Many alarming executive orders have been issued in the first days of the Biden Administration, but today I want to discuss a central feature of its economic policies. That is the implicit, and by some loudly shouted, belief that it is possible to pile up ever growing deficits by borrowing from the Federal Reserve. This belief must be spiked. A sub-cult in economics that likes to refer to itself as Modern Monetary Theory, or MMT to the insiders, holds that the amount of borrowing by the Federal government is meaningless. It can always be accommodated, according to this cult, by the Federal Reserve creating money that it lends to the Federal government. All policymakers need to do is keep watch on inflation, and if it appears all that money is beginning to cause price levels to rise, the solution is to increase taxes high enough to siphon off the excess money being spent by consumers. As long as inflation is stubbornly low, despite zero interest rates, the Federal government can spend all that Democrats dream of and really has no need to raise taxes. Members of Congress, whether Democrats or Republicans, love it. The Democrats love to spend the money; the Republicans love to cut taxes. It seems like a free lunch for everyone. ... Read More