Modern Monetary Theory is an economic philosophy based on the idea that all state spending is "deficit" spending, since money comes into existence when the government spends it, and when the government raises taxes, it does so in order to take that money out of existence, both in order to control inflation and to limit the concentration of power in the hands of the wealthy.
The corollaries of this are many, but the two standout ones are:The BoingBoing source for the excerpt above includes a nine-minute video of an academic lecture on the subject which is well worth watching [edited and condensed from probably a one-hour lecture]. The key concept is that the federal budget cannot be compared to a household budget; deficit spending and borrowing work differently when the entity issues the currency.
1. The government can create money to buy any good or service that the private sector isn't using without driving inflation (that is, if there's someone unemployed and the government gives them a job, that won't drive up wages because the private sector had already passed on using their labor, so the supply/demand ratio of labor to private jobs remains constant), offering full employment to everyone who wants to work; and2. The government can create money to buy goods and services that the private sector is currently using without creating inflation, provided it can convince people not to spend that money -- for example, by creating "war bonds" that sequester the vast sums that get pumped into the economy during wartime, to prevent the workers who receive those sums from bidding against the materials that are being used in munitions factories.These two facts are central to the Green New Deal, which proposes using a combination of a federal jobs guarantee and federal procurements of the materials needed for a sustainable energy conversion and climate change remediation to avert the climate crisis.
A Thorough Defense of Modern Monetary TheoryAddendum: For an outstanding longread on this subject, see Explain Like I'm Five: Functional Finance, written by TYWKIWDBI reader escapefromWisconsin.
Economists worry that MMT is winning the Argument in Washington
Addendum: This BBC video offers an excellent five-minute summary of the principles involved.
"Government spending is currently growing at an unprecedented rate to deal with the effects of the global pandemic. Many people worry that this could burden future generations with a crippling debt to repay. However, economist Stephanie Kelton, author of The Deficit Myth, argues that we need to rethink our attitudes towards government spending. Could the principles of Modern Monetary Theory help us not only navigate our way out of this crisis but also to build a fairer economy?"