What MMT appears to offer that conventional policymaking does not is the job guarantee. On one level this is attractive — central banks consistently overestimate how low unemployment rates can fall before inflation reappears. The guarantee would remove this discretion and use the composition of employment, not its level, to control inflation. Yet there is no certainty that it would create the “good jobs” Kelton imagines. It may end up looking more similar to workfare programmes. In a time of stagflation, with inflation and unemployment rising, it may become as unpleasant a tool for trying to force down private sector wage growth as conventional monetary policy. The descriptive part of MMT is more appealing: that monetary sovereigns really are currency issuers not users. That insight, however, is neither new nor particularly helpful as we work out how best to balance growth, inflation and fiscal sustainability on the other side of coronavirus.
Kelton is a razor-sharp writer, making accessible to noneconomists what can be technically challenging material in other hands. Smashing shibboleths of conventional economic wisdom, the author is unafraid to point out that the emperor has no clothes. She argues passionately for a more progressive economy, starting by flipping the script on how we conceive public finances and monetary policy. While written as polemic, The Deficit Myth is theoretically sound, though occasionally politically naive.