New York Post: $1 Trillion? Why Not $5 Trillion! For Progressives, the Sky is No Longer the Limit on Spending
Article by Nicole Gelinas in New York Post
$200 billion, $2.2 trillion, $900 billion, $1.9 trillion. Over a year, Congress has passed $5.2 trillion in extraordinary spending — and President Biden wants another $3-4 trillion, split between infrastructure and social spending.
When a “normal” federal budget, pre-COVID, was $4.4 trillion, and with borrowing, not taxes, funding nearly half of federal spending, it’s not crazy to ask how much is too much, before we risk huge inflation.
“Modern monetary theory” is a trendy philosophy — AOC is a fan — that holds that the government can spend as much money as it wants. Drinks all around! Even if bondholders don’t feel like lending to us to make up the difference in spending and revenues, the Federal Reserve can create new money through “keystrokes,” argues the first-ever MMT textbook, published in 2019.
The Fed has been doing that. In early 2008, the amount of money available in the U.S. economy was $7.5 trillion. By 2012, it had risen to more than $10 trillion. Much of this was the Fed printing electronic dollars, to encourage people to spend after the economy crashed: the Fed “grew” its own holdings from less than $1 trillion to more than $3 trillion.
That didn’t cause inflation (sort of), so why should this?
But this time is different. In a year, the Fed has nearly doubled its own holdings (again, that pen!) from $4 trillion to $7.7 trillion. Money in the U.S. economy has risen from $15.4 trillion to $19.7 trillion, partly because people who have kept their jobs have so little to spend on, with travel and entertainment off limits.
Obama spent $60 billion a year on infrastructure, so why not spend $500 billion a year, as the Biden plan reportedly proposes? Why not spend $500 trillion?
This could mean classic inflation: too much money chasing too few goods.
The academic version of modern monetary theory actually warns against inflation. Inflation “is a real danger,” wrote economist Stephanie Kelton in her MMT book. But the politicians .....
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