Hern, Braun introduce resolution condemning Modern Monetary Theory
Representative Kevin Hern (OK-01) introduced a resolution in the House of Representatives this week condemning Modern Monetary Theory, recognizing that its implementation would lead to higher deficits and inflation. Senator Mike Braun (IN) introduced the companion bill in the Senate.
Rep. Hern first introduced this resolution in the 116th Congress with the support of Heritage Action for America, Americans for Tax Reform, the National Taxpayers Union, and the Taxpayers Protection Alliance.
“Debts unequivocally matter,” said Rep. Hern. “Money has real value – it’s crazy that we need to say these things, but that’s the reality we’re living in. Modern Monetary Theory says the government can spend as much money as we want, that we are incapable of running out of money. It’s absolutely not true and alarming that several Members of Congress – who control the purse strings of the federal government – ascribe to this belief. My resolution, should it pass, would make it emphatically clear that our government condemns Modern Monetary Theory and its dangerous influence over the people elected to safeguard your tax dollars.”
Senator Mike Braun said, “’Modern Monetary Theory’ is a recipe for hyper-inflation, higher deficits, and higher taxes. While I’m not surprised that the big spenders in D.C. have latched onto a theory that tells them to spend irresponsibly and hike taxes, I believe we must denounce this flawed economic model before it’s too late.”
Rep. Hern introduced H.Res. 267 with two original co-sponsors: Rep. Ted Budd (NC-13) and Rep. James Baird (IN-04).
Rep. Hern’s resolution resolves that the U.S. House of Representatives realizes that deficits are unsustainable, irresponsible, and dangerous; and recognizes that the implementation of Modern Monetary Theory would lead to higher deficits and inflation. The resolution also acknowledges that it is the duty of the House of Representatives to condemn Modern Monetary Theory.
Modern Monetary Theory (MMT) suggests the federal debt is not important. As prominent MMT proponent, Stephanie Kelton, states: “MMT starts with a really simple observation and that is that the U.S. dollar is a simple public monopoly. [The U.S.] can never run out of money. It cannot face a solvency problem … in order to spend, the government doesn’t have to do what a household or a private business has to do: find the money. The government can simply spend the money.” Or as L. Randall Wray puts it, “We argue that financial affordability cannot be an issue for the sovereign U.S. government.”
More than 40 leading economists were asked whether they agreed with the underlying tenets of MMT by the University of Chicago’s Booth School of Business. 100 percent of respondents disagreed or strongly disagreed with the economic principle.
Opponents of MMT worry that relying on Congress to control inflation through tax policy is likely to prove less successful than relying on monetary policy through the Federal Reserve, which can be implemented more swiftly. Therefore, following MMT would likely lead to higher inflation rates – a move that would weaken the nation’s economy, diminish the value of the dollar, increase the prices of basic goods and services, and reduce the incentive to save and invest.
On February 26, 2019, Chairman of the Federal Reserve Jerome Powell said, “The idea that deficits don’t matter for countries that can borrow in their own currency I think is just wrong.”
The bill text can be found here.