US Federal Senate Bill SR89

US Federal 2023-2024 Regular Session

• Introduced: 3/1/23
• Refer: 3/1/23

Caption

A resolution recognizing the duty of the Senate to abandon Modern Monetary Theory and recognizing that the acceptance of Modern Monetary Theory would lead to higher deficits and higher inflation.

Impact

The resolution aims to effectuate a change in fiscal policy by discouraging the adoption of MMT principles within future legislative actions. If passed, it would signal a return to traditional fiscal and monetary policies that prioritize balanced budgets and control over inflation. By rejecting MMT, the Senate would endorse an economic strategy that considers the potential negative implications of unchecked government spending, such as increased national debt and diminished foreign investor confidence in U.S. financial stability.

Summary

SR89 is a resolution introduced in the Senate that calls for the abandonment of Modern Monetary Theory (MMT). Proponents argue that MMT could lead to unsustainable fiscal practices that would result in larger government deficits and potentially hyperinflation. The resolution suggests that economists from various political backgrounds have raised significant concerns about the viability of MMT as a framework for economic management, emphasizing the risky nature of relying heavily on government deficit spending financed by printed money.

Contention

Within the discussions surrounding SR89, there are stark divides among economists and policymakers about the merits and dangers of MMT. Opponents of MMT assert that it dismisses fundamental economic principles concerning debt and taxation, while supporters claim it offers innovative solutions for funding social programs without immediate fiscal constraints. Key points of contention include the claim that adopting MMT could undermine the Federal Reserve's ability to manage inflation effectively and could erode trust in government bonds, which are relied upon by both domestic and international investors.