In my recent piece at the Australian Independent Media Network, there was a section I was not able to put succinctly and thus left it out altogether. Joe Weisenthal from Bloomberg publishing as @TheStalwart on Twitter has managed to do what I was unable to do.
Joe Weisenthal writes:
When people think “x pays for y” what they think about is sales at a company (cash coming in) paying for employee wages (cash going out)
People love pointing out the math how if we taxed the rich more we could solve homelessness or some other societal ill. MMT points out we do not need higher taxes on the rich to get more homes. What we need is for Congress to allocate the money to spend on more homes, and we need the supply-side capacity to build those homes.
Ameliorating inequality by taxing the rich might be a social good, but strictly speaking, the government can do plenty more than it does even without a wealth tax or a change to the highest marginal rate on income.
If you point this out though – taxes don’t directly fund spending – you get accused of word games. The logic is that taxes diminish domestic demand for goods and services. This creates idle goods and services. Then when the government spends money, that money can be used to employ those idle goods and services. Ergo taxes *do* fund spending, in a kind of roundabout way.
Cash-in, cash-out is clearly not what’s described above
Joe Weisenthal did write all the above for Bloomberg but I have somewhat re-ordered it. I do not think it takes away from the context in any way.