The National Debt Is Irrelevant: Some Unsettling Questions Regarding Government Budget Deficits

David Barrows ()
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David Barrows: Aurora Philosophy Institute

Chapter Chapter 5 in Debates in Monetary Macroeconomics, 2022, pp 93-109 from Springer

Abstract: Abstract Abba Lerner argued that fiscal policy should pursue goals such as full employment, and that balancing the national budget is of secondary importance. Modern monetary theory (MMT) extends Lerner’s functional finance doctrine; it suggests that a nation’s currency is a public monopoly and that national debt is not a problem. However, this claim is contingent upon national competitiveness. The paper divides countries into five categories, ranging from high-income developed economies to failed states. High-end developed countries are best equipped to practice MMT. National debt is irrelevant to them. Other developed nations can practice some form of MMT, but must deal with constraints. Middle-income, weak, and failed states are incapable of utilizing MMT.

Keywords: Balanced budget; Fiscal policy; Functional finance; Modern monetary theory; National currency; National debt; Policy goals (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-11240-9_5

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DOI: 10.1007/978-3-031-11240-9_5

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