The Deficit Myth by Stephanie Kelton : It's not possible for the Government to run out of money.

You might assume that a book on economic theory would be boring. And to some people it might be, but “The Deficit Myth” by Stephanie Kelton was never boring even when it got deep into the numbers. In part, that is because the basic premise of The Deficit Myth is absurdly simple. You can write the entire idea down on the back of an index card and if you believed it, most of the conclusions would be fairly easy to see. Yet most people don’t understand because they have been told the opposite for so long that it takes hundreds of pages to convince them.

The basic idea is that the government can’t run out of money because it prints the money. I defy anyone to argue with that part. Ignore all the issues that pop into your head and ask yourself could the government if it wanted create as many dollars as it wanted. The answer is yes. A more complicated answer is, yes, but it might cause inflation. “The Deficit Myth” never denies the risk of inflation. In fact, inflation is the actual danger of the book, while deficit is the bogeyman that means nothing.

I believe that, if she had written the book in the last couple of months rather than before the current pandemic, her example would have been the stimulus package. The government spent trillions of dollars, but it didn’t have to raise that money. It simply created that money. It would only need to raise taxes if the amount of money put into the economy began to cause inflation.

Another important point in helping to explain this is the two bucket idea that she explains. Imagine you have two buckets of money. One is the government, and the other is everyone else. When the government spends money, it takes money out of its bucket and puts it in the other. This gives money to the people who theoretically spend it on things like houses, food, cars and entertainment. The government then taxes those people. Now lets assume that they tax 90% of it. Then ten percent stays in the second bucket. It didn’t disappear or become invaluable. It went to create wealth for the people in that second group, which is us, and the reason you took 90% out isn’t because the government needed the money. That 90% is taxed out of the economy to avoid inflation.

This book is longer than it needed to be for me. I’ve understood for a long while that the government could, if it had to, simply pay off the deficit and moving from that to understanding the reasons and values of understanding that were simple. But I suspect that many people are going to be far more resistant to the idea, especially those who most need to understand it. This is because for many people the idea of asking, “How are we going to pay for that” is a useful myth. It gives people in power an excuse for not giving people things they want and need or doing things the powerful don’t want to do that is difficult to ignore.

Unless of course you understand that the government pays for everything the same way. It literally makes the money. Then it becomes not a question of how are we going to pay for this but what are our priorities. How do you want to use the real resources of time, skills, infrastructure and other similar things rather than the fake resource of money? But for politicians it’s far harder to argue that we should let people die because keeping them alive isn’t a priority than it is to argue that we can’t pay for it. Even though the two are the same argument.

I hope everyone in America reads this book. I hope that more books like it are written. I hope that people write books to explain the flaws of the theories in this book because having listened to it I am sold on the idea that the government isn’t restricted by money, its restricted by the will to act and the idea that we can’t do that without raising taxes is an absurd lie that even the people who say it often believe. It also puts real restrictions on the obvious, but incredibly stupid question of then why doesn’t the government send everyone a billion dollars. That would push our economy past its limit and cause inflation. But so long as you don’t cross that limit, there is nothing stopping you from helping people more.