When Rep. Alexandria Ocasio-Cortez move out her “Green New Deal,” calling for clean energy and guaranteed jobs, one of the first questions she got was: How do you plan to pay for it?
The New York Democrat argued that ambitious programs could easily be financed through deficit spending.
“I think the first thing that we need to do is kind of break the mistaken idea that taxes pay for 100% of government expenditure,” Ocasio-Cortez told NPR’s Morning Edition in February.
In doing so, she shined a spotlight on a once-obscure brand of economics known as “Modern Monetary Theory,” or MMT.
“There was something of an Oprah effect when she did that,” said economist Stephanie Kelton of Stony Brook University. “People immediately probably started Googling ‘Modern Financial Theory’ to find out what she was referring to.”
Run that Google search and you’ll quickly find Kelton herself. The economist, who advised Bernie Sanders’ 2016 campaign, is one of the best-known evangelists for the theory. Kelton says paying for big government programs is the natural part. If Congress has the will, the Federal Reserve can effectively print the money.
“If Congress authorizes a few billion dollars of an additional spending or a few hundred billion dollars, then the Fed’s job is to make sure that these checks don’t bounce,” Kelton told NPR.
A central element of MMT is that governments that control their currency — like the United States don’t have to worry about spending more than they collect in taxes. They can always create more money. But despite the caricature sometimes supplied by each the idea’s critics and supporters, Kelton insists that’s not a blank check for unlimited government spending.