When Democratic Senator Joe Manchin announced that he would not support the Build Back Better Act — effectively dooming US President Joe Biden’s signature legislative initiative — he cited America’s “staggering debt”.
His concerns echoed those of the president’s Republican opponents, who insist that all that spending would expand the deficit and leave future generations groaning under the weight of a heavy tax burden.
But would it? Proponents of Modern Monetary Theory (MMT) would beg to differ.
Detractors of the Build Back Better Act subscribe to the conventional Ricardian economic assumption that, over time, a government must balance its budget, just like a private firm. But MMT holds that, as long as debt is denominated in a country’s own currency, its government cannot default.
Yes, excessive government spending can fuel inflation, but as long as prices are…
