In the “wonders never cease” category, the Washington Post, which is normally firmly in the camp of orthodox economic thinking and budget hawkery, ran a very well researched and complementary article by Dylan Matthews on Modern Monetary Theory. This may be a sign of MMT moving out of being regarded in policy circles as fringe (some might say lunatic fringe) to a useful part of an economist’s toolkit.
Matthews tries to be scrupulous in giving credit where credit is due, in both how much effort it has taken for the idea to obtain some legitimacy and who its major proponents are. The article starts with Jamie Galbraith presenting the MMT view of debt reduction, which sees it an economic dampener, more than a decade ago at the White, and was greeted with derision from the large audience. It traces its roots to John Maynard Keynes’ Treatise on Money and accurately recounts (in very short form) how Paul Samuelson and John Hicks tried to graft Keynes on to classical economics, while MMT comes out of the “post Keynesian” tradition.
It would be nice if the piece had more space to be empirical (for instance, it gives the opponents’ case, such as the Peterson Institute’s Joe Gagnon arguing that QE increases bank reserves and ought to lead to a lot more lending. Erm, Paul Krugman has pointed out repeatedly that in the Great Depression, the Fed did increase the monetary base (bank reserves) but money supply shrank. And we’ve seen now how banks are sitting on bank reserves. But this is about as positive a treatment as you are likely to see of a new economics idea in a mainstream media outlet.
Given that the piece did a good job of naming most of the major thinkers and writers on MMT (Marshall Auerback, and Rob Parenteau, creator of the term, “austerian,” were not mentioned, sadly), and also gave a nice shout out to Naked Capitalism as one of the blogs showcasing MMT writers, I feel a bit churlish criticizing the article. But one misconstruction stands out. It mentions the Roosevelt Institute’s New Deal 2.0 blog as another MMT friendly venue, when that is not longer the case, and for reasons that do not reflect well on the Roosevelt Institute.
Certain members of the professional staff at the Roosevelt Institute who are Obama/Democratic party loyalists were hostile to the discussion of MMT on New Deal 2.0, which was then edited by Lynn Parramore. Parramore featured MMT posts from Auerback and Randy Wray, both Roosevelt Institute fellows, as well as Warren Mosler and others who were not affiliated with the institute. Auerback, who was also writing at Naked Capitalism, told me he was getting pushback from Roosevelt Institute for his posts on MMT and the general need for more deficit spending. The antagonism intensified after the Roosevelt Institute took funds from the Peterson Foundation, which as we discussed at length (see here, here, and here) has an aggressive, long-standing campaign to use deficit fear-mongering as a way to justify slashing social programs, in particular Social Security and Medicare.
Auerback’s fellowship at Roosevelt ended last year and the excuse given was budgetary. That does not pass the smell test, given that his stipend was the smallest of all the fellows and no one else was cut from the roster. Parramore left Roosevelt Institute last fall and there have been no MMT related posts since her departure.
I have no doubt the Roosevelt Institute will use this article in fundraising, when the role of officialdom was the reverse of what a reader would infer: it set out to quash discussion of MMT rather than promote it. But since the Roosevelt Institute’s conduct was shameless even after it was outed for selling out FDR’s name on the cheap to a billionaire keen to dismantle his legacy, this incident should come as no surprise.