[Congressional Record Volume 169, Number 39 (Wednesday, March 1, 2023)]
[Senate]
[Pages S572-S573]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  SENATE RESOLUTION 89--RECOGNIZING THE DUTY OF THE SENATE TO ABANDON 
 MODERN MONETARY THEORY AND RECOGNIZING THAT THE ACCEPTANCE OF MODERN 
   MONETARY THEORY WOULD LEAD TO HIGHER DEFICITS AND HIGHER INFLATION

  Mr. BRAUN (for himself, Mr. Cassidy, and Mr. Scott of Florida) 
submitted the following resolution; which was referred to the Committee 
on Banking, Housing, and Urban Affairs:

                               S. Res. 89

       Whereas noted economists from across the political spectrum 
     have warned that the implementation of Modern Monetary Theory 
     (referred to in this preamble as ``MMT'') would pose a clear 
     danger to the economy of the United States;
       Whereas, in July 2019, Zach Moller, deputy director of the 
     economic program at Third Way, wrote in a memo the problems 
     associated with MMT, including that--
       (1) ``Under an MMT regime, policymakers would need to 
     respond to inflation by doing two of the most unpopular 
     things ever: raising taxes and cutting spending. . . . We can 
     easily imagine divided government's paralysis to fight 
     inflation: Republicans refusing to raise taxes and Democrats 
     refusing to cut spending.'';
       (2) MMT ``ends our central non-political economic manager'' 
     and ``markets trust the Federal Reserve and, as a result, 
     businesses and individuals have well-anchored inflation 
     expectations. . . . To solve the challenges higher interest 
     rates create, including a possible interest financing spiral, 
     MMT generally says that the Fed will be tasked with keeping 
     interest rates low by making the Federal government, through 
     the Fed, the consistent (if not the primary) purchaser of 
     bonds. This is a different mission for the Fed than it has 
     now. The Fed would no longer be tasked with intervening to 
     keep prices stable because it would be too busy buying bonds. 
     Bond purchases by the Fed generally increase inflation. Thus, 
     the Fed would no longer be an independent manager of the 
     economy.''; and
       (3) MMT ``destroys foreign confidence in America's 
     finances. . . . Holders of U.S. debt (in the form of 
     treasuries) expect stability in value, a return from their 
     investments, and the ability to be paid back. MMT blows that 
     up. Bondholders would no longer be assured a return on their 
     investment, and it will no longer be as desirable for our 
     creditors to hold U.S. debt.'';
       Whereas, on May 17, 2019, Joel Griffith, a research fellow 
     at The Heritage Foundation, wrote in an article entitled 
     ``The Absurdity of Modern Monetary Theory'' the following: 
     ``There is no free lunch. We will pay either through the 
     visible burden of direct taxation, the hidden tax of 
     inflation, or higher borrowing costs (as the government 
     competes with businesses for available capital). Such 
     realities might not make for a great stump speech, but facing 
     them squarely now can save us a lot of headaches down the 
     road.'';
       Whereas, on March 25, 2019, Janet Yellen, former Chair of 
     the Board of Governors of the Federal Reserve System, 
     disagreed with those individuals promoting MMT who suggest 
     that ``you don't have to worry about interest-rate payments 
     because the central bank can buy the debt'', stating: 
     ``That's a very wrong-minded theory because that's how you 
     get hyper-inflation.'';
       Whereas former Secretary of the Treasury and Director of 
     the National Economic Council Lawrence H. Summers--
       (1) on March 5, 2019, wrote in an opinion piece in the 
     Washington Post entitled ``The left's embrace of modern 
     monetary theory is a recipe for disaster'' that, ``contrary 
     to the claims of modern monetary theorists, it is not true 
     that governments can simply create new money to pay all 
     liabilities coming due and avoid default. As the experience 
     of any number of emerging markets demonstrates, past a 
     certain point, this approach leads to hyperinflation.''; and
       (2) on March 4, 2019, said that--
          (A) MMT is fallacious at multiple levels;
          (B) past a certain point, MMT leads to hyperinflation; 
     and
          (C) a policy of relying on a central bank to finance 
     government deficits, as advocated by MMT theorists, would 
     likely result in a collapsing exchange rate;
       Whereas, on February 26, 2019, Jerome Powell, Chair of the 
     Board of Governors of the Federal Reserve System, stated: 
     ``The idea that deficits don't matter for countries that can 
     borrow in their own currency I think is just wrong.'';
       Whereas, on February 24, 2019, Matt Bruenig, founder of the 
     People's Policy Project, wrote in an article entitled 
     ``What's the Point of Modern Monetary Theory'' that ``the 
     real point of MMT seems to be to deploy misleading rhetoric 
     with the goal of deceiving people about the necessity of 
     taxes in a social democratic system. If successful, these 
     word games might loosen up fiscal and monetary policy a bit 
     in the short term. But insofar as getting government spending 
     permanently up to 50 percent of GDP really will require 
     substantially more taxes in the medium and long term.'';
       Whereas, on February 21, 2019, Doug Henwood, a journalist 
     and economic analyst, wrote in an article in Jacobin entitled 
     ``Modern Monetary Theory Isn't Helping'' that ``MMT's lack of 
     interest in the relationship between money and the real 
     economy causes adherents to overlook the connection between 
     taxing, spending, and the allocation of resources'';
       Whereas, on January 28, 2019, in a question and answer 
     session with James Pethokoukis of AEIdeas, Stan Veuger, 
     visiting lecturer of economics at Harvard University, stated 
     that, ``if you take MMTers at their word in the most 
     aggressive sense, then what you would see is a massive debt 
     finance expansion of the welfare state with Medicare for All, 
     with a jobs guarantee, and with concerns about inflation 
     being deferred entirely to elected officials who would have 
     to raise taxes to keep it under control. I think in a 
     scenario like that, we do run a risk of going back to the 
     1970s pre-Volker style macroeconomics and I think that would 
     be bad.'';
       Whereas, on January 17, 2019, Michael Strain, Director of 
     Economic Policy Studies at AEI, wrote in an opinion article 
     in Bloomberg entitled ``Modern Monetary Theory Is a Joke 
     That's Not Funny'' that ``if you thought from the start that 
     the whole idea sounded like lunacy, you were right, even if 
     it's possible to admit some sliver of sympathy for it'';
       Whereas Paul Krugman, winner of the 2008 Nobel Memorial 
     Prize in Economic Sciences--
       (1) on March 1, 2019, posted on Twitter a point-by-point 
     rebuttal to an article entitled ``The Deficit Myth: Modern 
     Monetary Theory and the Birth of the People's Economy'' by 
     Stephanie Kelton, which concluded with Krugman tweeting 
     that--
          (A) ``Sorry, but this is just a mess. Kelton's response 
     misrepresents standard macroeconomics, my own views, the 
     effects of interest rates, and the process of money 
     creation.'';
          (B) ``Otherwise I guess it's all fine.''; and
          (C) ``See what I mean about Calvinball?''; and

[[Page S573]]

       (2) on February 12, 2019, wrote in an opinion piece in the 
     New York Times the following: ``And debt can't go to 
     infinity--it can't exceed total wealth, and in fact as debt 
     gets ever higher people will demand ever-increasing returns 
     to hold it. So at some point the government would be forced 
     to run large enough primary (non-interest) surpluses to limit 
     debt growth.'';
       Whereas, on November 15, 2019, Jason Fichtner and Kody 
     Carmody of the Bipartisan Policy Center wrote in a report 
     entitled ``Does the National Debt Matter? A Look at Modern 
     Monetary Theory, or MMT'' that--
       (1) ``deficits do have a role to play in public finance'' 
     but, ``as interest rates rise, some private-sector projects 
     no longer make financial sense and are forgone. Crowding out 
     private investment ultimately leads to a misallocation of 
     resources away from their most economically productive use, 
     hampering economic growth. . . . The more we borrow today, 
     the more expensive it will be to continue borrowing in the 
     future. At some point, debt has to be paid back. There is no 
     free lunch.'';
       (2) ``MMT underestimates other downside risks of debt'' and 
     ``MMT advocates note that inflation is the only restraint on 
     debt-financed spending. This leads some to conclude that 
     under the theory of MMT, debt is not a concern, as 
     governments can simply print more money to pay off debt. Such 
     a theory is roundly rejected by academic economists on both 
     sides of the political spectrum.'';
       (3) printing money has costs, including a ``loss of 
     credibility for the government'', an ``inflation risk'', and 
     exacerbating ``exchange rates'';
       (4) ``MMT assumes away politics'' and puts ``the onus of 
     inflation control on Congress, the institution that lately 
     seems worst-equipped to handle it. The Federal Reserve--which 
     has spent a long time building extensive credibility in its 
     commitment to fight inflation--would be largely sidelined.'';
       (5) ``even MMT admits that deficits and debt matter'', 
     noting that Stephanie Kelton has stated: ``I would never take 
     the position that we ought to move forward, passing 
     legislation with no offsets, to do Green New Deals, and Jobs 
     Guarantees, and Medicare for All. In the end, MMT's arguments 
     largely boil down to a disagreement over how much room there 
     is to borrow without accelerating inflation.''; and
       (6) it is ``hard to pin MMT down on anything at all'' due, 
     in large part, to the fact that ``prominent supporters of MMT 
     have taken vague, sometimes contradictory positions: When 
     politicians make claims about paying for the Green New Deal 
     through MMT, stay silent, and when economists criticize this 
     view, claim you are being misunderstood.'';
       Whereas the March 2019 report entitled ``How Reliable is 
     Modern Monetary Theory as a Guide to Policy?'' by Scott 
     Sumner and Patrick Horan of the Mercatus Center at George 
     Mason University found that--
       (1) MMT--
          (A) has a flawed model of inflation, which overestimates 
     the importance of economic slack;
          (B) overestimates the revenue that can be earned from 
     the creation of money;
          (C) overestimates the potency of fiscal policy, while 
     underestimating the effectiveness of monetary policy;
          (D) overestimates the ability of fiscal authorities to 
     control inflation; and
          (E) contains too few safeguards against the risks of 
     excessive public debt; and
       (2) an MMT agenda of having fiscal authorities manage 
     monetary policy would run the risk of--
          (A) very high debts;
          (B) very high inflation; or
          (C) very high debts and very high inflation, each of 
     which may be very harmful to the broader economy;
       Whereas the January 2020 working paper entitled ``A 
     Skeptic's Guide to Modern Monetary Theory'' by N. Gregory 
     Mankiw stated: ``Put simply, MMT contains some kernels of 
     truth, but its most novel policy prescriptions do not follow 
     cogently from its premises.'';
       Whereas the January 2019 report entitled ``Modern Monetary 
     Theory and Policy'' by Stan Veuger of the American Enterprise 
     Institute warned that ``hyperinflation becomes a real risk'' 
     when a government attempts to pay for massive spending by 
     printing money; and
       Whereas the September 2018 report entitled ``On Empty 
     Purses and MMT Rhetoric'' by George Selgin of the Cato 
     Institute warned that--
       (1) when it comes to the ability of Congress to rely on the 
     Treasury to cover expenditures, Congress is, in 1 crucial 
     respect, more constrained than an ordinary household or 
     business is when that household or business relies on a bank 
     to cover expenditures because, if Congress is to avoid 
     running out of money, Congress cannot write checks in amounts 
     exceeding the balances in the general account of the 
     Treasury; and
       (2) MMT theorists succeed in turning otherwise banal truths 
     about the workings of contemporary monetary systems into 
     novel policy pronouncements that, although tantalizing, are 
     false: Now, therefore, be it
       Resolved, That the Senate--
       (1) realizes that large deficits are unsustainable, 
     irresponsible, and dangerous; and
       (2) recognizes--
       (A) that the acceptance of Modern Monetary Theory would 
     lead to higher deficits and higher inflation; and
       (B) the duty of the Senate to abandon Modern Monetary 
     Theory in favor of mainstream fiscal and monetary frameworks.

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