“The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity.” — Thomas Jefferson
Prior to the Russian invasion of Ukraine, many Americans were shaken by the AP Headline, “US Inflation highest in 40 years, with no letup in sight.” Americans could already feel the pain at the pump, but this was a chilling wake-up call. President Biden attempted, unsuccessfully, to shift blame to Putin. The reality is that the Democratic Party and the Biden administration have again foisted an unsound academic theory on America to disastrous results.
Much like telling America to “re-imagine” policing by “defunding” the police, they have done the same with our economy. Against common sense and warnings from reputable economists, Democrat elites decided to experiment with economics and Americans are paying the price.
Though “Modern Monetary Theory” (MMT) has been dominant in academic circles for years, many first heard of it from Rep. Alexandria Ocasio-Cortez (AOC) (D-NY). At a 2019 meeting with her constituents, AOC claimed MMT should be “a larger part of our conversation” and that a question about paying for a program was wrong to ask.
For a simple definition, “Modern Monetary Theory (MMT) is an economic theory that suggests that government could simply create more money without consequence as it’s the issuer of the currency.” Robert R. Johnson, professor of finance at Creighton University, says: “The whole idea of MMT is that since a sovereign entity can borrow in its own currency, it can print more money when it needs to pay off all its debt.”
AOC aside, most people consider Professor Stephanie Kelton as the leading advocate and the de facto face of MMT. Kelton teaches public policy and economics at Stony Brook University. She has authored the seminal book about MMT, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy. In 2015, Kelton served as chief economist of the Democratic Party’s staff on the U.S. Senate Budget Committee. She was also chief economic adviser to Bernie Sanders in 2016 and 2020 and was a member of the Democrat's 2020 “Unity Task Force” reforming the platforms of the Biden campaign and the Democratic Party.
Before Kelton’s radical economic theory, the primary battle was fought between traditional economists and Keynesians. Like our founding fathers, traditional economists hold that governments must always attempt to keep balanced budgets, or the nation will pay a price. In the 1930s, John Maynard Keynes broke with tradition and advocated substantial government spending as a “stimulus” to create individual spending and alleged job creation.
His ideas quickly became mainstream among many economists. But even Keynes never went to the dangerous extremes of MMT in advocating that governments could just keep printing money without considering deficits/debt. Regardless, MMT offered the Democrats something they needed in answer to “how do you pay for it” with massive spending proposals.
The results of MMT have been as predictable as “defunding” the police. Reputable economists gave ample warning. Jerome H. Powell, the Federal Reserve Board chair, said in 2019, “The idea that deficits don’t matter for countries that can borrow in their own currency is just wrong.” Many other economists similarly criticized the unsoundness of MMT and the danger of inflation. The Federal Reserve asserted the following in warning: “Economic history is awash with disastrous attempts to finance government spending and debt simply by printing money. These examples range from currency debasement in the Middle Ages to the hyperinflations of the 1900s. Outstanding debt has value today because it will be repaid by future net revenues. If this is no longer the case … then a debt crisis occurs.”
Ironically, Professor Kelton felt vindicated when the government started issuing the massive stimulus spending due to COVID-19, tweeting in March 2020: “It took a virus to kill the deficit myth (that MMT didn’t work).” When the inevitable inflation took hold starting summer 2021, Kelton called inflation a temporary sign of “growing pains.” That fall, she went so far as to call inflation positive and “a good problem to solve.”
The assertions of the “temporary” nature of inflation in 2021 became pervasive among Democrat and administration leaders, including Secretary of the Treasury Janet Yellen. Democrats were busy attempting to push through the most massive spending package in history with the Build Back Better plan. Thankfully it failed.
As with various radical academic “theories” going against common sense, Democrats have almost broken the U.S. economy with runaway inflation associated with MMT. The more money put into circulation the higher inflation will rise; it’s not rocket science.
Proverbs 21:20 tells us, “In the House of the wise are stores of choice food and oil, but a foolish man devours all he has.” We need to jettison MMT before we have devoured our economy beyond repair and return to the common sense of our founders.
Bill Connor, a retired Army Infantry colonel, author and Orangeburg attorney, has deployed multiple times to the Middle East. Connor was the senior U.S. military adviser to Afghan forces in Helmand Province, where he received the Bronze Star. A Citadel graduate with a JD from USC, he is also a Distinguished Graduate of the U.S. Army War College, earning his master of strategic studies. He is the author of the book Articles from War.