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What Is The Modern Monetary Theory? | Velshi & Ruhle | MSNBC - YouTube
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an unconventional economic theory is
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gaining some traction thanks to the
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policy teams of Alexandria Ocasio Cortez
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and Bernie Sanders it's called modern
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monetary theory mmt I'll stay with me
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for this one
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mmt suggests that governments don't have
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to worry about debt because they print
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their own money if we need to spend more
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money on government programs we print
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more but too much money in the economy
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could result in inflation mmt suggests
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that we use taxes as a relief valve pull
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money out of the economy before it
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overheats from having too much money in
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there supporters of the theory say the
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government should stop trying to balance
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the budget period they go so far as to
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say that policies aimed balancing a
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budget hurt the economy by forcing cuts
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to programs in fact they think a budget
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surplus should be avoided at all costs
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a government holding onto money instead
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of funnel it in finding it into the
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economy is more harmful than piling on
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debt in the long run this is a very
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different approach than the
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pay-as-you-go proposals from Democrats
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or the massive program cuts suggested by
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Republicans over the last few decades
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and it's a total departure from
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mainstream economic theories one that
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hasn't been discussed a whole lot until
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now policy proposals from the
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progressive left like Medicare for all
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or from Bernie Sanders or the green new
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deal from Acacio cortes often raise the
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question of how we are going to end up
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paying for it one of the answers is we
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can just print more money joining us to
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talk more about this is the former
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chairman of the counts
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Economic Advisers for President Obama
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Austan Goolsbee Austin that's that's a
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hard one to lay out I've tried as best
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as I can
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what's your thinking on modern monetary
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theory in its place in the way we
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approach budgets and debt and programs
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well I thought you did a good job
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summarizing their views I guess I'd say
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as it applies to our politics
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I kind of agree that in a world where
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each time the Republicans take over they
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completely disregard that tax cuts need
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to be paid for and they run the deficit
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up that it's unrealistic and unfair to
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say to Democrats oh well if you want to
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do something important for the country
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that you have to pay for every cent we
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can't increase the deficit how many on
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that said the MMT
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as a theory as an economic theory is
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confused it's kind of a mismatch of
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things that don't really make sense or
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else are completely obvious so I wish
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they would spend less time talking about
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theory and more time just talking about
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what's reasonable that's a lot for an
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economist to say that okay help me
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understand this then because Bill Gates
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recently took exception with mmt calling
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it crazy talk but at the same time he
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conceded then you can raise that to a
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hundred and fifty percent of GDP before
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you reach a problem point is he right
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look I think the the argument that the
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US has a higher debt capacity than our
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current debt level nobody's gonna argue
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with that yes we can't that's why the
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markets don't freak out and as the as
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the deficit has gotten bigger the
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problem of deficits of course is that
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you have to pay back the money and it
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crowds out other priorities that we that
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we have rising debt we're gonna have to
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pay the end cuz there is interest it's
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like three yeah it's not free that said
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we can't afford it and the part of it's
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not really about MMT mmt as a theory is
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confused the argument that the US can
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afford to run deficits especially if
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it's for
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investing in things that are going to
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have a future payoff you know that we
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can do that because we've been doing it
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for things that aren't even investments
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we have now for the last two Republican
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presidents had massive increases in the
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deficit for tax cuts tying income people
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but so we could afford to do that where
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we've decided that's okay for it here's
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an issue I'm thoroughly confused and
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Austin seems to be yes we're all
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confused so let's move on a girli
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confused about to mmt yeah we have seen
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a whole bunch of Democrats already those
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who are in the 2020 races sort of eyeing
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this or at least getting themselves
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closer to an economist named stephanie
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kelton she helped popularize the
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popularize mmt if that's where democrats
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are going is this thing going to be a
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bigger talking point as we head into the
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primary race I don't know
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it'll look it might be but I mean truly
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it's confused their argument there's one
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part that's obvious and there's one part
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that's confused the part that's obvious
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is yes if you run up debt in your own
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currency you could print money to pay it
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back
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that would as Ali said lead to
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significant inflation that's monetizing
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the debt and then their second
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conclusion is what we can prevent the
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inflation by raising taxes but if you
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raise the taxes you eliminate the
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deficit we know that you could afford
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more government spending in the long run
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if you had a lot more tax revenue the
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question has always been what do we how
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much more tax revenue do we want to have
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so that's why I think the theory is a
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little bit muddled but the basic point
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if their basic point is why should we
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have to never run the increase the
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deficit to make investments when the
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Republicans repeatedly run up the
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deficit to cut taxes for high income
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people and the make sense that's totally
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reasonable you're investing in things
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that will offer you a greater economic
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return over the long term than you're
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paying in interest then that can be a
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reasonable transaction per building yeah
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sure exactly right the issue in we've
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sort of that's like they're saying they
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they are correct on that all right
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Austin thank you for working through
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this with us this one's a little tricky
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he's a former chairman of the Council of
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Economic Advisors my goodness I mean I
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do wonder do people remember what what
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health President Trump get elected were
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three words slogans and yeah hey MSNBC
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