Stephanie Kelton on How MMT Won the Fiscal Policy Debate

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:17)

And I'm Tracy Alloway.

Joe Weisenthal (0:19)

Tracy, you know what I was just thinking about? You don't troll me about MMT anymore these days. Do you remember that, when you used to do that?

Tracy Alloway (0:27)

Yes, all roads led back to MMT for, well, I mean, to some extent, they still do for the past year or so. We've been talking a lot about the shift from monetary policy to fiscal stimulus, and that's a big component of MMT.

Joe Weisenthal (0:43)

Yeah, you used to, every episode, you're like, Joe, why are you going to bring up MMT? But I guess we haven't really done that explicitly in a long time.

And so you stopped joking about that with me. But today, we aren't going to have to joke, because that's actually literally what we're going to be talking about.

Tracy Alloway (1:01)

It is an MMT episode.

Joe Weisenthal (1:03)

Yeah, and I think one of the things that's really striking to me, and I'll just say this, is that, to some extent, I really think that MMT has completely won the debate. And by that, I mean we have this big fiscal expansion happening in the US, and deficits by historical measures are very high.

And there are certainly people who are upset about it or angry about it. But it really feels like the entire debate is essentially happening on MMT terms or MMT language.

Tracy Alloway (1:37)

So, you're right. We definitely don't hear many mentions of bond vigilantes anymore. We don't hear people talking about, you know, how are we going to fund social programs? The deficit is so large, that sort of thing. Like that seems a little bit old fashioned now in many respects. I do wonder how much MMT can take credit for that versus the fact that we've just had such an unusual economic crisis, you know, this big exogenous shock, basically. So people are able to use that as an excuse to override those concerns. And this is something we spoke about on a recent episode of the podcast. But like, it seems like this crisis was so unusual, it really opened the door to people thinking about stuff differently. But you're absolutely right. MMT, it's definitely not a fringe movement anymore.

Joe Weisenthal (2:32)

No, and I think you're right. There's a lot of things that have happened both in this crisis and over the last decade, the persistent lack of inflation, despite, you know, the Fed's balance sheet expansion, despite deficits, that obviously perhaps changed people's thinking. The nature of this crisis and the sort of unanimous, nothing's unanimous, but widespread belief that the government had a role in underwriting the recovery due to its unusualness.

But it really is striking, like, you know, coming out of the great financial crisis, Greece and 90% and bond vigilantes, and they're still, you know, there are critics of the existing stimulus, for sure, and they didn't get a single Republican vote, but it's all on different terms now. It's about inflationary pressures, which was always sort of the MMT view of like, well, there's the limits to spending, not the sort of credit worthiness of the government. And so even though there's a long, you know, there's still huge policy fights and debates happening, they really have changed a lot. And I think it's a pretty legit question, the degree to which MMT thinkers have made that happen, but I do think it's part of what's really changed the whole discussion.

Tracy Alloway (3:46)

Yeah, now you mentioned policy there, and I really want to get into that particular topic when it comes to MMT, because I think one of the big criticisms of it as a school of thought is that even if you agree that MMT is the best way to describe the economic system, it might not actually lead to specific policy prescriptions or it might not lead to policy prescriptions that are all that different.

So politicians can agree that spending is bound by inflation, but maybe they all have different ideas still about how best to spend money. So I would love to dive into that a little bit more.

Joe Weisenthal (4:28)

Great. Well, we are going to be speaking with the preeminent person who without question has done more to advance the MMT message over the last decade than literally anyone else.

We spoke to her a couple of years ago, or a year and a half ago at our Odd Lots live event in New York City. So excited to have her back on. We're going to be talking, of course, with Stephanie Kelton, Professor of Economics and Public Policy at Stony Brook and the author of the New York Times bestselling book, The Deficit Myth, which just came out in paperback last week. And so very excited. Stephanie, thank you so much for joining us.