With Mark Blyth’s recent destruction of MMT as a solution for Scotland there has been yet another spark in the debate (see last blog post)
The trouble is, the debate just ends up going around in circles and it doesn’t need to.
At the heart of the MMT debate is the concept that a currency issuing state need never run out of cash because it can always resort to the printing press. This is in itself true.
The fundamental question that then follows is: Is this a wise thing to do? Specifically is it wise to print money for public spending when that money is not matched by tax or borrowing?
That should be the debate over MMT.
The deflections
The problem is that those disciples of the MMT religion want to expend lots of energy trying to debate matters which are not fundamental to the issue.
The press
The first deflection is the use of the term ‘printing press’. Here we end up discussing if the state prints money or just creates in through the Bank of England. Printing press is just a metaphor, so can we move on?
Tax is destroyed
A more fundamental issue is that MMT belief (despite the statements to the contrary from the Bank of England) that tax receipts are destroyed on receipt and all new spending is actually just printed money.
This seems to be a shibboleth for the MMT collective. You MUST believe this to understand the beauty of the MMT model.
Strangely though it’s irrelevant to the fundamental debate above. You can accept this or you can not accept it, it doesn’t make a difference to the concept of the wisdom of printing money.
MMTers like to say that it does matter, because if the state prints all government spending then there is no problem with printing more to fund spending. But in the fundamental debate it doesn’t matter if taxes are destroyed and all spending is fresh new money, the question still remains is it wise to print more than you tax and borrow.
So can we move on?
The new order
Again, another distraction in the debate is the MMT insistence that there is a specific order to tax and spend, specifically that it is spend first and then tax.
The idea being the government creates money in the economy by spending it into the economy and then takes some of it back.
Again this seems to be of huge importance whereas in principle it doesn’t matter in respect to the fundamental question; is this wise?
You can believe in an order of tax, spend, or spend tax, or more simply, doing both simultaneously in real time. However, this doesn’t really address the fundamental debate.”
So can we move on?
Getting to the heart of the debate
So if we are debating MMT can we all agree to disagree on these points.
Or better yet for the purposes of debate lets just accept that the issues are agreed, Tax is destroyed on receipt, all spending is freshly created new money by the state in the order of spending first, taxing second.
Now can we debate whether creating and spending public money above and beyond that which is expected to be returned in taxes and borrowing is wise?
