PBS is starting to mention MMT. See the article The good you do for the dollar when you pay your taxes.
Have you ever wondered why the U.S. dollar has value?
It is not because of the gold in Fort Knox. There used to be gold behind the dollar, but not now. President Richard Nixon cut the last ties in 1971, effectively ending the foundation of the Bretton Woods international monetary system.
Rather, the ultimate reason that the U.S. dollar has value, at least in the opinion of some economists, and in my own, is that no one likes being in jail. And dollars are a get-out-of-jail-free card.
April 15, when Uncle Sam collects taxes on our incomes, is right around the corner. We must pay those taxes in dollars, and there are penalties for not paying them, which can include time in prison.
As a proponent of MMT, myself, I should be overjoyed at this. Ironically, PBS picks the one part of MMT that I think is overplayed. It is not that there isn’t some truth in this part of MMT. It may be true that this use of money gives it its initial value. However, once this value is well established, I think it quite likely that there are other factors that help maintain and boost its value. I think this is important because if the U.S. dollar is ever to lose its pre-eminent position in the world it, will be due to other factors than our use of the dollar as a mechanism for paying taxes. That said, it will probably be possible to connect the decline in prominence to some aspect of taxation. It’s all a matter of degree, but that does have policy implications.
The PBS article links to a Washington Post article Modern Monetary Theory, an unconventional take on economic strategy by Dylan Matthews.
Talking about economist James Galbraith, Matthews said the following:
But if Galbraith stood out on the panel, it was because of his offbeat message. Most viewed the budget surplus as opportune: a chance to pay down the national debt, cut taxes, shore up entitlements or pursue new spending programs.
He viewed it as a danger: If the government is running a surplus, money is accruing in government coffers rather than in the hands of ordinary people and companies, where it might be spent and help the economy.
“I said economists used to understand that the running of a surplus was fiscal (economic) drag,” he said, “and with 250 economists, they giggled.”
The article goes on to discuss competing theories of economics. However, the author of the article, Dylan Matthews, never really shows a deep understanding of the topic being covered.
In discussing the arguments against MMT, Matthews never seems to understand the full significance of what Galbraith said about the fiscal drag. In some situations, recognized by MMT proponents, the economy needs some fiscal drag. By recognizing that a surplus is a fiscal drag, the MMT proponents have identified exactly the tool to use when drag is what is needed. This identifying of the proper tool to use is the opposite of saying MMT policy prescriptions will cause hyperinflation that will have no remedy. Matthews never seems to figure this out.
In picking quotes from MMT theorists to rebut the MMT critics, Matthews chooses the least effective arguments that MMTers use.