SALT LAKE CITY — I love having my mind blown. I love it when I read something or someone explains a concept to me that shows me I have been wrong, sometimes for years. It proves to me that, even at 58, I am capable of learning and seeing the world through a clearer lens. Like Mark Twain famously said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
Here are a few things I knew for sure that just ain’t so. I believed putting your cell phone in rice if you got it wet would help save the phone. I’d been told that was absolutely true! Nope. How about the one that says we only use 10% of our brains? Do you believe that is true? I used to, too, until I learned how absurd that myth is. Maybe the biggest lightbulb moment for me was when I learned that sugar does NOT make kids hyper. I’ve believed that and repeated it for all of my years! How can that not be true? Because it’s been debunked by dozens of studies. (This does not mean that sugar isn’t bad for you. I put it right up there with smoking.)
I had a new mind-blowing experience today when I finished the book The Deficit Myth by Stephanie Kelton. I have long considered myself a fiscal conservative. We shouldn’t spend money we don’t have. Right? What I now understand is that my belief still holds true for households and businesses, but not for governments that are currency issuers. Contrary to my previous belief, the federal government should NOT budget like a household. It doesn’t need to tax to fund itself; it spends to fund us so we can build a solid society.
This understanding of macroeconomics is called Modern Monetary Theory. Does it argue that the federal government can spend endlessly without consequence? No. But budget deficits are not boogeymen. Neither is debt, which is just a scary way of describing the ledger of nongovernment savings. The only real threat to a healthy economy when the nation controls its own currency is inflation.
I even look at trade deficits differently. They could also be described as stuff surpluses. The only challenge with trade deficits is job loss. If the government uses its fiscal capacity to maintain full employment, the trade deficit doesn’t really matter, according to MMT.
Perhaps the one that blew my mind the most was about social security and other “entitlements.” (Entitlements used to be called “earned entitlements” or the “social safety net” until politicians decided to demonize them and the Americans who receive them.) The social security fund can never run out of money because it is not based on taxes paid into it. The only reason President Roosevelt explained the program in terms of paying into the fund is that he wanted Americans to feel entitled to the money. The money comes from our commitment to pay it, not any direct corollary to taxes. How can that be? Because a currency sovereign can never run out of its own currency. Inflation is the only thing to watch and work hard to prevent (or in 2022, reverse.)
Did any of this blow your mind? Since I hope to be a student of the world until I leave it, please let me know if I’m wrong on any or all of the above. I’m not afraid of what I don’t know, only of what I know for sure that just ain’t so.