e,ideas1 ,stan ,veuger1 visiting lecturer of economics at ,harvard ,university1 stated that1 if you take ,m,m,ters at their word in the most aggressive sense1 then what you would see is a massive debt finance expansion of the welfare state with ,medicare for ,all1 with a jobs guarantee1 and with concerns about inflation being deferred entirely to elected officials who would have to raise taxes to keep it under control4 ,i think in a scenario like that1 we do run a risk of going back to the #aigjs pre-,volker style macroeconomics and ,i think that would be bad42 ,whereas1 on ,january #ag1 #bjai1 ,michael ,strain1 ,director of ,economic ,policy ,studies at ,,aei1 wrote in an opinion article in ,bloomberg entitled ,modern ,monetary ,theory ,is a ,joke ,that's ,not ,funny that if you thought from the start that the whole idea sounded like lunacy1 you were right1 even if it's possible to admit some sliver of sympathy for it2 ,whereas ,paul ,krugman1 winner of the #bjjh ,nobel ,memorial ,prize in ,economic ,sciences-- 7#a7 on ,march #a1 #bjai1 posted on ,twitter a point-by-point rebuttal to an article entitled ,the ,deficit ,myth3 ,modern ,monetary ,theory and the ,birth of the ,people's ,economy by ,stephanie ,kelton1 which concluded with ,krugman tweeting that-- 7,a7 ,sorry1 but this is just a mess4 ,kelton's response misrepresents standard macroeconomics1 my own views1 the effects of interest rates1 and the process of money creation42 7,b7 ,otherwise ,i guess it's all fine42 and 7,c7 ,see what ,i mean about ,calvinball82 and 7#b7 on ,february #ab1 #bjai1 wrote in an opinion piece in the ,new ,york ,times the following3 ,and debt can't go to infinity--it can't exceed total wealth1 and in fact as debt gets ever higher people will demand ever-increasing returns to hold it4 ,so at some point the government would be forced to run large enough primary 7non-interest7 surpluses to limit debt growth42 ,whereas1 on ,november #ae1 #bjai1 ,jason ,fichtner and ,kody ,carmody of the ,bipartisan ,policy ,center wrote in a report entitled ,does the ,national ,debt ,matter8 ,a ,look at ,modern ,monetary ,theory1 or ,,mmt that-- 7#a7 deficits do have a role to play in public finance but1 as interest rates rise1 some private-sector projects no longer make financial sense and are forgone4 ,crowding out private investment ultimately leads to a misallocation of resources away from their most economically productive use1 hampering economic growth4 4 4 4 ,the more we borrow today1 the more expensive it will be to continue borrowing in the future4 ,at some point1 debt has to be paid back4 ,there is no free lunch42 7#b7 ,,mmt underestimates other downside risks of debt and ,,mmt advocates note that inflation is the only restraint on debt-financed spending4 ,this leads some to conclude that under the theory of ,,mmt1 debt is not a concern1 as governments can simply print more money to pay off debt4 ,such a theory is roundly rejected by academic economists on both sides of the political spectrum42 7#c7 printing money has costs1 including a loss of credibility for the government1 an inflation risk1 and exacerbating exchange rates2 7#d7 ,,mmt assumes away politics and puts the onus of inflation control on ,congress1 the institution that lately seems worst-equipped to handle it4 ,the ,federal ,reserve--which has spent a long time building extensive credibility in its commitment to fight inflation--would be largely sidelined42 7#e7 even ,,mmt admits that deficits and debt matter1 noting that ,stephanie ,kelton has stated3 ,i would never take the position that we ought to move forward1 passing legislation with no offsets1 to do ,green ,new ,deals1 and ,jobs ,guarantees1 and ,medicare for ,all4 ,in the end1 ,,mmt's arguments largely boil down to a disagreement over how much room there is to borrow without accelerating inflation42 and 7#f7 it is hard to pin ,,mmt down on anything at all due1 in large part1 to the fact that prominent supporters of ,,mmt have taken vague1 sometimes contradictory positions3 ,when politicians make claims about paying for the ,green ,new ,deal through ,,mmt1 stay silent1 and when economists criticize this view1 claim you are being misunderstood42 ,whereas the ,march #bjai report entitled ,how ,reliable is ,modern ,monetary ,theory as a ,guide to ,policy8 by ,scott ,sumner and ,patrick ,horan of the ,mercatus ,center at ,george ,mason ,university found that-- 7#a7 ,,mmt-- 7,a7 has a flawed model of inflation1 which overestimates the importance of economic slack2 7,b7 overestimates the revenue that can be earned from the creation of money2 7,c7 overestimates the potency of fiscal policy1 while underestimating the effectiveness of monetary policy2 7,d7 overestimates the ability of fiscal authorities to control inflation2 and 7,e7 contains too few safeguards against the risks of excessive public debt2 and 7#b7 an ,,mmt agenda of having fiscal authorities manage monetary policy would run the risk of-- 7,a7 very high debts2 7,b7 very high inflation2 or 7,c7 very high debts and very high inflation1 each of which may be very harmful to the broader economy2 ,whereas the ,january #bjbj working paper entitled ,a ,skeptic's ,guide to ,modern ,monetary ,theory by ,n4 ,gregory ,mankiw stated3 ,put simply1 ,,mmt contains some kernels of truth1 but its most novel policy prescriptions do not follow cogently from its premises42 ,whereas the ,january #bjai report entitled ,modern ,monetary ,theory and ,policy by ,stan ,veuger of the ,american ,enterprise ,institute warned that hyperinflation becomes a real risk when a government attempts to pay for massive spending by printing money2 and ,whereas the ,september #bjah report entitled ,on ,empty ,purses and ,,mmt ,rhetoric by ,george ,selgin of the ,cato ,institute warned that-- 7#a7 when it comes to the ability of ,congress to rely on the ,treasury to cover expenditures1 ,congress is1 in #a crucial respect1 more constrained than an ordinary household or business is when that household or business relies on a bank to cover expenditures because1 if ,congress is to avoid running out of money1 ,congress cannot write checks in amounts exceeding the balances in the general account of the ,treasury2 and 7#b7 ,,mmt theorists succeed in turning otherwise banal truths about the workings of contemporary monetary systems into novel policy pronouncements that1 although tantalizing1 are false3 ,now1 therefore1 be it ,that the ,senate-- 7#a7 realizes that large deficits are unsustainable1 irresponsible1 and dangerous2 and 7#b7 recognizes-- 7,a7 that the acceptance of ,modern ,monetary ,theory would lead to higher deficits and higher inflation2 and 7,b7 the duty of the ,senate to abandon ,modern ,monetary ,theory in favor of mainstream fiscal and monetary frameworks4