The AEI really hates Bernie!

[mhatrw]

http://www.aei.org/publication/progressives-like-bernie-sanders-have-a-novel-economic-theory-that-says-they-can-spend-spend-spend/

I will let the Economist describe modern monetary theory, or MMT:

Warren Mosler, an innovative carmaker, a successful bond-investor and an idiosyncratic economist, moved to St. Croix in 2003 to take advantage of a hospitable tax code and clement weather. From his perch on America’s periphery, Mr. Mosler champions a doctrine on the edge of economics: neo-chartalism, sometimes called “Modern Monetary Theory”. The neo-chartalists believe that because paper currency is a creature of the state, governments enjoy more financial freedom than they recognise. The fiscal authorities are free to spend whatever is required to revive their economies and restore employment. They can spend without first collecting taxes; they can borrow without fear of default. Budget-makers need not cower before the bond-market vigilantes. In fact, they need not bother with bond markets at all.

Some context: The Democratic Party is “all in” when it comes to reducing income inequality, a redistributionist raison d’être. A wide egalitarian streak has always been there, of course. But it sort of comes and goes. In the 1990s, creating wealth seemed to take precedence over spreading the wealth. High-end inequality surged during the Clinton presidency, but with a rising tide was lifting all boats. There were no Occupy-like protests. Then came the slow-growth 2000s, Great Recession, and Not So Great Recovery. As new Nobel laureate Angust Deaton has written: “Slower growth makes distributional conflict inevitable, because the only way forward for me is at your expense.”

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So the progressive Dem challenge: making the argument to the US middle class that wealth redistribution really is wealth creation, really is pro-growth. I have called this the Grand Unified Theory of Liberalism, and it has a number of elements:

First, increased demand for goods and services is the primary driver of economic growth. Second, since the rich save more than the middle class, growing income inequality is sapping the economy of consumer demand and hurting growth. Middle-out economics! Third, taxing the rich and redistributing to the middle will boost growth and not harm long-term incentives. Now another way to boost demand and growth is more public investment, like infrastructure spending. But is that possible given America’s large public debt and a deluge of entitlement spending on the way?

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