Brian Romanchuk — Understanding Fiscal Sustainability Debates

I have encountered a number of discussions of fiscal sustainability over the past weeks. In particular, there have been debates between proponents of Modern Monetary Theory (MMT) and mainstream economists. This article does not attempt to settle the debate (although I am in the MMT camp, and obviously biased), rather frame the discussion. One of the problems with the debate is that the sides tend to talk past each other, as they have a quite different theoretical views, and this article explains why....

Bond Economics
Understanding Fiscal Sustainability Debates
Brian Romanchuk

Alexander Douglas — Simon Wren-Lewis, MMT, maths

Alexander Douglas replies to Simon Wren-Lewis on MMT.

Stories by Alexander Douglas on Medium by Alexander Douglas
Simon Wren-Lewis, MMT, maths
Alexander Douglas | Lecturer in Philosophy, University of St. Andrews

Scott Fullwiler — Replacing the Budget Constraint with an Inflation Constraint

As argued bazillions of times, the real point MMT is making is that the government’s budget constraint is the wrong constraint—the correct constraint is whether or not a particular budget position will raise inflation beyond an official target rate (say, 2%, which seems to be the choice of most central bankers).

Let me explain to Mr. Worstall and others how this could work rather easily—just as the CBO and OMB now evaluate government budget proposals regarding their effects on the budget stance, the CBO and OMB could instead shift focus on evaluating these proposals against the inflation target (I argued the same thing here, printable version here). Much like how policy makers supposedly take estimates of effects on the budget position rather seriously in making budget conditions, they could replace these with projections of inflationary effects. An inflation constraint provides more fiscal space than a budget constraint, but in no way does it provide unlimited fiscal space (again, as we’ve always argued). 

We could add quite a bit of detail here if we want, but I’ll just say a few more things.

New Economic Perspectives
Replacing the Budget Constraint with an Inflation Constraint
Scott T. Fullwiler | James A. Leach Chair in Banking and Monetary Economics and is an Associate Professor of Economics at Wartburg College

Bad Juju?

Grasping Reality with Both Invisible Hands
The Obama Tax Cuts: Now It Is Time To Think About Funding Them…
Brad DeLong

The New York Times | The Conscience of a Liberal
Debt in a Time of Zero
Paul Krugman

Economonitor | Great Leap Forward
Why Does Brad DeLong Worry About Paying For Tax Cuts?
L. Randall Wray

New Economic Perspectives
Brad DeLong Has Me Worried
Stephanie Kelton

Joseph Hykan — Sovereign Currency Issuers Are Always Solvent

No Budget Constraint

New Economic Perspectives
Sovereign Currency Issuers Are Always Solvent
By Joseph Hykan

Video developed for Eric Tymgoine’s modern money course.