They moved on from Keynesian economics a long time ago, today it is all about MMT i.e Magical Monetary Thinking errrr... Modern Monetary Theory
This 100%. Keynesian economics sees debt as temporary to be used to fight a war or stimulate the economy during a depression, with the expectation that the debt is paid down during the good times. This is what the U.S. did during World War 2. They ran up a huge debt to fight the war then paid it back down in the prosperous years following the war.
Modern Monetary Theory on the other hand is the philosophy of a six year old who asks daddy why the government can't just print more money to buy stuff.
MMT doesn't create price inflation, it acknowledges that monetary effects (like inflation and deflation) are the only real constraints on government finances when spending its own fiat, and that requiring debt financing for net spending is a farcical result of pretending fiat is resource-limited commodity currency, and encourages abandoning that kind of fiscal fiction in favor of expressly considering monetary effects in setting the kind of policy that has historically been called “fiscal”.
What I mean by it causing price inflation is that money directly spent (especially on social welfare programs) tends to flow to consumers within one or two hops, where it will directly bid up the CPI. Whereas money that is "loaned" tends to linger in the financial economy and mainly causes asset inflation (which only eventually, maybe, causes price inflation). By making the economic feedback loop shorter, MMT makes the results of monetary inflation more apparent, and from an Austrian perspective this is a good thing.
We started to use GDP vs Debt as the measurement tool to avoid actually paying off debt instead of endlessly servicing it. It didn't take much time to convince our 6-year-old selves that we could just endlessly service more debt when GDP grows and to grow more GDP. Obviously there's no bad if taking debt causes GDP to grow, and GDP will always grow, so debt should always grow, because more GDP!
Inflation, the magic silver bullet that makes a countrys' debt disappear.
At whose expense is of course the question.
MMT "theorists" will say different things every time you ask them.
I doubt many of them would say this though, because it's pretty obviously on-face wrong.
But as you've stated it, the "theory" is on-face wrong.
Money isn't created when the government spends because it borrows from private credit markets when it spends, taking money out of circulation.
Money is created by monetary policy, not fiscal policy.
I don't necessarily disrespect MMT, I just have trouble tying people down to making a specific claim. Either they are saying something obvious and not at all contrary to mainstream economics, or they are making claims that I think are wrong - but I have trouble pinning down any particular claims.
MMT proponents would not character bond issuance as something that takes money out of circulation per se. It is only when that money is taxed back out of the economy that money is removed.
In this construction central bank policy and government budgets both do play a role, the question is what comes first. When governments runs deficits, it signals the central bank to print money.
MMT is just “fiat money isn't commodity money, so fiscal constraints are historical cosplay rather than fundamental reality. The real constraint on so-called ‘fiscal’ activity is purely monetary.”
No part of the descriptive element of MMT is in actual serious dispute by orthodox economics. Orthodox economists just tend to prefer the policy behavior that occurs with c the cosplay of fiscal rather than purely monetary constraints. Which is fine—frankly, I think Congress does a bad enough job with fiscal policy when monetary policy is hived off and given to the Fed, so I can see some naive policy responses to the realities embraced by MMT that would be counterproductive. OTOH, acknowledging the realities instead of trying or bury them because their are some obvious bad potential responses is necessary to have the discussion that gets to policy that incorporates reality well.