Waddya Think? MMT OpEd writing campaign

The next round of insane debt ceiling debates is about to descend on Washington DC. I think this presents a great opportunity for MMT to grow, as it did during the 2011 fight. I suggest we all begin an OpEd writing campaign to our local newspapers. Given the state of print media these days, I'm sure many local papers would be happy to receive some free content.

I have attached a model OpEd that I drafted. I think it hits on most of the MMT talking points in a way that is widely understandable; of course nobody does this better than Warren, so I added 7DIF as suggested reading at the end. I'm happy to hear feedback on this draft and the idea of the OpEd Campaign generally. I'm sure these points will recieve a lot of criticism, but given the current state of economics in this country, I cant image people will hold us to too high of a standard  Lets do this thing!

Don’t fear the Debt

By XX

As the next Congressional showdown over the debt ceiling approaches, the whirlwind of Beltway discussions will once again tilt towards US debt and deficits. There are literally thousands of people in Washington whose job it is to analyze and commentate on federal budgets, deficits and debt. There are also countless organizations and think tanks dedicated to these subjects, many of which emanate from octogenarian billionaire Pete Peterson, who funds several debt-hysteria groups such as the Concord Coalition, Fix the Debt, and the more recent, youth oriented “The Can Kicks Back”.

Unfortunately, nearly all of these groups and commentators are dead wrong. Simply, the United States Federal Government is the monopoly issuer of its currency, the dollar. The US government is no longer under a gold standard, or any other fixed-exchange rate currency regime, and thus has the ability to issue currency in unlimited amounts and pay all its debts. Article 1, Section 7 of our Constitution grants the US Congress the unique prerogative to “coin Money [and] regulate the Value thereof.” Congress has assigned this incredibly important task to two of its agents: the United States Treasury and the United States Federal Reserve. These two government agencies work in tandem to ensure that funds are always available to meet congressional appropriations.  Contrary to consistent statements from economists, budget experts, members of Congress, and President Obama, there is absolutely no scenario in which the US Treasury can involuntary become insolvent, default on its debts, or “run out of money” (this is not the case for state and local governments, who are only currency users). Social Security, Medicare, and all other federal programs can never go bankrupt, regardless of the status of “trust funds” or other accounting mechanisms. All such concerns are remnants of the gold standard currency regime, which was ended domestically by Franklin D. Roosevelt in 1933 and internationally by Richard Nixon in 1971. Modern money is simply a means of facilitating commerce and moving real goods and services around the economy. As a fiat currency, the US dollar is no longer arbitrarily backed by the value of some shiny commodity; in our modern civilization it is backed by the ever increasing productivity of American workers.

So what is this debt, exactly? Our $17 trillion national debt exists mostly in the form of US Treasury securities, of varying maturity. These securities are simply a risk free, interest bearing alternative to dollar balances. They are functionally nothing more than savings accounts at the Federal Reserve. In fact, all values of US dollar deposits and treasury securities outstanding are accounted for by the Fed. Further, concerns about China funding our debt are misguided; the Chinese have earned several trillion in dollar balances in their reserve account at the Fed, by selling us goods and services for several decades. Instead of making the Chinese, or any other holders of US dollars, just hold these dollar balances in non-interest bearing accounts, the US Treasury offers debt, or its securities, as an interest bearing alternative to dollar balances. The market for US Treasury securities is broad, deep, and highly liquid. Since leaving the gold standard, the Treasury has never had any problem selling all of its securities at auction, and never will. There is also no such thing as “paying down the debt.” The value of Treasury securities outstanding has increased almost every year of our history, and the Treasury has been able to seamlessly roll over these securities since 1789, without any grandchildren involved. It can continue to do so into perpetuity, with interest rates determined not by markets, but by policymakers at the Federal Reserve.

Government debts are a risk-free asset to all private actors, and play an irreplaceable role in the global financial system. The sum total of bank reserves, cash, and US Treasury securities outstanding represent the dollar assets of the private sector. As a simple matter of accounting, the US federal deficit equals the nominal savings of the private sector, to the penny. Deficit spending does not subtract from anyone’s savings or “crowd out” the ability of the private sector to makes investments; to the contrary, all the dollars that the government spends in excess of those which it taxes back remain permanently in the private sector. Over the course of US history, our government has added around $12 trillion more than it has taken from its citizens. The simple fact that you or I have a dollar in our pockets is proof that the government has at some point spent more than it has taxed back. In no way should this be considered a bad or unsustainable phenomenon!

So what does this mean for policymakers?  If the deficit is too small (not enough spending or too much taxation) to overcome the natural and constant desire of the private sector (which includes individuals, large and small businesses, pension funds, foreign central banks, and others) to net save, unemployment will result. And right now, the massive hangover of private debt, including mortgages and student loans, is preventing the private sector from borrowing, lending, and expanding on its own, no matter what asset swaps and purchases the Federal Reserve may try. Therefore, it is the sole responsibility of Congress to deficit spend until the economy reaches full employment of labor and resources; nothing more and nothing less. The overriding economic concern of this spending is its ability to cause inflation, but not its creation of any arbitrary debt number or ratio. While some of this spending will certainly be considered “wasteful” by partisan observers, we must remember that absolutely nothing could be more wasteful than allowing millions of our fellow citizens to go unemployed or underemployed.

So given these conditions, what might be an easy way to increase employment? How about we stop taxing it! An easing or full repeal of the regressive FICA (payroll) tax might just do the trick. The latest employment figures for the summer of 2013 have been awful, and our current employment/population ratio remains painfully low. Getting to full employment should be the number one priority of anyone who calls themselves a progressive, because the political reality is that the American people will have little appetite for progressive reforms until the economy is strong. Our great nation has already suffered through five years of high unemployment, weak growth, and deferred dreams, represented by the nearly $5 trillion in lost economic output since the 2008 financial crisis. Dumb policymakers aside, we the people need not allow this tragedy to continue for one more day.

For more, please read “The Seven Deadly Innocent Frauds of Economic Policy” by Warren Mosler, and “Freedom from National Debt” by Former Deputy Secretary of the Treasury Frank Newman.