Here’s a little known fact about Bernie and his campaign. He doesn’t actually believe any of his “tax the rich to pay for” _______. I’m not saying he doesn’t want to tax the rich, only that he understands econ at the federal level well enough to know that targeted taxation is not possible in our system. He fully intends to tax wealth, but only because it is too concentrated and threatens our democratic process. However, a Presidential campaign, even at the primary level, is not the best venue to teach economics to a nation that has been deceived for decades. Until he is in a position to determine policy he will have to conform his rhetoric to common perceptions.
I have been friends with his econ advisor since ’15, but she has been with him for much longer and assures me he knows federal finance very well and shares her perspective. She is Dr. Stephanie Kelton, currently with Stony Brook University teaching post-grad level macroeconomics. Prior to that, she was the econ chair at the University of Missouri in Kansas City. She has been instrumental in Bernie’s policy platform since she was an advisor to the Senate subcommittee on policy for the Democrats. She is currently a fellow with his foundation and the primary econ advisor to his campaign, again.
Dr. Kelton is one of the leading advocates for Modern Monetary Theory in the world and consults regularly with Wall St banks and other governments concerning federal finance with a sovereign fiat currency, which we have. It would appear that the only ones not up to speed with modern economics is the American voter and the politicians that must, or prefer to, pander to them. The details of the theory (as in gravity is still a “theory”) are currently being contested in upper echelons of economics, with heavy hitters like Reich, Summers, and Krugman weighing in for traditional Keynesian theory, which was written to conform to the gold standard that prevailed at the time.
Modern Monetary Theory (MMT) is neither left or right in ideology, but does indicate that governments that create their own sovereign currencies by fiat and only have debt denominated in the same currency have much more policy space than currently thought. They can never fail to pay any obligation denominated in the currency they create at will and are only constrained by the availability of real resources, not money. They can effectively “afford” anything that is available priced in their currency denomination. Such currency issuers, obviously, never need to “get” currency from any source to spend, so borrowing is obsolete as a funding mechanism and taxation only serves as inflation control.
Decoupling spending from revenue, as I’m sure you can see, vastly changes available policy space for economies/governments, enabling them to be less dependent upon wealth for funding and less susceptible to ups and downs in business cycles. While our monetary system was designed around defending a gold reserve, it is also very well adapted to fiat currency as it currently functions. In a system that is only constrained by real resource availability, any suffering or lacking by the people that can be mitigated with spending at the federal level is entirely a political policy decison, not economics.
It isn’t difficult to see how that counters the present austerity rhetoric that both parties have promoted by fear mongering deficits (required for a net importer) and debt (a record of NET currency in circulation/savings after private bank debt is settled). Some prominent MMT economists are projecting problems if we enforce taxation/premiums on the working class for Medicare4All, which is why Bernie always promotes taxing those whose money isn’t flowing in the economy.
Drawing down available currency with any velocity while making millions of insurance industry workers unemployed is more likely to be deflationary than inflationary and may require tax “cuts”, not increases, for the working class. The wealthy must be taxed higher anyway, so Bernie is approaching the issue as “two birds with one stone” logic. I am confident in his policy and that he knows how to implement it without doing damage to the economy, and I don’t expect him to explain every nut and bolt. He has a stable of very well credentialed economists to draw from with deep understanding of our monetary system. Together, they can unleash the power of our economy to its full potential without the voodoo and scare tactics used by conservatives and neoliberals to avoid any benefit to the “little people” from their government.
