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Comment by bryanlarsen | Hacker News Reader

This criticism is usually applied to MMT. MMT says that in times of inflation you should raise taxes. Nobody is doing that.

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That's not what MMT says. It says that excessive spending in the economy can create inflation. A possible way to compensate (not the only one) is to raise taxes.

But it doesn't say that the only cause of inflation is excessive spending. That idea is a monetarist fantasy, who are able to keep saying that even in the middle of a pandemic, with a logistic collapse, an energy crisis and a major war. Still, they think that everything will be OK raising interest rates and taxes.

Totally crazy. I'm curious to see what they will say if we see something a lot worse, deflation, in the next years.

"This criticism is usually applied to MMT. MMT says that in times of inflation you should raise taxes. Nobody is doing that."

Except that it doesn't say that.

The basics of MMT analysis is that put forward by Warren Mosler in Argentina recently. [0]

- Floating exchange rate

- 0% interest rates and no further issuance of public debt

- a guaranteed job for all at a fixed living wage

Taxes are very much secondary in MMT analysis. The stabilisation comes from government refraining from giving people free money for doing nothing, which is what paying interest on debt and reserves represents.

"As Mosler tirelessly repeated in his expositions, the price level of an economy, and therefore its level of inflation, can only be explained by the price that the State is willing to pay for the goods and services it needs to supply itself. This especially concerns the price of labour reflected in wages, since the origin of all goods and services is socially embodied human labour. "

[0]: https://gimms.org.uk/2022/05/16/journey-to-the-heart-of-arge...

That's Mosler's MMT, there are other MMT proposals which are closer to the path taken by the administration. Kelton's for example.

It's the same thing with a different marketing emphasis. Although increasingly they appear to be heading down the same policy dead ends as Post Keynesianism, simply to try to appeal to the Democratic Party.

You won't find any MMT proposal that proposes changing taxes to control inflation, because that doesn't work any more than changing interest rates does. You don't want humans involved in the stabilisation system - it has to be done by the automatic stabilisers, and on the spend side.

Taxes are set based upon fiscal policy goals which are, or should be, indifferent to the business cycle.

The analysis within MMT comes from an understanding that we control inflation via a buffer stock of human labour, and that government sets the price of currency when it spends.

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