If there’s anything to be taken away from the COVID-19 pandemic, it’s that our country is broken. In terms of health care, we simply don’t have the capacity with current private and public spending to treat all patients affordably and properly. Our health care system just isn’t built to be elastic enough to deal with both the pandemic and standard medical emergencies. On top of this, our nation is currently going through a massive affordable housing crisis, which has only been exacerbated by the pandemic. The supply shortage of lower-income housing has impacted Broome County significantly. Furthermore, our infrastructure is also failing. Back in 2021, the American Society of Civil Engineers gave U.S. infrastructure a rating of C-, which is obviously very low for one of the richest nations in the world. But what if I told you there was a magical cure to these ailments — a way that we could use government, rather than relying on private projects, to fix our wounded country? In theory, I believe there is a solution that could help solve all these problems and perhaps even more.
The remedy goes by the name Modern Monetary Theory (MMT), and so far has only been talked about by some radical economists. So, what is it? According to Business Insider, it is defined as “an economic theory that suggests our government could simply create more money without consequence” in order to fund important public projects. The underlying basis of MMT is that fiscal policy should be used to manage the economy and spending rather than monetary policy. This means that lawmakers would choose how much money to print on a case-by-case basis in order to support projects such as health care, rather than the central bank determining how money flows into the economy. In the United States, our central bank has a monopoly on the supply of money. What MMT means is that the government could ignore the national debt and choose to run a perpetual budget deficit, leading to more investment in health care, housing and infrastructure without the need for generating more tax revenue. If the federal government were to pursue Medicare for All, for example, they could seek to print the estimated $3 trillion or more necessary to fund this program rather than relying on tax hikes and shifting the budget out of other departments.
I firmly believe MMT could allow Democrats to reverse engineer the “de facto fiscal policy,” as described by Dylan Matthews of Vox, that Republicans tend to use to pay for tax cuts and defense spending, which is hiking the deficit. However, Democrats could use this pro-deficit spending path to help address the concerns in our economy I mentioned in the first paragraph. Now, before I go more in depth into how MMT can positively impact the macroeconomy, I’m going to address a concern that may have crossed your mind — if we decide to ignore the deficit and just print currency necessary to fund our large-scale public projects, won’t that lead to hyperinflation?
No, it will not. Inflation can result when “aggregate demand (the purchasing being done in the economy) outstrips the real stuff (consumer goods, factories for corporations, etc.) available for purchase,” according to Vox. If we follow the MMT strategy of increasing the printing of the dollar, and there are a lot of dollars but not enough real things to purchase, there will be inflation. However, the response to this could be a standard increase of taxes when inflation becomes too high, which isn’t too radical of an idea. Additionally, inflation tends to “[come] from monopolists and other predatory capitalists using their market power to push prices higher” according to Vox, and increasing government regulation of the economy can be a solution tied in with MMT. In fact, I think that accepting slightly higher prices is absolutely a worthy sacrifice in order to solve so many core economic problems with the way our current capitalist system works. I want to emphasize that higher prices for individual goods would be offset by low living costs through welfare expansion. Additionally, the opportunity cost of losing out on universal health care, universal affordable housing and universal high minimum wage is much higher than the opportunity cost of a rise in prices for consumer goods.
How can MMT specifically solve the three core economic problems I have mentioned: a broken health care system, low supply of affordable housing and crumbling infrastructure? Well, it all has to do with what you can get out of spending bills. Back in November, Biden passed a $1 trillion infrastructure bill, allowing for the funding of America’s outdated infrastructure. Broome County’s own county executive, Jason Garnar, praised the legislation back in November, saying that the funding Broome County will get under the initiative will “not only fix roads and bridges but bring broadband internet service to every corner of the county,” according to WNBF. But there is much more that could be done. If this public spending did not rely on our ability to afford new federal programs via tax increases or cuts to existing programs, we could seek to address all of Broome County’s infrastructure issues. If the government wasn’t constrained monetarily, we could also promote universal health care without damaging private insurers immediately. If the government had the capacity to pour money into hospitals during a transition from private-owned to state-owned insurance, the immediate negative effects to patients and doctors could be circumvented. Federal spending could also be used to fund thousands of new affordable housing projects in cities with large homeless crises. Most importantly, if we were to adopt MMT, the federal government could allocate funds to all these projects rather than choosing one over the others.
As we navigate this pandemic and seek to reform our economy for the better, we must be willing to take risks to improve equity. Much of the controversy surrounding MMT is involved with hesitancy over disregarding the national deficit, but it’s important to note that the United States has entered high national debt relative to gross domestic product (GDP) many times before, and this has corresponded to increased spending on social programs, defense spending and economic growth. During the Great Depression, the U.S. government chose to increase the deficit in order to boost well-being and the domestic economy. While this type of fiscal policy has never been implemented before under a large capitalist political system, the times demand we take more risk. Additionally, if MMT doesn’t work, we can always seek to cut defense spending and reallocate funds to welfare or increase taxes on the ultra-wealthy. But these measures fall within our current gridlocked system of government. If Congress is unable to allocate enough funds to sustain the lives of all citizens, and if the current system is broken, maybe it’s time for us to roll the dice and create a new system.
Sean Reichbach is a freshman double-majoring in economics and philosophy, politics and law.