This post replies to a Facebook post by Erik Rydberg.

Thanks for your facebook post. It brings out an important issue. But I agree with some of the critics that you need to know a bit more about Modern Money Theory and Monetary Sovereignty.

First, let’s note that when you limit the power of Congress to make policy, you also limit the power of the people.
What you’re proposing is getting the Green New Deal done and then going back on a diet of decreased fiscal policy space for the Government when that is done. But limiting the fiscal policy space of the Federal Government is what has gotten us into our current crisis of government in the first place.

Consider that even though the capability to engage in increased deficit spending has existed since 1971, we have not engaged in the deficit spending for public purpose we have needed since that time. That is why we are in the fix that we in in so many different areas.

In part, that has happened because many among our leaders did not, at first grasp the significance of what Nixon had done in getting rid of the Gold Standard. Certainly Jimmy Carter, in many ways our most Green President, had no clue, and certainly most of our decision makers and even many today have had no clue.

I know that MMT economists have been trying to spread the news about the increased fiscal policy space available to monetary sovereign government for a long time now. I’ve been prominent in that movement since 2010, and am the author of 7 kindle e-books that in one way or another are about spreading that news.

I also know that some of our Congresspeople, perhaps even most, are now aware of their increased fiscal policy space, but are afraid of talking about that subject or talking against austerity narratives, because they fear their donors or the mass media reaction to their attempts at educating the public or both. Nevertheless, because of past ignorance, fear, and even ill-will toward the idea of legislating for people, we have never used the powerful tool of increased fiscal policy space to meet our many and growing national, state, and local problems, or the problems of our world at large.

So, of course, I very much agree that we should inform people about this increased fiscal policy space and the power it gives us to pursue and realize progressive goals, even in the face of the increased power it also gives to our war mongers and conquest nuts to wage wars that jeopardize human survival. This may, at first, seem unwise. But we have to take into account that right now, we really have no choice except to embrace MMT and the Green New Deal because without it, our civilization, and perhaps even our world will be coming to an end anyway.

Second, so far, you and I are in agreement that we must have both the Green New Deal and also the increased policy space that MMT knowledge brings to us, because we cannot reach our necessary goal without using MMT-based policy and Monetary Sovereignty. Our disagreement, however, comes in when you propose to limit our policy space once the Green New Deal has been achieved.

The reason, why I disagree with you strongly about this is that the Green New Deal isn’t the end of history. It isn’t a utopia where we can freeze all change. Instead, it’s a state that will spawn its own problems.

There will be the problem of maintaining the greening of the world we will have accomplished. There will be the problem of maintaining the political power of bottom-up democratic movements fighting against the forces of reaction for as long as intelligent beings exist. There will be the problem of maintaining the various forms of equality and social justice we intend to create. There will be the problem of transitioning to a unified and democratic world. There will be the problem of adapting to new problems that in the nature of the case we cannot anticipate now. All of these problems will require using the policy space that monetary sovereignty brings to governments which, if we are successful, will be of the people, by the people, and for the people.

I’ll get more specific. You may not understand that a nation like ours, likely to be involved in substantial current account deficits as long as the rest of the world is developing economically, must, in order to maintain full employment, deficit spend in amounts at least equal to the size of our current account deficit, in order to ensure that that our non-government sector, including our non-profits, our private businesses, and our households, taken in the aggregate doesn’t lose net financial assets year after year.

You also may not be aware that to satisfy the savings desires of our people, we also need to deficit spend an additional amount beyond the deficit spending we need to offset the trade deficit. This is necessary because if we do not do this then we will see falling aggregate demand which again, will result in rising unemployment and a need for more government deficit spending.

So, MMT tells us that there is constant and continuing need to use the deficit spending capability afforded to us by monetary sovereignty to maintain full employment at a living wage, because of the combined trade and savings leakages we are going to experience even after we’re reached the Green Deal. In fact, that need for deficit spending is most probably at a level of 15% of GDP right now! If we once again constrained the policy space of the Government, by restricting that monetary sovereignty and that deficit spending, then over a period of years we would find ourselves unable to maintain the Green New Deal and the blessings, including protection from climate change and ecological destruction, we seek from it.

We would again find ourselves in a deteriorating political, economic, and social situation in which economic, social, environmental, political, and legal justice were again slipping away from us. So if we value the Green New Deal and all that it brings, then we must continue to protect and use monetary sovereignty, and the increased policy space it brings, as long as we have human systems and the political and governmental components they contain.

What we must do about the increased dangers of war and destruction that flow from our technological advances is to combat that in the old fashioned way with political means.
We need the Green New Deal to be the foundation of a new society. We need the peace movement and peace activists to be a core part of it. We need Green Parties to be peace parties and when we win at the polls we need to keep winning so that our Green regimes can work towards stronger international institutions that can prevent and contain wars and foster democracies that truly want and will work constantly for peace.

Continuing political success, and not legislation that constrains our monetary sovereignty is what will bring us peace. Growing economic and social ties with other nations forged with the participation, consent, and active support of people at every level of our various societies, in contrast to the way we forge such ties now, is what will bring peace.

New institutional arrangements that make use of our information technology tools to empower everyone to participate in building voting blocs and electoral coalitions that can overcome the iron law of oligarchy and ensure the continuous bottom-up creation of new democratic forces is what we need to prevent the domination of our political systems by feudal, plutocratic elites that legislate for their own interest, rather than for public purpose. And that, in turn, by preventing the formation of elites dedicated to militarism and continuous war, is what will, finally, bring us lasting peace.