The Deficit Myth Book Summary - The Deficit Myth Book explained in key points
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The Deficit Myth summary

Stephanie Kelton

Modern Monetary Theory and the Birth of the People's Economy

3.9 (247 ratings)
25 mins

Brief summary

"The Deficit Myth" by Stephanie Kelton challenges the notion that government deficits are inherently bad and argues the importance of rethinking the role of money in our economy.

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    The Deficit Myth
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    The federal government shouldn’t budget like a household.

    Imagine a typical political ad starring everyday, patriotic Americans. There’s a waitress, a businessman, and maybe an affable construction crew. The ad shows each of these stand-up citizens hard at work. Then, it shows them back at their kitchen tables planning the family finances.

    Over these wholesome scenes, a voice poses a question: “You and your neighbors are responsible with your spending – shouldn’t the government be as well?” It seems like common sense. If a family can create and stick to a budget, so can the government. 

    However, Modern Monetary Theory, or MMT, argues that this analogy is a little too simple. While your everyday household uses money, the government actually makes it. It’s a subtle distinction that makes a huge difference.

    The key message here is: The federal government shouldn’t budget like a household.

    Traditional economics treats the government like a big, complicated family household. So if a family wants to buy something, like a new couch, it has to either make money from work or borrow money from the bank. Similarly, if the government wants to buy something, like a public health system, it needs to make money by taxing citizens or borrow money by issuing bonds. This is called the taxing and borrowing precede spending, or TABS, model.

    But consider this: Where does money come from? In many countries, including the US, Japan, and Canada, money is made by the government. In the US, the Federal Reserve either prints it as bills or issues digital dollars directly into bank spreadsheets. Since only the government has this issuing power, it has monetary sovereignty – a monopoly – over its supply.

    Being a currency issuer is important because, unlike a family, a government doesn’t need to earn money. It can simply make more of it. In fact, MMT says that money only exists in the first place because governments began spending it into existence. 

    Therefore, the TABS model is backwards. If the government wants to buy something, it must issue and spend the money first. After all, collecting taxes and borrowing only become possible after the money is already circulating. This is called spending before taxing and borrowing, or the STAB model.

    So does MMT mean governments can just print as much money as they want? Not necessarily. However, it does mean they have fewer fiscal constraints than the average family. They don’t need to worry about deficit spending or going broke. But they do need to consider inflation. We’ll look at this issue in the next blink.

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    What is The Deficit Myth about?

    The Deficit Myth (2020) lays out the basic tenets of Modern Monetary Theory. This unconventional approach to economics asks us to reexamine how we think about budgets, scarcity, and even money itself.

    The Deficit Myth Review

    The Deficit Myth (2020) by Stephanie Kelton is an eye-opening exploration of government deficits and the myths surrounding them. Here's why this book is worth reading:

    • By challenging conventional wisdom, Kelton provides a fresh perspective on the economy and government spending, allowing readers to question long-held beliefs.
    • The book's clear and accessible explanations make complex economic concepts understandable for everyone, regardless of their background in economics.
    • It offers a compelling argument for rethinking the role of government deficits, making it both thought-provoking and relevant in today's economic landscape.

    Best quote from The Deficit Myth

    Once you internalize the difference between the currency issuer and a currency user, you can begin to see, through a new lens, why so much of our political discourse is broken.

    —Stephanie Kelton
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    Who should read The Deficit Myth?

    • Political junkies seeking a hot new take
    • Amateur economists looking to learn more
    • Anyone who has ever asked, “But how are we going to pay for it?”

    About the Author

    Stephanie Kelton is a writer, political advisor, and professor of economics and public policy at the State University of New York at Stony Brook. She served as the chief economist for the US Senate Budget Committee and has written for the New York Times, the Washington Post, and the Los Angeles Times.

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    The Deficit Myth FAQs 

    What is the main message of The Deficit Myth?

    The main message of The Deficit Myth is that government deficits are not always bad and can be used to strengthen the economy.

    How long does it take to read The Deficit Myth?

    The reading time for The Deficit Myth varies depending on the reader's speed. However, the Blinkist summary can be read in just 15 minutes.

    Is The Deficit Myth a good book? Is it worth reading?

    The Deficit Myth is a thought-provoking read that challenges traditional beliefs about government spending. It offers valuable insights into economic policy and its impact on society.

    Who is the author of The Deficit Myth?

    The author of The Deficit Myth is Stephanie Kelton.

    What to read after The Deficit Myth?

    If you're wondering what to read next after The Deficit Myth, here are some recommendations we suggest:
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