Yeah, MMT basically asserts that the separation between fiscal and monetary policy is artificial, and that the only real constraint on “fiscal” policy (tax and spending) is monetary effects, not the metaphorical limited purse (“fisc”) that must be filled with revenue and borrowing to allow spending.
It is not “Congress can spend willy-nilly” but “Congress needs to stop thinking about fiscal balance and start thinking like the Fed.” (Or, perhaps, “Congress needs to define fiscal policy with movable levers which it gives control of to the Fed or a Fed-like body.”)
Irrespective of its economic merits, any policy which depends on a competent and upright Congress does not inspire confidence. It feels like it's bound to be one of those "True MMT Hasn't Ever Been Tried (TM)" things.
MMT isn't a thing to try or be tried: it's not an ideology or set of policies or even policy goals (there is a very loose correlation between adherence to MMT and certain progressive policy goals, but they aren't the same thing.)
MMT is an understanding of factual nature of the environment in which government operates. Reduced to one sentence it is “the entire concept of fiscal balance is play-acting as if the government was using commodity or externally-controlled fiat currency, rather than it's own fiat and a distraction from the real constraints on government finance, rather than something which reflects, or even loosely guides policy makers towards, the real constraints.”
Factual is class of statements, opposed to normative statements.
> MMT is an old lie
It can't be that old, since it only describes the constraints on sovereign finance of entities functioning in their own pure-fiat currencies, which isn't a subject that has been of interest for very long.
MMT is not based on facts about the world as it is, but on conjecture, ergo it is not factual.
The old lie is that sovereign entities (note the deep and old roots of that term in feudal societies) can debase their currencies with zero consequences.
Usually this works well for a long time, until all of a sudden it doesn't.
dragonwriter seems to have meant "factual" in the sense of "concerned with questions of fact", "is" rather than "ought", and was not intending to claim (at least in that statement) that the answers MMT provides are correct.
gray-area seems to have interpreted "factual" as "accurate" or "truthful", and was objecting that defining a theory as "concerned with things which are actually fr-reals true" is cheating.
To be fair to gray-area, "true" is probably much more common a use of "factual". On the other hand, the broader context was that dragonwriter raised the point in objecting to argument about what MMT purportedly says we "should" do.
MMT is not evidence based, it is in no way factual (it is neither backed by facts, nor is it concerned with facts) - it is a conjecture about what might happen in the best of all possible worlds based on abstract arguments about perfectly spherical economies in a vacuum.
Factual is entirely off base as a descriptor and has been picked here in an attempt to make it seem grounded in reality and without challenge.
I expect at this point you're actually disagreeing in some sense with what dragonwriter believes but I don't know and I won't speak for him.
My point here is not to defend MMT but the quality of the conversation.
If someone comes along and says Modern Moo-netary Theory says we should to build too many catapults, and another someone points out that the theory doesn't address questions of "should", pointing out that the theory talks about spherical cows in space doesn't rescue the original objection.
That a theory makes unrealistic assumptions is absolutely an appropriate objection to raise, but it belongs upthread. Otherwise it won't be seen by people who've already decided what they think of the narrower topic of this subthread, and we'll get more repetition of worse arguments.
There was an obvious implication that it made recommendations (in order for it to have "been tried") which I still believe is what dragonwriter was objecting to.
My objection is to people talking past each other rather than engaging (whether intentionally or unintentionally) and remains as relevant as ever.
> it's not an ideology or set of policies or even policy goals
That might be true in the academic sense.
But in reality, the only people who talk about MMT are people who just want to spend money infinitely and claim that there is no negative consequences to doing so.
Which of course, doesn't make any sense if you know anything about MMT in the academic sense, which absolutely admits that there is negative consequences to spending/money printing.
Mainstream economists don't really think MMT has much to say, TBH, and few professionals care about it.
As someone who took a lot of political science and economics classes once upon a time, and has an ongoing amateur interest in these things, MMT is the first time I've looked at one of these macro-level explanations/descriptions and not felt like I needed to ask a bunch of stupid questions that are (inevitably) going to be dismissed with a heaping dose of condescension. Finally, something that makes total sense when I look at how real world systems (and especially governments) behave.
It's less that it's simple (it doesn't really seem simpler to me than any other fundamental approaches to macro, no?) than that at least real-world behavior of governments, and changes in the world as a result of that behavior, doesn't all seem to point strongly in the direction of something about it being wrong or badly incomplete. It's simple like universal gravitation is simpler than epicycles.
Ok and the fact remains, that the vast majority of experts in the field dismiss MMT as something that doesn't provide much of value to the field.
Thats the important part here. Whatever your opinion is on any of this, basically all the actual people who know what they are talking about, disagree and think that MMT is basically valueless.
The world isn't that complicated. Its brutal and uncaring. We make up complicated systems beacuse we'd rather not face the pointless brutality of it all. Contrast the complexity of religious faith in life after death to the biological reality on the ground for the best example of this.
Similar background. MMT, for me as well, is the first comprehensive explanation of money that just fits everything and makes complete sense without any glaring holes.
All other theories feel like yeah... but how does it explain this phenomenon or that
Not-quite Fiscal Theory: the fed mints a $1 trillion dollar platinum coin and lends it to congress to allocate the year's budget. The coin may not have any value beyond spot, but everyone can see that congress has a rare piece of metal!
An issue with using fiscal policy this way is that many of the things that are worth spending money on aren't easily movable levers, they are long term projects.
If inflation is accelerating and we need to cut spending to fix things it may be difficult or inefficient to cut the budget of a 10 year infrastructure project. If we need to spend more one year, do we just flood the healthcare system or military with money temporarily?
Changing tax policy frequently creates uncertainty for people investing in long term projects, which increases risk and cost associated with funding them.
I like that there is an academic debate going on about MMT, but there are practical challenges in implementing it. While far from perfect, the current monetary policy approach is easier to implement and change, while outsourcing capital allocation decisions to the banking system.
It is not “Congress can spend willy-nilly” but “Congress needs to stop thinking about fiscal balance and start thinking like the Fed.” (Or, perhaps, “Congress needs to define fiscal policy with movable levers which it gives control of to the Fed or a Fed-like body.”)