Prof. Paul Krugman mentions MMT again in What Are Taxes For? He says:
Does the same thing hold true for the federal government? Well, the feds have the Fed, which can print money. But there are constraints on that, too — they’re not as sharp as the constraints on governments that can’t print money, but too much reliance on the printing press leads to unacceptable inflation. (Cue the MMT people — but after repeated discussions, I still don’t get how they sidestep the issue of limits on seignorage.)
So taxes are, first and foremost, about paying for what the government buys (duh). It’s true that they can also affect aggregate demand, and that may be something you want to do. But that really is a secondary issue.
Here is my response in his comment section:
Prof. Krugman, it is you who can't seem to fit the two pieces together. A monetarily sovereign government that is the monopoly provider of nonconvertible floating rate currency is not operationally constrained since it funds itself (although it is constrained by inflation and the exchange rate). Political restraints can be imposed, but this does not change the operational reality of the present monetary system; Political restraints simply hobble it, leading to political kerfuffles like the debt ceiling controversy that threaten the economy needlessly.
Taxes do not — and cannot — fund the federal government, since it is the currency issuer, unlike state and local government, and households and firms, which are currency users. Taxes are not revenue for the federal government as they are for state and local governments. Nor is borrowing required to finance the federal government. Nongovernment net financial assets are injected through federal expenditure (spending and transfers) and are withdrawn by taxation. Addition and subtraction on spreadsheets.
Treasury issuance shifts the composition and maturity of government liabilities, providing interest as subsidy to bondholders. Tsy issuance is not operationally required under the present system, so this subsidy for bondholders could be eliminated. Congress could remove the no-overdraft rule, and the Fed could carry negative equity. Tsy issuance is monetary operation to drain excess reserves to allow the Fed to hit its target overnight rate. The Fed can do the same by paying a support rate on reserves, as its does now.
You say you cannot figure out MMT. Have you read any of the literature? For example, consult Warren Mosler's "Soft Currency Economics" and Mosler and Forstater, "A General Analytical Framework for the Analysis of Currencies and Other Commodities."
This is important because the problem of the debt and deficit is a pseudo-problem, and accounting mirage. The only problem the US faces is the availability of real resources. Right now, the US has enormous idle resources while we are wasting time arguing over pseudo-problems. The opportunity cost of this is huge.
UPDATE: Traders Crucible responds, Paul Krugman, just read this post