Although I agree with the premise of the recent commentary (May 16) by Barbara Burt and Marcus Hutchins, supporting a major increase in the federal budget deficit to respond to the pandemic, I take issue with this statement: “Because it makes its own money, the federal government can never go broke.”
This statement is the core argument of the new Modern Monetary Theory, which assumes that “money grows on trees.” This was demonstrated to be wrong in French economist Thomas Piketty’s 2013 book “Capital In the Twenty-First Century.”
Excessive deficits do eventually matter because they lead to inflation, and, in the extreme, the collapse of the currency (think Zimbabwe). Money does not grow on trees.
Gore Flynn
Portland
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