Ky congressmen never so sure as when they’re wrong about monetary theory

“We are never so certain of our knowledge as when we’re dead wrong.” —Guy Davenport in the essay “Pergolesi’s Dog from Every Force Evolves a Form”

The late Lexingtonian’s construction of an often experienced axiom is about artist Joseph Cornell who berated filmmaker Stan Brakhage for not knowing composer Giovanni Pergolesi’s dog. Cornell panned Brakhage’s cultural ignorance. The dog, famous for its typing, really belonged to ecologist Elisabeth Mann Borgese. Davenport goes on; “ignorance achieves wonders” and then reveals other dead wrong certainties.

Wonders of ignorance here are claims by federal politicians about our money system. Although not as entertaining as a spat between artists, Davenport’s warning is timely as we get beyond COVID-19 and as more of us understand that inequality is planned and managed.

Modern Monetary Theory (MMT) provides a framework to understand the facts of Federal Reserve Bank operations and describes how spending, taxes, deficits, and debt work. Among MMT’s insights are that federal spending precedes taxation and that what we call the national debt is merely the amount of federal spending not paid back in taxes. We don’t owe China a penny and our grandchildren are off the hook. MMT economists never separate spending and inflation and require spending only to available or producible resources.

Two from Kentucky’s congressional delegation regularly botch describing US monetary operations. They both defend austerity, false scarcity and their pronouncements on the facts of our money system are as glib as they are wrong.

Following are quoted claims by either Representative Andy Barr or Senator Rand Paul. After are corrections, with citations, for those curious enough to investigate. Readers know the Congressmen’s language and are understandably sympathetic, only because of repetition, to their status quo rhetoric.

On deficits; “Rather than enact tax increases as a way to finance unprecedented levels of government spending, I believe that we must focus on living within a budget and setting our funding priorities.” Not accurate. See Beardsley Ruml’s 1945 speech Taxes For Revenue Are Obsolete. Ruml was the chairman of the Federal Reserve Bank of New York. See also, Warren Mosler. Mosler is a former bank owner, current advisor to central banks, and noted investor. “…the government has to spend its dollars before they can be collected as taxes or as payments for bonds. And everyone in the Fed knows it.” and “Government spending is NOT operationally limited or in any way constrained by taxing or borrowing.”

On Covid deficit spending; “As far as any more relief, though, there is no money. There’s no rainy day fund. There’s no savings. I mean, there really is no money. It means we’d have to borrow money from China and other countries, and I’m not for spending more money that we don’t have,” and “It is unfair to young and future generations of Americans to raise the debt ceiling.” Not accurate. See Stephanie Kelton, author of The Deficit Myth and former chief economist for the Senate Budget Committee. “The national debt poses no financial burden whatsoever.” “…borrowing from China involves nothing more than moving China’s dollars from their checking account [at the Fed] to their savings account.” “The only thing we owe China is a bank statement.”

To allocate resources for public welfare we should expect truthful descriptions of our monetary system. We would pay for health care, renewable energy, and education the same way we pay for the military, appropriations and grants to fossil fuels, industrial agriculture, and big pharma. Hereditary credibility is an oxymoron and the congressmen should support their claims with facts. I’m sure the Herald-Leader would allow them 600 words to do so.

Todd Kelly is a nurseryman and gardener from Lexington. Civil and constructive critiques or comments can be sent to todd@maurygarden.com.