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Current Affairs

A Magazine of Politics and Culture

Our Money Where Our Mouth Is

To deliver on our promises to ourselves and each other, we must embrace a bold, inclusive, and realistic vision of public finance.

This article is also available in Spanish.

Just before the 4th of July, New York City Mayor Bill de Blasio, like other All-American politicos, announced a crackdown on illegal fireworks sales. No one is quite certain why or how the flashbangs started, but the mayor made it crystal clear the NYPD would be responding with sting operations. The new force only included 42 cops, but money talks. Facing a global pandemic-induced depression, a national movement to defund law enforcement, and a municipal financial crisis, de Blasio and leaders like him will still shell out for broken windows policing. To protect and serve…somebody. 

I grew up selling fireworks back home (where a cop recently executed Antonio Valenzuela in circumstances similar to the murder of George Floyd). My high school wrestling coach and friends still sell them for a living. But I understand that even after a summer of lockdown, beatdown, and clampdown, some people don’t find the same joy in exploding paper and gunpowder that I do, and even consider fireworks dangerous. 

Some of those people get the mayors’ ears. Their notions of public safety, nuisance, and health are encoded in law and pull funding from public coffers. Like many others, I find police harassment more dangerous, frustrating, and toxic than fireworks. The same goes for myriad cries of hunger, pain, and despair. But across the country, despite the demands of protesters, municipal governments have poniedup for police funding, even as they use federal emergency money to bolster general budgets. Both the brutality and ticky-tacky bullshit continue apace. For instance, fireworks citations may result in arrests—and thus trigger a lethal interaction between police and the public. On the other hand, cops might just charge people for possession and load another $250 of debt onto a Black and/or Latine household during an already racialized depression. One more snapshot of public money spent to snatch more money from the public.

Every dollar budgeted for petty tyranny should go elsewhere. But as activists have long argued, we need to zero in on what that next “elsewhere” is. For abolitionist organizer Mariame Kaba, demands to slash police budgets must be paired with demands to fully fund healthcare, housing, education, and good jobs. These also happen to be four rights guaranteed under the Green New Deal. If we follow through, Kaba argues, there would be “less need for the police in the first place.”

I strongly agree. Moreover, I would humbly suggest that any cooperative vision of safety and justice requires a more cooperative vision of public finance to support it. At the local level, we should move toward community control over actual budgets and labor they support. But we should also reassess the entire architecture of public finance in the United States. 

The need for more democratic demands on our money systems is dire. In the short run, we desperately need to sustain and expand emergency payments to cope with the pandemic, yet the GOP has promised to cut off the next round of aid at the arbitrary limit of $1 trillion (while also demanding more federal funding for cops). In the long run, we should demand public money for our own needs, for what truly makes us safe, just as voraciously as Trump and others argue for a bottomless budget for cops and troops, costs be damned. In essence, we must demand a blank check.

Don’t get me wrong. I’m a big fan of an old saying, “Don’t let your mouth write checks your ass can’t cash.” I’ve been a financial regulator and a direct services attorney. Both jobs mostly meant helping people handle bullshit bills: from the big bills that break our backs, to the little bills that break our brains. I think fiscal responsibility is absolutely, one-hundred-percent, no-doubt-about-it, across-the-board mission-critical. But real fiscal responsibility doesn’t zero in on personal prudence; it challenges systemic power.

That’s why I love Modern Monetary Theory (MMT). MMT shows how the government’s bills actually differ from our bills, starting with the fact that the government makes and manages the money we use, and unpacking what that means. If you look at a dollar bill, you’ll see the signatures of its creators; not taxpayers or bondholders, but the same government that prints, mints, and types into existence the currency we use everyday. Unfortunately, it is also the same government that props up the rich, while bleeding the poor. Moreover, it polices and micromanages our general use of money, while doing nothing to curb the financial lawlessness or corruption that actually harms society. Rather than seeing money and markets as creatures of law, many of us imagine them as sites of a sacred “natural order” and the government as a watchman over profane peripheries. In this view, money and markets come first, and law and politics “intervene.” 

But the economy is foundationally a construct of law and politics. To quote law professor Christine Desan, the constitutional order of money, in particular, “can bring people together or set them at each other’s throats.” Our current order arguably locks us into a zero-sum struggle. But, as in so many other cases, we are fighting to seize and transform that order. And on our way, we should approach public finance as a site of struggle beyond redistribution. 

In order to dismantle our broken world and build a new one, we need to think about the monetary system less in terms of “tax-and-transfer” and more in terms of “create and destroy.”  When we talk about D.C.’s fiscal responsibility, we should insist Congress spend more money—on us—and cease spending on activities that hurt us, because they hurt us. Making this case requires a deeper view of what money actually is—not a scarce natural resource, but an abundant social resource. This is a central insight of MMT. Thinking this way begins with a quip former Sanders economic adviser Stephanie Kelton often shares: once we recognize that “money doesn’t grow on rich people”—much less poor people—we gain more breathing room for policy creativity. Instead of getting punished, we can finally get paid.

  MMT is not a set of policies, but an interdisciplinary body of thought that quite literally “follows the money.” Suggesting the source of money is everyday people’s market activity is a con. Some MMT economists call it an “innocent fraud.” I’m not so charitable. So get in the car. We’re going forensic accounting. 

Orthodox economists ahistorically argue money emerged to facilitate voluntary exchanges, a story known as the “myth of barter.” In this tall tale, people first traded things “in-kind”, e.g. your wine for my wool, but this was inconvenient and cumbersome. Eventually, societies developed common media of exchange—money. This is a comfortable story for comfortable people: it suggests money is a gloss over other economic activity—first, there were markets, and from them flowed those coins with the emperor’s head on them. 

MMT tells a different story of the past, present, and future of money. Our monetary systems do not emerge from the market. Rather, money is a constitutional project, created, administered, and patrolled by states and other legal authorities. Throughout history, lawmakers have consolidated power precisely by standardizing the means of tribute and punishing those who refuse to pay it. As the U.S. Supreme Court has recognized, money and the power to establish “legal tender”—instruments we can use to satisfy our debts, especially to the state —is a power attendant to sovereignty itself.  

Central to MMT is the indisputable fact that the U.S. government issues rather than merely uses a currency. The U.S. government can’t go broke—if you only pay for things in dollars, and you make the dollars, you can’t bust. It follows that Congress doesn’t have to go out and “find money” in the world. It doesn’t have to tax or borrow a dollar to spend a dollar. Other countries might be hooked to the U.S. dollar or another foreign currency in order to import critical goods like food and medicine; if they run out they’re in trouble. But in the United States, the federal government—or a bank with government permission—creates the points we use in our everyday lives. So long as its bills are in dollars, the U.S. government, as a whole, can always pay them. A balanced federal budget isn’t necessary. 

Of course, just because the government can spend as much money as Congress authorizes doesn’t mean it should spend as much money as Congress wants. But we should be thoughtful about federal spending not because of fiscal costs to the government per se, but because of price stability in the broader economy. 

Conventional wisdom says inflation (a continuous rise in general prices) will occur if too many dollars chase too few goods and services. If the government prints too much money, this wisdom says, prices will spiral and soon people will be pushing wheelbarrows of bills to buy a $2 billion loaf of bread. MMT economists take a more hard-headed approach, focusing on what public spending actually accomplishes. Inflation doesn’t happen automatically or immaculately. Before actually raising prices, firms consider profits, wages, inventory, bottlenecks, and other concrete factors. But overall, MMT economists agree that in certain contexts, government spending can spur inflation that’s bad for everyday people. 

But once we see that the macroeconomic focus should be inflation rather than federal deficits or national debt, much of what we’ve been told about public finance is unmasked as nonsense. For instance, it’s become a knee-jerk reflex to compare the federal budget to our own budgets. If Washington plans to “pay for” something, anything, it should find a “payfor”—a tax increase or spending cut to match its expenses. 

The underlying idea is that the government, like us peons, only has so much money. If it was to spend more, it has to take more or borrow more from someone else. But if you pay any attention, you know D.C. doesn’t stretch it like we do. Sometimes it raises taxes and spending together. Sometimes it doesn’t. The Treasury has had debt outstanding since 1791 and has never paid down the total. More concretely, the repo man never comes for the military equipment that the federal government has spread to my hometown and other police departments across the country. Congress deficit spends on its actual priorities (policing, war incarceration, deportation, extraction) “without one penny in offsets, no questions asked” all the time. The 2020 Democratic primary debates featured twenty-one questions about paying for social programs and zero about paying for war. 

Austerity has a human target. At the federal level, this fundamentally means starving the rest of us of money and the possibility of economic growth. It’s a matter of accounting. As any professional pinchfist will tell you, the money has to come from somewhere. When the U.S. government runs deficits, it means the rest of us are less likely to have to do so. When the government spends money, that money goes somewhere: into the broader economy. As Kelton puts it “their red ink is our black ink.” But as the government reduces debt, it is taking income away from everyone but the government, usually meaning red ink for public services. MMT economists argue that Bill Clinton’s budgetary surplus essentially meant the government was taking more money out of the broader economy than it was putting in, causing private lenders to step in to meet the demand for funds, leading to excessive private debt build-up and the global financial crisis. 

To put it bluntly, the conventional wisdom about where money comes from and how governments fund operations is both factually incorrect and morally indefensible. In an effort to sound eminently reasonable, deficit hawks reduce budgeting to crude, meaningless, elementary arithmetic: an “illusion of control.”  

Meanwhile, MMT argues policy should help balance the overall economy, not the budget. Indeed, MMT is ultimately “not about money”, but about reassessing the government’s limits in serving the public. 

So what does all this mean for movements? This is a multi-trillion dollar question. Some leftists shun the study of money, casting it as superstructural and divorcing it from class and power. This is shallow. By controlling monetary design, and obscuring the role of the state, the ownership class tightens its grip on the means of production and the kinds of labor we do. When we talk about class, we need to talk more deeply about cash: what it is and why it seems to rule everything around us. 

Most immediately, we should recognize that forsaking federal spending hasn’t disciplined our masters: it’s granted them free reign. When the federal government doesn’t spend enough money into the broader economy, households and firms wind up borrowing from Wall Street (and Silicon Valley) to make ends meet. In other words, when the federal government refuses to spend sufficient public money on public goods, Fortune 500 companies stingily distribute social necessities—housing, healthcare, education, etc.— by shouldering us with debt and padding their own assets. The pandemic has shown how this sort of dependence on profiteering creditors has made our economy uniquely fragile.  We can’t afford medical bills, rent, student loans, or fireworks citations when income evaporates. Austerity would only make things worse. The first MMT thinker I ever read wasn’t an economist, but Bill Black—criminologist, law professor, and one-time assassination target of anti-porn activist and white-collar racketeer Charles Keating. Black’s work argues that in the context of austerity, creditors, insurers, and landlords try to draw blood from stones and increasingly resort to worse behavior. Just like cops. 

We must fight back, but we continually fall for divide-and-conquer. Above all, if we’re to decarcerate and democratize the economy, we must destroy the dangerous myth of “taxpayer money.” If we’re looking out for “taxpayers” and not the public as a whole, we are cementing a stratified economic identity: necessarily favoring wealthier groups over poorer ones— men over women, white people over Black people, U.S.-born people over immigrants, and so forth. People who primarily identify as “taxpayers” are Trump and Pence’s base, living the tradition of the 1980s demonization of Black “welfare queens” and their children: the “embryonic criminal class.” Municipal fines and fees—levied because “taxpayers” will pay for public services —have contributed to what law professor Angela Harris calls a “sprawling system of surveillance, punitive discipline, and control that makes the lives of poor people profoundly unfree.” 

Taxpayer associations across the globe pressure us to constrain government action by arguing states are fiscally incapacitated.

 We have seen opponents exploit the cry of “taxpayer money!” before. Some argue the “only substantive criticism” faced by the Sanders campaign concerned tax increases on middle and working class people. Because every social program is said to entail broad tax increases, it’s no surprise many people of color and other marginalized groups remain rightfully skeptical that voters will ever “fight for someone they don’t know.” History proves their suspicions correct. In Racial Taxation: Schools, Segregation, and Taxpayer Citizenship, 1869–1973, legal historian Camille Walsh argues that the Supreme Court rejected the push for a fundamental federal right to education, led by Chicano students, families, and activists, overwhelmingly because of the burden it would place on the (implicit and unspecified) rights of white taxpayers. 

MMT can help flip this script. Repeatingly casting taxes as “the price we pay for a civilized society” is only going to ring less true as barbarism intensifies. We don’t need to demand people chip in for rights we should already have—or an insurance system that would have helped stabilize the economy when the pandemic hit! As sociologist Tamara Nopper argues, rejecting the frame of “taxpayer money”—and its focus on white suburbia as the “paragon of moral budgeting and social innovation” —is the logical next step for abolitionist movements. Historian Destin Jenkins argues true investment in Black communities demands we eschew local, racist financing and “leverage federal financial power.” Ultimately, dismantling oppressive systems demands even more ambition, including the embrace of deficit spending. And so does the nurturing of a new world in the face of the ultimate threat to our safety: climate change.

If past efforts to obtain socioeconomic rights have failed in large part due to the abuse of fiscal responsibility rhetoric, what does that mean for the future? The Green New Deal (GND), for example, is a rights-based program —specifically promising us guaranteed healthcare, housing, and employment, as well as education. If the past is any guide, it is imperative that we overcome the taxpayer money myth. In general, the GND turns our gaze to what we stand to gain rather than sacrifice. The fiscal vision should match: as economist Pavlina Tcherneva argues “tax-the-rich-to-pay-for-progress” leftism is an “imaginary umbilical cord” that tethers us to our oppressors. Money doesn’t grow on rich people. 

The success of any rights-based programs depends on winning full-fledged fiscal support. Rights can be abstract, unstable, and vague. Without proper funding, rights—even so-called “negative rights”, like free speech or suffrage—aren’t real. Yet demanding rights, in the streets if not the courts, is also one of few ways people of color and other marginalized groups have achieved political victories in this country. 

The GND mobilization hinges on one right above others. Due to its focus on a Just Transition, the GND requires a federally-funded, locally-driven Job Guarantee, committing the federal government to providing a living wage job caring for people, community, and planet to anyone who wants one. For the program to change the way we work, we also need income protections to support workers who leave emission-intensive sectors, and workforce development programs to supplement wages in GND-critical sectors. This will likely mean bigger federal deficits, but MMT shows us why this isn’t a problem. In fact, once we stop obsessing over deficits, we can more clearly see how to pay for the GND while keeping inflation in check.

This is crucial: inflation myopia is a historical enemy of the job guarantee. Activists like Coretta Scott King had to struggle with the Fed, which argued an enforceable right to a job would goose prices in an inflationary period. Today, the Fed still tries to dampen overall prices by keeping enough people unemployed that workers are too scared  to fight for higher wages. In other words, the central bank argues that purposefully keeping some people out of work is necessary to ensure stable prices. As stratification economists argue, this means certain communities—including Black, Indigenous, and Latine folks, disabled folks, queer folks, veterans, and people with a history of carceral involvement—perpetually live in depression by design. As law professor Lua Kamál Yuille argues, anti-discrimination law has not rectified the situation: there is still no fair employment without full employment.

  MMT rejects the sacrifice of workers to an inflation volcano that rarely erupts. We’re not interested in curbing GND spending. Precisely because the GND aspires to the transformation of our energy, housing, transportation, and agricultural systems, and promises to make a space for anyone in doing so, we should engage in relentless, direct fiscal expansion. Rep. Alexandria Ocasio-Cortez has rightly recognized we have a model for our endeavor. During World War II, Treasury economists learned an important lesson that still undergirds MMT: ultimately, government spending is not constrained by financial resources but by the physical resources (like labor and machinery) available. 

This is another way of saying price stability is still key. But contrary to critics, the inclusion of a Job Guarantee should not be a cause for concern. Recent data indicate that spending employment has had little influence on inflation as of late. It is no surprise then, that a former Fed Governor has even accused the Fed of lacking a “working theory of inflation,” period. Contrary to the conventional wisdom, MMT proposes we permanently maintain a full employment economy and stabilize prices by additional means. Because MMT appreciates the actual complexity of prices, it embraces taxation as an inflation management tool. But it also embraces environmental, antitrust, and financial regulation as “non-fiscal payfors.”

Detailed inflation analysis requires industry and labor expertise. Deficit-focused economists waive away the nuance in favor of playing around with GDP or unemployment data for the economy as a whole, but the granular approach is the path to a working GND. Some aspects of the GND might pressure prices, others might not. Shrinking the defense, fossil fuel, financial, real estate, and insurance industries could lower some prices. The war machine devours barrels upon barrels of oil, tons of steel, and other emission-intensive resources. But military spending that doesn’t produce goods for civilian consumption to “chase” is also more inflationary than other spending. If the M4A component of the GND eliminates private insurance jobs and cuts wasteful health industry spending enough, it could be deflationary. Wall Street pressures prices by speculating on commodities, including fuel and housing. Unregulated bank lending could also spur inflation. 

 If we need to tax or regulate certain activities to prevent inflation flowing from the GND, we can start with activities that actively harm us. In general, the left should focus on taxing the rich, regulating credit and rent, and contemplating other tools to address gouging by vultures. Nothing stabilizes prices quite like stabilizing prices. And stabilizing prices on the backs of the rich and powerful goes hand and hand with waging peace. 

Ultimately, we need a public finance framework that allows us to treat our crises as actual crises. Since 2008, critics across the political spectrum have taken “orthodox economics” to task for, frankly, being wrong about everything. By contrast, MMTers have the receipts on the most important macroeconomic events of our time. And unlike some of our fellow travelers, MMT leftists have committed ourselves to the contours of a political program. 

We are only asking people to be as critical about money as they are about everything else. Adopting a public money frame doesn’t mean spitting accounting jargon: it does mean insisting on lenses that keep our eyes on the prize. It means encouraging people to punch up, rather than down or across, when it comes to money matters. We don’t make the money. But we do deserve it. As much as it takes.

The pandemic is unmasking the insidiousness of our monetary arrangements. While the Fed creatively uses its legal powers to push on puppet strings, Congress and the Treasury forsake simpler, stronger, fairer methods. Once again, disaster demonstrates we confront both fascism and neoliberalism head-on. For decades, the GOP has shown it will write that blank check for the security of the tribe of people it considers deserving of care. By contrast, the Democratic congressional leadership has demonstrated an “obsession with deficits” and already shown signs of retreating back to austerity mode.

Time for counterpressure. In addition to trillions of dollars in direct stimulus to households, the pandemic demands a payments holiday, if not a jubilee. The federal eviction moratorium has expired; states are beginning to hear housing lawsuits again. But the GND exists because most of us are chronically in crisis—precisely because our economy churns and cranks our basic obligations in order to operate. Let’s shut it down. Last Labor Day, I proudly joined roughly 1,000 other folks under the leadership of the Rev. Dr. Delman Coates, to march on the Fed, in the footsteps of Scott King, to demand true full employment and the use of “public money for public power.” This has previously served as the tagline for the annual MMT conference: a rare “economics” gathering where anyone can chat with someone who writes technical textbooks for a living. We love to see it. But we’ve also just begun.

It’s a mistake to underestimate the public’s ability to take a hard look at the guts of society. Indeed, movements regularly demand people think more deeply about difficult concepts like “property”, “gender”, and  “race”. So it must be with “money”—in an accessible and inclusive register, in the service of more powerful movements. But people who live paycheck to paycheck—or no paycheck to no paycheck—are used to making money do backflips. If people can come to accept something as convoluted as the current conventional wisdom, they can come to embrace something as straightforward as MMT. The public sees the federal government taking drastic action to save the wealthy, while hemming and hawing about whether everyone else deserves assistance. The math doesn’t add up. MMT shows the system could pay us, but stiffs us anyway. And thus that the status quo must go.
Policymakers are already incorporating many MMT arguments. Now comes the hard part: doing the damn thing. In the aftermath of the October Revolution, one economist fondly referred to the Commissariat of Finance’s printing press as a machine-gun “shot up the bourgeois order in its rear…” We have less violent traditions to invoke: chiefly a mildly famous march to “cash a check”—of whatever amount justice demanded. But no matter how you cut it, establishing a government for the people ultimately means seizing the money power: put another way, “the only way out is through.” We can’t be afraid to rewrite the rules of our shared ledger: of who should own and who should owe.

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