In a Presidential Lecture delivered Oct. 15 in Stony Brook University’s Staller Center, Stephanie Kelton, a leading voice in the emerging conversation about economic reform, began with a single provocative question: “But How Will We Pay for It? Making Public Money Work for Us.”
Kelton, a professor of public policy and economics at Stony Brook’s College of Arts and Sciences, set out to show that when Republicans and Democrats point fingers at each other about national deficits, they’re missing a valuable opportunity to have substantive debates about real economic issues.
Kelton was introduced by President Samuel L. Stanley Jr., who invited her to speak at his Presidential Lecture Series. These lectures, open to the community, share unique perspectives on topical issues. Recent past speakers include Phumzile Mlambo-Ngcuka, United Nations Under-Secretary-General and Executive Director of UN Women; Margaret Jay, Baroness Jay of Paddington; and Pulitzer Prize-winning journalists Bob Woodward and Carl Bernstein.
President Stanley noted that Kelton’s topic was particularly timely in light of the upcoming midterm elections.
“Her economic ideas based on Modern Monetary Theory, which she helped found, are driving new concepts and influencing the direction of the Democratic Party,” he said. “She is often cited as one of the leading economists of our time.”
After thanking President Stanley and the staff that helped pull the event together, Kelton jumped into her subject, stating that: “Whatever the agenda item is, whether it’s infrastructure or free college or Medicare for All, when you get a politician who says they’ll introduce this legislation, they will be asked, ‘How are you going to pay for it?’ as though that’s the most important question to begin with.
“You’re not debating the benefits of the proposal and you get bogged down in a question about taxes and so forth,” Kelton said. “I want to see if it’s possible for us as a nation to move beyond this question and have better debates and better dialogue about the things that really matter.”
Kelton went on to discuss ways in which the U.S. can begin to reshape that question.
Below are 10 key points from her lecture:
1. Economic Concerns Are Nothing New: Warnings that the U.S. will soon run out of money have always been with us. Kelton said there’s no reason for the conversation to be about catastrophe, but a paradigm shift is needed.
2. The Federal Budget Is Not a Household Budget: The biggest mistake we make is thinking the federal government budget is like a household — that like us, the government can’t spend more than it makes and take on more debt without courting disaster.
3. The Government Is Always in Deficit: The deficit is nothing more than the government spending more into the economy than it takes. The government is almost always in deficit and the private sector is in surplus.
4. The Debt Clock Is an Asset Clock: The entire national debt is a historical record of all the dollars the government spends into the economy that are not taxed back and are currently being held in the form of U.S. government securities, called treasuries. Actually, she said, the national debt clock is an asset clock.
5. The U.S. Benefits from China’s Manufacturing Economy: Some are anxious about borrowing from China, but the U.S. is a beneficiary of that nation’s manufactured products and investments. The U.S. gets the products China produces and China invests its money in U.S. treasuries. Quoting a bond trader, she said: “The only thing we owe China is a bank statement.”
6. What Getting Rid of the National Debt Really Means: Eliminating the national debt would mean eliminating safe securities that people like to hold in their portfolios.
7. Paying Down National Debt Has Led to Recession: Since 1817, there have been seven times in U.S. history when the government has run budget surpluses and paid down its national debt. Each time that policy led to depressions and recessions, driven by households spending more than their income and incurring unsustainable debt.
8. Invest Now to Prevent Future Inflation: When it comes to entitlements, instead of saying “Social Security is going broke, we have to cut benefits and the system is unsustainable,” we should be saying: “What are the things we can do today, what investments we can make today to increase the odds that in five, 10, 20 years the U.S. economy is productive enough that we can make good on all of those promises without causing an inflation problem?”
9. The Government Cannot Really Go Broke: The U.S. government is never going to run out of the U.S. dollar. “It can’t run out of dollars any more than a carpenter can run out of inches or the scorekeeper here at Stony Brook can run out of points [during a football game],” Kelton said.
10. Considering What’s Affordable Is Good Economic Policy: The debate we should be having is about focusing on the things that matter and what can we afford in terms of labor, resources and materials.
President Stanley concluded the discussion with a Q&A that focused on increased public debate about the economy, legislation, markets for sovereign currency, inflation and Kelton’s former role with Bernie Sanders’ presidential campaign.
“Her novel ideas give us a lot to think about,” President Stanley said. “They ask us to see our economy and our world from a different vantage point, one that creates possibilities and new potential for people and government. We’re privileged that we have individuals like Stephanie who are working to move the conversation in this way.”
— Liza N. Burby