The Munk Debates Podcast - Be it resolved: Debt and deficit fears are overblown as advanced economies address the COVID-19 pandemic

Episode Date: July 29, 2020

The economic fallout from COVID-19 has compelled governments around the world to launch the largest fiscal and monetary aid programs in living memory, incurring massive deficits in the process. This is happening at the same time as a radical, new approach to economic policy making is gaining momentum: Modern Monetary Theory (MMT). Its proponents believe that governments that issue their own currencies are not limited by revenues when it comes to spending. What governments choose to spend money on is a political, not an economic decision. Opponents of MMT and deficit spending argue that there are no free lunches in modern economics. Too much government spending leads to slow growth, devalued currencies and wasteful, politicized public expenditures. On this episode of the Munk Debates Podcast, Stephanie Kelton, author of the new bestseller, The Deficit Myth, and Jacob Funk Kirkegaard, from the Peterson Institute, debate the essence of these two competing arguments.SOURCES: CBC, ABC, CNN, Bloomberg, CNBC, Yahoo Finance, Fox BusinessBecome a Munk Donor ($50 annually) to get 72-hour advanced access to the full length editions of Friday Focus and Munk Dialogues. Go to www.munkdebates.com to sign up. Hosted on Acast. See acast.com/privacy for more information.

I think it's time for this toxic binary zero-sum madness to stop. We're not in imperial power. We're a revolutionary power. We are no longer in a world where you can plot out moves statesmen to statesmen like a chessboard. You don't know anything about my background or where I came from. It doesn't matter to you because fundamentally I'm a mean white man. We can't do this to the next generation because America will cease to exist. Welcome to the Monk Debates podcast. Every episode we provide you with a civil and substantive debate on the big issues of the day. Free of spin, focused on the facts and animated by smart conversation.

To arm you, the listener, with enough information to make up your own mind. Today's debate, be it resolved, debts and deficits. Fears of both are overblown as advanced economies address the COVID-19. pandemic. I'm your moderator, Rudyard Griffith. Well, the economic fallout from the COVID-19 pandemic has compelled governments around the world to launch the largest fiscal and monetary aid programs in living memory. We are hearing of a massive COVID-19 recovery package that EU leaders finalized earlier today, an unprecedented stimulus amount. Our government will be creating a billion dollar COVID-19 response fund. I want to

all premiers and all Canadians to know. Our government is here for you. Now, I'm going to sign this, and it's a great honor, $6.2 trillion. I've never signed anything with a T on it. I don't know if I can handle this one, Mitch. We can't chicken out at this point, this is happening at the same time

as a radical new approach to economic policy making is gaining momentum. Modern monetary theory. Its proponents believe that Governments as issuers of their own currencies are not limited by the revenues they collect when it comes to what they spend. They argue that governments instead should create and spend money on programs that are in the public good. Not to do so is a political, not an economic decision. Why are our pockets only empty when we talk about a 100% renewable energy that is going to save this planet and allow our children to thrive?

We only have empty pockets when it comes to the morally right things to do. do. But when it comes to tax cuts for billionaires and when it comes to unlimited war, we seem to be able to invent that money very easily. Critics of so-called MMT think that it is based on a deeply flawed theory of money and how it works in the real economy. Rather than ushering in a new era of prosperity and economic opportunity, modern monetary theory risks dooming advanced economies to soaring inflation, declining productivity, and currency debasement. In some, there is no free lunch in economics. This is the view that we can just print money and create growth.

I mean, you know, I think of all the ideas I've ever heard in my lifetime, that's one of the stupidest. I mean, you know, if you could create growth by printing money, then Zimbabwe and Argentina, Venezuela would be the richest countries in the world. On this installment of the Monk Debates podcast, we challenged the essence of these arguments by debating the motion, be it resolved, debt and deficit fears are overblown as advanced economies address the COVID-19 pandemic. Arguing for the motion is Professor Stephanie Kelton, author of the brand new book, The Deficit Myth, Modern Monetary Theory, and the birth of the people's economy. Arguing against the motion is Jacob Funk Kierkegaard, senior fellow at the Peterson Institute of International Economics. Stephanie, Jacob, welcome to the Monk Debate podcast. Thank you for having us.

My pleasure. I'm really looking forward to this conversation, as all of us have been kind of reacting to the effects of this. pandemic globally. One of the big themes that's emerged is the extraordinary fiscal and monetary response that governments around the world have launched to combat the economic consequences and fallouts related to COVID-19. So to have an opportunity to have your two big brains elucidate and educate us about what is the implications of all of this is a treat indeed. So what we're going to do as per our usual format on this show is put two minutes on the clock for each of you to provide your opening statements on our resolution, be it resolved.

Debtes and deficit fears are overblown as advanced economies address the COVID-19 pandemic. Stephanie, we're having you argue in favor of this motion. So take us away with your opening remarks. I think I would like to start by making a simple assertion, and that is that words matter. For too long, we have chosen to use words like debt and deficit. words that induce anxiety and evoke a strong negative reaction to something that in reality is quite benign if we think about it the right way. So whenever you hear, one of us use the word deficit, I want you to think instead of your financial surplus. And whenever the word debt comes up,

I want you to hear the words dollar savings. Because the reality is, that so much, virtually everything, that we have been taught to think and fear about federal budget deficits and government debt is, I believe, either misleading, incomplete, or just flat out wrong. Deficits can be used for good or evil. They can enrich a small segment of the population, driving income and wealth inequality to new heights while leaving millions behind. They can fund unjust wars that destabilize the world and cost millions their lives. Or they can be used to sustain life and build a more just economy that works for the many and not just the few. They can help us in this moment of crisis with COVID-19 and the urgent need to repair our economies, our broken

health care system, our communities address real problems in society, and in our economy, everything from climate change to health care and education. Thank you, Stephanie. And thank you for setting the table for us, so to speak. So Jacob, you're arguing against our motion that debt and deficit fears are overblown as governments respond to COVID-19. Let's have your opening remarks, please. Well, let me start by saying that this time of a pandemic is a time of extraordinary politics, economics, and therefore also an extraordinary budget situation. Because while I certainly believe that there is ultimately a concern about debts and deficits, there is an existing government

budget constraint, it in my opinion does not apply in this extraordinary situation. There is absolutely no doubt in my mind that it is incumbent upon the government at this time of pandemic to spend what is required to sustain economic activity, protect incomes, protect the solvency of businesses from the pandemic. We will be helped greatly by the fact that the pandemic, in my opinion, will be deflationary. So inflation will be even lower going forward, which translates into lower levels of interest rates

and therefore ultimately lower debt burdens. But this shouldn't deter us in the long. run from recognizing that there is limits to what government can spend and the circumstances under which they spend it. Thank you, Jacob. So, Stephanie, let's have you react to Jacob's opening statement and maybe his final words there that there are limits to what governments can. And I'm assuming he's implying that governments should spend based on certain inherent

constraints that they have economically. and otherwise. Let's have you respond to that. The question of limits is, you know, if you're saying at what point should we worry about the size of the deficit, at what point should we worry about the growing national debt? Remember that I've asked us to think to substitute different words here. So it's like asking at what point should we begin to worry about the size of the private sector's surplus or at what point should we begin to worry about the quantity of dollar savings that are out there. At some point, God willing, the economy is going to recover and we're going to approach something closer to full employment. And that's when the deficit will begin first to shrink itself because people enter the labor market and find jobs and get reemployed, their incomes increase, they begin paying taxes.

So the deficit will shrink on its own over time. It isn't something that we need to actively pursue. the limit is in our economy's capacity to safely absorb whatever spending Congress has authorized. If Congress continues to pass legislation, providing too much stimulus as the economy recovers and returns to something closer to full employment, the punishment for that would be inflation. So the limit, the relevant limit to government spending is the economy's capacity to safely absorb that new spending to meet that demand with more supply and to do that in a way that doesn't involve bottlenecks in production and inflationary pressures. So Jacob, let's have your response here and maybe focusing really on Stephanie's argument just now that deficits will take care of themselves.

This will go away and by implication, you know, this persistent anxiety that we've had over decades now about the supposedly pernicious effects of deficits on the economy, on productivity, on economic growth are overblown. I believe that government initiative, government actions, and spending is typically in advanced economies a force for progress. But I think if we look around the world and take a look at countries that have much lower levels of income inequality, These are actually countries that do not rely on debts and deficit spending, and they certainly do not rely on the central bank to finance this spending. They are high-tax economies.

There's no budget deficit, right? In fact, Germany still has a gigantic budget surplus. We Germans are really like budget surpluses, and the difficulty is that Germany has its own debt break, and its own debt break basically means it has to run a surplus. It has a legal debt ceiling. And I think what this tells you is that countries that wants to use government spending as a force to achieve these kinds of long-term societal goals, income inequality, health care for all, etc. There are also countries that have recognized that you need to have a tax income to pay for this.

It is not a sustainable way in the long run to rely to an excessive degree on the central bank to do so. Okay, well, this is starting to get interesting here. Stephanie, you have a very different view. You think that governments believing that taxation is critical to their ability to spend and tax policy is somehow essential to budgeting decisions. you think we need to throw that out the window. That's an old way of thinking and frankly a destructive way of thinking in terms of fashioning citizens and the public

with the public services and goods that they need. I'm saying that instead of approaching the federal budgeting process, the way that we had, we're not doing it now, we're just simply passing legislation that authorizes the government to spend and we're not worrying about raising any revenue to offset that spending at the moment. Well, thank you all very much. It's a very important day. I'll sign the single biggest economic relief package in American history,

and I must say, or any other package, by the way. So you're talking about a $6.2 trillion bill, and this will deliver urgently needed relief to our nation's families, workers, and businesses. Now, Jacob says that he's worried about, you know, carrying on with deficit spending in the long run. I would have us look back at our actual historical record and note that the federal government's budget has in fact been in deficit for virtually my entire lifetime with, I think, five years accepted. Inflation hasn't run out of control. Interest rates are right where the central bank wants them.

And what I've argued doesn't have anything to do with the central bank playing along or somehow financing and making it possible for the government to do what it's done. But I'm arguing doesn't depend upon the central bank buying bonds or not buying bonds. It's simply the case that any spending that is authorized by Congress, those payments will be carried out by the government's bank. That happens to be the Federal Reserve. And so every time Congress commits to spending, it's effectively ordering up new dollars. And the Federal Reserve fills that order by making the appropriate entries in people's bank accounts, creating new, digital dollars. That's just how it works today. Thank you, Stephanie. So Jacob, respond to that because you believe that central banks and especially the Federal Reserve have a role to sell debt,

in sense, the open market, to provide an interest rate to investors in that debt, whereas Stephanie is making an argument here, an interesting one, that that whole process in some way is kind of redundant. If Congress mandates the spending, the Federal Reserve creates that money, and that spending is realized for the economy on behalf of the American people or on behalf of any large government. So why do you still feel the role of central banks to sell debt internationally at prescribed interest rates should still be part of our kind of monetary and fiscal calculus? I think what Stephanie is advocating is essentially that we should abolish monetary policy as the controller of inflation and as the sort of principal cyclical plumber, if you like,

the entity that controls the business cycle in the economy that provides most of the real-time stimulus or if required raises interest rates to reduce economic activity to lower inflationary pressures and expectations. We should replace that with fiscal policy. My view on that is that that is not likely to work out in practice. I wouldn't trust Congress to be able to do this and basically, you know, do it in real time or do it in a time of an election year because political necessities and imperatives would take over, which is exactly why some years ago, central banks were made nominally independent because you wanted to take them out of the constant political back and forth.

It's fairly unprecedented and worth noting that this represents all of the living former Fed chairs. So as you mentioned, Paul Volker, Alan, Alan, Alan, Alan, all coming to the defense of the Federal Reserve's independence in an op-ed in the Wall Street Journal yesterday saying that the Fed needs to be free of short-term political pressures and that it also needs to operate without any sort of fear of its leader, the current chair, Jerome Powell, being removed. What Stephanie seems to be advocating is that we should seem to do away with them and rely solely

on fiscal policy by simply doing away with the interest rate and have more or less all spending being financed by new money, central bank money creation. But I think that would have very significant broader implications. If you do that, it takes away the risk-free rate of which most private assets are also priced, would have very significant implications for the broader functioning of the U.S. financial system. Okay, this is great, because we're really now getting to the nub of this debate. So, Stephanie, I want you to react to Jacob's critique that, in a sense, the Fox is now in charge of the fiscal henhouse. And by neutering the role of central banks, you are creating a situation where it won't work in practice. Congress, the spending, they won't be able to politically pull back.

And that as a result, the inflation risks, the risks of currency depreciation, these are real systemic problems of the theory that you're advancing. Well, let's start by remembering that Congress already has the power of the purse. I'm not suggesting that we give Congress any new authorities or powers that they don't already have. And if you think that Congress has some sort of a deficit bias and that in an election year, Congress will try to, you know, provide all of these sweeteners and increase deficits in order to, you know, make the population very happy, deliver windfalls. And so, forth, I would suggest that we examine the record and you just don't see that. We have mostly divided Congress and even when we don't have divided Congress, you just don't see the abuse of the fiscal purse, of the power of the purse in ways that I think many people might be concerned about, including, I guess, Jacob on this point. But I'm not saying that we should take away the power of the Fed. What I'm saying are a couple of things.

First, I do not believe that the Federal Reserve or any central bank ought to be given sole responsibility for achieving a balanced economy. And that's effectively what we've done in the U.S. Congress has told the Fed, you have a dual mandate. It is your job. You steer this huge economic ship using, really, one price. You set the overnight interest rate. Jacob said that's the risk-free rate. you fix the policy rate, you move it around, nudge it here and there,

and you try using that policy tool to deliver full employment and basically price stability. We decided today to lower the target for the federal funds rate by a quarter of a percentage point to a range of 2% to 2.5%. The outlook for the U.S. economy remains favorable, and this action is designed to support that outlook. What I'm saying is I think that is asking way too much of the central bank. And I think central banks around the world are telling us you have asked way too much of us. We just don't have the ability to do what you're asking us to do.

We need a fiscal partner. And these are our elected representatives. And I do think that we should and can expect of Congress to approach the federal budgeting process in a way that, pays less attention and is less concerned about the budgetary impacts of their spending and is more concerned about the real effects. So if the economy is operating below full employment, there are clearly idle resources. You have lots of unemployed labor. You have slack in your manufacturing, utilization rates are low and so forth. I think it's reasonable to ask Congress to think about ways in which they can make investments in our economy without offsetting that spending,

okay, in other words, without the need to raise taxes to offset all of that spending, but that we get the benefit of important investments in our economy that aren't hung up out of fear of adding to the deficit. Thank you, Stephanie. Jacob, do you share the view that countries that have high debt loads have problems with secular growth and with productivity and with sustaining high living standards. Because the argument that Stephanie is putting forward here is that we can sustain a much larger debt and deficit burden. I mean, just look at the differences between the United States and Japan. Japan is over 100%

of GDP of debt. I think, no, I actually don't subscribe to the sort of general proposition that a high level of debt, that there is some sort of arbitrary threshold. at which point the level of debt becomes an exonerable drag on growth. The main reason why Japan has such a massive government debt at the moment is that it has another factor that has been an exonerable drag on growth for the last 30 years or so in Japan and is rapidly coming to many other countries around the world, which is demographics.

The real problem for countries is not that there is necessarily this, arbitrary level of debt at which growth cannot happen and living standards begin to suffer. The real problem is that growth slows down as a function of population aging. That reduces private investment because why should you invest in a market that is slowing? It puts more onus on the government to be the investor of last resort. I actually agree with a lot of what Stephanie is saying that there is clearly a role in aging societies for the government to be much more active when it comes to public investments, and it can do so to a large extent without worrying too much about the additional debt such investments incur because the low interest rates ensure that the

total weight of the debt burden remains very low. Thank you, Jacob. So, Stephanie, just to the listener who is trying to wrap their heads around this conversation, is there a limit to the amount of debt that a nation state issuing its own sovereign currency can carry? What about the currency risk. I guess as just a layperson, you'd think that if there was a lot more of something, it would be worth less. Why aren't we at risk of the devaluation of the U.S. dollar? There is no robust relationship between the amount of dollars that are being emitted or supplied over time and the value of a country's currency. The point that I think we're missing, that I think is really important, is, you know, this idea.

about the government debt, what we're calling the government debt, which I'm suggesting we remind ourselves, is just dollar savings. People want to net save the currency, not just Americans, but people around the world. There's an enormous appetite for the U.S. dollar. And the only way to satisfy the desire to net save the currency is for the issuer of the currency to make that currency available. And we do that in one of two ways. The government runs deficits and makes supplies the currency. And then with those dollars, we can supply some of them to the rest of the world. We buy imports from around the world.

And that all increases the dollar savings, both domestically and internationally. But the strength of the dollar is reflected by the fact that so many people want to net save in our currency. So I think that's essentially the answer. to the question. Jacob, what's your view on that? Because there's a feeling out there that this extraordinary fiscal stimulus is undermining the value of the world's reserve currency. And we've seen a precipitous fall in the last month or so of the US dollar versus other currencies. Do you agree or disagree with Stephanie that there is a connection between deficit spending on the scale that we're seeing now and worries about currency depreciation? I think I agree to a large extent with that

that there is no particular relation between the value of the dollar exchange rate and the levels of fiscal deficits that we have historically seen in the United States. The role of the dollar in international financial markets as a sort of global anchor currency, safe haven, etc., is, of course, a complex issue that has to do with the depth of U.S. dollar-denominated assets. It has to do with the U.S. traditional leading political role in the world. The fact that the United States is a functioning, you know, fairly transparent democracy compared to, say, China or other potential suppliers of global reserve currencies. But I do worry that if you go ahead with the kind of policies that Stephanie is advocating, then I do think that means that you end up with. much, much larger deficits in the United States.

And maybe some of those deficits are incurred for good sound reasons. But nonetheless, there is a risk that you could have a run on the US dollar, and it could lose the current status in the world, which would be a very negative event for the United States in the long run. And then just one final thing to what Stephanie said, it is true that Treasury debt carries interest, But the Federal Reserve also pays interest on reserve balances, banks reserve balances, where a lot of this extra money creation would end up.

So it's not, in my opinion, correct to say that money creation by the government doesn't incur an interest cost. It does through the central bank's payments on reserve balances. Stephanie, have you addressed that point of Jacobs? Because that's an important one. Why wouldn't interest rates rise in the face of continuing? large-scale government spending, not only in the context of COVID-19, but your vision is large investments in the greening of industrial infrastructure in supporting a caring economy. These are, in a sense, a series of generational contributions that you envision funding through

the issuance and the expansion of U.S. money supply, now into the future for many years to come. Well, actually, I don't think that's what I'm suggesting. What I'm saying is, if we are in a situation where we have lots and lots of vital resources, tens of millions of people who want to work but are locked out of employment, sitting on the sidelines, those people can be hired by the federal government and jobs can be created around, as you said, a care economy. We can put them to work caring for people, caring for their communities, caring for the planet. But you can't have what's not available. So what I'm saying is that in a depressed economy, there is lots of fiscal space.

You can spend into a depressed economy without the imperative to guard against the inflation risk by raising taxes. And the offsets become increasingly important as the idle resources diminish. So it is time and place specific in terms of what the government can do with authorizing new spending on big new programs. now is a great time to do some of that stuff. We won't always have this much fiscal space available. So on the interest rate question, I think this is important because you're right. Somebody's going to pay the interest unless we want to let the overnight interest rate go to zero, which is where the gravitational pull, as the government engages in spending in excess of taxes,

those dollars would just pile up in the banking system. They can sit there as idle reserves earning no interest, or they can sit there. as idle reserves, earning whatever the Federal Reserve chooses to pay on overnight reserve balances. Okay, that's a policy choice. If the government is engaged in deficit spending, the deficit increases the supply of dollars in the banking system, and currently, the government subtracts those dollars away and replaces them with U.S. treasuries, which are also interest-bearing. So either the Treasury pays the interest or the Fed pays the interest. It's essentially six of one and half a dozen of the other, except that when we do it through the Treasury, it results in this thing

called the national debt. And it results in a line item on the federal government's budget called the interest burden, right? Interest expense. And this makes everyone kind of crazy because they see the national debt and, oh my God, the interest expense is going to be bigger than what we spend on national defense. And so I'm saying, if we can't just come to terms with what is actually happening and just sort of breathe through it and understand that it poses no financial risk. It's not inherently dangerous. If we can't come to terms with it, then let's dispense with the issuance of the treasuries. Let's let the Fed pay the interest instead. In fact, we could let the Fed issue the securities. Jacob, I wanted you to respond to that point. It's an interesting one.

What if the Federal Reserve just paid all the interest out of money it created? And we just took interest payments out of the Treasury and therefore out of the federal budget. Because Stephanie's right, people get scared. They read that the interest payments on their national or subnational debts are equivalent to all their spending on education. Stephanie's saying, no, get rid of it. Push it onto the Fed. Fed pays with it with dollars that it creates with its computer.

I think ultimately pushing it all onto the Federal Reserve would represent a significant decline in fiscal and fiscal. government economic transparency in this country, it would become even more opaque, and I would certainly not support that. But I do agree with Stephanie that there is a political fight to be had here to convince Americans that this is worth the money, that the things we are spending our money on, and incurring these debts and this deficit to achieve is worth it. But I would rather have that debate up front than have it sort of hidden away, carried out. you know, through the Federal Reserve balance sheet.

I fundamentally view this, let the Fed take care of all the interest rates payment as a significant reduction in transparency, and that's not a good step. Stephanie, this is an interesting charge, that there's a kind of opacity that comes from spending when it is assumed as an obligation of the Treasury. We're losing one of the most important things that we fought for over the last few decades, which is greater insight and transparency in how government spends. Well, I completely disagree. I think that the current set of arrangements is what is not transparent.

This is what's opaque. No one. People don't understand government finance. And part of the reason is because of the way we currently run the government's fiscal operations. People hear that the government is running a deficit so it needs to borrow. No, it doesn't. It doesn't need to borrow. No government that issues its own currency ever needs.

to borrow that currency from anybody else in order to spend. So we confuse people by doing this thing that we call borrowing and issuing bonds that we call debt and saying that because the government has engaged in deficit spending, it needed to borrow, and now it has taken on debt, and then we call that a burden, I think we could make it much more transparent

by saying to everyone clearly, look, the government's own deficit spending gives rise to the dollar, the dollars that fall into someone's hands that are then made available to purchase government bonds. So what's really happening, if we want to be transparent and tell people the truth, is that the government is supplying dollars through its deficit and then allowing people who have those dollars to trade them in for interest-bearing dollars. You know, you can think of it as a form of UBI. It's like a universal bondholder income. This is a subsidy from the federal government

to people who are wealthy enough to afford to save in the form of interest-bearing currency, to buy bonds. Okay, why do we do that? Right? We should have a conversation about whether that serves a public purpose because we're spending something like $385 billion a year on interest expense. So that money is just going to people who are fortunate enough to have some bonds. The government is running them through a primary dealer market that's profiting from playing the intermediary, the middleman in this process, and none of it's necessary. Absolutely, none of it is necessary. Now, we could have a debate about whether it, in fact, serve some public purpose to allow this, but what we could also do is what I suggested. If we want people to have access to a safe

interest-bearing alternative to non-interest-bearing cash, let them have an account at the Fed. Let the Fed pay the interest, and then it would become that much more transparent. Thank you, Stephanie. So, Jacob, would you like to respond to what you've just heard from Stephanie? My view is really one of ultimate political accountability and control. As I said, I would much rather have the debate up front in the political arena about what the spending should be on and justified in that way than making it possible for politicians to just basically, you know, do whatever they want and then have the interest rate paid by the Fed and the central bank money funding it.

Because ultimately, as I said earlier, I don't believe that that is going to end in a nice place because we know, unfortunately, that our politicians are not our best angels when it comes to this. And I don't believe that they would be able to control themselves in the long run over this, irrespective of who pays the interest and the degree of transparency. That's why I think it is a dangerous road. You're listening to the Monk Debates podcast. If you like this podcast, check out our other episodes, including debates on everything from the U.S. election to the accuracy.

of COVID-19 data to whether billionaires should exist. All free to download or stream on our website, monkdebates.com. Okay, let's go to closing statements. Stephanie, we're going to put two minutes up on the clock. This is your opportunity to kind of underline for our audience, the key points that you want them to take away from this conversation. Again, our resolution, be it resolved, deaths and deficit fears are overblown as advanced economies address the COVID-19 pandemic.

I want to start with a reminder. that all government spending today is already financed by new money creation via the central bank. There's no way to say, I'm afraid of what might happen if the central bank were creating a currency on behalf of the federal government as it engages in spending. That's already how it works. So what we need to do is come to terms with the way the government actually spends, the role of taxes, and the purpose of borrowing, and to recognize, that the government has the fiscal capacity, that Congress has the power of the purse. And it's in the Constitution. In the United States, it's Article 1, Section 8. The founders wanted it that way. They

wanted our elective representatives to have the capacity to arrange the budget, to organize the budget, to commit resources on behalf of the American people, and to budget in the interest of the broader population. And I think that's a good thing. I don't want a non-elected by of technocrats standing in the way or attempting to stand in the way of a duly elected body, Congress, making decisions on behalf of the American people. I do not have the same concerns that Jacob has that are elected officials, if they were to have a better understanding of how all of this stuff works, would push things to the extreme in the ways that I think Jacob is concerned

and that we would end up with sort of punishing inflation and so forth, because I believe in democracy. I think that if our elected officials were to abuse the power of the person in those ways, then there's a way to deal with that. We deal with that at the ballot box, right? The American people would then say, this is not how we want you operating the federal budget. This is hurting us. And so it wouldn't last for very long if you did end up in a situation like that.

I want to check. I want a third-party independent agency involved. You know, we have that today. It's just that we ask agencies like the Congressional Budget Office to help our lawmakers evaluate spending decisions not based on any inflation risk associated with the spending, but simply does it add to the deficit? How much does it increase the debt? So we're really asking them for feedback that is the least useful form of feedback.

And I just think that we need a fundamental reorganization of what we ask third-party independent agencies to look at, and it'll help guide lawmakers, and the rest of us are there for the accountability. Thank you, Stephanie. Jacob, we're going to give you the last word, two minutes up on the clock, just to summarize this debate and, again, what you want listeners to take away. I think it's important to recognize that in national emergencies, government and government spending is really what stands between us and a prolonged Great Depression.

And therefore, it's absolutely critical that God, governments have the willingness and capacity to spend what is necessary at a time of national emergency like during the current pandemic. And I think we have to say that that willingness and that ability has been present in the United States and across the advanced economies during COVID-19. So in that sense, I think the current system has actually passed a very important test. But that doesn't mean, therefore, that it is necessary to throw the entire existing system, more or less out of the window and rely on an entirely new and politically unstable and potentially desabilizing set of new institutions that does away with the traditional role of central banking

and monetary policy and equips and entrusts elected officials, which typically have an overbearing self-interest in short-term re-election with essentially the sole lever for steering the macroeconomic steering of national economies. I do not believe that this presents a set of incentives that would lead elected officials to safeguard the long-term economic interests of the United States or any other advanced economy. Thank you, Jacob. And thank you, Stephanie. This is an important conversation for us to have. What's happening right now in terms of the fiscal and monetary response to this pandemic has really opened people's eyes to the fact that we need more thoughtful, substantive conversation about how nations and countries manage their debts and deficits. And both of you have approached this discussion today with real civility and substance. That's what the Monk Debate podcast is all about on behalf of our listeners.

Thank you very much. Thank you so much. My pleasure. Well, that wraps up today's program. Again, thanks to Professor Stephanie Kelton and Jacob Funk Kirkagard for coming on the program. And I want to urge listeners to check out Stephanie Kelton's new book. It's a big international bestseller, The Deficit Myth, Modern Monetary Theory and the Birth of the People's Economy. The Monk Debates podcast is a place for civil and substantive debate on the big issues of the day.

To listen to more debates on everything from Life, Life, After, COVID-19, to how it's changing our cities, to the new geopolitics of the age of pandemics. We've got it all on our website at www.munkdebates.com. You can also find detailed show notes on today's debate. Well, thank you, audience, for helping us bring back the art of public debate. One conversation at the time. I'm your moderator, Rudyard Griffiths. The Monk Debates are produced by Antica.

Productions and supported by the Monk Foundation. Rudyard Griffiths, Marilynne, Missouri, and Christina Campbell are the producers. The Monk Debates podcast is mixed by Monica Brighton. The president of Antica Productions is Stuart Cox. Be sure to download and subscribe wherever you get your podcast. And if you like us, feel free to give us a five-star rating. Thanks again for listening.