GND and MMT: Ideas That Can be Shaped to Matter

One revolution down, two more underway. That about summarizes the situation here in the United States. The completed revolution has been inflicted on the Republican Party, which has been taken over by a New York property developer representing Americans tired of rule by coastal elites who have ignored their concerns.

Once the party of fiscal probity, it is now the party of tax cuts that balloon the deficits.

Once the party of free trade, it is now the party of mercantilism and protectionism, led by a President who believes that foreign governments pay the tariffs he levies on imported goods, and is unaware that the burden borne by American consumers and businesses now offsets the stimulative benefit of his tax cuts.

Once the party that believed deeply in the checks and balances the Founding Fathers built into the Constitution, it is now the party that refuses to constrain President Trump’s expansion of the scope of executive power.

Once the party that favored open immigration as a response to human suffering and business interests in keeping wages down, it is now the party of restrictions on immigration.

Surely those changes warrant the caption “revolution”.

The other two revolutions are only now gathering steam. Both are the products of the febrile imaginations of academics and leftish politicians. Each, if successful, would have profound effects, some malign, some beneficial, on the future not only of the United States but of the world’s economies. In combination, the Green New Deal and Modern Monetary Theory as now proposed would change the way we live, travel, work and finance our governments.

The GND is a plan to cope with the perceived threat of global warming. Conceived by Alexandria Ocasio-Cortez, a young, media-savvy member of the Democratic Socialists of America elected to congress as a Democrat in 2018, it is designed to match in scale Franklin Roosevelt’s New Deal which did or did not, depending on your choice of historian, enable America to survive the Great Depression. AOC, as she is known, sees herself as the FDR-equivalent in the fight against climate change.

The plan would aim at zero greenhouse gas emissions by, say, 2050 if not sooner — no more gasoline-fueled cars; no more oil or natural gas-based heating systems; all electricity to come from carbon-free sources (although the role of to be accorded nuclear power is not resolved); all existing buildings to be retrofitted to reduce emissions; any remaining carbon dioxide emissions to be offset by a variety of measures.

Although it is not certain that the storms, fires, floods, droughts and other plagues bedeviling the U.S. and the world are caused by global warming, or that such heating-up is the result of human activity, it now seems sufficiently possible that such is the case to warrant a vigorous policy response. Perhaps not on the scale envisioned by gang green for the GND, certainly only by a GND shorn of the adornments of income redistribution, free college tuition, government-controlled health care and other baubles added by some of its proponents. But on a scale more ambitious than laid out in the Paris accord of 2015.

Sneering is easy, policymaking is hard. So look beyond the fact that that GND’s most visible and, truth be told, effective advocates are Ocasio-Cortez, profoundly and irremediably ignorant of economics and history, and Greta Thunberg, a 16-year old Swedish school girl. Thunberg, writes the aptly named Dominic Green in the British magazine Standpoint, has a ” fiery vision [that] convinced the parliaments of Britain and Ireland to declare a ‘climate emergency’,” no matter that, although probably unknowingly, she is involved with “green lobbyists, PR hustlers, eco-academics and energy companies … preparing for the biggest bonanza of government contracts in history: the greening of the Western economies” according to Green.

Best to view the GND as the opening round in a battle for new emissions controls, which must include removing CO2 from the atmosphere as well as reducing new emissions. And as a comprehensive list of emission-reducing measures worthy of careful analysis of their costs and benefits.

All of this sounds and would be expensive. But that is no problem for the Green New Deal advocates because of the second revolution: the rescue of Modern Monetary Theory from the scrap heap of history. MMT advocates believe that any country with its own fiat currency, unmoored from the gold or any other standard, can ignore deficits and cover the costs of its projects by printing money. The central bank’s presses would be switched off not when red ink floods the nation’s books, but only when inflation rears its unlovely head, on the assumption that once inflation does emerge it can swiftly be re-caged. In place of FDR’s policy of tax-and-tax-and-spend-and-spend, we would have AOC’s policy of print-and-print-and-spend-and-spend.

In its pure form MMT produces Maduro’s Venezuela and Mugabe’s Zimbabwe, and is hardly worthy of serious consideration. But in a more moderate version it forces us to rethink fiscal policy. Such a rethink has been due ever since Germany imposed on Greece a ruinous dose of the austerity that has been the traditional cure for deficits. Indeed, it is already underway. Harvard’s Larry Summers (click on recommend reading above) and others are arguing that, with interest rates as low as they are, it would be sensible to spend on new infrastructure projects with projected returns in excess of current interest rates, even if such spending runs up America’s already-swollen deficit. Call it MMT writ small enough to make it unnecessary to head for the grocer with bushel baskets of dollars.

It is tempting to ridicule both MMT and the GND, a temptation to which this writer is not alone in yielding at times. That is unwise. Like many but far from most revolutionary ideas, these, when shaped and amended in the course of democratic debate in the learned journals, the popular press, and on the campaign trail, can result in sensible and better public policies. We just might benefit from these revolutionary contributions to climate and fiscal policymaking, shaped to accommodate reality. Or end up with massive, inflationary spending on a non-existent problem. I hope for the former and fear the latter.