Background

I’ve been following MMT-related ideas for a long time. As an economics student in the ‘70s, I was horrified at the societal loss inherent in idled capacity. We lose the bridge that might otherwise be built, the mining, the metallurgy, the aggregate demand that spurs investment and employment in industries down the line. But we also sacrifice people’s livelihoods, their skills, their dignity, their local tax base, their children’s shot at a better future. And for what? Lack of money to build the bridge? Green pieces of paper with decimal values and images of historic figures? Designed and printed by the US Government itself? It made no sense. Of what use are austerity, stagnation, involuntary idleness, if your expenditure is my income? Environmental and inflationary considerations aside, this aversion to deploy seemed an inexplicable and self-undermining policy vice.

I was introduced to the notion of Functional Finance in 1978 via Abba Lerner’s book Flation. In 1979 I took what turned out to be my last Economics course, a microeconomics survey with William S. Vickrey, famed for welfare-maximizing auctions and proposals for congestion pricing. Vickrey, we may recall, was awarded the Bank of Sweden Prize in October 1996, and passed away a few days after the announcement. I was cheered to find that late in his career my old professor had become an advocate for “chock-full employment” by any deficits necessary, an MMT progenitor. I was saddened that he would be unable to share his unorthodox conclusions about the virtues of public deficits on the global Nobel platform.

Some time around 2006 I ran a web search on Vickrey to see who might be carrying on his work in Functional Finance and allaying the superstitions around federal government debts and deficits. Matthew Forstater and Pavlina Tcherneva had edited a collection of Vickrey’s macroeconomic writings, and thus I discovered the cohort of fine economists at UMKC and the Levy Institute, and Mosler’s Seven Deadly Innocent Frauds.

I determined that to be an effective advocate my best approach would be to research these economists’ operational depictions, and see if I could find a correspondence with the system’s own public documentation. MMT’s factuality would be demonstrated not by “Ruml said something” or “Greenspan said something” but in dry documents like the US Summary General Ledger, the Treasury Financial Manual, and the Statement of Federal Financial Accounting Standards. Chapter and verse.

And upon such research I concluded, by about 2011 and despite my support for a robust fiscal program, that several of MMT’s most distinguishing claims did not comport with the system’s own documentation in the US. These findings are the empirical basis for my arguments here.