By Kent R. Kroeger (Source: NuQum.com; November 25, 2020)
The recent Twitter exchange by Democratic congresswoman Alexandria Ocasio-Cortez (AOC) and Nikki Haley, the former U.S. Ambassador to the U.N., over whether the U.S. can afford direct payments to U.S. households to help with the economic damage caused by the coronavirus pandemic is a shining example of how our two major political parties can unite in constructive dialogue to solve our nation’s most pressing problems.
I’m just kidding.
The AOC-Haley debate over direct financial aid to Americans suffering due to the pandemic was a poopfest.
AOC and Nikki basically told Joe Biden and his call for national unity to go screw themselves.
The AOC-Haley Twitter exchange lasted only a few snarky tweets:
AOC: To get the (corona)virus under control, we need to pay people to stay home.
Haley: AOC, Are you suggesting you want to pay people to stay home from the money you take by defunding the police? Or was that for the student debts you wanted to pay off, the Green New Deal or Medicare for All? #WhereIsTheMoney
AOC: Nikki, I’m suggesting Republicans find the spine to stand up to their corporate donors & vote for the same measures they did in March, except without the Wall St bailout this time.
And I know you’re confused abt actual governance but police budgets are municipal, not federal.
AOC: Utterly embarrassing that this woman was a governor & still doesn’t have a grasp on public investment. Wonder if she says federal financing works like a piggy bank or household too?
All this faux-seriousness from folks who worship Trump for running the country like his casino.
And if you allow me to judge the winner of the AOC-Haley Twitter spat, AOC won in a first period knockout. It was the 1986 Mike Tyson-Marvis Frazier fight, only with more attractive combatants.
But before I give AOC too much credit, her rebuttal to Haley’s assertion that the U.S. can’t afford to solve America’s most serious problems (i.e., health care costs, student debt, climate change, etc.), realize that AOC is simply repeating an economic argument developed by advocates of Modern Monetary Theory (MMT).
In an over-simplified summary, MMT describes currency as a public monopoly and economic problems such as unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires.
Stony Brook University Professor Stephanie Kelton, a former Bernie Sanders economic advisor, is among MMT’s most visible current advocates.
And, in truth, MMT is not that new. The theory’s core ideas ate not far removed from 100-year-old Chartalist Theory and similar economic arguments have been offered by U.S. economists and bankers for decades.
In a 1993 Harvard Business Review published dialogue, William A. Schreyer, Chairman of the Board Emeritus, Merrill Lynch & Co., Inc., New York, New York, a sharp critic of MMT, still concurred to one of its principle conclusions:
“The federal budget deficit is not the most important threat facing the U.S. economy. When policymakers focus narrowly on the budget deficit, they ignore what truly drives rising prosperity and long-term economic growth, that is, saving and investment. There is real danger in Washington’s myopic fear of the deficit. As we have seen too often in recent years, a focus on deficit-driven government accounting can place growth-oriented economic policy in a straitjacket.”
But there is also no doubt that politicians like Bernie Sanders and AOC are probably most responsible for helping propel MMT-thinking into mainstream political debate.
But before you think I’m a doughy-eyed lefty, think again. I voted for Trump twice, label myself ‘pro-life,’ believe ‘woke’ politics has more to do with politicians finding a new way to milk Americans for more campaign donations than anything else, and remain a healthy skeptic of the doomsday predictions surrounding climate change (though, I am convinced the earth is warming due to human activity and its consequences are real).
AOC would never ask someone like me for my vote.
Nonetheless, AOC’s logic on helping American households deal with the economic consequences of the pandemic is far more coherent than anything Haley or any other major politician have said on the subject. And that includes Nancy Pelosi and Joe Biden.
No country has ever gone bankrupt spending money on solving its most serious problems — and the coronavirus pandemic is that type of problem.
As Prof. Kelton likes to ask, “Did we spend too much money on World War 2?”
All that being said, I remain sensitive to the question: “Can large, long-term federal deficits be a bad thing?”
And my understanding of Prof. Kelton and MMT is that, of course, federal deficits are bad if the government spends the money poorly. Imagine if our $27 trillion national debt had been obtained entirely through the government purchase of solid gold bathtubs for every American street corner. Our currency would be worthless and our economy in a shambles. Buying U.S. debt would be the worst investment option on the planet.
But that’s not how this country has spent the money it has printed. Not even close. Past spending and investment decisions (public and private) have made the U.S. economy the best long-term investment around. Admittedly that could change. A twenty-year military occupation of country with little impact on the world economy or U.S. strategic interests might do that if we give it a chance. But even that questionable investment comes with economic upsides, particularly if you are a military contractor or an MSNBC military “analyst.”
The fact is, simplistic notions of what policies the U.S. can and cannot afford are rooted in, as AOC puts it, a flawed understanding of public investment. Financing the federal deficit is not like a piggy bank or household budget. To treat it as such is to risk doing real and lasting harm to the U.S. economy and the American people.
Therefore, it is time we collectively wake up to the con that the U.S. cannot sustain deficit spending, a deception engineered out of self-interest by politicians from both parties who gain more power by perpetuating it.
The reality is that the U.S. can sustain deficit spending as long as the money is spent wisely and solves real problems.
AOC — 1 … Nikki Haley and the U.S. Political Establishment — 0.
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