We are all MMTers (Still)
October 22, 2020·Money
Stimulus is being debated everywhere, but only about what it's supposedly for. The deficit and debt have vanished from the conversation entirely. Neither party mentions them. Neither side defends them. The silence itself reveals that something fundamental about how we talk about government spending has shifted.
• Political actors across the spectrum have stopped defending fiscal discipline. Tax cuts exploded the deficit years ago with barely a mention. Stimulus packages face constant debate about their purpose and recipients, yet nobody questions whether a currency-printing government can afford them. The position itself has become untenable.
• The messaging around stimulus is completely fragmented. Media coverage splits into isolated narratives about families, small businesses, financial markets, and the unemployed. Yet these separate conversations share one thing in common: none of them invoke the language of limits, tradeoffs, or constraints.
• Deficit talk isn't just less common. It's structurally absent. Network analysis of stimulus coverage shows massive narrative disagreement on nearly everything—except what doesn't appear at all. The deficit and debt exist outside the conversation, not as minor subplots but as absent categories.
• This wasn't a coordinated shift or a reasoned argument. There was no debate that changed minds. Politicians simply abandoned old positions without explanation or defense, and nobody called the inconsistency out. Consistency itself has become a liability in politics.
• What gets accepted now as economic reality will determine what remains politically possible for the next decade.If currency-printing governments are understood to face no fiscal limits, the only question becomes what to spend on. The framework itself is the prize.
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Comments
This alternate reality reality was pointed out by ET thru another Quid screen about 2 years ago. I think it was “The Dog That Didn’t Bark”. I had noticed during 2018 that no one ever seemed to mention the growing deficit as the Tax Cut exploded it. That post awakened the power of Narrative to drive behavior for me. Any thoughts from the Pack about which Missionary finally says the obvious, and hurtles this Narrative into the abyss?
As I recall, the last President that talked seriously about the deficit was Ronald Reagan, and he was an actor by trade.
But there was still at least theatre around, say, the debt ceiling, balanced budget amendments etc. for many years thereafter.
An adjacent point to this note would be the following observation:
As Ben noted back in 2016, Trump breaks us because we changed from a cooperation game to a competition game. But additionally, Trump allows others to break us in the future by devaluing a former currency once held as electorally important, namely consistency. John Kerry was absolutely savaged because of his Iraq War flip-flop. In a race as close as that one you could argue it cost him the election. By today’s standards that line of attack seems quaint. So now with consistency being valued at a lot less the politicians who would have formerly been against a print-our-way-out approach have almost no incentive to hew to that ideology. Certain things have very little credible opposition left, and MMT will soon be one of them. Sure, in 2022 when the Harris administration uses it as the reasoning behind some spending program the usual cast of characters will object, but given the power to magically conjure anything they want will be too tempting when they’re eventually back in charge. A decade from now the anti-MMT crowd will be made up of a dozen Libertarians working at Cato and the six remaining pro Ron Paul bloggers left alive. It’ll be just another fixture in economic life. Us late Gen-Xers and early Millennials will sit around a carbon-neutral campfire and reminisce about the times before Jay Powell’s face was on the $250 bill.
I’m not sure there will be a Missionary that says “Stimulus” should be called “Debt Support”, “V” looks more like “L” or “K”, or in my best Inigo voice “QE, I don’t think it means what you think it means.” Deficits, Debt and QE are now permanent fixtures, trying to extinguish any one of them would cause capital destruction. It feels like the Missionaries (Central Banks, Government) parade out daily telling us to get on the inflation/MMT train. Was the GFC of 2007/8 an event rather than Missionary driven?
damnit, why did I waste all that time studying Keynesian economics… I could have skipped 50% of it and developed a new hobby or something
the smartest man I knew (RIP) used to tell me that we shouldn’t obsess about the deficit so much as “we owe it to ourselves.” This may have been true back when he said it but the ever growing scale of foreign owned IOUs may have made him rethink things
That percentage is actually going down…
https://fredblog.stlouisfed.org/2018/04/whos-buying-treasuries/?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=fredblog
“The problem with gravity is that it always works.”
“The story of Pandora’s Box is much more compelling if the protagonist had no choice but to open it.”
MMT, to me, sounds like a relatively fringe theory latched on to by economists trying to Narrative Control the Pandora’s Box of QE. The narrative being that “We are in control.”
And in many ways they do have control, but when push comes to shove their only recourse is more stimulus. That was the price of QE, for better or for worse.
We are all in agreement that this is the new reality. The difference is whether or not you believe that the economy has hit escape velocity. Because gravity always works, every time, no matter how many clever tricks we’ve pulled to keep the ball in the air.
According to the Betting markets, it appears that either Brainard or Yellen will be Biden’s choice for Treasury Secretary. Now Fed officials will meet with Former Fed officials to figure out how much to spend? Is there a more clear signal that Biden plans to “Just Print Money” to support massive Budget Deficits?
That somehow the crackpot economic theory MMT (Magic Money Tree) has become conventional wisdom?
How is this possible?
Simple expedient short term thinking by career Politicians? (If so, then Term Limits!)
Since Academics dominate the Federal Reserve system, is this a function of a deluded Left Wing Academia cranking out thousands of PhDs in Economics, that tolerates no diversity of “thought”? (If so, then Defund Academia !)
But why don’t the younger generations resist? They are the ones to face the bill.
Even if the bill comes in the form of INFLATION
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