At the recent VP debate, I watched two gentlemen blame each other’s “spending” for causing the recession. This does not bode well for MMT or reality entering our politics. Up until now, I thought there was hope for Democrats. But after watching the VP debate, if they all start following Biden’s lead it’ll mean they are moving further away from the reality instead of closer.
As you or anyone who has read an MMT book like the Seven Deadly Innocent Frauds knows, budget deficits and debt are not real problems. Recessions cause deficits, not the other way around. But, listen look at this art of the exchange (courtesy of abcnews) that illustrates what I’m talking about:
BIDEN: And, by the way, they talk about this Great Recession if it fell out of the sky, like, “Oh, my goodness, where did it come from?” It came from this man voting to put two wars on a credit card, to at the same time put a prescription drug benefit on the credit card, a trillion-dollar tax cut for the very wealthy. I was there. I voted against them. I said, no, we can’t afford that.
And now, all of a sudden, these guys are so seized with the concern about the debt that they created.
RADDATZ: Congressman Ryan?
RYAN: Let’s not forget that they came in with one-party control. When Barack Obama was elected, his party controlled everything. They had the ability to do everything of their choosing. And look at where we are right now.
They passed the stimulus. The idea that we could borrow $831 billion, spend it on all of these special interest groups, and that it would work out just fine, that unemployment would never get to 8 percent — it went up above 8 percent for 43 months. They said that, right now, if we just passed this stimulus, the economy would grow at 4 percent. It’s growing at 1.3.
For that last 4 years Republicans would attack Democrats and the Administration for debt and deficits. Democrats would counter with two wars, and the other things republicans deficit spent money on before the recession. The implication was that Republicans were hypocrites for only caring about deficits when Democrats were spending on things Republicans didn’t like. From a MMT perspective it wasn’t a harmful counter-argument.
Unfortunately, the above statement by Biden implies that the Republican spending was the cause of the current recession. That is a very destructive narrative. First of all, the absurdity for implying that I am out of a job now, because the government bought a tank 10 years ago. The second is that it reinforces the conventional wisdom that budged deficits are bad in of themselves. Also, it reinforces the false idea that debt denominated in a Sovereign currency can cause any crisis.
I was hoping to convince Democrats of the truth. That debt and deficits don’t really matter(at least not in the way they think). Instead they appear to be moving closer to the Austrian school and the idea that sovereign debt causes recessions – instead of the other way around. I hope Biden’s logic doesn’t catch on with the rest of the party.