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New Economic Perspectives. org, January 20,
2018
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Reviewer Comment:
This is an interesting discussion by two leading proponents of Modern Money
Theory in response to a post by Jared Bernstein questioning the main concepts
in this MMT. The four topics are here. There follows here the first few of a
lengthy group of posts by various commentators on the original discussion. The
interested reader will find all of them at the URL.
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Jared: Overheating is possible, and taxing
is a lousy mechanism for dealing with it.
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Jared: What about the Fed? The central bank
introduces another piece of the MMT framework about which I'm confused.
Suppose, even if the economy is below potential, the Fed decides it doesn't
like all this money printing and deficit spending advocated by MMers.
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Jared: Krugman's 'finance-ability' point:
Krugman argues that self-financing is more inflationary than bond issuance, but
he's not making the above points about MMT's flawed (IMO) assumption that tax
cuts could handily deal with accelerating prices. He's worried about currency
debasing.
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Jared: Timing issues re revenue raising vs.
printing money: A theme of my work, to which MMTers often object, I think, is
that we need to raise more revenues to pay for public goods. I recently wrote,
for example, that, given our aging population, it will take something like 3%
more of GDP to meet our obligations to Social Security and Medicare/Medicaid by
2035. MMTers push back that as long as we're below potential, we can print that
money to support government spending, so stop getting so wound up about
'payfors'.
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