THE MODERN NEW DEAL THAT'S TOO GOOD TO BE TRUE

George Selgin

Center for Monetary and Financial Alternatives, CATO Institute, February 8, 2019, 4 pgs.

Reviewer Comment:
In this brief note the author is replying to an op-ed by Stephanie Kelton that appeared in the Huffington Post and in turn to his own brief 'tweet' in which he noted that MMT is simply a 'naive' kind of Keynesianism. And that 'tweet' in turn has generated much condemnation by MMT fans. In this response he elaborates.

Dr. Selgin recommends readers interested in deeper analysis read what Thomas Palley has written.

He asserts that he is not 'clueless'. Then provides several verbatum quotations from Professor Kelton's original article. These appear to confirm her idea (theory) that, given that the Federal Government can - that is, it is 'technically feasible' - to execute MMT it must also be 'financially affordable'. And she appears to favor revamping the government budget process itself and simply ignore our 'obsession' with trying to 'pay for' everything. She specifically claims that the FED is the government's bank.
Dr. Selgin provides another further point. "In other words Congress can pass any budget it chooses, and our govenment already pays for everything by creating new money". And another: "Once we understand that money is a legal and social tool no longer beholden to the false scarcity of the gold standard, we can focus on what matters most..."

Yes, we now receive this kind of remarkable mythology from accredited professors of economics. Heaven help today's students. It is no wonder that we have Representatives in Congress spouting off sucn nonsense as we receive from AOC.

Dr. Selgin wonders also. He comments: "Now how could I possibly have reached the 'incredible' conclusion that Professor Kelton was telling readers of the Huffington Post that the government could pay for the Green New Deal (GND) by expanding the money stock ("creating new money") and that it could do so without causing inflation, or otherwise having the GND become 'a drag on the economy'.

He admonishes us - "Let us be serious". He fingers her 'notions' as old line Keynesian theory, but that theory was promoted during the Great Depression when there was actual unemployment and actual recession in all segments of the economy. His link here is to an article on the GND. He points to the fact that we are NOT in a Great Depression condition in unemployment or economic condition. Even Keynesians and Chicago monetarists recognize that difference.

His main point is that Professor Kelton has no evidence on which to base her claims that today the massive spending fuled by massive 'printing' of more credit money required to fulfill even parts of the GND would not trigger inflation and economic dislocations.

Then he turns to resource availability. He questions if the actual physical resources are adequate. But, unfortunately, he concludes by avering that he is not questioning the goals of the GND. He considers that 'Perhaps the programs it entails are worth whatever sacrifices they might involve: and perhaps they, or some of them at least, will ultimately pay for themselves by enhancing productivity, as Professor Kellton also believes."

But it is not only the means (financial disaster) that is the fundamental danger of the GND policy smorgasbord, but the very ends that are sought - total government control of economic, hence political, life of the American people.

Holtz-Eakin, Douglas & Dan Bosch - The Green New Deal: Scope, Scale and Implications

Bosch, Dan - The Regulatory Impact of the Green New Deal

Magness, Philip - Postmodern Monetary Theory

Mueller, Anthony - Where Does the Idea That Deficits Don't Matter Come From?

Gulker, Max - How Modern Monetary Theory Could Become the Left's Worst Nightmare

Selgin, George - The Theory of Free Banking: Money Supply under Competitive Note Issue

Rogoff, Kenneth - Modern Montary Nonsense

Minack, David - MMT Can Kill Secular Stagnation

Epstein, Richard - The Farcical "Green New Deal"

Bader, Hans - Green dreams wither in the face of political realities