The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, Stephanie Kelton. Public Affairs, 2020, 325 pages.

Abstract

The book is well-written, well-structured (if a bit repetitive), and, surprisingly, even entertaining. [...]taken with a pinch of salt, it might even disabuse its less knowledgeable readers of some basic misunderstandings about public finance. [...]Kelton approvingly quotes former Fed Chair Alan Greenspan, who during a 2005 congressional hearing on the financial sustainability of the US Social Security system, responded to Former House Representative Paul Ryan’s worry about the Social Security system becoming insolvent by saying that ‘there’s nothing to prevent the federal government from creating as much money as it wants and paying it to somebody’ (182). According to MMT, those limits are primarily a function of the economy’s capacity to put the newly issued money to productive use. According to MMT, the point of taxing or borrowing is not to collect revenues to finance government spending (after all the government could ‘print’ all the money it needs).