MMT – a Never-Ending Crisis

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Bidenomics: Staring at a Fiscal Abyss

In the WSJ, Arthur Laffer and Stephen Moore warn of the crazy economic theory that spending has no consequences, aka Bidenomics.

Never mind that the economy was already bouncing back as businesses reopened. Mr. Biden and the MMT (Modern Monetary Theory) crowd thought they had invented a perpetual-motion machine. Instead, they unleashed the worst inflation in 40 years.

Arguments by proponents contend that because the dollar is the world reserve currency and the Treasury can sell bonds at low interest rates, “Uncle Sam can spend and borrow limitlessly with no economic risk,” continue Messrs. Laffer and Moore.

Here’s the Reasoning:

As Stephanie Kelton, an economist at Stony Brook University, put it: “Deficits can help us fight a myriad of problems that plague our economy—inequality, poverty and unemployment, climate change, housing, health care, and more.”

Sound the Alarm

Free-market economists scoffed, Laffer and Moore remind readers:

History is littered with nations that tried to spend and borrow their way to prosperity: ancient Rome, interwar Germany, Argentina, postwar Britain, and more recently Bolivia, Mexico, Zimbabwe, Greece and Venezuela.

Average weekly earnings of employees rose 15% between January 2021 and May 2024. But that was a loss in real terms, since prices were up 19%.

Even with trillions in handouts, working Americans have seen their average real annual income decline by more than $2,300 in today’s dollars.

In the late 2000s Australian economist Bill Mitchell coined the term “Modern Monetary Theory,” or MMT, to describe what one might call Keynesianism on steroids. John Maynard Keynes (1883-1946) argued that government should stimulate the economy by spending and borrowing during a short-term shock like an economic crisis or a war, then pull back to a reasonable level of spending and debt once the crisis has passed.

To the authors’ chagrin (and knowledge), not one of those Nobel economists has issued a retraction.

According to the WSJ: Mr. Laffer is the president of Laffer & Associates. Mr. Moore is a visiting senior fellow at the Heritage Foundation. They are co-founders of the Committee to Unleash Prosperity.