Top House Budget Dem: DC can spend whatever it wants because it’s “like the monopoly banker”
Representative John Yarmuth (D-Ky.), Chairman of the House Budget Committee.
Representative John Yarmuth (D-Ky.) Is chairman of the House Budget Committee, which plays a key role in shaping the $ 3.5 trillion reconciliation bill currently being debated in Congress. During a speech at the Louisville, Ky., Rotary Club in June, he explained why he believed the government could borrow and spend the trillions of dollars in discussion without any negative impact on the economy.
Below are his remarks, edited for clarity and brevity.
We don’t need to find ways to take people’s money to pay for what we have to do in this country. Because we issue our own currency, because we borrow and spend in our own currency, we can pay what we want to pay.
We just tell the treasury to pay the bills, write the checks when the bills come in.
You say, ‘Well, what about the debt, $ 28 trillion? Don’t you put it on our grandchildren?
No we are not. This is standard conservative rhetoric. And even some Democrats repeat it like a parrot: “Put it on our children’s credit card.”
We have been accumulating debt in this country for 230 years. No one has ever been asked to pay for their grandfather’s debauchery. It never happens.
People were saying that, I’m sure, when the national debt hit $ 1 billion under Abraham Lincoln. I know they were saying that when it hit at least a trillion dollars under Ronald Reagan because I heard about things back then. It was a trillion under Reagan, it’s now $ 28 trillion. Has anyone been asked to pay off this debt?
No. Because we don’t have to.
We have a sovereign currency. We are not like businesses, we are not like families, we are not like state governments, we are not like local governments. We don’t have to balance our checkbook.
We are like the Monopoly banker. We create the money. We distribute the money that everyone plays the game with.
We are one of 10 countries in the world positioned to do it this way. UK is one, Canada, Japan, Brazil, there are a few but not many. The EU cannot because they share their currency.
But we are.
There is a book called “The Deficit Myth” written by a woman named Stephanie Kelton. This is basically the best exposition and explanation I have heard of what is called modern monetary theory.
And modern monetary theory is exactly what I just described: when you have sovereign currency, you can basically do whatever you want, spend what you want. The only constraint on your spending is that you can’t put more money into the economy than the economy can absorb.
So theoretically, let’s say we want to give each family a $ 200,000 voucher to buy a house. You can do it. You can put in money, you can create money. You can do it.
What’s the problem with doing that? What would happen to the price of houses? Obviously, there would not be enough housing stock and prices would skyrocket. And that would make that coupon pretty much worthless for a lot of people.
It is therefore the constraint.
But what happened is that Milton Friedman’s school of economics – which is essentially the one we’ve all lived in for 70 years – turned out to be wrong.
We have consistently increased the national debt. We have not experienced serious inflation in the country. We have very low interest rates, historically low interest rates relative to the federal government’s borrowing costs. And the dollar is, against other currencies, as strong as it has been historically.
People say, “Well, if the president’s budget passes, the debt-to-GDP ratio would be 117%, the highest ever in the country’s history. “
It’s true. But Japan’s debt-to-GDP ratio is 240%, more than double ours. They have zero interest rates on their bonds, they have no inflation. They are not an exact comparison, they have their own issues.
The point is, there are more and more economists who are saying that maybe we have looked wrong at the issue of debt and what it means. One of those people is Jay Powell, Chairman of the Federal Reserve, who is not a liberal Democrat – he is appointed by Republicans.
A lot of economists are now saying that we have to start looking at it differently because it’s different from what we’ve been operating in for decades.