The Case Against Both Paul Krugman and MMT
It’s an unfashionable view, but austerity is still sometimes the only way to deal with a national debt crisis. A timely new book shows how to do it.
It's foolish to rule out austerity economics.
Photographer: Bloomberg/BloombergAusterity isn’t exactly the flavor du jour in international macroeconomics. The debate over a government’s tax-and-spending plans has lurched leftward, around the so-called “Modern Monetary Theory.” MMT argues that budget deficits don’t matter that much so long as states can print money. The only constraint is inflation, and this risk is often grossly exaggerated.
Such is the magnitude of the shift that Paul Krugman, the Nobel prize-winning economist who has lambasted austerity zealots throughout the financial crisis, is now defending orthodox macro (including the notion that deficits matter more than MMT fans claim) against attacks from the likes of Stephanie Kelton, a professor at Stony Brook University and Bloomberg Opinion columnist.