Kristi Noem likes to pretend that funding the federal government is just like her kitchen-table economics (which she couldn’t make work without huge infusions of federal subsidies for her family’s crops and her husband’s job selling federally backed crop insurance). More sensible economists understand that federal budgeting is nothing like household budgeting. Individual households aren’t responsible for general welfare. Individual households aren’t charged with using fiscal and monetary policy to temper inflation and recession.
And, as Modern Monetary Theory recognizes, in serving those important macroeconomic goals, governments are not constrained by microeconomic conditions:
MMT argues that government spending does not face the same constraints as a regular household budget. When we — regular people — want to buy something, we have to spend our existing money or get a loan. MMT points to the fact that the government doesn’t tax in order to raise revenue to then spend. It simply spends what it authorizes. Moreover, countries with a sovereign, fiat currency — which includes the U.S. — cannot run out of money.
According to MMT, the limits are not in our government’s ability to spend money, or even in the deficit per se, but in inflationary pressures and resources within the real economy. Can the government spend trillions and trillions of dollars on health care and infrastructure? Technically, there’s nothing stopping it. The question is whether there’s enough available labor and resources to carry out such projects without raising inflation. And governments with non-sovereign currencies or foreign debt face considerably harder restraints [Daniel José Camacho, “Can We Afford Economic Justice in the United States?” Sojourners, 2018.10.10].
Kristi Noem’s kitchen-table pablum not only misses the facts of macroeconomics but also exposes her true priorities. Noem thinks that the government has the fiscal capacity to give the Trump class more tax breaks and to buy ever bigger war toys, but when it comes to ensuring all Americans can afford health care, suddenly Kristi’s back at the kitchen table, griping that the newspaper didn’t carry any good coupons. Kristi’s kitchen-table budgeting isn’t government reality; it’s her excuse for lacking the will to stand up to the rich and powerful and support the common people:
If the government is not as broke as some say it is, then the inability to invest in things like public education is due to a lack of political will and not some natural law written into the fabric of economic reality [Camacho, 2018.10.10].
America can do a lot more than Kristi Noem thinks. We can certainly do things that differ from Noem’s narrow vision of “great”ness.