One of the annoying claims by the so-called fiscally responsible is that we can’t “print prosperity”–that is, we can’t deficit spend in order to help the real economy. It’s derided as unrealistic and ‘ideological’ (whereas fiscal austerity is implied to be ‘common sense’). Peter Cooper explains how it is fiscal austerity–the worship of deficit reduction–that elevates ideology over real-world consequences (italics mine):
The phrase “print prosperity” is shorthand for the common message board accusation that MMT [modern monetary theory] ignores real resources and gets bamboozled by money as if it is magic. The accusation is very common. The term “print prosperity” was coined, to the best of my knowledge, by a Math Professor, no less, who happens to be keen on the kind of “fiscal conservatism” advocated by the Concord Coalition.
I consider it a perverse injustice that, in online discussions, MMT sympathizers are frequently reproached for imagining that “we can print prosperity” when in fact it is us who constantly stress as a fundamental point that the only true constraints are resource based, not financial or monetary in nature. We are the ones insisting that if we have the resources, we can put them to use. It is the neoclassical orthodoxy and others who try to make out that we can’t use resources, even if they are available, because of some magical, mysterious monetary or financial constraint. Just who is it that believes in magic here?
MMT shows clearly that if we have the resources, money is no obstacle to a government that issues its own flexible exchange-rate fiat currency. It is not saying that creating money magically creates goods and services. It is saying that it is nonsense – superstitious nonsense – to think affordability for such a government could be about money rather than resources.
As I noted in a recent post, when you have idle workers, idle capacity, and severe infrastructure needs, spend the money:
The problem is that, faced with two linked problems, idle capacity and idle workers, we are politically unable to engage in the obvious solution, which is deficit spending to prevent workers and industry from sitting idle. Instead, we are left with the option of flooding banks with quantitative easing. Oddly enough, banks, many of which still have questionable balance sheets, instead of loaning to businesses with inadequate demand (go figure), are shunting this flood of dollars into speculative markets, since, as Cook notes, that’s where the (desperately needed) profits are.
As regular readers will know, I have no problems with deficit spending, but how one creates those deficits is really critical. The obvious way to solve the ‘dual idleness problem’ is through various employment programs–and it’s not like our infrastructure isn’t in need of a massive overhaul.
Instead, we moralize about balance of accounts, as millions are unemployed and underemployed and our nation’s infrastructure crumbles.
We are not on the gold standard anymore….