I knew it was a good sign when Bernie was named as the ranking member on the budget committee, and an even better sign when he hired Stephanie Kelton. Via Al-Jazeera:
In the meantime, Sanders has used his position as a ranking member on the Senate Budget Committee to expound on his own vision for a political program. Last month, he put out a report advocating for a federal budget that would help “rebuild the disappearing middle class.”
Most of the policy initiatives suggested in that report — such as raising the minimum wage and boosting infrastructure spending — have been proposed before by Sanders and members of the Democratic Party. But the report also included a novel way of thinking about the federal deficit: Although Sanders said debt reduction is a worthy goal, he put far greater emphasis on reducing what he called the “other deficits in our society,” such as unemployment and income inequality.
That shift of emphasis — from an abstract, intangible economic indicator like the federal deficit to more concrete issues such as infrastructure and household income — appears to have been influenced in part by a heterodox strain of economics known as modern money theory (MMT). That school of economics has long been ignored by denizens of Capitol Hill, but it has plenty of adherents on the progressive left who are cheering Sanders's recent public statements.
The Vermont senator is not an MMT adherent, but one of its leading practitioners, Stephanie Kelton, is now his chief economist on the Budget Committee. That hire, and Sanders’s subsequent public statements, have drawn the approval of progressive journalists such as The Fiscal Times’ David Dayen.
"Sometimes, Washington backs into its best ideas without even knowing it,” wrote Dayen in late January. "Sanders’s MMT-tinged push for higher spending comes at precisely the right time, when politicians are looking to respond to inequality and economic despair."
MMT economists view money as something that is spent into existence by the state. The more money the government spends, the more money the private sector accumulates. When the government taxes in order to recoup some of that money, it does so not in order to generate revenue for itself, but to limit the supply of money and give it some stable value.
“If the government were spending $100 and recovering $90 of it by taxation, that’s leaving $10 somewhere in the economy,” Kelton told Al Jazeera. “And the question is, is that too much or too little? The way I would think about it is, the danger of putting too much into the economy and taxing out too little would result in inflationary pressures."
That’s not a danger that Kelton sees looming anytime soon. There is, she says, “a lot of slack in the economy,” which could be ameliorated through stimulative government spending on things like infrastructure and a more robust social safety net.
You can listen to Stephanie Kelton talk about MMT here.