It can fulfill the above goals with tax rates that take in far less revenue than needed to make ends meet, and it can do so for years-even decades. The government doesn’t tax people to balance the budget, though. Fourth, to encourage or discourage certain behaviors, via tax credits for solar panels or high tax rates on gasoline. Third, to redistribute income, levying a negative income-tax rate on poorer parents, for example, or a higher tax rate on millionaires. Second, to control inflation, raising taxes to take money out of the economy and lowering them to put money in. wouldn’t find a market for the dollars it makes. If American citizens and companies didn’t need to pay taxes in dollars, they wouldn’t need to earn money in dollars, and the U.S. Why, then, does the government tax anyone? Four reasons: first, to maintain a monopoly currency. It literally makes money with the central bank, the Federal Reserve, creating electronic currency out of thin air. The government doesn’t tax people and companies because it needs money, contrary to popular myth. government doesn’t need to earn money, she argues. Kelton explains why, to MMT theorists, the U.S. An economics professor at Long Island’s Stony Brook University and a former adviser to Bernie Sanders’s Senate Budget Committee, Kelton aims to demolish what she calls “the household myth”: that is, as we’ve often heard from politicians, that we should balance the federal budget the same way we balance our family budgets. Several academic authors have published MMT books in the past half-decade, but Kelton’s is the first to target a lay audience rather than students or academics. In her 2020 book, The Deficit Myth, economist Stephanie Kelton has a surprising answer: not really.
It’s natural to wonder whether this can go on forever. Total debt easily exceeds 100 percent of GDP. The United States is now running its biggest budget deficits since World War II: 14.9 percent of GNP last year, and 10.3 percent this year. Yet in practice, both parties govern as if MMT is now the law of the land, with tax policy entirely unrelated to spending policy, both in good times and bad. Former president Donald Trump proposed several spending plans that purported to balance the budget over 15 years, and President Joe Biden campaigned on financing his spending plans with tax hikes. can print or borrow as much money as its elected officials desire. Neither Democrats nor Republicans officially subscribe to “ modern monetary theory,” or MMT-the idea that the U.S.
The Deficit Myth: Modern Monetary Theory and the Birthplace of the People’s Economy, by Stephanie Kelton (PublicAffairs, 336 pp., $30)
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