Krugman "legitimizes" MMT (but needs a copy editor)
Fine word, legitimate, but you know what I mean. Krugman's blog:
There have, however, been a couple of side shows, with what I guess now constitutes mainstream Keynesianism – carried forth in public debate by Martin Wolf, Simon Wren-Lewis, Brad DeLong, Jonathan Portes, Paul DeGrauwe, and whatshisface, among others – subjected to non-austerian criticism on both flanks. On the left are the Modern Monetary Theory types, who assert exactly what the austerians like to claim, falsely, is the Keynesian position – that budget deficits never matter (except for their direct effect on aggregate demand). On the right are the market monetarists like Scott Sumner and David Beckworth, who insist that the Fed could solve the slump if it wanted to, and that fiscal policy is irrelevant.
Well, it's nice that Krugman now recognizes MMT as a legitimate school of economics -- initial caps and all -- beyond the stale salt water vs. fresh water dichotomy.*
On the other hand, I'm not keen on Krugman's framing: "[B]udget deficits never matter" is an offensive echo of Dick Cheney. Which right there is our first copy editing problem: Krugman's got to get his snark straightened out. I mean, you can't classify MMT as part of the left and then put Dick Cheney's words in their mouths, right? It's a category error.** (And since Krugman is a truly brilliant blogger, I'd expect no snark kerfuffles from him at all, signalling, to this close reader at least, some deeper underlying failure to think things through on the Good Professor's part.***)
On the third hand, we've got Krugman's parenthetical:
"(except for their direct effect on aggregate demand)."
To my simple mind, Krugman's main sentence plus parenthetical seems a lot like "The American flag is all red (except for the blue and white parts)," but I'm assured by people who are a lot smarter than I am about MMT that Krugman's statement is technically correct. So we call in our copy editor for this little problem too, and the parenthetical becomes:
"(although deficits, like taxes, can and should be used to manage aggregate demand)"
Fixed it for ya....
NOTE * Some, like me, might quarrel with putting MMT on the left. Starting from a real understanding of the operational realities of money creation isn't a left vs. right thing, is it? And I certainly know MMTers who wouldn't place themselves on Krugman's spectrum at all. That said, since Krugman doubtless thinks of himself as being of "the left" (and if he is, then Obama's a Kenyan Socialist) he's really saying "These guys are on my side." Which I suppose isn't the worst possible outcome.
NOTE ** Then again, Krugman may be putting MMT words in austerian mouths ("assert exactly what," for some definition of exact). Gee, thanks, and why, and anyhow the same copy edits apply.
NOTE *** Or, to be fair, a sign of some deeper tectonic shift beneath the everyday political landscape, a la pre-1860 America, such that received categories no longer apply. Krugman the partisan would be the last to notice such a shift consciously, but it could be that Krugman the stylist might, unconsciously, have done so.