Deficits

There is a new idea in the field of economics that is a refinement of old ideas and it is called, modern monetary theory (MMT). It has come into prominence to answer the question, if deficits will eventually ruin the economy, why hasn't it happened. The government has run deficits for over 200 years and things are still working. Politicians use phrases like your passing the debt to your children or China will take over by buying our debt. This is designed to show the evils of deficit spending. The normal way to deal with deficits is to either raise taxes or cut spending or both. MMT suggest that you set your goals and then issue money to finance those goals. If this means deficit spending then so be it. This answers the question that always comes up with every new program, how are you going to pay for it. If it is a valuable goal then pay for it by issuing money. This takes courage that most politicians do not have because they don't want to face questions like, burden grandchildren or have China take control of our money. During the recession of 2008 the government did deficit finance but not enough and so the recovery was the slowest ever. MMT predicts that more spending would have led to a faster recovery. Deficits are intuitively unhealthy because people think in terms of their own experience. House holds, cities and states cannot run deficits at least for long but the federal government can because the feds can print all the money they need. The country is now embarking on an experiment using the idea that if it is a good thing then print the money and do it.