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The deficit myth kelton5/13/2023 ![]() As Kelton immediately notes in the introduction: In almost all instances federal deficits are good for the economy. has operated at a deficit almost continuously since 1930 ( FRED) without going "broke". For now, let us conveniently skip the fact that the U.S. The motivation for this book is the political obsession with needing to pay for all policies without increasing the national deficit. In one sentence, this book is about debunking the myth that we need to know how we should pay for policy and we shouldn't conduct fiscal policy if it increases the deficit if the government in question is a monetary sovereign. In what follows I break down what the book is about, including my own thoughts, and conclude with a brief look at how MMT has been applied. Enter Stephanie Kelton, whose book The Deficit Myth is an Amazon top-seller on just this topic. This is all to say that I was not entirely familiar with the principles of modern monetary theory (MMT). ![]() This has led those who believe in modern monetary theory or functional finance (the original Abba Lerner version), the topic of this post, to rejoice (see for instance this contentious post by JW Mason, and Paul Krugman's reply). ![]() ARPA made no reference to how the program would be funded, in particular, there is no reference of the deficit. ![]() Since the American Rescue Plan (ARPA) passed, a mini-storm of debate has broken out about about inflationary pressures (an article by Claudia Sahm on INET). ![]()
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