Dear President Trump: Your Tax Plan Needs Bigger Deficits!


Forbes has the article Dear President Trump: Your Tax Plan Needs Bigger Deficits!

What I want to highlight here is this: the private sector needs government deficit spending if it is going to recover properly from both the heart attack of the Financial Crisis and the decades of disease brought on by income redistribution and rising debt levels. This is so because government deficits are private-sector surpluses.

I just have two nits to pick with this article. In talking about the possibility of inflation, the author stated,

yes, it can be inflationary. But a) we are a long way from that point right now and b) it’s only happened once in recent history: World War Two.

I am disappointed in the statement that the last time we had inflation was WW II. Why do Modern Money Theorists always pretend that the inflation of the 1970s never happened? I know it would just complicate matters to discuss the 1970s. However, leaving out the 1970s makes people who remember that time doubt the rest of the story you are trying to tell.

In fact, the inflation of the 1970s was a mini version of what happened in WW II. Lyndon Johnson wanted to fight a war in Vietnam at the same time that he wanted to stimulate the domestic economy. Add the oil shortage imposed on us by OPEC, and it is easy to see that the inflation of the 1970s is easily explained in MMT terms.

The second nit is just a typographical error. The hypothetical $400 trillion deficit mentioned at the end of the article should have said $400 billion.

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