That is beyond the pale of reason. If the government takes one dollar from me and uses it to buy a candy bar, it’s the same as if I spent the money myself on the candy bar. To put it another way, if an unknown entity purchases a hammer, how can you tell from the effects on the economy whether the government was the purchaser?
Except the government doesn’t “use” that dollar to buy anything. It destroys reserves through taxes and creates them through spending. Yes, the TGA (Treasury General Account) receives reserve credits when taxes are paid and is debited when the government spends. And yes, spending must derive from a positive TGA balance, which is why the Fed and Treasury orchestrate treasury sales on the primary market. But treasury bonds are financial assets which can be, and are frequently, exchanged for reserves. Treasury securities are effectively ‘savings’ accounts at the Fed whereas reserves are ‘checking’. So, all things equal, deficit spending is an injection of net financial assets into the non-government sector.
This is more than a semantic distinction. If the government doesn’t need tax revenue to spend, then taxing/spending is more accurately described as the creation/destruction of reserves and deposits rather than ‘transfer payments’. Nothing is being ‘transferred’ because there is no finite supply. The end result may look like a transfer depending on how we choose to tax and spend, but that’s a political choice.
I challenge you to explain how this survey comports with your claim that the majority of economists do not reject MMT.
Read the questions asked in the survey. Guess what? MMT economists also would answer with a resounding STRONGLY DISAGREE to both questions.
Question a: Nobody believes this or claims it. You can’t just create infinite money with no impact on inflation. MMT points out that deficits matter for DIFFERENT REASONS than mainstream neoclassical thought holds.
Question b: Again STRONGLY DISAGREE. You cannot deficit spend ad infinitum because you will exhaust the supply of REAL RESOURCES in the economy, which will drive real spending capacity to zero.
This survey looks like a sham designed to smear MMT based on fundamental misunderstandings of what MMT is.
I’d like to see a citation supporting this claim.
Here’s a tweet from Ed Crooks, chief editor of the Financial Times.
Lastly, I’ll offer a point that I hope you can agree with, to wit: the government can expand the money supply to match increases in the supply of goods and services without triggering inflation. If, however, the government prints vast amounts of money, then inflation with increase. Can we agree on that point?
Yes, if the government creates massive amounts of net financial assets in such a way that productivity does not increase in some proportion, you will get inflation. However, this misses a couple things:
- Most money spent in the economy (deposits, not reserves) are created by private banks making loans. I think the number is something like 97%
- Effective government spending often either replaces private spending or increases productivity in some way, such as infrastructure