Stephanie Kelton Why You Should Stop Worrying About The National Deficit

Stop Worrying About National Deficits

Bernie Sanders’ economic advisor Stephanie Kelton, a leading voice behind the push to spend more on progressive priorities, appearing in the Intelligence Squared U.S. debate on the motion “Stop Worrying About National Deficits.”

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She’s arguing for the motion alongside James Galbraith, who was Executive Director of the Joint Economic Committee in Congress. Arguing against them are Todd Buchholz, director of economic policy under President George H. W. Bush, and Otmar Issing, former chief economist of the European Central Bank.

Below are some excerpts from the conversation (please note the transcript is computer generated and may contain errors).

Stop Worrying About National Deficits: Transcript

Cold Open: Butted SOTS

Stephanie Kelton 1:34:18

Mark Twain famously told us that it’s often easier to fool people than to convince them they have been fooled. 1:34:37 And the American people are often fooled into getting confused about government deficits. The word itself sounds like a problem.”

Todd Buchholz 43:24

Yes, well, boy, I wish I believed in the tooth fairy. I wish I believe that Elvis still lived, and I wish you could scoff at government debt. I’ve got a historical question was Alexander Hamilton a fool?


John Donvan 20:12

Money, it doesn’t matter whether it’s bills or coins, or crypto money’s worth depends on the value we give it. goods and services are traded by that value. Savings rely on it, debt is repaid by it. And nations can rise and fall depending on how and where they spend. In this pandemic, unprecedented spending has thrown new focus on national budgets as they dip further into the red. In the US and parts of Europe, debt is set to exceed the size of their economies, partly the result of giant fiscal responses to the pandemic and a surge in borrowing.

John Donvan 21:09


First, I want to welcome the team arguing in favor of the resolution stop worrying about national deficits. He is an economist and a Professor of Public Affairs at the University of Texas Austin. James Galbraith is the author of many books, including inequality, what everyone needs to know. He’s debated with us before. So I want to say to you, James, welcome back to intelligence squared. And Keynes’s partner is an economist and leading authority on modern monetary theory. Stephanie Kelton is the author of the deficit myth. And I can see by that title, that that’s going to be central to the debate where we’re going so thank you so much, definitely for joining us at intelligence squared. Thank you. And now let’s meet the team arguing against the resolution. Stop worrying about the national deficit. They’re saying worry. A former White House economic director of economic policy and the author of the price of posterity. Todd Buckholtz, Todd, welcome to intelligence squared.

Todd Buchholz 26:17

Good to be with you.

James Galbraith 26:18

Thank you.

John Donvan 26:19

And your partner is Otmar Issing a former chief economist and member of the Central Board of the European Central Bank, joining us from Germany where it’s approaching midnight. Thank you for staying up. And thank you so much for joining us.

Ottmar Issing 26:32

My pleasure. All right,

John Donvan 26:34

now that we’ve met the the four experts who will be debating stop worrying about the national deficit, I would like to our audience, I would like our debaters to give our audience just a preview of what to expect in the program, I’m going to ask each team to give us you know, a look ahead at the thing that they need to convince you of in over the course of this debate. So Stephanie Kelton on the side arguing for the resolution in 30 seconds, tell me, what is the core thing that you need to convince this audience to see the way that you see it?

Stephanie Kelton 27:08

Well, thank you, I think the biggest thing I’d like the audience to do is every time you hear the word deficit for the next hour or so, I want you to hear, that’s my surplus. That’s our surplus they’re talking about. So the biggest thing I want to convey to you is that there’s another way to think of the deficit, and that is to call it our financial surplus.

John Donvan 27:32

Okay, you’re going to try to get people to think of the deficit in a completely different way. Thank you, Stephanie. And I want to go to the against side now. And I’ll go to you, Todd book called the same deal in 30 seconds or less. What is it that you need to convince this audience to see on this topic, the way that you and your partner See

Todd Buchholz 27:48

it? Well, thank you. First of all, to start no one believes during a pandemic that we should cut spending, or be concerned about the deficit. That is not today’s discussion. Having said that, our concern is that modern monetary theory says that you should engage in reckless grand spending even in good times, and it interest populist politicians with far too much power to do ill. And it finds common people foraging through dumpsters in Venezuela to make ends meet because of irresponsible politicians. Hold on your wallet. That’s what you need to do have modern modern monetary policy takes hold.

John Donvan 28:29

Thank you, Todd. And that’s your 32nd limit. So thank you for that. But you got your point across and it sounds like we have a great debate ahead of us. But before we launch into opening statements from each debater, a reminder, you still have a few moments to cast your vote for against or undecided on the resolution. Stop worrying about national deficits. Again, you can do that by going to IQ to from any browser or your cell phone one more time the URL to vote is IQ, the number two Okay, now we go into round one. Round One is composed of opening statements from each debater in turn, those statements will be four minutes each, they’re uninterrupted. Our resolution one final time is stop worrying about national deficits. And first up to speak for the resolution. Here is James Galbraith. James, the screen is all yours.

James Galbraith 29:18

Thank you very much. And let me first express my thanks to the host for the explicit timing of this debate. The injunction stop worrying about budget deficits, forces the question when exactly did the worries start? We’ve just come through four years when no one in power and Americans express the slightest concern about national deficits. And an amazing year when we ran a budget deficit of $3.3 trillion, without the slightest bad effect on interest rates, the economy or public morals. So why now? A Senate would suggest that the answer is clear. America just held an election. a democrat wanted only this and nothing else. just changed. Our task Professor kellton son mine is to show that this is not sufficient reason to disregard 40 years of solid evidence and sound economic theory. I will address the evidence she will explain the theory. Our distinguished adversary Mr. Bucholtz, who in March called for a government to pass out $500 in debit cards to every American so that they could go spend it and have some fun. Today is worried about deficits he wrote last month that look to the rest of us and the US and many of its g7 cohort look, not just ill, but veering towards broke. I checked the dictionary broke is a synonym for insolvent. Yet our distinguished adversary Dr. ism, wrote just this month, to be sure, advocates of MMT are technically correct. When they point out that no any country able to pay its debts in its own currency cannot become insolvent, because there is no limit to the sums of money that it can create. I think doctor is saying for this very clear statement of technical economics. And Dr. Kelton and I will take it as decided on a three to one vote that point but the United States or similar countries cannot go broke or insolvent. For what other reasons might one worry. It typically deficit worriers Name three interest rates, inflation and exchange rate to large national deficits drive up interest rates in countries that pay debts in their own currency. Obviously, not. Japan has a national debt twice GDP and interest rate on government that that’s negative in France, it’s almost 100%, the interest rate is again, negative in the United States. The 20 year constant maturity, Treasury rate was about 1.4% just now, and they have a 10 year rate is below point 9%, which is an even better deal than Pope Julius got from Michelangelo for the Sistine Chapel. And those are market rates. Efficient markets theory tells us that they reflect the expectation of inflation over 10 or 20 years. That expectation could be wrong. But it is not open to economists who purport to believe in efficient markets to question what about the dollar short, the dollar might decline some in the years ahead? If so, American goods Americans buy will be more expensive, American jobs will be more plentiful, and they’re and they will sell better on world markets. That’s an internal matter. But the dollar collapse, the thought is absurd. In every world crisis, investors have come into the dollar not out of it, just because there is no safer alternative, certainly not the euro for which Germany gave up the Deutsche Mark 21 years ago. America’s worries are unemployment, climate change, COVID-19 inequality precarity the polarization of our society, militarism, the threat of wars, America goals are full employment, balanced growth and reasonable price to those are written into law. As Keynes said, anything we can actually do, we can afford. If you haven’t started worrying about deficits don’t start. If you have started, stop, vote for sound economics and for your mental.

John Donvan 33:23

Thank you, James Galbraith, for that our next debater will be arguing against the resolution. I want to welcome back into the conversation. Todd Buckholtz, Todd, the screen is yours now. Well,

Todd Buchholz 33:36

thank you very much. I should say, john, that my understanding was that Otmar would be leading our side. I’m happy to either change that

John Donvan 33:47

Nope, nope, nope, that would be our error in our script. And we’re absolutely willing to make that switch. So let me just make that change. And I’ll do it that way. I saw you were drinking drinking a cup of tea as I introduced you. So I was wondering, for your casual look forward. So let me do it this way, our next debater will be speaking against the resolution. Please welcome at Marist. At more, the screen is yours. It’s my

Ottmar Issing 34:11

pleasure to be invited to this interesting debate. The whole world has been hit by the pandemic, all countries are running high deficits, and spending huge amounts of money to limit the severity of the downturn. However, beyond the special case, the idea that deficits don’t matter, at all has become popular with a number of politicians, and even on the fringes of the economics profession. And isn’t it true that interest rates or government bonds are close to zero in a number of countries in Europe either negative Why shouldn’t should governments not exploit this unique situation and take out almost unlimited credit to Finance expenditure for all kinds of Socially Important goals from education to stopping global warming test Japan are delivered convincing evidence that all warnings about the risk of high public debt like substance Japan as a benchmark for optimal economic policy, it’s a strange enough proposition. My colleague, Ted Poe halls will destroy this illusion that has considered effects. To a large extent, the public depth figures of industrialized countries today are coming close fairly close to the levels reached after World War Two. However, these already frightening figures are only the tip of the iceberg, the greater part of the public debt is not visible. In Germany, for example, the official figure for the ratio of public debt to gross domestic product is now 72%. If you add the applications for future social spending, from pensions to health care, the number rises to a staggering over 400% similar ratio supply to many other countries. The person porn into one of these societies arrives with a heavy load to bear. On top of all the future challenges arising from climate change or aging populations. High public depth in implies limits to future expenditures and funds, interest rates rise, the house of cards will collapse. But wait a minute. Here comes the metric medicine, a doubt the government’s with a competence to create money, and all the problems of the rising debt level disappear. After all, a country cannot get go bankrupt in its own paper money. Professor Galbraith fourslide quoting me, and I said it’s technically correct. I insist on technically, does the euro area not provide evidence that problems of financing public deficits and debt are due to the fact that member countries have lost sovereignty over their own currency. In fact, the really lessons from Europe is really different. The countries with the biggest current fiscal problems are those that used to suffer from inflation, high interest rates at repeated devaluations, as long as they had their own currency. The main incentive to give up this competence and challenge the Euro was to seek shelter under the roof of a stable currency, and enjoy the lowest interest rates in the history. Their current difficulty stemmed from the fact that they have accumulated high levels of Euro denominated debt as if they had retained their own national currency. And as if they had still the option to have their valuation. The message from the experience with the Euro as a common currency or for now 19 countries is straightforward. If you wish for a stable currency, solid public finances are an indispensable prerequisite in times of elect

John Donvan 38:31

to jump in, because your time is up. But thank you very much. And here’s a reminder of where we are you have heard the first two opening remarks. And before we get to the third, I want to remind you that you can submit questions for our debaters. You can send these now using the q&a tab on your screen and you have a few more minutes to submit those. Okay, next up on screen with an opening statement in support of the motion to stop worrying about national deficits. Here is definitely Kelton Stephanie, the screen is yours.

Stephanie Kelton 38:58

Thank you very much. Thank you to to Dr. Galbraith, and to our distinguished debate partners. This is going to be I think, a lot of fun. So I would like to start with a quote from the great American humorist Mark Twain. Mark Twain famously quipped that it ain’t what you don’t know. That gets you into trouble. It’s what you know, for sure. That just ain’t so. And I think we’re going to hear a lot over the course of the next hour that Justin So okay, and I want to try to take this opportunity to fix some of the broken thinking. That’s what Dr. Galbraith and I are here to do is to fix some of the broken ways in which we think about and dialogue about public finances about the government deficit and the national debt. And what I want to present you with first are some unassailable facts. Let’s start with what we know for sure. First, the federal government is nothing like a household. And as soon as we begin to start to think of the federal government’s finances as akin to our own, that the government faces or ought to face the same kind of constraints that you and I face, or that a private business faces or even that state and local governments face, we’re going to go down the wrong track, the federal government is nothing like a household. It shouldn’t run its budget, the way that you and I run our budgets if it tries to do so it almost always ends badly for the economy, it will drive the economy into recession. Governments aren’t like households, because governments issue the currency. And households are what we want to think of as users of the currency. So I want you to think of a very hard line that separates what the federal government can do with its budget, its spending power, and what the rest of us can do, we play by a different set of rules. That’s the first important point. The second important truth is that every deficit is good for someone. The deficit is just the difference between two numbers. The first number is how many dollars the government is spending into the economy each year. And the other number is how many dollars the government is subtracting back out mostly by taxing us. So a deficit means the government is adding more dollars to our economy than it subtracts away, which means that someone is getting a surplus. So in the same way that the number six becomes a nine, when you flip it around, the government’s deficit becomes a financial surplus when you turn it around, and look at it from the vantage point of our economy as a whole. So their deficits are our financial surpluses. If you like the government deficit works to blow financial resources, dollars and government bonds. Those are financial assets that show up on our balance sheets, they become part of our wealth, they’re part of our savings, a surplus when the government eliminates deficits, balances its budget or moves it into surplus, then it’s operating its budget, like a vacuum, it’s hoovering those dollars away from the rest of us. And that reduces our wealth. So think about whether you want the government to be running deficits which produce your surpluses, or whether you’d prefer them to Hoover away some of the financial assets that you hold. The third truth is the deficits can be too big. No one is arguing for unbridled deficit spending out of control, never ending larger and larger deficits. deficits can be too big. And inflation can be evidence of a deficit that’s gotten too big. But deficits can also be too small, and evidence of a deficit that is too small is unemployment. That’s what we have today. And that’s what Dr. Galbraith and I would like to convince you of let’s worry about the unemployment and the death and the depressed economy, not the government deficit.

John Donvan 43:18

Thank you very much, Stephanie Kelton, and our final opening statement comes from Todd Buckholtz, Todd The floor is yours.

Todd Buchholz 43:24

Yes, well, boy, I wish I believed in the tooth fairy. I wish I believe that Elvis still lived, and I wish you could scoff at government debt. I’ve got a historical question was Alexander Hamilton a fool? Alexander Hamilton’s words are spoken by schoolchildren around the world enjoy the Broadway musical. And in that musical, they learned that Alexander Hamilton had the federal government absorb the debt of the states and pay it off. But a foolish thing to do the modern monetary theorists would say, why not just tear up that debt? After all, it’s just an asset. I don’t think Alexander Hamilton is a fool. I do think we are confronting a situation where the next 10 years Social Security and Medicare in the US those trust funds will go dry. And there will be automatic spending cuts, if nothing is done. Now our colleagues here say, well, we can keep spending until inflation shows up. I would like to ask why is it our distinguished colleagues have so much trust in politicians to do what politicians hate to do that is cut spending and raise taxes when inflation comes? Stephanie has presented with to us some of the old canards, we owe it to ourselves. That’s nonsense. One third of us debt is in the hands of foreigners, including $1 trillion to the Chinese. The second canard is that it’s an asset for us. Well, that’s a fallacy. Those people who Issue who buy bonds are not the exact same people who buy the bonds. It’s not an even match. The motto or the mascot of modern monetary theory should not be $1. Bill, it should be earplugs because the modern monetary theorists refuse to listen to 2000 years of history. Let’s go back. Ancient Greece, city states went bankrupt lending to the temple of Delos. French Revolution Louie the 16th loses his head. Why? Because he spent too much money. Alright, that’s old history. Let’s go to modern times. Chile, early 1970s. Inflation, Chile, Brazil and Argentina in the 2000s, Bolivia in the 1980s. Okay, they encountered inflation depreciation wages fell 40%. Our colleagues say they’re worried about everyday people wages fell 40% under MMT. Like policies, okay, those are lesser developed nations perhaps How about Britain? The 1970s. How could you forget that in the 1970s, Britain begged the IMF for the biggest bailout to date. And James Callaghan, the labour Prime Minister of Britain explained to the MMT theorists of the day, the predecessors the Dr. Kelton a doctor gave called right? We cannot in all candor, do what you ask. Okay, Britain, let’s put that aside. Let’s go to a place that’s a little more socialist friendly. Sweden had a terrible t 90s. Have you forgotten that the central bank had to raise interest rates? 500%. Have you forgotten that Canada, the Canadian dollar cratered, and they could not sell their bonds in the 1990s? In each case, those countries had to slash spending and do what is right now, a survey was recently done of top economists in the in the US, many of whom are inequality, global warming, social welfare state, none of them not one supported the principles of MMT. Now perhaps our colleagues here are like Albert Einstein, a lonely Swiss clerk working by himself, somehow coming up with a magical way that breaks shatters ideas about space and time, you may decide today, whether they are the Einsteins of our day. But in the meantime, I’d suggest vote to be concerned about the deficit and the debt vote because our lives depend on it. And hold on to your wallet.

John Donvan 47:37

Thank you, Todd boek house. And that concludes the first round of this debate. And that is the round of our opening statements. Now we move on to round two and round two is where the debaters take questions from me and also from you and our live audience. So if you haven’t yet submitted your question, you have only a few more moments to do that, using the q&a tab on your screen. And also in this section. It’s meant to be more like a conversation. The debaters can question one another and jump in on one another as long as we do it with some respect and civility, which I will help facilitate. So I want to go James Galbraith, since you were the first speaker. What I hear your opponents saying is that although you made the case that in the United States, over the last number of decades, there has been deficit spending, and the chickens have not come home to roost. Interest rates are low, inflation has remained low. But they’re telling you that it’s only a matter of time, that there’s a ticking time bomb, one metaphor, another one that Maher used was the House of Cards ultimately will come down. And they cited numerous historical and geographical examples. Chile, Argentina 1970s Britain, French monarchs. So what is your response to their their basic argument that it might look okay now, but eventually reality will catch up with reality?

James Galbraith 49:04

Well, if we’re going to compare the United States and say, well, we’re just like Argentina, or just like Venezuela or Zimbabwe, essentially, you’re on very weak and shaky ground. Those countries borrow and the currency that they do not control, mostly in US dollars, their exports have to pay for those interest payments. Those are mostly in commodity prices that are set on world markets that they don’t control very well. Venezuela, of course, it’s a place where you have a combination of an oil dependent economy with all kinds of internal problems. This is not the United States. This is not Europe. This is not Japan, and this is not the People’s Republic of China, for that matter. So when we’re talking about the countries that are very prominent members of the World Economic Community, the ones that set the tone. They are countries that we call financial software. What they do is they issue code that’s in their own currency. And as Dr. ISON said very clearly, that means they cannot go through They cannot run out of their the means to pay their debts. That’s an accounting matter. That’s a point of fact. It’s a point which was underlined just a day or so ago by a man. I’m looking forward to the current president of the European Central Bank. So again, when one can Yes, sure if you’re in them, and I was involved in Greece in 2015, Bruce had a major tech problem that needed to renegotiate the debt, the United States does not need to renegotiate its debt. The Constitution actually states that the United States that shall not the question will be paid as a matter of our most basic one, going back to 1865. Now, James, James do not have a position that can be compared to Argentina, Venezuela or Zimbabwe.

John Donvan 50:47

One thing I want the panelists at the moment is when you’re speaking, trying to make an effort to look into the camera, that’s in sorry, I’m sorry, I know, it’s hard not to look at the screens where we’re seeing each other’s faces. But Todd Todd, you’ve been great on this. So you wanted to jump into a go for it?

Todd Buchholz 51:01

Yes. So So Jamie, of course, tries to put in his earplugs and SWAT away the examples and he swats away Chile and Argentina and and and those nations, but he ignored Britain in the 1970s. Isn’t that a g7? country? He ignores Sweden, is that not an advanced country? He ignores Canada, is that not an advanced country? Of course they are. And they fell into terrible problems. Sweden’s debt to GDP ratio doubled during the 1990s. And they had to do something about it. So this canard, this fiction that if you’re a big country, you are insulated, that’s simply not true. And I’ll address Japan in due course, because that example is a terrible example, and actually works against what our colleagues are arguing, but I don’t want to take up time for others in this session.

John Donvan 51:54

And that’s very kind of you, because I do want to go to Stephanie, to respond to what you were just saying, which is that your that I think, Stephanie, that Todd is saying that you and your partner are cherry picking the examples that prove your case and overlooking the examples of currency issuing nations that had difficulties with this, and you’re ignoring them. So what’s your take on that?

Stephanie Kelton 52:11

So there are currency issuing countries that have had difficulties with debt. That’s just simply not the case. Canada has not had a debt crisis. Sweden did not have a debt crisis. You have countries that want to manage their exchange. That’s

Todd Buchholz 52:23

not that’s simply not true of interest rates. Let’s

Stephanie Kelton 52:26

talk about let’s talk about let’s talk about Britain. Let’s talk about the 1970s. Let’s talk about what happened when the Callaghan and the hate and the Halley government went to the IMF and what that was about. That was a political stunt. Let’s call it what it was. The government was not broke. The government was not running out of money. The British government never needs to go to anyone to get the British Pound because the British Pound can only come from the British government as the issuer of the currency. The only place it can come from Why did the government go to the IMF was a political stunt where the government had drunk the Kool Aid had decided monetarism, they were going to follow monitors and they wanted a way out and they wanted to be able to say to the British people, we’re out of money. We can’t afford social programs, a social contract. So they went to the IMF, they negotiated alone got a standing facility for several billion dollars and guess what? They never tapped the facility. They never spent one pence from that does that tell you something tells me the government didn’t need the money in the first place? Why on earth would you take out a loan if you were desperate and going broke and then never tapped the facility? It was a political stunt.

John Donvan 53:36

Let me bring in Mr. And Otmar as you respond, can you again look into the camera? And yeah, just see what your thinking is on this.

Ottmar Issing 53:43

Too short Reeboks one on UK canon is famous for simply have

John Donvan 53:50

to start again and to look into the camera rather than looking down at the screen. Here you are thanks.

Ottmar Issing 53:57

Toss. Convent of the Labour Party in Blackpool. And Callahan mentioned that the idea that we can get out of unemployment by spending more money and inflation. This time has gone. We have experienced that this was to be steak steak violation. What’s the consequence? And I should be cautious to comment on the US. But may I remind you that the US spent so much money you’re running high deficits to finance the Vietnam War. It has exported inflation to the rest of the world. Of course, inflation in the US didn’t happen but it was exported to the world. And as a consequence, the Bretton Woods system of fixed exchange rates broke down. It was your currency but our problem

Todd Buchholz 54:55

so, so Stephanie had had called Britain going to the IO A political stunt. Very odd that the Labour Party which was pro union and dominated by the unions would have pulled off such a stunt, in the name of what she says is right wing monetarism. That’s ridiculous. I’d like to ask her about the Carter bonds in the 1970s, Jimmy Carter, because the US was incapable of successfully selling US Treasuries, Jimmy Carter designated foreign bonds, that is he issued bonds in Deutsche Mark and Swiss francs, because bond holders in the US had lost half of the value of their bonds during the inflation of the 1970s. Here, again, is an example where reckless spending, we’re ignoring deficits, we’re thinking you can print your way out of a crisis hurts common people more so than even the elites. I mean, read

John Donvan 55:51

James Galbraith, respond to that, because I saw you’re

James Galbraith 55:55

old enough to have served in government in the 1970s. And I remember them very well. And those conditions are not at all comparable to what we have now. Among other things, the 1970s, the dollar was up against a very powerful pair of currencies, one of them being the Deutsche Mark. And since the 1980s, this has not been the dollar has been supreme in the world. We are not going back to stagflation, that our threat at the moment is deflation, and is that it is the enormous amount of unemployment, and the decline in prices that we’re observing, which is reflected in very, very low interest rates around the world. So there’s something about unemployment or doing something about climate change, or doing something to deal with a pandemic, is going to drive us into bankruptcy, and therefore we can’t do it. There’s a form of really national self harm. It’s a form of saying that we cannot deal with the problems we have, because we might go back and have a problem that we had 50 years ago. It’s actually I think, a proposition which is not only historical, but also profoundly against the national interest.

John Donvan 57:06

Let me let me take a little bit of a sense of what I heard in James’s response to you and also from Stephanie, that. And I don’t think that they mean this in a pejorative way or pedantic way. But they seem to be saying that you and Todd are kind of stuck in an old way of thinking a classical way of thinking, which they argue, has been mostly disproven by the last half centuries worth of deficit spending, and that, and that, they’re almost kind of saying you need to get with the program. You need to I mean, Stephanie, and put it I need to break the old idea. What What about that, that concept that that old ideas or the ideas that you’re referring to are old, and that they’re outdated and incorrect, just as a broad philosophical

Ottmar Issing 57:54

point, I never accept the notion of old versus new ideas subproblems is are the ideas make make idea sense or is economically and against the historical background we should not forget. It is a defensible position. And as change just as mentioned, it’s through globalization and demographics have exerted deflationary pressure. I fully agree with that. But the tide is turning is Charles Goodhart and Pradhan in their new book has showed the tide is turning. So globalization will be slow. So this deflationary pressure will be changed to inflationary pressure and at the same time, societies are aging. So labor force will be stronger wages will rise. So, the combination of high dept strong money grows and more union power we receive he slicing inflation will not I am not predicting hyperinflation. But this type of deflationary pressure is fading fade facing out.

John Donvan 59:22

So definitely, what I think I hear at Mark thing is that you are you think you have found an exception to gravity, and that gravity will ultimately reassert itself and I’d like you to take that point on, but also something that Todd suggested in the beginning of sort of moral hazard that if if control of how the currency is designed and manipulated, passes from fed from the Fed and other central banks to the politicians who have every incentive in the world to spend and spend and spend for political personal gain. That’s that is a large moral hazard. So those two points that you’re trying to have sort of the gravity will ultimately reassert itself. And that, that there’s a moral hazard and letting politicians do.

Stephanie Kelton 1:00:09

Well, okay, first of all, it isn’t about letting politicians do anything Congress already has the power of the purse that we aren’t. We are endowing Congress with any new powers and authorities that it doesn’t already have. Congress can already appropriate funding for whatever it deems a priority. We saw that in the cares act. That was a $2.2 trillion piece of legislation that passed both the House and the Senate got signed by the White House and became law, Congress did not go out and find $2.2 trillion, they didn’t come hat in hand, to the rest of us, our taxes didn’t go up. They didn’t go to China and asked for some dollars so that we could carry out a relief package here in the US. Congress has the power of the purse. So they appropriated funding. And where did the money come from? That piece of legislation effectively orders up from the government’s bank, its fiscal agent, the Federal Reserve $2.2 trillion, they get created by the fed on behalf of Treasury as authorized by the government. That is how it works today. So we’re not giving the government new powers, new authorities and this premise that you have that this idea that governments will go wild, if somehow they wake up and realize that they have the power of the purse, and if they vote for the spending, the money will be there that they’ll just run, run wild and spend out of control. to that I say, all evidence to the contrary, look at our economy today. We know that this economy desperately needs more spending, you turn on the news, every night, you see miles stretching, of cars waiting to get food from food banks, we know that 10s of millions of people are on the verge of having their unemployment insurance expire. Congress has gone home, they’ve gone back for the holidays, they’re out, they’ve checked out, they’re not going to spend anymore. So this idea that Congress is just so eager all the time to spend money is is simply not our reality.

John Donvan 1:02:10

Let me jump into because I think you’ve made that point very clear that you you do not think that that you think that that’s a canard. So I want to take that to Todd, who made that point that we really, it’s he considers it, Todd, you consider a very dangerous idea to give the Yes. Go ahead.

Todd Buchholz 1:02:24

I think it’s I think it’s very dangerous. And I think the reason why Congress and the US deficits have not previously gotten out of hand, is because MMT years have not won the argument. It’s because most people in Washington are sensible, and have to learn from history and recognize that they shouldn’t have a free hand to spend whatever they want. Take a look at what’s happening today in Turkey. Now I know Jamie might say, Well, that doesn’t count. It’s not a major country. But President heir to one of Turkey controls the central bank, it is not independent. He’s gone through four different presidents, or heads of the central bank. And about five years, his son in law was the finance minister. As a result, Turkey today raised interest rates by 500 basis basis points to 15%. Because inflation has gotten out of hand, when you give government officials priority to control the central bank, you get higher spending and higher inflation and less responsibility. One of the great achievements in economic history throughout the world in the last 30 years, is making central banks more independent. So they are not beholden by crass politicians. And those of you watching this who might be on the left wing of the political spectrum or the anti Trump part of the political spectrum, just imagine if Donald Trump had known about MMT, and know that he should be in control of the Federal Reserve Board even more. So what would have happened to spending? So I think these are very dangerous doctrines. Jamie, I

John Donvan 1:04:05

want to take one more point to you before we go to audience questions. And and that is, you know, the the presumption that we’ve been talking about that interest rates have remained low, even this year, has trillions of dollars have been put into the into the monetary system. And and that’s true in terms of the basket of goods that the the government measures the, you know, the normal things that people would buy to survive and to get by. But if you look at the prices of assets, if you look at the stock market, if you look at housing, if you look at bond prices, there’s a there’s an inflation going on there, which suggests that that money is actually having an inflationary impact. I wanted you to take on that aspect of sort of the the financial world inflation impact as a result of that spending and is that in itself a warning sign that as your opponents would be saying the party is over or is beginning to end

James Galbraith 1:05:03

coming out on that page, one of the things I was involved in, in the 1970s, actually, when I was very young was the drafting of the basic law that governs the Federal Reserve was working on this for the House of Representatives. It’s called the Humphrey Hawkins full employment and balanced growth factors passed in 1978. And it’s known as the dual mandate, it gives the Central Bank of the United States flexibility to produce enough to follow an employment call, as well as a price call. It is a more flexible mandate than the European Central Bank has. And guess what 40 years have gone by and the Federal Reserve has done all right, with the dual mandate, it has not run allowed the country to run away and out of out of out runaway inflation. And it has been able to respond very flexibly and effectively to financial crisis, both in 2007 2009. And most recently, this year with a with a collapse that came about because of the pandemic. So I think we can be fairly clear on the basis of historical evidence that the monetary system that we have, the banking system will have the central banking system that we have that is perfectly compatible with the kind of public finances that we have included with a very large deficits that we’ve been running this year that we ran over the course of several administrations in the past. And the markets are saying very clearly that they expect this to be true for the indefinite future. And so is, for example, the nonpartisan Congressional Budget Office, which expects the inflation rate to go back to 2%, which I think is probably an overstatement of where it’s going to go. But certainly doesn’t fear a runaway inflation. I think that says that we’ve got to do something about the deficit percent, is acting against the markets, the best professional opinion, and fundamental common sense. All right, thank

John Donvan 1:06:47

you, I want to now go bring you our audience into the conversation. And to kick this off, we’re going to bring in actually our global audience. And by that I mean, over the last few weeks, we’ve been asking people around the world to submit the way they would argue on this debate, what their, what their point is, which side they’re on and why they’re on that side. So hundreds of people went online, and they wrote something like a high national deficit will decrease the value of the currency. And I think about half of our debaters here would be agreeing with that. And now having gathered all of those arguments together, we are using artificial intelligence to help us understand what matters to this global audience what arguments and ideas they thought were most important. So we have turned to IBM Watson, which uses artificial intelligence to actually to look at and scale public opinion as it’s been submitted to us. And then it uses its ability to process natural language to map out the themes, and the key points across more than 1000 submissions that we received. So let’s take a look at how that process works. First, people around the world submit their arguments online, then the AI assesses the quality of the arguments, filtering out any irrelevant submit, sorting the remaining arguments into for and against. Next, the technology identifies the recurring key points, ranking them based on their quality and their frequency. Finally, the AI creates a coherent narrative of the strongest and most prevalent points for both sides of the debate. Okay, and now we get to hear what the results were. This is a selection of key points and arguments that our global audience again, more than 1000 people around the world thought were most important on this topic. Let’s listen to


Hello. The following analysis used AI models to identify the critical key points made by each side on the motion, we should stop worrying about national deficits. 50% thought we should stop worrying about national deficits with 17% of those arguing that national deficits have no direct negative impact on the economy. One arguments at a high deficit does not mean a high risk of default, financial institutions are strong and productivity is increasing. Thus, the danger of an economic fallout is minimal. Another key point for the motion was that to an extent the national debt allows financial growth. One argument said that spending money stimulates the economy, which will then bring the government money and lower the deficit. People also think spending into a higher deficit is acceptable during a health crisis. The remaining 50% were against the motion with 17% of submissions, arguing that a rising deficit can lead to inflation and cripple the economy. One argument said national deficits fundamentally weaken a nation’s economy and must be arbitrated to achieve a balanced resolution. Another key point against the motion was that national debt burdens future generations. One argument said we cannot pretend that we have money that we don’t have. It’s disrespectful to younger generations to run up the national deficit. People also said that high public debt is dangerous. While the world is so unstable with politics. Wars prevalent racism and extremism. Also having high national deficits around the world will cause more instability. Please visit the website to see more results. Good luck to the human debaters.

John Donvan 1:10:14

Alright, so we heard some of the arguments that the global audience is making, actually, we’ve touched on already and, and we see that some of the dividing lines are quite similar to the, to the dividing lines in this conversation. But there was one one point made that we haven’t brought to and that’s the social impact of deficits. People are mentioning things like global instability and things like war and extremism. The team is arguing against the resolution, I’ll come to you tomorrow on this one, our deficit a threat to global security, we’re not just not talking about the markets, but actually to to global security, overall. And again, if you can, when addressing if you can look into that camera that’s at the top there, that’d be great.

Ottmar Issing 1:11:01

I think the bisque By the way, Chaves has made such a convincing argument for me depends on the bank, controlling the money supply and or the international side. I think we need stability in international relations. There are so many tourists coming from to politics. And this, this is not the background against which governments should irresponsible spend money. I think the trust, for example, in the dollar as a dominant currency of the world is based on this future stability of the currency. So I think a country like the US is the least one to to risk, the stability of its currency. And I would suppose that if nuke US government, and including the Fed would explain that they would apply MMT policies, the donor would lose its leading position in the votes, because people would be afraid that in the future, then this would the US dollars would not be safe enough.

John Donvan 1:12:15

Like to respond to that?

Stephanie Kelton 1:12:17

Yeah, I do. Thank you. So I keep hearing this bizarre discussion about the central bank being for store cajoled, or asked to do something to aid and assist government spending that somehow what we’re talking about is the capacity of the government to run deficits being somehow dependent upon the central bank’s acquiescence in all of this, that it has to give up some independence. Nobody has said any such thing. What I described with respect to the cares act, is the way that governments always spend, the government decides what it wants to spend. And the Fed is the government’s bank, the Fed carries out all payments that are authorized by Congress on behalf of Treasury always It doesn’t say no to the government, it cannot, it has to clear the payments. What the Fed has independence to do is to set the price at which Congress will access those funds. Now, think back to Ronald Reagan, Ronald Reagan ran massive deficits. He didn’t have a friendly Federal Reserve Chairman holding interest rates near zero to accommodate all of this, he had paul volcker, and interest rates were double digits, they were almost 16% when Reagan was president, they never got below 7%. So a very high interest rate environment that did not stop ronald reagan from running massive deficits with two huge tax cuts, and a huge buildup in the military that almost tripled the national debt. So you don’t have to have the Fed behaving in a certain way to allow Congress to do what Congress can do. Republicans do it all the time they increase the deficit for tax cuts and wars. And the rest of the time the deficit increases is because the economy goes into recession. Those are the big drivers.

John Donvan 1:14:03

Let me just let your opponents respond to some of what you were saying. Otmar saw you raising your hand, did you want to jump in on that?

Ottmar Issing 1:14:09

Just one sentence to say that

John Donvan 1:14:12

the circuit bank is to look up at the camera

Ottmar Issing 1:14:15

not to saying that the central bank base pays the bill is such like saying my bank is paid big, paying my bill, you have after disposal funds, which are created by the Fed. But I think of the central issue, that would be the better position to answer

Todd Buchholz 1:14:39

will look I mean, with all due respect, I think Stephanie is running away from her own writings, because it’s very clear, although actually it’s very difficult to make sense of MMT. But if you struggle with it, you will find that they diminish the authority of the central bank, and they leave it to the Congress to decide when to tighten or loosen policy. But putting that aside, the US dollar today is the world’s reserve currency. But you don’t choose to be the reserve currency of the world, the world chooses you, depending on your behavior. So the extent to which the US undermines its credibility by saying the debts don’t matter and deficits don’t matter, we will have a depreciated currency, we will have inflation. And we’ll you will have everyday people, mothers and fathers and children having their standard of living drop, because that that’s exactly through 2500 years of history, and 26,000 miles of circumference around the globe, you can ignore that history. And you can make up a new one. But I’m hoping the American people and those watching this program do not fall for that.

John Donvan 1:15:49

Let’s bring in James Galbraith James.

James Galbraith 1:15:51

Yeah, if you’re worried about the standard of living of our children and grandchildren’s good thing to worry about, and the way they improve it, is to improve the quality of life now to build back a better America a better world to deal with climate change to provide the parents with, with jobs that provide them with adequate incomes, to provide the children with the capacity for education, provide the whole population with health care to deal with a pandemic, simply saving money on the government accounts is not going to improve the quality of life for anybody. In fact, it is going to make it harder and more difficult to improve the quality of life. So yes, we shouldn’t be worried about our children, we should be worried about what we’re doing for them, not what we’re not doing for them by not getting involved in tackling the problems that they actually have.

John Donvan 1:16:40

I wanted to add an item I want to bring in since you brought up a good deal of history. Throughout the conversation, we have an audience member also bringing in some history. I’ll take his question, too, from Earl stealin, who asks, Is there a case to be made that the government can and should use greenbacks and print currency as Lincoln did to fund the Civil War and use that currency to pay for new goods and services? without creating debt and to create a strong and more stable economy? In a sense, I think at the core of that question is, it embraces the argument that your opponents are making, but they’re going all the way back to Lincoln for it, maybe as the American in the on the team? Todd, you would like to take that one on? Well,

Todd Buchholz 1:17:24

I think it does bring us back to the idea that the government can print money. And of course, back in the 1860s, you had it was pre independent central bank, it was pre Federal Reserve Board, and you did have different independent private banks, they were able to issue their own currency. So it was a very difficult or very different situation.



Todd Buchholz 1:17:51

as is my first words on this program. We’re in a pandemic, we should be spending money. Nobody disagrees with that. Jamie, I’m sure is sincerely worried about the unemployment rate, as we all are at 6.9%. That is far too high. But let’s just scroll back February of 2020, before the pandemic hit, the US unemployment rate was only 3.5%. The lowest I’ve ever seen in my lifetime Jamie had ever seen in his lifetime, or Stephanie or Otmar. So I don’t think we should go into this program and say that MMT, or this story about debt is one that’s solely appropriate during pandemic, we have to ask when an economy is doing well. Are you willing to give up fiscal discipline? And I think that’s a very dangerous bet for common everyday people.

John Donvan 1:18:46

Give me two days to do and respond to that.

Stephanie Kelton 1:18:54

No, I i think that that this is exactly compatible with what Jamie and I are arguing. I think we’ve found some agreement here, that in the current moment, we recognize that the economy needs the fiscal support that has been provided. And I will make the case. And I think, Jamie, as well, that we aren’t doing enough that in spite of the three plus trillion dollar deficit we have today, it is still too small. Congress needs to do more to provide fiscal support to the economy as a branch to the other side of the pandemic, and beyond that recovery and investment in the economy. So at what point does it become appropriate for the government to withdraw some fiscal support? That’s the question. And I think we’re having the right conversation. We’re looking at the real economy. It’s sending us a signal count the number of people in the unemployment line, how many how many people remain unemployed, we’ll give you a pretty good idea of how long we need to continue the fiscal support and when it will be safe for Congress to begin to withdraw fiscal support. No one is saying keep deficits at three or 5 trillion in perpetuity We’re saying recognize the important role the federal government can play, using its budget to sustain incomes to keep families whole to keep businesses from going under to keep people from losing their homes, provide a bridge to the other side, and the deficit is needed. Now. It’s too small. And we’re going to need it for some time to come

John Donvan 1:20:22

off. Mark, you raised your hand on that one.

Ottmar Issing 1:20:24

Yeah, very short. Stephanie. We are concerned, as Todd has mentioned about unemployment, you discards the notion of a natural rate of unemployment. So let’s see society. But I’m asking you, what is your sense when deficit spending should stop? Until what ratio of unemployment until everybody is employed at a good wage? As you said in your book, I think this is a fantasy.

Stephanie Kelton 1:20:57

Well, I don’t think it’s a fantasy. And I think that what we do today is we manage and I say we central banks attempt to manage the inflation rate by finding the quote right level of unemployment right now, but they believe that there is some amount of unemployment that is necessary that you have to trap people in unemployment in order to prevent inflation from accelerating. So that is the way we fight inflation. Today, we use human beings, we lock them in unemployment, and we say thank you for your sacrifice, you’re helping the nation guard against inflation risk, I am saying and in the MMT framework, we’re saying there is a better way to do this, that we can in fact, anchor prices. But do it in a way that guarantees that everyone who wants to work and can’t find a job anywhere else in the economy can have employment. So you do it with a buffer stock of employed workers rather than with a buffer stock of unemployed people. And you anchor the wage so that the government is providing a decent job at a good wage for anyone who can’t find work elsewhere in the economy, that anchors prices, and you can get price stability alongside full employment instead of doing it the way we do today, which is used unemployment to try to tame inflation.

John Donvan 1:22:15

Alright, Todd, are you persuaded explanation there? Are you

Ottmar Issing 1:22:19

your optimum, your optimal unemployment rate is zero.


That is correct.

Todd Buchholz 1:22:28

I don’t think anyone has made the point I’d like to make now, which is that fighting deficits and debt can actually help the economy and create more jobs. Let’s go back to the 1990s. during that decade, the US economy created nearly 20 million net new jobs, why President Clinton, a Democrat, and Republicans in Congress got together and agreed to cut spending, the deficit went down. Now during this period, the Federal Reserve Board did not change interest rates, the inflation rate change, but interest rates fell market interest rates, interest rates for borrowers, for homebuyers for car buyers, for businesses, those rates fell, which meant we had a burst of investment, and nearly 20 million net new jobs were created. So I’m thankful that a democratic administration and a republican administration in the 1990s had the sense to jettison any emerging ideas of MMT and instead, accept principles that go back 2500 2500 years.

James Galbraith 1:23:39

You know, we do have experience with full employment policy in this country, we drove an unemployment down to zero in the Second World War kept inflation under control. We drove unemployment down very far below 4% in the late 1990s. And there was no revival of inflation. We drove unemployment down below 4% in the last few years, without any revival of inflation. So it is clearly possible to do it. And it’s clearly possible in the context of the United States. What we did in 2020, when we were hit with a pandemic was utterly remarkable. We, basically in the United States, we poured to over $2 trillion into the economy over 10% of our national income, to support people’s dysmorphism income to replace their lost wages to keep them in their homes. We’re running out of money now we need to put some more in it’s as simple as that. To say we can’t do it for some reason that wasn’t apparent seven months ago, is so sad proposition which has no foundation in any any reality that we’re currently facing. What is the reality is that people’s debts are continuing to pile up their mortgages, their rent, their utility bills, their incomes are not keeping pace, their jobs have not come back. And we need to be in a position one way or another to Get them through that so that the economy can in fact recover Mr. buckles suggested in in March that we’d give everybody a $500 debit card, which would have been $500 times 300 and 20 million or 100 and 50 billion for the whole country, another addition to the deficit.

John Donvan 1:25:17

I want to bring in a question on

James Galbraith 1:25:23

consent now that we have a big deficit.

John Donvan 1:25:26

I want to break it in

James Galbraith 1:25:27

right now. Also,

John Donvan 1:25:32

I’m sorry, my apologies for talking over you. I just want to get to some other audience questions. While our resolution is about the national debt, there’s a question from Walter Chen, who’s in the audience. That that isn’t about the national debt. But I think that the essence of his question is sort of a sense of alarm that the, for the for the argument that the foresight is making, and it goes like this, if public debt if public debt does not matter. What about personal and corporate debt? Could government buy all personal and corporate debt, then it’s everybody happily ever after? And I want to take that to Stephanie, because I think it sounds like a challenge to your side. And I think it’s a little bit red meat for your opponents. But can you respond to why what what’s the what’s the difference between what I understand you don’t actually call government dead? You call it something else that but what’s what’s the difference between that and a corporation or a household? Because you’ve made the argument in the very beginning, that this is not like household debt? Okay,

Stephanie Kelton 1:26:38

so yes, you’re right. I they’re very different, right? It when the federal government issues a bond, it is making a promise to the bond holder and the promise is in the future, that bond will turn back into currency, right, I will pay that bond off by giving you US dollars, which can only come from me, the federal government, the United States of America. So the government is the issuer of both of these financial instruments, it is the issuer of the currency, and is the issuer of this debt instrument that we call a government bond. Okay. So is the risk different when a private company borrows and takes on debt? Of course, if GM issues bonds, if IBM issues bonds, it is raising money, and now it’s on the hook to pay back what US dollars, but where do these companies get us dollars? Well, from earnings, right, they have to get the currency from somewhere in order to be able to make good on the debt service and and to pay the debt. And so it’s a completely different. Again, they’re completely different risk factors associated with these things.

John Donvan 1:27:44

I’m not sure that your opponents would disagree that those are different things. So I will move on unless one of you wants to Okay.

Todd Buchholz 1:27:50

Well, I would, I would just say one thing very quickly, comparing personal debt to government debt. Here’s a big difference. If your relative if your father is a spendthrift and spends all of his money and goes deep into debt, and then dies, you don’t get stuck with that debt. The American legal system says the debt dies with dear old broke dad. But when the government spends money, it goes on forever as debt and new generations inherit that debt. So in that sense, public debt is far more and far more dangerous than personal debt, because it’s passed on to innocence generations to come.

John Donvan 1:28:33

Let’s stay with this point and move on to another question, because I can see you Stephanie, dying to anthro respond to this. And I think that is a question that a lot of people will have is the generational impact. Is it? Is it not fair is the debt is this chicken not gonna come home to roost in 1050 100 years?

Stephanie Kelton 1:28:53

No, the the bonds that we’re talking about are going to become the assets to people in the next generation. And I think Mr. buckwald said earlier and and the point is a correct one, that it is always a distributional question. You cannot burden an entire generation, with government bonds with assets with wealth that they inherit, what does happen is that in the future, the future will be populated. Some of the people in the future will be taxpayers and some of the future people in the future will be bondholders. And so there is a distributional issue, right, who receives the interest on those bonds, who holds them as part of their wealth in their portfolios. There can be different people but for sure, the next generation will inherit a portion of those government securities and they will be part of their net financial wealth of tomorrow.

Ottmar Issing 1:29:46

Stephanie, this is very strange hearing from you. The pumps are mostly bought by Rich people. And the burden of Texas etc has to be borne by party also the poor people. So this trouble, the higher public depth, and the more ponza issued, the more inequality is created by this instrument. Now,

John Donvan 1:30:18

I want to move on to one other question while we have to have a little bit of time. And it’s this isn’t the real argument of the deficit hawks, that they disagree with how the surplus is distributed? And and Todd and Adam, are you have not described yourselves as hawks on this. But I think this question is directed to you that, that what you what you’re really objecting to is where the spending would go, that it’s a policy issue. And I’d like you to address that, because I thought I heard hints of it also in some of James’s critique of your argument. So do you want to take that on?

Todd Buchholz 1:30:54

Well, I actually disagree disagree with that. I don’t think I don’t have an argument with where the money is spent in principle. I think that’s up to the American people. And if they want a larger military, or it’s prudent to have a larger military, as it might have been in the early 1980s, when we were politically facing off against the Soviet Union, that might make sense today, it probably wouldn’t make sense. No, I think the point that Otmar and I are making today is the idea that you can print money and rack up deficits without recognizing that that puts a pain, pain on the economy and on families. That is a myth. Just look at it this way. Franklin Roosevelt and his advisors are honest and smart. They created the Social Security system in the 1930s, set the retirement age at 65. Why? Because in the 1930s, the average 65 year old was dead. First worked out Franklin Roosevelt himself didn’t leave the ch 65. In the 1950s, you had about 15 full time workers for one retiree. Now in the US and Germany, and elsewhere, we’re getting to the point where it’ll be about two and a half full time workers for one retiree, the numbers just don’t work. You can try to create magic, say Abracadabra, say modern monetary theory, but I don’t see how when you have two people in the workforce and one person in a retirement home, that that is a sustainable system. So if you care about a sustainable society you need I beg you to care about the long term debt and deficit.

John Donvan 1:32:32

Games, I can give you the last word if you would like it. Otherwise, we can wrap because we’re coming to the end of this round.

James Galbraith 1:32:39

Yeah, Social Security does a very good job of keeping the elderly population out of poverty. And it does an excellent job of keeping all cows from being a burden on their working on their working children. This is a very valuable thing. It has really nothing to do with with the public budget deficit with the finances at the government as a whole. And everything to do with the welfare of the community, both the older people and the younger people, as well as survivors and others who benefit from the system. It’s one of the great successes of the 20th century in the United

John Donvan 1:33:10

States. All right, that concludes the second round of our debate the conversation round, I want to thank you all for conducting that very simply. Here’s where we are. We are about to hear closing statements from each debater, they will be brief, they will be two minutes each, and this is their last chance to try to persuade you to vote for their side. Remember, right after they’ve made these arguments, you will be asked to vote for the second time. And it’s your votes that will decide our winner. So let’s move on to round three closing statements and here to make her statement in support of the resolution. Stop worrying about deficits. I’m sorry, I’ve got the pronouns wrong on this hair to make. I’m sorry, Who’s going first? Because the pronoun and the script are conflicting with each other. Are you are you first Stephanie? Are you first James? Either one. Okay. I’m going to go to you, Stephanie here to make her closing statement in support of the motion. Stop worrying about the national deficit is Stephanie Kelton.

Stephanie Kelton 1:34:10

Thank you. And thank you all again. I’m going to go back to my favorite American humor is Mark Twain. And I’m going to say that, you know, Mark Twain famously told us that it’s often easier to fool people than to convince them that they have been fooled. And I am here to tell you with my friend, Dr. Galbraith, we have been fooled. And you they are trying to fool you tonight. And the American people are often fooled into getting confused about government deficits. The word itself sounds like a problem. You hear someone say the government’s budget is in deficit. It almost, you know, on the surface presents as a problem. And what we’ve tried to do here tonight is to cast a different light on this thing that we call the deficit to remind you that on the other side of the government’s deficit, lies a financial surplus for someone who gets it and for what purpose? Those are important questions. The cares act that I brought up a couple of times already tonight was an example of a government using its deficit to send unemployed workers an extra $600 a week to help keep them whole, to send a 1200 dollar check to most Americans in the pandemic to help out with costs to help small businesses keep their workers on payroll and cover expenses. That’s an example of government using the deficit to deliver a financial leg up for struggling people. Another example of using deficits was the tax cuts that Republicans passed in 2017, a roughly $2 trillion addition to deficits that delivered a financial windfall to the people in our society who least need the help. So as a reminder, every deficit is good for someone, the question is, for whom and for what, right now, the last thing we need to do is turn on government deficits to be afraid of them to begin to worry about them. Because if we do that, our lawmakers in Washington are going to pull back they’re going to refuse to provide the fiscal support that our economy desperately needs. And that’s going to hurt all of us. So I’m asking you not to worry about the deficit, not to get fooled, and to vote for the move. Thank you.

John Donvan 1:36:25

Thank you, Stephanie. Kelton, our next closing statement is against the resolution. And it comes from Todd buckles. Todd,

Todd Buchholz 1:36:31

with Thank you, and thank you so much for giving us the opportunity today, and the opportunity to speak with our distinguished colleagues. But I have to be honest, modern monetary theory, which advocates larger deficits and printing of money almost in all cases, is modern in the sense of Jackson Pollock painting is modern. It’s colorful, it’s hypnotic, but it’s a mess. And it can give you a an I understand the impetus for us. I understand the frustration. I’ll tell you the other day, I was driving to a friend’s house with masks with my daughter. I hadn’t been to the neighborhood before. And there was a roadblock. And my daughter said, Let me turn on Google Maps. And I said, No, I don’t need Google Maps, I’ll find a way to do it. I know how to I’ll figure out how to get there. And so we’re driving around and sneaking through the community. And I’m lost. And Google Maps is now telling me make a U turn at the next intersection. But I’m not going to listen because I think I know better. And Google Maps is again telling me make a U turn at the next intersection. And Google Maps has the map. It has the evidence it has the experience. What do I have? I just have the moral superiority that I know better? Well, I’m afraid with this debate comes down to is not evidence. Because we’ve talked throughout history. We’ve talked throughout continents, we’ve talked throughout eras, we’ve talked about Democratic administrations Republican administrations, and there’s absolutely no evidence that modern monetary theory would have raised the standard of living more likely it would have depleted and possibly destroyed the standard of living of countries that adopted it. So Winston Churchill purportedly once said, you can always depend on the Yanks to do the right thing. After they’ve exhausted every other opportunity. Well, we’re looking at lots of different options, including MMT. But it is better to do the right thing and to respect the debts and deficits and to understand that it is not necessarily our standard of living but our children and grandchildren. It is what is at stake.

John Donvan 1:38:47

Thank you, Tom boats are third in the lineup and closing statements. James Galbraith James, the screen is yours.

James Galbraith 1:38:54

Thanks very much. Listen, to worry is human to worry unnecessarily, is neurotic. We have plenty of things to worry about and the issue that divides Professor kellton and myself from our opponents isn’t really deficits are national. You should look a vitesse is whether we have the capacity to address the important problems that actually face us whether we have the capacity to stabilize our economy in the face of a pandemic and to deal with the public health challenges, whether we have the capacity to reduce unemployment, whether we can cope with climate change, whether we can address inequality and the legacies of racial divide in our countries. These are the issues that are in front of us. Our opponents saying no we can’t do that there are mysterious reasons of high finance why this is impossible to call. JOHN Maynard Keynes for them other epic ever would rise cadabra would come Down. This is not the way the world actually is. We have seen, as I’ve said many times so far in this debate, from this year’s experience from the experience of the past four years, from the experience of the past 40 years, that yes, we can address this problems, if we have the will the organization, the capacity and the determination to do them. We can’t do it. If we say, Oh, no, there’s some mysterious financial reason why we can’t. That’s our opponents position. But the opposition is really, that they don’t want to address this province. We do. And we say, once again, if we can actually achieve this, we can afford it. finances or bookkeeping matter for our countries. It is a matter of it’s important, but it is not a constraint. And people should stop worrying about things that are not important so that they can focus their will and the attention on things that truly

John Donvan 1:40:57

thank you James Galbraith and Otmar Issing, you get the last word in this debate, you are arguing against the resolution stop worrying about national deficits. Your closing statement begins now.

Ottmar Issing 1:41:07

Fuck you not worry about public deficits functions as a permit to unlimited public spending called AI has demonstrated that the ineffectiveness and finally collapse of the Soviet economic system there due to the soft budget constraints on companies. The same is true for public finance. Without constraints, public spending went out of control. There are always so many socially beneficial projects that previously lacked the funding to be realized. against the background of centuries of inflationary episodes. A renowned German economists once remarked, expecting public politicians to resist the temptation of free public spending. It’s like expecting a dog to sit disciplined before a box of sausages. This pure caricature cemetery of defunct currencies house innumerable tops throughout long history of humankind, all of them were ruined by excessive public spending, beat by kings, dictators or Parliament’s. The proposal to ignore public deficits and depth is pure populism, promising a land of milk and honey, the surest way to undermine and ultimately destroy the value of currencies.

John Donvan 1:42:47

Thank you my thing. And that concludes round three of this intelligence squared us debate.


arguments, it’s

John Donvan 1:42:53

now time for you, our audience to tell us who you felt was most persuasive, we’re going to ask you to do your second vote. And I want to remind you, it’s the side that sways the most votes between the first and the second vote that will be declared our winner. So to cast your second vote is just like the first time around, go back to IQ to Exactly the same thing you did is once again, the same format are you for against or undecided on the resolution, and you might even still have that tab open. It’s exactly the same URL. And you can do this from any browser or cell phone. Or if you need to start from scratch, go to IQ, the number to And again, it’s for against or undecided. So that basically means that the that the competition part is over. And I want to I want to say that this was a for us a very interesting debate. And what we appreciated was that it was quite technical. You’re all economists and quite sophisticated, but I felt that you were able to make this very, very accessible to a lay audience. And I appreciate that. But what I really appreciate is the manner in which you talked with one another and disagreed sharply, but did so with respect and civility, which is the goal of intelligence squared from its founding back in 2006. So I just want to say thank you for the way that you all did this. It’s it’s an example that we hope more society can learn from so thank you for that. I also, I’m mostly curious as the results are being tabulated. I’m just curious, I’m not trying to create a Kumbaya moment. I’m actually trying this, but I’m curious to know, where do you feel that there’s any common ground between the two sides, if any at all? And again, if there isn’t, there isn’t. But I’ll start with you, Stephanie. Do you as you were listening to your opponents, where were their points that they made that you actually thought okay, they’re right about that. where there can be common ground? Or do you think that the division on the core issue is just too broad?

Stephanie Kelton 1:45:05

I think that, you know, the the message that came through the loudest for me was concerned about the inflationary effects. And there, I think we are in complete agreement that what, what I believe is that, you know, we ought to recognize, as I’ve tried to argue here today that, you know, Congress, we’re not giving Congress any new power or authority, we’re recognizing the Congress has the authority to authorize the spending that it chooses to authorize the punishment for pushing things too far, the punishment for excessive spending is not default. It’s not insolvency. It’s not bankruptcy for the nation. It is inflation, that is the relevant risk, that is the thing to pay attention to. And so I think that there is agreement around that. And I don’t think that either Dr. Galbraith or I have argued for pushing things too far, what we have argued is that there is sufficient fiscal capacity available today for governments to more aggressively operate their budgets to address the problems in the economy, and that when the time is appropriate, you pull back some of that support. And so we’re cognizant of the inflation risk, and nobody is trying to argue for pushing things too far.

John Donvan 1:46:22

Todd, you want to jump in on that? Again? The question I’m putting is, did you see common ground at all? Well,

Todd Buchholz 1:46:28

I mean, I certainly agree in house flattered that Jamie had read my piece in The Wall Street Journal where I proposed a stimulus.


We’re in a pandemic

Todd Buchholz 1:46:40

still. So there, maybe not there. Oh, sorry. No, you’re good. Okay. So you know, I certainly can’t speak for Otmar, but during a pandemic, I was all for stimulus, I think was very important, very effective. And I think the cooperation between the president the White House and the Congress was unpressed. saw in the spring, because it was desperately needed. So we certainly have common ground on that. I do think, you know, our side, the side that Otmar and I are taking, it’s a more difficult argument to make amid a pandemic, you know, if you think the government should be spending, I kind of wonder I mean, it would be interesting if we had had this debate a couple years ago, when Trump was proposing massive tax cuts. I actually wonder whether Stephanie and Jamie might have been might have brought up the deficit as a concern at that time knowing though that tax had would. I’m sincerely asking I don’t know,

Stephanie Kelton 1:47:41

I wrote a piece you can you can find it in the New York Times, I did an op ed for them about the Trump tax cuts. And I was one of I will say, a very small number of Democrats who came out and said the the impact on the deficit is not a reason to oppose the Trump tax cuts, period.



John Donvan 1:48:03

Good, interesting ends, I saw you raising your hand

James Galbraith 1:48:05

for the reagan tax cuts. And I very much the same view, which I stood against the democratic deficit hawk consensus of those days and correctly so that those tax cuts brought the economy back in 8384. Right, once the deficit hawk administration, unfortunately, vowed george HW Bush that lost the republicans in the white house in 1992. The truth of the matter that the republicans generally, except in a few cases, where principle prevails, are more Keynesian than the democrats are. And but they do it in a way which is profits, their own constituencies. And that’s, you know, that’s a problem for me. But they’re, the principle was clear. Back in the early 80s, Murray, Reagan Ballmer was Reagan’s chief economist said, oh, we’re very clever. We’ve got our Keynesian stimulus. And right after our recession, we got it in two years before it went into effect.

John Donvan 1:49:06

That was my last word on,

James Galbraith 1:49:11

you know, some odds with my party, all my career on this point.

John Donvan 1:49:17

Tomorrow, what are your thoughts on this?

Ottmar Issing 1:49:19

First, like Todd has mentioned, we fully agree that in a pandemic or in a downturn, that government should run to a deficit. I think this is cupboard grounds, in the sense we are Cajuns since long, not just now. I think the main point we disagree, Stephanie, is that you? You made a important point saying you are also worried about inflation. My concern, I think Todd’s concern is that the way you Such as to stop inflation by racing tech rising Texas. I think this is politically for me a bit naive. The government, which so far was not constrained by any spending limit, it’s now forced Not only is to stop spending, but to increase Texas, I think this is a proposal against all political experience, I think

John Donvan 1:50:29

I see that I did not create a Kumbaya. Whether there was a common ground, the answer seems to be not not not so much, I want to let you know, I now have the results of the vote. I’m going to bring them into a minute, I just want to do a little bit of commercial for what we are at intelligence squared. And I know that a lot of you are regular members of our audience, but to those who are not, I just want to share the fact that what we do what we bring you into millions of people around the nation, these debates that we do through podcasts, and television, and public radio, we do it all for free. And it’s something we care about a lot here at intelligence squared, we’re nonprofit. And if you want to learn more about what we do, or watch one of the more than 180 debates that we’ve put on so far, you can do so by going to our website IQ to us. org. That’s also where you can join in and help us out by making a contribution, there’s going to be a link to our website, also showing up right now in your chat. And before we get to the results, which I’m about to do, I just want to remind you, we are recording this debate right now. But it’s not going to be released to the public until December 4, and that’s going to be on Bloomberg Television, as the it’s debatable program. So we’re going to reveal the results to you. But we want to ask you to keep it quiet. Don’t give away the ending. Until the public thing watch this for themselves. No spoilers, you’ll know what we don’t want them to know. All right, it’s all in now. I have the final results. Once again, remember, it’s the difference between the first and the second vote that determines our winner. Here’s how it went on the resolution stop worrying about national deficits before the debate and polling our live audience 55% were in agreement with the resolution 29% were against and 16% were undecided. Those are the first results again, it’s going to be the difference between the first and second that determines our winner. On the second vote, it went like this resolution stop worrying about national debts. Their first vote was 55%. Their second vote was 73%. They pulled up 18 percentage points. That’s going to be the number to be let’s see the team against the resolution. Their first vote was 29%. Their second vote went down to 24%. That means this debate goes to the team arguing for the resolution. Stop worrying about national deficits. Our congratulations to that team. But our congratulations to all four of you for taking part in this debate and doing so with such civility and intelligence. Those are our hallmarks. Congratulations to all of you. Thanks to everyone who took part and thank you for me john donvan and intelligence squared us We’ll see you next time.

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