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American Institute for Economic Research,
January 6, 2019, 6 pgs.
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Reviewer comment:
The author creates a hypothetical futuristic situation in 2034 in which a
'neoconseervative' administration is conducting multiple wars with millions of
soldiers and massive payments to contractors. It is funding all this by
employment of MMT. The 'left' politicians are furious but unable to curtail all
this because they, themselves, used the same MMT to fund their massive social
projects including for public health care, renewableenergy and eliminating
unemployment by putting everyone to work. He created this prospect to
illustrate that MMT can function to fund anyone for anything. He refers to
Frederich Hayek's 1945 article "The Use of Knowledge in Society". He
offers descriptions of three ways in which government ability to spend
generates additional social problems.
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15 Years From Now
Dr Gulker sets a scene in 2034. By then America has a strong 'neoconservative'
government. It is engaged i n4 wars and has 20 million individuals on active
military duty. There are domestic conflicts between protestors against the huge
government contracts and those claiming the protestors are 'unpatriotic'.
Government is financing all the wars and domestic spending by unlimited
creation of 'money' - MMT gone wild. Income and corporate taxes are near zero.
Now the 'left' is protesting even though only 6 years earlier they had used the
same concept to fund unlimited health care and renewable energy plus more. Now
the election of 2036 campaign centers on right- left control of the unlimited
federal budget
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Modern Lovers
The author admits his scenario seems 'far-fetched' but maintains that it
reflects this idea 'that governments who print their own money can spend as
much as they want'. He notes that this idea is NOT new but was the basis for
previous claims for such programs as Medicare and Medicaid, job guarantees and
other welfare programs. So the subject of 'budget constraints or the ability to
borrow' has been debated for years. But is that the only real issue? Rather
than focusing on 'could' as the issue we might consider 'shoud' when evaluating
govern spending.
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Trouble with a Blank Check
His first question is about the real capacity of government bureaucrats to
allocate resources effectively. He cites Fredrich Hayek's paper on the 'use of
knowledge' - (von Mises made the same point, that it is impossible for central
planners to have adequate knowledge.) His second point is that the more
government spends the more it is subject to lobbying by special interests. His
third point is that increasing power of a current government to spend and
control will enable future governments to do the same, with possibly
significantly different objectives in mind.
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