March 2021 Issue: The Defecit Myth-The Deficit Myth by Jennifer Lehman

The Deficit Myth by Jennifer Lehman

Pdf Summary

"The Deficit Myth" by Stephanie Kelton is a book that challenges the conventional understanding of government deficits and their impact on the economy. Kelton argues that deficits don't matter for the federal government, which acts as a currency issuer, unlike households, which are currency users. She presents evidence that balanced budgets have not prevented economic downturns in the past and proposes that the focus should be on balancing the economy rather than the budget. Kelton suggests implementing a federal job guarantee and expanding social welfare policies to address issues such as poverty, infrastructure, inequality, wage growth, student loan debt, and climate change. She also highlights the unique role of the U.S. as an issuer of a global reserve currency and the constraints faced by countries that are currency users. The book argues that by embracing Modern Monetary Theory (MMT) and revising spending criteria, the U.S. could address pressing social and economic issues. The author cites the COVID-19 pandemic as a real-world demonstration of the power of MMT thinking and suggests that automatic stabilizers could have been a more effective strategy in responding to the crisis. However, the concerns about the deficit may hinder the implementation of Kelton's proposals. Overall, "The Deficit Myth" offers a thought-provoking perspective on fiscal policy and its implications for the economy.

Keywords

The Deficit Myth

Stephanie Kelton

government deficits

economy

currency issuer

currency users

balanced budgets

federal job guarantee

Modern Monetary Theory

MMT