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Comment by freedomben | Hacker News Reader

You're correct, but I think the problem is that a lot of people who advocate for MMT, don't actually understand it, because many of the pro-MMT people I've talked to really do think you can print money forever.

It's not unique to MMT, the same thing happens with plenty of other subjects too.

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I think people conflate what MMTers were saying post-2008, which was we had WAAAAAAAAAAAY more capacity to print money, especially from 2008-2014 or so, with we can spend literally infinite money. And so you get all of these people saying "MMT was wrong" with the pandemic inflation, when it's the exact opposite. We started running into real resource constraints (due to lockdowns, supply chain issues, etc) and inflation shot up exactly as expected. Now, even as an MMT fan, I'm perfectly willing to admit that predicting where the real constraint is is extremely hard. And that politically in the US raising taxes on a dime is basically impossible. But MMT wasn't wrong, for the parts that have been tested as much as they can be.

Where in the world would raising taxes on a dime be perfectly acceptable? Imagine you have a rent or mortgage payment, but inflation hits 10% so your taxes go up 10% month over month to counter it. Your costs were fixed, the inflation affected other things besides your long term agreements, and yet, you would default on your payments because you got 10% less that month after taxes. Who would not want to burn the whole system down after experiencing that?

> Where in the world would raising taxes on a dime be perfectly acceptable?

Any place where the no-taxes-ever party doesn't have a permanent stranglehold on at least one branch of a deadlocked government.

The United States is an outlier in this.

> Imagine you have a rent or mortgage payment, but inflation hits 10% so your taxes go up 10% month over month to counter it.

If inflation is that high, the real cost of making your mortgage payment is shrinking in real dollars.

> Where in the world would raising taxes on a dime be perfectly acceptable?

"Any place where..." Noted that you couldn't conjure a single example.

> If inflation is that high, the real cost of making your mortgage payment is shrinking in real dollars.

This assumes that inflation is evenly distributed in all sectors. It isn't. Your CPI inflation rate is a proxy, a rough index, an average, and a dubious one at that prone to all sorts of bad signals.

Tax rates are evenly distributed (even if a higher tax bracket results in a higher rate, it's still evenly applied across the population).

Inflation isn't. Wages don't move in lockstep with inflation, particularly across all sectors and across all jobs. It moves in fits and bouts, and a raise may only come once a quarter or once a year for many (since businesses need their expenses to be predictable).

This idea that taxes could be unpredictable based on some rough, government sponsored index of inflation is quite silly on deep inspection. It completely upends the predictability of doing business.

And the cost of that unpredictability would be a contraction in the economy from less spending to hedge against the uncertainty of income.

Not even the MMT people understand MMT. The lack of formal models means everyone is working with wildly different and often contradictory definitions

> everyone is working with wildly different and often contradictory definitions

I’ve found the main MMTers to be mostly consistent amongst themselves in their theories. Now, I think some ideas are wrong, but they do seem mostly on the same page. I agree MMT does an excellent job convincing laymen of some pretty wacky ideas and that’s one of my bigger complaints with it.

Also, I find the focus on mathematical models problematic in mainstream economics. It obfuscates a lot of erroneous assumptions. Models are great for testing, but words are useful for communicating ideas too and can sometimes be a better format, especially for wider audiences. To be clear, I’m not saying models are bad or that MMT shouldn’t use them, in fact I saw one MMTer post this paper recently: http://www.levyinstitute.org/pubs/wp_992.pdf

Absolutely, I think MMT in particular is prone to doing this and it’s one of my bigger gripes with it.

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