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Behind the Money Curtain: A Left Take on Taxes, Spending, and Modern Monetary Theory

By   Follow Me on Twitter     Message Jim Kavanagh       (Page 1 of 10 pages)     Permalink    (# of views)   4 comments

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Taxes do not fund government spending .


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That's a core insight of Modern Monetary Theory (MMT) whose radical implications have not been understood very well by the left. Indeed, it's not well understood at all, and most people who have heard or read it somewhere breeze right past it, and fall back to the taxes-for-spending paradigm that is the sticky common wisdom of the left and right. 1


This, despite the fact that the truth of the proposition is obvious if you think through just a few steps about the process of money-creation. What makes it hard to see is the dense knot of conventional theory and discourse in which we are entangled, and which seems impossible to cut as cleanly as MMT suggests.


But the discussion around the newly-enacted Republican tax bill has brought the issue of tax policy to the forefront again, and it's time for the left to realize how fundamentally wrong that common wisdom is, and how continuing to argue within the phony terms of the taxes-for-revenue paradigm occludes and reproduces a persistent reactionary fiction regarding what taxes are for.


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Housebound


The argument of the common-wisdom economic paradigm is that the government must collect taxes (or borrow money--we'll get to that) to spend on whatever programs it wants to fund. In this paradigm, the government extracts money from an external, economically prior source, and uses it to pay for government programs. For both the left and the right in this paradigm, taxes are for funding government spending: money first flows into the government through taxes collected, and is then spent into the economy in various programs and purchases. The arguments that ensue are over how much money to collect in taxes, from which sources, and which government programs to fund with the money collected.


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Former college professor, native and denizen of New York City. Blogging at www.thepolemicist.net, from a left-socialist perspective. Also publishing on Counterpunch The Greanville Post, Z, The Unz Review, and other sites around the net.

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