House Republicans Demand Hearing on MMT to Get Democrats on the Record
(Bloomberg) -- Republicans on the House Budget Committee want to put Democrats on-record about the nation’s growing deficit and the economic theory that argues it’s not so bad.
The 14 Republicans on the committee, including ranking member Steve Womack of Arkansas, are seeking a “hearing on the fiscal and economic implications of Modern Monetary Theory," according to a letter they addressed to the panel’s chairman, John Yarmuth, a Democrat from Kentucky. The school of thought, known as MMT, says that countries printing their own currency don’t have to worry as much about budget deficits because they can’t go broke.
“The debate over the validity of this increasingly prominent theory goes to the heart of every issue our committee is expected to address,” the letter reads, adding that a hearing should include MMT supporters and critics, and an expert from the Congressional Budget Office, a nonpartisan government agency.
The members are pushing to quiz Democrats on the potential deficit impact of expensive policy proposals, including a Green New Deal and Medicare for All, as MMT has broadened the debate about the economic consequences of yearly budget shortfalls, according to Lauren Aronson, a Republican spokeswoman for the committee.
Republicans have traditionally positioned themselves as fiscal conservatives seeking to cut government spending to balance the budget.
The nation’s debt, however, has grown under Democrats and Republicans, including the current president.
The deficit expanded to about 3.9 percent of gross domestic product last year, after several years of shrinking before Donald Trump was elected in 2016. The 2017 tax cuts passed by a Republican-led Congress are projected to add at least $1.5 trillion to the nation’s debt over the next decade, according to the CBO.
“House Republicans are trying everything they can to distract from their record of exploding deficits to finance tax cuts for millionaires and corporations,” Sam Lau, a Democratic spokesman for the Budget Committee, said in an emailed statement.
The request for a House hearing comes one week after Senate Republicans called for Congress to denounce MMT, rejecting the theory’s assurances about inflation risk, according to the five policy makers backing the resolution.
The previously obscure theory gained prominence from Washington to Wall Street after Representative Alexandria Ocasio-Cortez of New York said it should be included in the conversation about paying for expansive policy proposals. Stephanie Kelton, a former chief economic adviser to presidential contender Bernie Sanders, is a proponent.
MMT has not been widely embraced by congressional Democrats. In the rules set by the House majority at the beginning of the year, Democrats maintained a budget restriction that prevents new legislation from adding to the deficit.
Some progressives disagreed with this rule, because it would limit new government spending. Republicans in the last congress waived this rule for their 2017 tax cuts.
Billionaires, analysts and financial leaders have debated the merits of the theory. Former Treasury Secretary Lawrence Summers said that governments should focus on “urgent social problems” and not the deficit, and economists from both Standard Chartered and Bank of America Merrill Lynch said that such a theory could help interest rates and inflation in times of recession.
Critics include International Monetary Fund Chairman Christine Lagarde, who said it’s not a panacea, as well as Federal Reserve Chairman Jerome Powell, who said the concept is “just wrong.”
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