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caption: Cover of Stephanie Kelton's The Deficit Myth
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Cover of Stephanie Kelton's The Deficit Myth
Credit: Courtesy of Public Affairs Books

It was an economic theory with little traction, then the pandemic hit

The United States government has been spending a lot of money lately to shore up people and businesses. The Covid-19 pandemic prompted the biggest relief package in U.S. history.

This year’s CARES Act had a two trillion dollar price tag. That’s half of total federal spending in 2019.

Where did the money come from? The central bank announced it would purchase an unlimited amount of Treasury bonds and government-backed mortgage bonds “to support smooth market functioning.” Basically, they printed it.

Stephanie Kelton is an authority on and proponent of Modern Monetary Theory, a new approach to economics. The theory maintains the U.S. government should print money to finance massive spending projects, like The Green New Deal, and Medicare for All, and the CARES Act.

In this talk, Kelton covers her views on debt and deficits, inflation, taxes, and our financial system overall. She says the biggest economic myth is that the government should manage its budget like a household.

The theory has detractors, heralded investor Warren Buffett, not known to be a deficit hawk, among them. He says putting the theory into practice would lead to spiraling inflation.

Kelton is a professor of economics and public policy at Stony Brook University. She served as a senior economic adviser to Bernie Sanders in his 2016 and 2020 presidential campaigns. Her most recent book is The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy. She gave this talk, presented by Town Hall Seattle, on June 15.