THIS PAST MAY, the AFI Silver Theatre and Cultural Center packed one of its theaters for a screening of Finding The Money, a 2023 documentary on Modern Monetary Theory (MMT), an emerging heterodox school of macroeconomics. The screening was sponsored by the Labor Heritage Foundation as part of their annual Labor Film Fest. While many in attendance were no doubt interested in the film itself, the size of the crowd — about 200 — is likely explained by the presence of well-known US trade unionist and president of the Association of Flight Attendants (AFA-CAW), Sara Nelson, who led a post-screening panel with the director, Maren Poitras, as well as the economist Stephanie Kelton and local progressive Protestant clergyman Rev. Delman Coates.
Although Finding The Money features a number of MMT partisans, the film is largely a portrait of Kelton, who has become the leading international spokesperson for MMT due to her dynamic online presence and prominent public role as economic advisor to Bernie Sanders during his 2016 presidential campaign. The viewer is provided with a number of quaint, pseudo-candid sequences of Kelton working in her office, spending time with her dog, and preparing for interviews, presentations, and media appearances. The bulk of Finding The Money, however, is dedicated to Kelton’s eloquent, sometimes passionate, arguments in favor of MMT’s economic policy-making approach.
The basic thrust of MMT is that orthodox economics’ understanding of the relation between the US state (i.e. the federal government) and its currency is deeply flawed. Specifically, the pop-economic common sense on the national deficit and debt are misunderstandings derived from orthodox economics itself. According to MMT proponents, the very terms “national deficit” and “national debt” are misnomers. As Kelton effectively puts it in the film, how can the U.S. government run a deficit when it has sovereignty over the medium of exchange? And how can it be indebted when the currency through which that debt is measured has value only insofar that it is backed by that same sovereignty?
If these terms obscure the phenomena they are ostensibly meant to describe, what exactly are the “national deficit” and “national debt”? Explaining the deficit is simple: it is largely a measure of national investment in the private economy. When the federal government runs a “deficit,” it means that more currency is circulating in the private economy than the organizations of the state. The very idea of a federal “deficit” is ridiculous, considering that the way the US state budgets its spending has absolutely nothing to do with tax revenue. Therefore, analyzing the state budget’s relation to the economy in terms of expenditure versus revenue is nonsensical. Describing taxation as “revenue” is also largely a misrepresentation, since that “revenue” is destroyed after collection. Taxation is, in fact, a means by which the state reproduces sovereignty, rather than a means of collecting funds.
Federal debt can be explained in similar terms. The US state does not actually “borrow” to meet expenses, since it is capable of minting the currency it uses in its budgetary decisions. The “debt” is almost exclusively a representation of the value held in existing US bonds rather than money owed to lenders. In other words, the actual phenomena described as “deficit” and “debt” have almost nothing to do with common-sense interpretations of these terms. Politically, this redefinition collapses the “fiscal conservative” logic that has undergirded the past few decades of austerity, which has almost always been justified by yearly federal deficits and increasing debt.
On these points, MMT is obviously correct. The federal government does not relate to its currency in the same way as a private firm, making terms like deficit and debt non-applicable. MMT’s analysis of the way the US state relates to its currency opens space for imagining a much wider spectrum of action for the federal government. Since it is not actually constrained in the ways that the ideology of “fiscal conservatism” has historically claimed, the US state is in practice capable of progressive interventions in the economy considered impossible according to that orthodoxy. But there are aspects of MMT that seem underdeveloped, particularly in how its advocates understand political struggle and the state itself.
Advocates of MMT are adamant that the actions of federal policy-makers are the result of misunderstandings resulting from unexamined orthodoxy, rather than political choices consciously justified with faulty, “common-sense” economics. During the post-screening panel, Kelton stated that she does not believe misnomers like the “national deficit” and “national debt” are being circulated to “pull the wool over our eyes” and that most policy-makers genuinely believe these are accurate descriptions of how the federal government operates. The film also demonstrates a strong commitment among the most prominent MMT-aligned economists to the idea that misrepresentations of the federal government’s taxation regime, budgetary processes, and relationship to its currency are not in bad-faith. According to them, all that is necessary to solve the problem is a slow process of education.
This is incredibly naive. While there are many useful fools in the federal government, the utilization of ideas like national deficits and debts to limit what citizens believe the state to be capable of and to justify the imposition of brutal austerity is clearly one front in a broader political project of US capital to ward off any use of state power outside its interests. While it is, of course, important to educate people in a correct understanding of how the federal government operates, this will not automatically lead to an end to austerity politics. Without a political struggle against a ruling class and political elite with a vested interest in reproducing fiscal austerity, that austerity will continue to be the logic of the US state, no matter how much educational work is done.
MMT advocates’ weak understanding of the political stakes involved in the logic of austerity is also related to their underdeveloped theory of the state itself, though that does not stop them making sweeping claims regarding states generally. Indeed, Finding The Money includes extended sequences in which pro-MMT economists claim that MMT can explain the historical development of all states, trans-historicizing their analysis of the US federal government. This is patently ridiculous. Not all states relate to currency, be it their own or that of other states, in the way the US federal government does. It is telling that the historical examples given in the film to provide evidence of MMT’s trans-historical application are all of fiat currencies.
Despite this, Finding The Money effectively conveys the more limited MMT criticisms of current economic orthodoxy in the federal government. The sequences that demonstrate the deep and clearly willful economic ignorance of federal bureaucrats like former Comptroller-General David M. Walker and CEA chair Jared Bernstein are brilliant moments of documentary comedy that successfully subvert “fiscal conservatism.” However, socialist viewers should keep in mind that MMT advocates do not have all the answers, especially on political strategy or how we should theorize the state at a broader historical scale.
