In This Review

The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy
The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy
By Stephanie Kelton
336 pp, PublicAffairs, 2020
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Kelton, an economist, is a prominent proponent of modern monetary theory, the idea that many rich countries need not worry about expanding their deficits. In this clear and vigorously written book, she argues that any country that borrows in its own currency in a floating exchange-rate system has no effective limit on its central-government debt. A country reaches the limits of its ability to spend when the rate of inflation rises; the size of its budget deficits and public debt is irrelevant. Kelton sets these compelling arguments in a broader left-wing agenda for the United States that includes greater environmental protections and government-guaranteed work, with minimum pay fixed at $15 per hour, for any U.S. resident who desires it. Recent U.S. congressional fiscal action in response to the pandemic, as well as new programs launched by the Federal Reserve, suggests that the author is at least partly right in her assessment of the spending power of governments.