Question

MMT supporters say that budget deficits are not an issue. For example – Trump budget deficits are $ 1Trillion per year. Bernie Sanders is saying that we can provide health care to all without raising taxes on the average person. Under MMT that is fine while the traditionalists say that it will be disastrous.

a. Explain the rationale of the MMT supporters. Is there any evidence that MMT may be on to something?

b. What does MMT say about inflation and how to handle it?

Answer 1

Rationale behind MmT supporters is that government spending must stop or reduce before inflation kicks in and inflation should be ultimately point of consideration as against fiscal deficit as government can print own money and meet growing debt liability.

MMT says inflation has to be sustainable first and can be manageable and subsequently can be handled in a way that it can be curbed by reducing government spending and increasing taxes and through automatic stabilizers which act in absence of government intervention.

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