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Modern Money and Historical Trauma


Angela P. Harris is Professor Emerita at the UC Davis School of Law.

In September of 2017, I attended the First International Conference of Modern Monetary Theory (MMT) at the University of Missouri, Kansas City. Subtitled “Economics for a New Progressive Era,” the conference displaced the university’s annual Post-Keynesian Conference, signaling a growing enthusiasm for MMT among academics, advocates, students, and regular people. Reporters from Bloomberg and the Wall Street Journal were in attendance as twenty-seven panels and several keynotes covered topics from “Stock Flow, Consistent Models, Finance, and Growth” to “MMT in the Streets: Grassroots Organizing and Mass Mobilization.”

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Taylor Mac

I got home from Kansas City in time to catch the last half of the third chapter of the “24 Decade History of Popular Music,” a “radical faerie realness ritual” presented by the drag artist Taylor Mac. Two hundred and forty-six songs long, and covering the history of the United States from 1776 to the present, the work was performed without a break for twenty-four hours in New York last October. I saw it at the Curran Theater in San Francisco, where it was presented in four six-hour blocks (with no intermissions) over the course of two weekends. I was fortunate enough to be there for three and a half of those blocks: twenty hours of dazzling, fabulous costumes; music from a slowly dwindling band (one musician departing every hour until only Mac remained); burlesque dance; “The Mikado” performed with the characters as Martians; and historical events reenacted through audience participation, from the Civil War (we threw ping-pong balls at each other), to the Cold War (two giant inflatable penises, one stamped with a Russian flag and the other an American flag, bounced from the balcony down to the orchestra and eventually ejaculated white ribbons on the crowd).

What do PowerPoints in Kansas City have to do with rubber breasts, high heels, and glitter in San Francisco? For me, the answer is white supremacy.

Key to the MMT project, as I understand it (I am not a member of the movement), is a distinction between “monetary sovereigns” and “monetary subjects.” Monetary sovereigns are entities that print and control flows of money: they not only issue currency but also collect taxes, fines, and fees, float their exchange rates, and denominate their debts in their own currency. Monetary subjects, like you and me, don’t have these powers; we use money but do not have the authority to create it. Monetary sovereigns are often nation-states, but not always. Greece, for example, is not a monetary sovereign, because it uses the euro rather than issuing its own currency. Zimbabwe is also a monetary subject rather than a sovereign: it uses the United States dollar as legal tender. The United States, however, is a classic monetary sovereign. It issues dollars, which are not tied to gold or any other material object, and it requires taxes, fines, and fees to be paid in those dollars.

The first principle of MMT emerges from this distinction: monetary sovereign governments face no purely financial budget constraints. In the US, so-called “deficit hawks” like to compare the national budget to your household budget, arguing that both budgets need to balance. Social programs like Medicaid and Social Security, it is said, are in danger of disappearing if and when the federal government runs out of money to pay for them. From the MMT perspective, however, this is one hundred percent wrong. Since monetary sovereigns print their own money, they cannot “run out” of money or “go bankrupt” like an ordinary monetary subject. Not that governments can print money forever without consequences. Steven Hall, lecturer in economics at the University of Adelaide, Australia, explains that “governments can cause inflation, if they choose, by spending too much themselves, or not taxing enough. When this happens, the total level of spending in the economy exceeds what can be produced by all the labour, skills, physical capital, technology and natural resources which are available. We can also destroy our natural ecosystem if [we] produce too many of the wrong things, or use the wrong processes to produce what we want to consume.” But the revenue constraints that politicians conjure are a mirage. The idea that governments must collect revenue before they can spend it gets it backwards. Monetary sovereigns print money first, circulate it, and only later collect it back in taxes.

Following from this premise, the MMT principle that filled the conference rooms in Kansas City with fizzy excitement was this: The government’s financial deficit is everybody else’s financial surplus. When the country goes into “debt,” it means that more money has been released into the economy for people using that money to do things with. Moreover, those things should be things that make the whole society better off. That, after all, is the point of a nation-state: to promote the flourishing, and enable the pursuit of happiness, of the people who live within its jurisdiction.

Where should the federal government’s deficit spending power be directed? The policy proposal that transfixed most of the Kansas City participants was one with potentially bipartisan appeal: a federal job guarantee. If the United States can spend money without the fear of going out of business, why not use that capacity to guarantee every citizen (or every legal resident, or even every resident, legal or not) a job at a living wage? A federal job guarantee could be targeted to bolster sectors of the economy that are not well supported by private enterprise.

Take the care sector, for instance. We desperately need well-trained, dedicated, responsible people to help us take care of our children, the elderly, and the infirm. Some people with disabilities need attendants; people trying to escape drug addiction need counselors and peer support. Care work is essential to society, yet most of the jobs currently available in the private care sector are poorly paid. Infrastructure presents another opportunity. As candidate Trump mentioned frequently (but president Trump has not), investment in national infrastructure is desperately needed, especially as an increasingly chaotic climate batters aging, poorly maintained systems and structures.

A federal jobs program might be used to expand the boundaries of what counts as work – a necessary discussion as automation replaces workers with technology. As in the Great Depression, when the Works Progress Administration hired artists, writers, muralists, and photographers, the federal government could pay creative people to do what they love and do best, serving as a patron of last resort.

And care, infrastructure, and creative production are only the most obvious national needs. MMT conference participants suggested that regions, states and municipalities could play an important role in defining the jobs to be funded by the federal government. One region of the country might need more agriculturalists, for instance, while another might need more IT people. The process of allocating federal job monies could involve bottom-up participation by communities, rather than being controlled from Washington.

MMT advocates argue that a federal job guarantee, unlike a universal basic income, should be appealing across the political spectrum. As Vicki Schultz and others have observed, the American Dream has always emphasized work; to be a good citizen is, in part, to participate in the economy. Today, however, there are not enough good jobs to go around. Workers who are unemployed for any length of time tend to stay that way.; employers are reluctant to hire people with gaps on their resume, preferring to poach from other employers. Many potential workers have been sidelined in our current economy: mothers who can’t afford child care, the structurally unemployed, people with felony records, people lacking the educational credentials or skills training to qualify for the jobs they want. Instead of pretending that there is a “natural rate of unemployment” and preventing so many Americans from accessing the labor market, MMT advocates in Kansas City argued that national governments owe their citizens the opportunity to work. From their perspective, a national currency is a promise; no government should impose taxes without providing its citizens with the means to pay them.

The idea of a job for everyone who wants one, of course, is not new in the United States. For example, as UCLA historian David Stein reminded us, one of the demands of civil rights leaders in the 1960s was full employment. But as my time in Kansas City continued, I began to feel a prickle at the back of my neck, a feeling that only grew stronger upon my immersion in Taylor Mac’s radical faerie realness ritual back in San Francisco. Eventually I realized what the feeling was.

Taylor Mac described judy’s (Mac’s preferred pronoun) 24-decade, 24-hour tour of popular music as an attempt to “dream the culture forward.” In order to progress, judy argued, we need to come to terms with our past. In a willfully frivolous and opinionated way, Mac’s show takes the full measure of the racialized, gendered, and sexualized exclusions, engulfments, and exploitations, the rituals of disgust, anger, and sunny denials, that thread through our national history. Mac spent much of Chapter One walking us through a history of Indian removal that ended in a confrontation in song and story between adopted Cherokee girl Louisa Maria and her well-meaning, white missionary parents. Mac sang a nineteenth-century song whose peppy chorus insisted, chillingly, “The Chinese must go!” Joined by guest vocalists Steffanie Christi’an Mosley and Lia Rose, Mac sang songs from the civil rights era, including a searing, howling version of Nina Simone’s “Mississippi Goddam.” And after World War II, Mac ordered the mostly white people seated in the center sections of the theater to get up and slow-walk to the sides in order to reenact white flight (acting on Mac’s suggestion, some of us people of color moved into their seats, greeting each other with hugs and high-fives).

I remembered, in the course of this radical faerie realness ritual, that throughout the nineteenth and early twentieth centuries, Southern states were reluctant to finance public elementary education, for fear that black people would take advantage of it. During the civil rights era, some of the same states closed their public facilities, including schools and swimming pools, rather than see them integrated. In a 2001 paper, economists Alberto Alesina, Edward Glaeser, and Bruce Sacerdote argue that the United States lacks a European-style welfare state primarily because of white supremacy. As they put it bluntly, “Racial animosity in the US makes redistribution to the poor, who are disproportionately black, unappealing to many voters.”

Cutting social programs, or preventing them from existing in the first place, is popular, then, not only because policymakers don’t understand macroeconomics. What, in 1995, Charles Derber called “the politics of triage” runs on resentment of populations seen as “dependent,” “lazy,” social “takers.” An example is President Bill Clinton’s promise to “end welfare as we know it,” replacing Aid to Families with Dependent Children (AFDC) with the far stingier Temporary Assistance to Needy Families (TANF). Despite the fact that far more white households than black households received AFDC, the program became politically expendable because of its association with African Americans. Today, as law and society scholar Kaaryn Gustafson has documented, the persistent belief that welfare fraud is rampant has led to a blurring of the boundaries between the welfare system and the criminal justice system, so much so that in some locales prosecution caseloads for welfare fraud exceed welfare caseloads.

H.L. Mencken famously defined Puritanism as “The haunting fear that someone, somewhere, may be happy.” American history suggests that as a group, white people are similarly haunted by the fear that somewhere, somehow, a person of color might be receiving a government benefit that they don’t deserve. And as a group they are willing to do anything, including throwing their own poor under the bus, to prevent that person from getting it.

MMT’s job guarantee proposal is thrilling, as was the optimistic enthusiasm in those conference rooms and the energy, creativity, and intellect of those involved in the movement. But the good-hearted, mostly white conference-goers in Kansas City could use a dose of Taylor Mac’s radical faerie realness to understand what they will be up against. Calls for a federal job guarantee will only succeed if they can circumvent the treacherous tropes of the undeserving benefit recipient. Universal benefits programs – Affordable Care Act, anyone? – are haunted in the United States by the spirit of racial resentment; targeted benefits programs are sooner or later doomed by it. Fostering economic justice, then, is not only a matter of policy know-how. It requires dreaming the culture forward.

As Mac’s show vividly demonstrated, white supremacy is woven into America’s DNA. Until we can incorporate an understanding of racism, its dynamics, and its effects into economic analysis and policy, race will continue to be the third rail for projects in the United States intended to serve the “common good.”