With the Biden administration getting ready to run huge budget deficits, our national debt will rise to levels (debt as a percentage of GDP) not seen since World War II. The pandemic, it is argued, requires massive spending to get the economy back on track. Europe will be right behind us, and Japan is already there. Is all of this spending sustainable? Can any level of taxation cover these expenses, or are we pretending, somehow, that there is a free lunch in all of this?
Right in the middle of this debate has popped up a new book, The Deficit Myth by Stephanie Kelton, a traditionally trained economics professor at Stony Brook University. Published in 2021, the book was a New York Times bestseller. Imagine an economics book a best seller! Kelton, now the principal spokesman for a movement called Modern Monetary Theory, argues that the debate over deficits is real, but the language of the debate is all wrong. Conventional economists are skeptical, but Kelton makes a strong case for thinking about deficits in entirely different terms. The book is very accessible and will serve as a good guide to understanding the implications of all this spending. No previous training in economics is necessary to enter into the discussion.
Book: The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy by Stephanie Kelton, Hachette Book Group, 2021