The British Labour Party and MMT

Both Bernie Sanders (like Obama) and Britain’s Labour leader Jeremy Corbyn (like Cameron and May) have painted themselves into an economic corner that they will be sorely taxed to escape. All of their political lives they have used the budget deficit to chastize their conservative and neoliberal counterparts as either budget busters or austerians. Having recently been introduced to MMT (Modern Monetary Theory), however, they are finding themselves unable to reverse themselves and tell the public that a governmental budget is not the same as a household budget and the government is not in any danger of going broke.
MMT economist Stephanie Kelton, Professor of Public Policy & Economics at Stony Brook University and an economic advisor to Sander’s 2016 presidential campaign, reports that although Sanders is convinced that MMT is the way to go, he dared not change his anti-deficit position because he risked political blowback[1].
Jeremy Corbin, while in a similar position, is apparently being advised by neoclassical economists advocating a continuation of the Conservative Party’s austerity policy. If he becomes prime minister, a real possibility, but fails to make good on his promises to restructure the British economy and make it fairer to the working class, he could easily relegate the Labour Party to a long period in the wilderness. Of course, he has the same problem as Sanders—reversing himself after decades of bashing Conservative, Liberal, and even Labour governments for balancing the budget on the backs of workers.
U.S. Republicans, however, have screamed about budget deficits for decades, but every time they took control of Congress and the presidency, they invariably increased expenditures and reduced taxes on the rich, creating deficits that dwarfed the deficits of their Democratic predecessors. In all but one case—Richard Nixon—the deficits did not lead to inflation, and to be fair, Nixon inherited a war that was itself inflationary[2].
The best political strategy for both Sanders and Corbyn is probably to mute their balanced budget talk during their campaign and change policies only when they get into office. Corbyn should have some serious talks with Ann Pettifor (a member of the Labour Party’s Council of Economic Advisors), and Steve Keen before he goes any further.

---

1. Stephanie Kelton Has The Biggest Idea In Washington  ↩
   
2. Nixon did err in repealing a 10% surtax on income enacted by the Johnson Administration to curb inflation. Almost immediately, inflation started rising. Nixon attempted to impose price contrals late in his first term, but they had no teeth and were for the most part ignored. Gerald Ford, Nixon’s successor, engaged in persuasion, to include distributing WIN (Whip Inflation Now) buttons, without result.  ↩