How to speak accurately about economics before understanding MMT

ABOVE: The final slide in my introduction to MMT presentation.

By Jeff Epstein, Citizens’ Media TV
Created for Our Revolution: Monmouth (Monmouth is a county in New Jersey).

Modern Monetary Theory (MMT) is an accurate description of how the federal economy works. Unfortunately, what almost all Americans believe to be true about our economy is, in fact, in direct opposition to reality. Therefore, every conversation relating to the funding of federal programs, between people who do not understand federal economics, is not just pointless; it directly sabotages our efforts to actually achieve the programs we need to survive: universal healthcare, a Green New Deal, clean air and water, and so on.

We rely on (unbought!) scientists to guide us regarding climate change. So too must we rely on (unbought!) economists to guide us when it relates to federal economic policies. Only they can truly answer questions such as:

  • Can we afford it?
  • Specifically, how can we afford it?
  • What effects, both positive and negative, will it have on our economy?

The federal government of the United States has access to the most prestigious economists in the world. Yet when we the people propose a policy, our government turns to us – average citizens who do not understand how the economy works (and do not have access to these economists) – and demands that we determine how it will be paid for. “How are you going to pay for it?” We are put in a position where until we can satisfactorily answer this question – until we can “come up with the numbers” – our government will not give us what we need to not die.

The truth is, according to MMT economists, we can indeed afford every program that progressives such as Bernie Sanders tell us that we need – all at the same time. In fact, these programs don’t just “cost less,” they add money to our local economies, all around the country. To say they “cost a lot” is only looking at half of the ledger: there is growth offsetting the expenses.

It is even more important to acknowledge the non-economic benefits of these programs. For example, the primary benefit of Medicare For All is not that “it’s cheaper,” but that it prevents people from dying, suffering, and going bankrupt. The fact that Medicare For All “is cheaper” is a result of these non-economic benefits, not the cause!

To truly understand the economics behind these critical programs, here are some papers written by MMT economists:

Finally, to learn MMT in general, here is a good place to start.

Practical advice you can use right now, with resources to learn more

All that said, we as activists and volunteers will still be pushed (such as on the 2020 presidential campaign trail) regarding these topics. How do we respond in a way that is respectful and accurate, when we ourselves have only an introductory understanding of how the economy works? It is a difficult position to be in. This is especially true when those asking the questions don’t understand how the economy works but are confident in their misunderstandings.

The long-term goal, of course, is to thoroughly learn MMT. Yet this must be accompanied by some more short-term, immediate advice. Below is an attempt to get you started.

DISCLAIMER: I am not an expert. I have no degree in economics. I am a smart “MMT activist” who has studied MMT starting in February of 2018. What I am good at, what I can do, is introduce the basics of MMT, and express what I learned from the economists. After your eyes are open to MMT, however, it is time for you to move on to the experts to learn more.

Any errors in this document are mine alone, and will be fixed as necessary. If you notice any problems or have suggestions or requests, please let me know.

“Yeah, but how are you going to pay for [insert program here]?”

What follows is a an economically accurate answer to the “pay-for” question when it comes to federal programs. As much as possible, we must stop pretending that we already know how to answer this question (and its followups!), because most of us don’t. This response addresses this in a way that is accurate yet defers to the only ones who can properly answer it: the MMT economists and scholars:

I don’t know the whole answer. I’m not an economist. But I do know what the economists conclude. They conclude that we can pay for our programs in exactly the same way we pay for endless wars and subsidies for the fossil fuel industry. We are the richest country in the history of the world. According to economists, we can indeed afford healthcare and education for all of our people. In fact, these programs don’t just “cost less,” they add money to our local economies throughout our state and all around the country. But these economic benefits pale in comparison the program’s real, non-economic benefits, such as fewer people dying, suffering, and going bankrupt for lack of healthcare.

For further information on why the pay-for question is so meaningless as it relates to federal programs, please see The “to truly understand…” bullet point under more info, in the inflation/hyperinflation section below.

The myth of (federal) taxpayer dollars

Here is an economically inaccurate example:

  • General: “If someone misuses our tax dollars, they should be punished!”
  • Specific: “If our tax dollars are used by a company to take American jobs overseas, that company should lose all federal contracts, tax breaks, and subsidies.”

Here is an economically accurate replacement:

“If a company takes American jobs overseas, they should lose all federal contracts, tax breaks, and subsidies.”

More information:

Won’t Medicare For All (or other progressive programs) raise my taxes?”

What follows is a short speech I gave on August 8th, 2018, for Our Revolution: Monmouth, containing many useful elements that do not require a knowledge of MMT.

As background, this was delivered in response to New Jersey Democratic representative Frank Pallone, who says that although he thinks Medicare For All is best, there are “not enough votes for it.” He incorrectly states that the program would “require a huge tax increase“, along with many other plainly inaccurate things about its implementation. According to Open Secrets, Pallone has received more than $100,000 from the healthcare and pharmaceutical industries in the previous year, and has received many more overall donations from PACS than people.

Democratic, so-called “progressive” Representative Frank Pallone, tells us that “we can’t afford Medicare for all! Medicare For All? How’re you gonna pay for it!?”

Even a Koch funded study says that Medicare For All will cost $2 trillion less than our current, corrupt, for-profit healthcare system. So how do we pay for something that’s even cheaper than what we pay now? What a ridiculous question.

But it’s better than that. Because, along with many of the other programs that we so desperately need, like universal college, a job guarantee, and a Green New Deal, Medicare For All doesn’t just “cost less,” it adds money to local economies all around New Jersey and all around the country. Medicare For All will prevent us from paying obscene prices on drugs, and being charged for something we do not want while unconscious.

Americans won’t be afraid to go to the doctor, since Medicare For All means that going to the doctor won’t bankrupt you. This means that illness and injury will be treated – before it becomes more serious and more expensive. (Not to mention, no more begging or arguing with insurance companies, especially while sick!)

According to Frank Pallone, Medicare For All will require “a huge tax increase.” If he so confidently knows that’s going to happen, then surely he knows where that information comes from. So this is for you bird doggers: Demand to see that academic economic study. Demand that he tell you the names of the economists who confirm these “massive tax increases.” And when he hands you an article from Forbes magazine, you ask him again.

The truth is, according to economists like Bernie Sanders’ own Chief economic advisor, Medicare For All will work like a tax cut for 95% of the American people. Given today’s health care system, American families will spend an average of $3,000 a year less on healthcare. The middleman for-profit health insurance industry, and the price-gouging pharmaceutical industry, they will make less money under Medicare For All. But us actual people are going to pay much less.

Frank Pallone wants to scare you in the pocketbook. Don’t let him do it. Because he’s wrong!

We can afford Medicare for all. Our government just doesn’t want to give it to us. So it is up to us to make them want give it to us. And if they still won’t to do it, then it is time to replace them with people who will.

That’s how you pay for it!

(And once you #LearnMMT, you’ll realize it can be better than even that. Start here: https://citizensmedia.tv/2019/06/25/mmtresources/)

More information:

The truth is, Medicare for All, along with all federal programs, does not need to raise taxes at all for the purposes of revenue (this is why). Bills that do raise taxes for revenue, such as FICA payroll taxes for Social Security, do so for reasons other than economic necessity. A truly clean Medicare For All bill would entirely eliminate healthcare related taxes (for the purposes of revenue).

There are many more benefits to Medicare For All than just financial ones. For example, Medicare For All dramatically reduces the fear, stress, and red tape related to:

  • the ability to visit the doctor or hospital of your choice, even when on vacation.
  • losing your (and your family’s!) healthcare when you leave a job – which, in turn, gives you more power to demand better from your employer.
  • being denied coverage or having to go through the appeal process – especially while sick.
  • being charged for something (unneeded, out of network, etc.) while unconscious.

But won’t we have to borrow money from other countries like China?

An economically accurate response:

No other country creates the United States dollar. Only Congress can do that. As long as resources are available to purchase, Congress can create as much money as it wants in order to purchase them. So what purpose – what sense – is there for Congress to borrow something that only it is allowed to create? Further, how could another country find dollars to lend except by first getting those dollars from us?

For me and you, the term “borrow” is, for example, when we ask a bank for a loan. That loan is indeed income which can be spent. It is also simultaneously a debt to that bank, for which 100% of the loan principal plus interest, is owed back to the bank. We really can be “in debt.”

There is simply no equivalent situation for the federal government. The terms “borrow” and “debt,” as they mean to me and you, simply have no equivalents to the federal government.

More information:

  • Bonds and other US treasury sales do not fund government spending.
  • As long as the government still exists, it is impossible for it to be unable to pay its bills (pay back treasury securities and interest on the maturity of those securities). Former Federal Reserve Chairman Alan Greenspan: “There is zero probability of default.”
  • MMT economist and investor Mike Norman in this very informative video: “First of all, I want to make this statement. Flat out. The United States has no debt.” Not in the sense as that word means to me and you.
  • MMT economist Randy Wray: The US should stop selling bonds entirely. Why does the US sell bonds when they have no economic need to do so?

But won’t all this spending cause inflation? Hyperinflation?!

An economically accurate response:

The only serious inflationary episodes that have occurred in the United States since 1960 were during the OPEC oil shocks of the 1970s. Hyperinflation, which is truly out-of-control inflation, has never occurred in the United States – including during the Great Depression of the 1930s (when we were also on the gold standard). All historical occurrences of hyperinflation in other countries have occurred for only one reason: catastrophic supply shocks. In an economy such as the United States, which can provide basic needs for all of its people, hyperinflation is not just unlikely, it’s close to impossible.

More information:

  • Good articles on the reality of hyperinflation: one, two, three
  • The reality of inflation in general by three MMT scholars
  • Historical hyperinflations: On top of other factors:
  • To truly understand why Congress-created currency does not (and, really, cannot) initiate inflation, it is necessary to understand how the federal government creates money. Congress does not first create money and then decide what it wants to do with it. They first
    1. decide what they want to do,
    2. determine what resources are necessary to do it (resources are real, tangible stuff: raw materials, labor, technology, and time),
    3. determine the cost of purchasing those resources (what they are willing to pay), and finally
    4. create the exact amount of money as decided upon in the previous step, sending it out into the economy, to actually make it happen.

    In other words, if the resources do not exist, the money is never created. In addition, it is precisely because of this sequence that the “how are you going to pay for it?” question is revealed to be so nonsensical. It is impossible to determine the cost of resources before determining what those resources will be – which is impossible to determine until you decide what want to do!

  • Finally, all money created by Congress is electronic: created, without exaggeration, by a finger on a keyboard on a computer on the internet. Physical money is not created until an American citizen requests it from an ATM or their bank. At that point, the bank purchases the physical currency from the central bank.

If the biggest and richest US states can’t successfully provide universal healthcare to their citizens, what makes you think that the federal government can provide it for every state?

An economically accurate response:

Because just like you and me, states are currency users. States are therefore truly dependent on taxes for revenue. The federal government is the one and only issuer of its currency (in addition to having access to the resources in every state and territory). This ability affords it orders of magnitude more economic flexibility, allowing it to succeed where even the richest state cannot.

More information:

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