Near the start of this episode, Yeva Nersisyan talks with Steve about leftist economists who are still wedded to the belief that government spending relies on taxpayer money. She says if an academic on the left uses the ‘taxpayer dollar’ framing, then you cannot be surprised when the right uses it too – to say they’re saving taxpayer money, cutting wastefulness, cutting inefficiency. It’s why being consistent is so important. If one side can use it, the other side can too.

“It leads to the Elon Musks of the world using this taxpayer money trope to basically take a sledgehammer or a chainsaw to the public sector.” 

Yeva and Steve revisit some basics of MMT, including the understanding that a government is not like a household.  

Our own spending doesn't really affect our own income. We'll still get our wages, we will still have that, and then we will continue consuming, but consuming less and therefore end up with more savings. 

But it doesn't work for the economy as a whole. Because for the economy as a whole, if spending goes down, that means there is now less income, and less income means someone somewhere is earning less and therefore they have to cut their consumption and they also have to cut their saving. And it becomes this cycle where, okay, someone cut their consumption, now someone else is earning less or the grocery store is earning less, right? And now they have to fire their workers. Now their workers don't have income and they are spending less, and so on and so forth. 

Yeva and Steve go into other insights of MMT, including sectoral balances and the reality of the so-called national debt.  

They unravel the absurd dynamics of current economic policy and look at the implications of proposed spending cuts by the Department of Government Efficiency, or DOGE. Fallout from the government's ruthless abandonment of social programs will be disastrous.  

Yeva Nersisyan is an associate professor of economics at Franklin and Marshall College in Lancaster, PA. She received her B.A. in economics from Yerevan State University in Armenia, and her M.A. and Ph.D. in economics and mathematics from the University of Missouri-Kansas City. She is a macroeconomist working in the Modern Money Theory, Post-Keynesian, and Institutionalist traditions. Her research interests include banking and financial instability, and fiscal and monetary theory and policy. She has published a number of papers on the topics of shadow banking, fiscal policy, government deficits and debt, and the Green New Deal. Nersisyan is currently coediting the Elgar Companion to Modern Money Theory with L. Randall Wray. 

Find her work at levyinstitute.org/publications/yeva-nersisyan 

: All right, folks, this is Steve with Macro N Cheese.We are, we're in some weird times now, folks. I mean, this Dogecoin of an agency, the Department of Government Efficiency [DOGE], has brought out a chainsaw  to the public space of the United States.It has come through the door, kicking doors down with jackbooted U.S. marshals in the small agencies.It is telling people, without an act of Congress, simply the executive telling them, this is what you're going to do and you're going to do it. And they test the bounds of the courts, they test the bounds of public opinion, they test the bounds of the media.And right, wrong or indifferent, they do what they say they're going to do.And this is the unfortunate thing for us, you know, out here watching this political theater transpire, we watch feckless Democrats, worthless, feckless Democrats, tell us that a parliamentarian has stopped them from passing the PRO Act. Now let me ask you a question. Would Donald Trump allow a parliamentarian to block the PRO Act if that was what he was pushing?Ask yourself why we have a uniparty, one that plays the role of the patsy, the feckless, useless, worthless group, and the other that plays the big tough guy walking into the bar, run behind me, we got your back. Even if it's leading to disgraceful fascism, even if it's leading to absolute destitution for millions, loss of job, you know, it doesn't matter.I've said for years the problem with MMT, it was playing too many gentlemen games. Because you're watching right here, right now, people tired of fecklessness that should not be a gateway to becoming a fascist or a Reich winger.But alas, when the other side of the coin, in this kayfabe of a lie of an electoral system, when they come out there and they show you that they won't do anything, they can't do anything. Joe Biden didn't stack the courts, didn't do any of the things at his disposal.And then day one, you watch this maniac walk through the door and literally do whatever... you have to ask yourself, I wonder why people are becoming right wing fascists. It's not hard to understand. And it's made even more difficult when people don't understand the way that the federal finance system works.These people are just as clueless as the average person is when it comes to taxes, funding, spending.They think their hard earned tax dollars are going to wasteful, fraudulent spending, things that are going to things they despise and they think it's their hard earned tax dollar doing it.For years we have preached and begged and pleaded and yelled and screamed and said mean things and nice things and tried every angle we could to get people to wake up and understand that it's not your hard earned tax dollar. And of course you got the overly, overly technical guy comes, well actually Steve, the Treasury's General Account..., and you just want to say "slap".You want to borrow Donald Trump for just a minute, bring him over to pop the guy, right? Just for a minute, send Trump back to fascism land. But you need that guy over there who.Well, actually it is, you know, Steve, you're not really being exactly correct. And you wonder why regular people don't have any faith in MMT.You wonder why they're hand wringing going, I don't know, they're saying it's just a theory. This one guy over here saying, well, what about the Treasury's General Account?This guy over here is telling me that the consolidated balance sheet says taxes are destroyed upon receipt. That money doesn't exist in the government sector, it only exists in the private sector.It starts getting all tricky then because then you got MMT versus MMT. Well, he doesn't really know what he's talking about. He say taxes don't fund spending.Well actually...And so now you've got Donald Trump saying, I'm not going to listen to any of that crap.I know the country has its own printing press, I know it can't go broke, but I'm going to go ahead and play this to the hilt, and I'm going to bring my boy Elon Musk, the tech feudal dictator oligarch from Silicon Valley, the kid who was gifted an emerald mine basically. And given everything he's ever got. This guy is in there slashing and burning our public space and there's not an ounce of real legitimate pushback.Even Emma Viglin goes on her Majority Report with Sam Sader saying, well, I read The Deficit Myth and I just don't find it compelling. So she allows the lie to go through. And you got Kshama Sawant, Jill Stein, what do they do?They're at their worker strike back telling everybody it's taxpayer money. They can't help but carry the water for Margaret Thatcher and Ronald Reagan. And guess who that emboldens. No, it isn't the Left that emboldens.It emboldens Donald Trump, MAGA, and DOGE, because you're feeding into the lie that is crushing our society right now. And to bring this back to a more gentle, more happy place. Maybe, maybe not. Probably not. Because there's not really much to be happy about in this.I'm bringing on my guest, Yeva Nersisyan on, who works frequently with Randy Wray, the economic chair at Franklin and Marshall College, and she's a research scholar at Levy Institute as well. She has been on the show many times. And I love Yeva because she brings an amount of realism.Not, you know, the fake realism that we see a lot of folks try to trot out. You know, the grown ups in the room, the diminishing of the Left, the oh, you lefties are the problem kind of thing.She speaks plainly and she speaks from a perspective that I value anyway, and I hope you'll value it, too. So without further ado, bring on my guests. Yeva, forgive me for my long monologue, but I'm pretty hot about this. Welcome to the show.

: Thank you. Thank you, Steve. Always happy to talk to you.Although I was worried a little bit that you were equating MMT with the Democrats or the mainstream Left or...

: Well, you know what? I'll put it to you this way. I think that appearances tend to be that way, unfortunately.I think a lot of people see Stephanie [Kelton] frequently overly identifying with the Democratic Party, see Warren Mosler overly identifying with the Democratic Party, and they don't see the others that are standing out independent of that. And, you know, whether that's true or not, it's not really relevant. It just seems to be what comes down the pipe. I am not one of those folks.So I am on the Left, and I'm being called a Stalinist. I'm being called all kinds of crazy cockamamie nonsense. I guess it's a means of trying to deplatform what we do, but whatever.And I think to myself, MMT is politically agnostic. It's the plumbing. It can't get much more agnostic than that.It only becomes ideological once you're talking about where you're spending and what you're doing with it in the public space. And then you're looking at the lens to analyze what's happening. Right? I guess from your vantage point, tell me what your thoughts are here.

: Yeah, I'm happily not on social media, so I don't really know who's associated with what. So I can sort of stay blissfully oblivious on that front.But the way I see MMT is it gives the Left, the political Left, the activist left, the tools to do what it needs to do. Right? So in the sense, I don't know if it's the role of the academics per se to do the activism. Right?[Sure] I see the role more in the education and in the development of the theories and the application of the theories, to the different policy proposals like the Green New Deal that we've talked about before or the Build Back Better [Plan}. Right, those kinds of things. And then what the activist/political Left does with it. Right. That's another story.Now, whether MMT has been able to sell the story to that Left, I think that's really the question. And I feel like the Left hasn't necessarily been consistent, as you were saying, on this issue of money. RightThat when it suits them, they will not use the taxpayer money tropes.When it doesn't suit them, like when they don't want the tax cut or when they don't want the military spending and so on, then they will pull out the taxpayer card. And I think that this inconsistency is actually very damaging. And I would say this is one area where MMT academics have been consistent on. Right?We've talked about this previously that with the 2017 tax cut, the MMT or academics were saying the problem with the tax cuts is not the deficit. So you, meaning the Left, the Democrats, if you want to include them on the Left or not, you probably don't want to do it. Right?You should stop talking about the deficits because that is really not the problem with the tax cuts. Instead you should focus on what is the impact of this on income inequality. Right?And then to get even more, I guess, wonky, what is it going to do to aggregate demand? Is it going to push us over our potential and therefore cause inflation? Right? Those are the kinds of considerations that you have to worry about.Not that we are going to create deficits to pay for the tax cuts for the rich. Right? Because the deficits themselves do not necessarily matter. So I think that's where the Left has actually to be consistent.And for that they actually have to understand MMT. And I'm not really sure that that understanding is there.

: I don't think they understand it at all. And in fact, I don't think they want to understand it.You know, we've had people who I have very high regard for but are not MMT'ers and I'm very disappointed that they haven't really taken the information and integrated it into their own work.You know, they've remained a bit of a full cup, and it's hard to put new information into a cup that's already flowing over with things they think they know but really ain't so. Right? You know, there's a great opportunity in Tulsa, Oklahoma, where Clara Mattei has started this Center for Heterodox Economics.And I love Clara, but Clara has a mentor who is antagonistic to MMT. I think she really genuinely believes it's tax dollars going to Israel, going to the war machine, or going to whatever thing.And, you know, in talking with her, I love her to death. And I think her book The Capital Order is absolutely must. And I hope that the Center for Heterodox Economics is a great thing.But I would really like to see her lean into this because without it, I think that there's a lot of things they're going to really miss out on. And to be fair, Jamie Galbraith was there.And Jamie Galbraith, you know, he may not call himself an MMTer, but I do believe that he is, at least within the MMT framework. Everything I've ever seen he's written has fallen within an MMT lens.But that's another example of leftist economic minds coming together and not really platforming MMT and not really centering MMT when reality is.Is that what's going on in society today, the thing that's laying off tens of thousands of our friends and relatives and neighbors, with these DOGE cuts, stems from their not understanding federal finance. It's not whether they have good sensibilities as socialists or whatever. It's that they genuinely don't understand how the federal finance works.And so they repeat the tropes of Margaret Thatcher and Ronald Reagan thinking they're doing God's will. And in reality, they're setting the Left back in ways that I just don't think they've come to grips with.

: Well, I agree. I agree with that sentiment for sure. Right? At this point, to be agnostic on MMT, I don't even know what that means. Right?You either understand it and you agree with it or you don't. It's not like this is 20, I don't know, 15, 16, 20, 20. Right?That you were just exposed to MMT ideas because you read Randy's [L. Randall Wray] primer or you read Stephanie's [Kelton] The Deficit Myth. So, okay, before then you were agnostic and then you read the book you gotta make up your mind at some point, right?So when people say that they're MMT agnostic or they're skeptical, I'm thinking you just wanna like, have your cake and eat it too, Right? Right now you're thinking, okay, MMT is popular. So I'm just gonna say I'm skeptical.But if tomorrow the tide turns and everybody turns against MMT, which is a possibility, then I'm gonna say, well, I was always a skeptic, right? So that's how I view these people. But I would say I don't know if convincing the academics is really the goal, right?Because that's not how MMT got popular. It didn't get popular because MMT academics were able to convince other heterodox academics that MMT is correct. In fact, that never happened. Right?And you know, you can talk to Randy Wray about all of that because he was at the forefront of all of that. And I was just a, you know, graduate student a few years later than that. But that was never really what drove MMT to become popular, Right?What happened was MMTers started talking to the activists, or the activists started talking to MMTers, right? So I think that's where really it got popular. And then it made people hopeful that things will change.So in that sense, it's not educating the academics because like you said, they're all dug in into their own things, it's educating the public. I think that really should be the goal. But on this question of the taxpayer dollars, right?So if you want to use it as an academic who's on the Left, right? Then you cannot be surprised when the right uses it to say, well, we are saving taxpayer dollars, right?We're cutting wastefulness, we're cutting the inefficiency. So that's why to be consistent is so important, because if you are going to use it, then others are going to use it too.I mean, I've been at conferences where I've seen people who call themselves Post Keynesians stand up and say, well, these are the programs we gotta do, and this is the impact on employment and so on, and this is how we're going to pay for it. And whenever I've tried to push back, they have pushed back even harder, saying, no, you gotta pay for it. You can't just do it without taxes.It just has to happen that way. So that's why I'm really not hopeful in terms of changing the hearts and minds of the academics.And honestly, I don't even know if that's necessary for social change. I don't think academia, and I say this as somebody who is in there, right, is where change comes from. That's really not, you know, not the case.But yeah.So here we are, we have the Elon Musk's of the world using this taxpayer money trope to basically take a sledgehammer or a chainsaw to the public sector with the kinds of results that we don't even know what the results are going to be.

: So when I think about my starting point in this MMT, I don't think people remember this all the time.But, you know, I started as a far right conservative Republican and then I migrated my way, sort of left to libertarianism, which at least had the good sense of being anti drug war and anti war, but they didn't mind a war on the poor. They didn't mind a lot of other evil things that I had to really go through a lot to learn.And then I got my MBA and I thought my, you know, poop didn't float. I was really big kid on campus and I had a lot of student debt to show for it. But they mistaught me as well, right?So I left being a Republican, I left being a libertarian. I basically threw my MBA in the trash once I learned MMT.MMT fundamentally took all of the time and investment I put in learning all the wrong things and put a giant flashlight on it and said, you learned all the wrong things. Now I use that information, though, to help guide me in terms of talking to other people that were there as well.And I have had that conversion experience, you know, I mean, I have had that opportunity to go from right to left and literally experience a massive transformation. And I have to credit the awakening that taxpayer dollars aren't a thing. It was the big awakening that changed everything for me.Now other people say, well, that's not the most deep insight about MMT. There's a lot of great insights once you get deeper into it.But the one that brought about not just in education, but an awakening was the taxes literally do not fund the federal government. And I use this joke, I say Sbarro's has a bunch of 50 cent coupons and they print 50 cent coupons all the time.Sbarro's does not need its 50 cent coupon back to fund itself. It throws them in the trash, it destroys them, it rips them up, it stamps them, does whatever to show they've done their job.And the federal government does the same thing. The federal government spends that money into the economy.It bounces around in sales and paychecks and other things in the economy, and then it returns home as a tax and it's destroyed. It's done its job. And I don't think that's hard to understand because I think of it in two loops.I think you got a tax loop and I think you've got a spending loop. And they're not tied together, but one makes room for the other. And in this case, it just made all the sense in the world to me.And I was able to pivot from all the things that I had been taught, rightly or wrongly, and be able to integrate those things and understand now where a lot of the people that were like me anyway, can't speak for everybody, but people that walk my path. I understood where they were coming from and understood where they were wrong. We've tried a lot of things. Right?You've got a lot of great books out there. Dirk Ehnts has written books. Randy Wray has written books. Bill Mitchell's written books. Tons.Stephanie [Kelton], of course, has written written books and is writing another one, I think, on the inflation myth. I mean, there's a lot of books out there. What do you think it'll take? Is it that we don't have a good TikTok game?Is it that the activists are spending too much time trying to pretend they're academics instead of speaking populist messages? I don't know. I'm really at a loss because it makes so much sense and it literally fundamentally changed me. Radically.I mean, radical change came from me learning MMT.

: Yeah, I mean, as I said, I'm not on social media. So as far as how you spread the message. Right? Far and wide, I'm. I guess I'm the wrong person to talk to about that.I guess I'm wondering why there are all these, like, political podcasts that are on the Left and why they're not featuring MMTers more frequently. That always puzzles me. So I'm, I'm not really sure whether an outreach to the particular people who already have an audience could be helpful potentially. But I think you're right in that this taxpayer money thing is a very important myth to dispel. Right? The myth of the taxpayer money.And this relates to, again, the myth that the government is like a household and people can relate to that. Right? So people can relate to their own budgets. Right? They do budgeting. They have their income flows and then they have their expenditure flows.Right? So they can see all of that. And they can see that one of the outflows from their paycheck is the tax money, right? That's going.So they're like, well, it's going somewhere, right? Because I'm spending it so somebody's earning it. So in some sense, at an intuitive level, they probably understand it that way.So this confusing of the household and the government, right? I think that's a big hurdle.And in general, it's this micro versus macroeconomic logic that people sometimes have difficulty with, including my own students.And I tell my students, if you've done with intermediate macro, if, if you forget everything, all the models and the math and so on and the graphs, right? I hope that you will at least remember the macroeconomic logic and how sometimes it seems counterintuitive because we're thinking about it as individuals. For example, I shared my piece with you on what do we say when we cut government spending, right?And there's this idea that the government is going to save, just like we would save if we were to cut our own spending. Right? Again, because we're thinking about the government like a household.But it doesn't work that way because here we're applying the microeconomic logic, right, where we're only looking at what happens to our own self or to the government when it cuts its own spending or when we cut our own spending. But what macroeconomists have to do, they have to say, well, okay, so you cut your spending, but it didn't just end there, right?What you did has repercussions for someone else because your spending is income for someone else. If you're spending less, someone somewhere in the economy is earning less, right?You're buying fewer of those avocado toasts that we're told we should not be buying or the Starbucks coffees and whatever other, I guess, overpriced indulgences there are. So then if we did it, we cut our spending, we would end up with more saving at the end of the month, right?Because our own spending doesn't really affect our own income. We'll still get our wages, we will still have that, and then we will continue consuming, but consuming less and therefore end up with more savings.But it doesn't work for the economy as a whole.Because for the economy as a whole, if consumption spending goes down, right, that means there is now less income, and less income means someone somewhere is earning less and therefore they have to cut their consumption and they also have to cut their saving. And it becomes this cycle where, okay, someone cut their consumption, now someone else is earning less or the grocery store is earning less, right?And now they have to fire their workers. Now their workers don't have income and they are spending less, and so on and so forth.And so what is paradoxical, and this was recognized by Keynes is the so called Paradox of Thrift is that if we cut our consumption, right, we're going to actually end up with less saving as a whole, not more. Right? This is the counterintuitive result because it doesn't work that way for the individual.We will end up with more saving if we cut our consumption. The economy as a whole cannot save more by consuming less. And so we can then extend the same logic to the government.Okay, so the government cut its spending, right? We fired all these workers that DOGE is trying to fire and now these workers don't have their income anymore. Well, what are they going to do?They're going to definitely cut their consumption. They're definitely going to cut their saving, right?And so their consumption that used to be income for someone else is no longer flowing through the economy. So now someone else is not getting that right? And they have to cut their consumption and their saving and so on and so forth.So what happens is that if the government cuts its spending, we end up with less, less national saving for the economy as a whole. This is the sectoral balances, right? If the government is reducing its deficit, then the private sector will have a smaller surplus. Right?That's the same idea, but it's hard to see because it doesn't work that way for the individual. So I think this is one of the issues that the macro versus micro logic is different.And of course the government not being like a household, it's a part of that as well.

: You know, I want to talk about sectoral balances for a second. This was another, not as big of an aha moment as the taxpayer, but it was really close. It was like a 1B.You know, I think we typically look at it in three different sectors when we're talking MMT. I know you can break it up into whatever sectors you feel like.But from the standard look, it's like private debt, governmental public debt, and then rest of world/demand leakages. And when you look at those three sectors, I want people to understand that it's like it's either plus or it's minus.And so there's always a matching trade off in that mix. Right? So when private debt goes up, that means me and you don't have as much money to spend.Our capacity to take out loans or to purchase things is now tied strictly to what our income is. And if we have enough income to pay our debts and so forth, fine.But if not, then we start getting into bankruptcy and we start getting into things where we've got to cut consumption or we lose our homes and things like that. When the rest of the world trade balance kicks in, I'm not sure if that's the right way of saying this, but when the US Is a net importer, that means, quote, unquote, "dollars are leaving", so to speak, even though they're being parked, they're leaving the U.S. economy. And we are then in turn trying to find a way to get that bucket filled up.In terms of the government's position on trade, the government's position on rest of world, we're looking at a negative there. So that leaves only one place to bring money into that sectoral space.You're out of bank credit on the private side, you're at a trade deficit on the other, and that leaves one, and that's the federal government.If we cut federal government spending, then we're in a real significant problem that triggers recessions, depressions, mass layoffs, all kinds of real serious problems. I maybe butchered that, but tell me what your thoughts are.

: Yeah. So there is an important distinction between the flows, right, of spending and income and the debt, right?Which is the stock that then happens if the flows are negative for example. So think of your household financial balance, right? Which is just the difference between your income and your spending.And let's say if you spent a hundred dollars less than your income, then you would have a positive balance at the end of the month of a hundred dollars. And now this added to your wealth, right? To the stock of your wealth.So that's the difference between the flow of spending and then the stock of wealth. Right? And if you were in the opposite situation, let's say you spent $100 more than your income.That means you ran a deficit of $100, which you have to finance somehow by, let's say, going into debt. So that's why the flows of deficits lead to the accumulation of the stocks of debt. Right?You can think of the bathtub analogy where, say, the level in the bathtub is your level of debt, right? Which is a level. You can measure it at any point in time. And then spending is the inflow of water and your income is the outflow.You can think of that way, right? Like the drain.And then if you're spending more than your income is, then the level of the water in the tap will go up, which is the debt, okay? Because you spent more than your income, right? You added more water than it was being drained, in a sense. So the sectoral balances are looking at the flows, right?Like how much did we spend relative to how much we earned? And for the economy as a whole, the total spending and total income is equal, right?Because every dollar of spending has to accrue as income for someone in the economy. It cannot just disappear. We can't yet send it to Mars, right? Maybe we will do it when we send Elon or something.But so every dollar spending has to accrue as income for someone, which means that total spending and total income are equal. Well, that means that if you take the difference between total spending and total income, then it's going to net to zero because they're equal.So what we are doing with sectoral balances, we're saying instead of looking at total spending and total income, let's do that for the different sectors, right? So the easiest one is the government and the non government sector.So we take the economy divided into government and non government and we say, okay, let's say government income minus spending, which gives you the balance, right? Whether a deficit or surplus, and then add to that the privates or the non government sector income minus non government sector spending.So what you're doing is adding all the incomes and subtracting all the spendings, right? So it's the total income minus total spending, which has to be equal to zero. And I don't know if I explained that very well.It's harder to do if you don't have a board with you.

: I know.

: So that then means that if government balance plus private sector balance equals to zero, then it means the government balance equals to the private sector balance with the opposite sign, right? Or you can say it the other way around. And then you can complicate it where you can add the foreign sector.I mean, the one thing about the foreign sector is that like you said, it's touched, you know, dollars that are flowing out, right? We're spending more on foreign goods than what foreigners are spending to buy our goods, okay? And that's been the case for the US since 1980s.So Donald Trump is not going to eliminate our trade deficit with his tariffs, right? That's not going to happen. So we are the supplier of reserve currency. Everybody wants to sell to us.We're the biggest economy in the world, so we are going to have that trade deficit. So once you take that as given, you say, okay, if you're going to have a trade deficit, which means foreigners have a surplus, right?Because that's what the trade deficit mean. We have a deficit, foreigners have a surplus. It's looking at the same thing from two different sides.And if foreigners have a surplus, then somebody must be paying for that surplus, right? MMT speaks in terms of like who is financing whose surplus. So for every surplus there has to be a deficit somewhere, right?Because the two have to add up to zero. So then who's financing that foreign surplus? If the government said we're going to balance our budget, we're going to be in that zero position.Well, guess who's financing that foreign surplus then? It will be the private sector, right? The households and the firms in the United States.So that means they will have a deficit that's equal in value to that foreign sector surplus or our trade deficit,in other words, right? Now if the government is running a deficit, right, we would say its deficit has to be at least as much as our foreign sector surplus/the trade deficit because that's the minimum you need to allow your domestic private sector to be in that balanced position.In other words, to be neither saving nor running a deficit, okay? Now even that is not ideal because then we're looking at the sector as a whole.If you have that kind of a situation, then it means there are a lot of units in your private sector who are running deficits and accumulating debt. That's the situation we had with the Clinton surpluses, right? Which eventually led to the global financial crisis a few short years later.So that then means that you want your government deficit to be higher than your trade deficit. So to allow your private domestic sector to be in that net saver position to, in other words, run a surplus, right?And I do think the sectoral balances are super important because it is accounting and you can sort of state it without any opinions necessarily, right? And say, okay, here's how the world works. That for every deficit there has to be a surplus and for every surplus there has to be a deficit.If you want your government to be in a surplus, tell me who you want to be in the deficit position, right?Or if you're saying we're going to cut the government deficit, okay, well, we know that every dollar government deficit adds to the non government sector surplus. Tell us whose surplus you're going to be cutting, right?So if you say we're going to cut government deficit, it sounds all good because it's a deficit. But if you understand that it's also a surplus, right? For some other sector, the private sector.Then you say, well, are you telling us you're going to be cutting the private sector surpluses? Because that doesn't sound very. What's the word? It's not a politically winning argument. Right?So I think we do have to lean in a lot more on the sectoral balances. It is more difficult to explain them in this kind of format, but once you see the graphs, it becomes easier to understand. Right?

: It's beautiful. It's mirrors. Right. So you can see on one side the exact curves on the asset side are the same on the liability side, when you.It's double entry accounting, it's capturing in a graph. I mean, it's really powerful.Stephanie used that one where she had a picture of a mountain and there was a lake at the base and you got to see the reflection of the mountain. And it was like sectoral balances. I mean, it was like kind of, you know, just the great natural essence of what this captures.

: Yeah. I mean, a lot of it boils down to misunderstanding what money is. That money is a balance sheet entry.Even when I have a whole semester, it is difficult to explain that to my students. You know, I have recently had them watch this Jon Stewart clip where he's talking to Thomas Hoenig, who's the former president of Kansas City Fed.And Jon Stewart is like, why can't we issue the trillion dollar coin and pay off our debt to China? You know, and Honig is trying to say, well, if you do that, you still have an IOU, right? You're just exchanging one for the other.And they just go back and forth, back and forth. And then you can.And then I told my students, well, we can put this on a balance sheet and say, okay, well, what happens if we do issue that trillion dollar coin and pay off China? Right? We no longer owe China in the form of treasury debt, but now they have this coin, which is still a liability of the U.S. treasury. Right?So in that sense, money never disappears. It's always on some balance sheet as a liability. And so it has to be that for it to be an asset for someone else.It's just that for my students and for the general public, it's hard to see how money has these two sides because we always look at it from one side. It is always an asset for us. Right? Cash is always an asset for us.So it's hard to wrap our heads around the fact that it's a liability for somebody that can just be then therefore created on demand.

: Here's what I tell people when I talk about this and if I'm wrong, please correct me. But what I tell them is China sells goods and services into the United States. It receives US Dollars.It sits there, looks at these US Dollars and says, do I want to keep these and save them? Do I have a need for them elsewhere? And if not, maybe it chooses to buy U.S. treasury bonds to earn whatever the going interest is on their own money.And that money is.I mean you're buying treasury bonds with US Dollars, you're not buying them with Bitcoin, you're not buying them with chicken necks or frog legs, you're buying them with US dollars. So we're not in debt to China in terms of borrowing Chinese yuan or renminbi or whatever the heck they call it.We are literally letting them have a time boxed interest bearing savings account at the Fed or at the treasury, however you want to put it. And that right there, when the term of that is up, they can either cash it out or buy additional Treasuries.It's not an imposition on the country to do that. I mean they bought and sold goods and services to receive that money and they chose to put it in a bank basically and earn interest on it.How is that dangerous?

: And that bank is the Federal Reserve. If you go to the Fed's balance sheet, you will see an item there that says on the liability side that says foreign official. Right?Something like that. Which is basically those reserves of the foreign central banks in dollars, right? They don't exist in a lockbox somewhere in China.They are on the balance of the Federal Reserve, right? On the liability side. And for the Chinese central bank they would be on the asset side. And so when China is buying bonds, that account gets minus.Then instead the liability of the treasury, right? The bonds they get plus. So we are exchanging one liability for another. Again, those dollars were our liability and now those dollars don't exist.Instead the treasury security as a liability just appeared, right? So we're exchanging one liability for another just like we would do with the coin. And then China is exchanging one asset for another, right?Fewer deposits at the Federal Reserve and more treasury bonds that they're going to hold, which are like deposits, you know, of US Dollars that pay interest.

: Correct me if I'm wrong, but the only way to stop China from having US dollar holdings is to stop buying stuff from China because otherwise they're going to receive US Dollars, right?

: Yeah.

: You know, I mean it's like, so what are we worried about?I mean, you know, it is fundamentally ludicrous to me because, I mean, we probably have every flavor of currency in the world in reserve accounts because we've done business with every single country in the world. I mean, and probably similarly vice versa. I mean, at some level, everybody's got each other's currency, at least reserves.Currency reserves to facilitate trade. Well, without it, how do you. I mean, am I close or am I completely wrong?

: You are listening to Macro N Cheese, a podcast by Real Progressives. We are a 501c3 nonprofit organization. All donations are tax deductible. Please consider becoming a monthly donor on Patreon, Substack, or our website, realprogressives.org. Now back to the podcast.

: The dollars do have that position in international trade that is unique, right? So in that sense, [sure, yeah.]We don't need the currency of many other nations to buy things from them because a lot of things are for sale in international markets for dollars. So that's what the Europeans call our exorbitant privilege. Right? Which makes all debate about trade very interesting, too, because we're trying to.We say, okay, we have this privilege.But Donald Trump is like, no, they're winning at trade and we're losing at trade, and then the rest of the world is looking at us and saying, you guys have the reserve currency. What are you even complaining? [Like idiot to you?] And so on. So, yeah, other countries do need the dollar reserves, right? So, like right now, for instance, Trump is apparently has just signed an executive order that we're going to have a Bitcoin reserve, which just makes zero sense for a country like the United States. We don't really need reserves of anything because we are that final means of payment in international transactions.

: Absolute grift. Absolute grift.

: So, yeah, it's.I mean, the one situation which kind of made it obvious that those dollar reserves that other nations have are on the balance sheet of the Fed is what happened with Russia right after the war in Ukraine when they froze the Russian assets, right? They froze Russia's reserves.So there was a point where they were saying Russia is going to default on its debt because they don't have access to their dollars and therefore they cannot make payments on their foreign currency debt. Something like that.And I haven't followed that very much, but I always use that as an example for my students to say, well, that those dollars exist on a balance sheet somewhere. Right? Anyway, we're talking about this foreign reserves. That balance sheet somewhere is the Federal Reserve. [Right.]

: So let's jump back to DOGE again, so one of the big things that Elon Musk has been targeting is not only the payment system, which Nathan Tankus has really, really written extensively on, but focused heavily on Social Security now.[Yeah] And Stephanie [Kelton] has written quite a bit lately in her The Lens Substack about Musk and his slash and burn approach and so forth, being the real threat to Social Security. But you know, one of the things that, because I have followed this for a very long time is the actual Social Security law itself.The Social Security law itself was set up by FDR way back in the day and it imposed a FICA tax that was intended to be skin in the game. So no one ever was confused as saying, well, you know, you're getting a handout, this is a freebie.No, everybody has been conditioned to the absolute max that it's their hard earned FICA dollars that have been going in there and they're entitled to those FICA dollars, etc.But having talked to Scott Fullwiler years ago and, and really followed Jamie Galbraith and Stephanie  and the rest of the other MMT voices that are legal scholars that have gone in and dove into the actual language of the bill, we're talking about two key things. Number one, FICA is like a, a tally stroke, if you will, in a spreadsheet for a thing called the trust fund.That, that trust fund was set up as a means of, quote unquote, "authorizing payments".And we've had Alan Greenspanbattle back and forth with another right wing lunatic and Paul Ryan years ago where he tried to get Greenspan, of all people to admit that, you know, Social Security was going to be insolvent and wouldn't private savings accounts make it more solvent? And Greenspan said, well, there's literally nothing preventing us from creating as many dollars as we want.The real question is, can we create an economy where the real resources are available for purchase? But the problem is these little teeny words in the law.It has to have so much clicks on the track, so many tallies to say we've got enough funds in there to stay solvent. Which is a lie, because the money's all new money coming from the Treasury.You know, when you look at your checks, it's not coming from, you know, the trust fund, it's coming from the government. It's all new money. It's not the old hay penny from 1919 that Granny put in the bank. It literally is new money.What the difference is that little teeny bit of framing in the way the law was written that the trust fund has the authority to make payments. So I guess my question is, this is a stupid question.You're not going to be able to answer it because you are an economist and these folks are just talking heads. But I guess the question is why is it that that element of the Social Security law isn't front and center? We're not talking about non stop.Instead it's [imitating Bernie]  "we're going to make the billionaire class pay into Social Security to keep it solvent." Well, I mean, this is once again back to the money growing on rich people thing.And so naturally DOGE is going to go in there and slash it because, you know, money grows on rich people. Well, we can't have that.So help me understand the Social Security cuts that DOGE is trying to do and help me understand where the framing is wrong on Social Security.

: Yeah, well, Social Security is a good example of that taxpayer money logic that we were talking about previously, right? So we have this idea that we're putting money, taxpayer money aside, right?In this separate account that's then going into funding the Social Security payments for the retiree. So in that sense it's an entitlement, right?It's not like either of food stamps or, you know, SNAP or Medicaid where the government is giving you something for nothing. Right? This is. No, it's your hard earned dollars. Right? Well, so Elon Musk recently called Social Security a Ponzi scheme, right?And I thought to myself, well, it's not a Ponzi scheme, but the trust fund is definitely a fiction. Right? And I'm not the first one to say that. I think Randy Wray is probably the one who's who said that.So that's really the MMT position over the years.And last year or the year before, I don't remember anymore, I did write an op-ed where I said, well, "for a progressive reform of Social Security, we should follow Alan Greenspan and not Bernie Sanders." That was the title of my piece because exactly what you were saying, right?That the progressives always think that to reform Social Security means to get more of those tax revenues so that we can keep this fiction, right? That there's this pot of money set aside for the retirees, right?We can keep that fiction alive for longer because we can increase what's coming in, right? We can grow that pot, so to speak. And then what I was saying is that that's not what reform should be focused on.Reform should be focused on getting rid of the whole trust fund, right? And instead of saying, well, we're just going to do it, pay as you go. Right. Like many European nations do. They don't have a trust fund. Right?And yet their benefits aren't less generous necessarily.I think ours is probably the stingiest retirement plan that there is, a pension, you know, pension or Social Security plan that there is among the developed nations. And so if you get rid of that trust fund, then you also run out of this estimates for when the trust fund is going to run out of money.When is Social Security going to go broke, right? And then you can't call it a Ponzi scheme anymore because you don't have this thing where your money's coming in to pay the other ones. Right?Then there is never going to be enough to pay everybody off because that's what leads to the accusations. Right? And it also leads to this whole thing about, well, we got to privatize it in the sense that we should take this.So right now, if there is any surplus right, in the Social Security, and I don't know if there is any more, but if, let's say Social Security is collecting more of those taxes than it's paying out, and therefore it's accumulating a surplus, it then turns around and turns it over to the Treasury in exchange for some treasury bonds, right?So then for a long time, conservatives like Paul Ryan were just salivating at the idea of privatizing Social Security in a sense that this surplus would no longer be invested in treasury bonds. Instead it would be invested in stocks, you know, private financial asset. And of course, it would just boost the price of those assets.And we know who holds most of those financial assets, and it's not you and I, right?So, yeah, getting rid of Social Security has been, I think, on the agenda of the American Right probably since its inception or probably since they felt strong enough politically to even dare to think about it. And the left hasn't made it harder for them. It's made it actually easier. I think that every time this came up, right?That you would have the liberal economists basically say, no, like we do have to raise the taxes, we do have to raise the cap right? Because there is a cap after a certain salary, you don't get taxed, you don't get the Social Security taxes anymore. Right?So if you're making like $400,000 a year, there's a big portion of that income that you're not paying Social Security taxes on. I don't remember what the cutoff is. I think something like 140k, but I wouldn't bet on it. So then the reform was always about let's raise that cap.Right? Therefore collect more tax revenue and they think they are bulletproofing Social Security by keeping it as a separate account.I think the MMT position always has been, no, you are creating this accounting fiction which can go into a deficit. Right? Which can then go bankrupt.And you can say, well, this part of the government's budget is bankrupt, even though the government can easily just issue its own currency and pay any obligation that it has. Right?

: Yes.You know, one of the things that's really griped me about the entire way that the Bernie Sanders progressives, the California Dems, all the folks that think, you know, they're marching firm, their knees are pumping, their elbows are pumping, and is that instead of taking a minute to understand how it works, they just feed right back into that thing. Full cups once again, always full cups.They always know better and they're always there as the gatekeeper to whether what you're saying will matter or not matter. Kind of like you can see the hands of justice, the scale. Well, I'm not sure what you're saying makes good political sense, so I'm going to skip it.When in reality, eliminating FICA for the average working class person would be a huge boom to their income. It would be a huge life change for them to have that additional money to fund things in the here and now that they need right now.But the myth keeps it alive and well and once again elevates rich people to the saviors of the system. And we need rich people.If we need rich people's money, then that means we need rich people instead of fundamentally realizing the currency issuer is where it comes from. And that brings me to the last point. And I think this is to me the part that scares me the most about DOGE.And that is one of the core insights that MMT has taught me is the role of currency issuers and currency users.And as you look at the currency issuer slashing its spend, whether it be on salaries for people in DEI programs or you know, whatever agency the right wing decides it wants to slash, whatever. Your point of one person's spending is another person's income is very important because all those lost jobs, all that lost income has a huge impact all the way throughout the system. And we talk about the federal government spends it into the economy and then each of these folks, they get taxed at the local and state level.That's funding for the states, that's funding for the municipalities, that's funding for the public pensions of each state.That's funding for roads, that's funding for schools, that's funding for all these things that now, all of a sudden, those people who had federal jobs and have now lost that income, that spend is stopped.We're not only setting the stage for a deep recession and mass layoffs, but it is a cascading effect, it's an avalanche effect of starting at the currency issuer, turning the spigot off on the water, and then the desert that comes, the monetary desert that comes at the state level. Now they've got to make budget cuts and they've got to start. And that means other people are getting laid off.And then that trickles down to the municipalities and the schools and they have to make cuts. And all of a sudden, all the contractors they hired are suddenly being let go, and that's more spending that's cut.And now you've got all these people that are either on unemployment or whatever, but they're making a fraction of what they made before. And so the debts that can't be paid won't be paid. And so the bankruptcies go up and on and on and on.Can you talk a little bit about the hierarchy of federal and state and local and the impact that cuts at the federal level do to the nation?

: Sure. I think the American public underestimates how much their own income flows are related to the expenditures of the federal government. Right?I think a good example of that is that sign that went around during the Tea Party protests, Hands off my Social Security, right? That people don't understand. Well, your Social Security, right, comes from the government. Right? They just think that.I mean, I don't know how you misunderstand that it came from the government.And you see all these people who apparently had voted for Trump, who used to be federal contractors or they were working for federal contractors, and now, like you said, that flow of money has to stopped and they can't get paid anymore. Now, I think whether it's actually going to happen or not, I think it's still playing out.Right?  Because they have frozen some spending, but then the courts have said you have to unfreeze it. We will wait and see if they're actually going to abide by court orders or not. Right? I think even that is uncertain in the moment.So in the sense, it's hard to say, right? When all is said and done, what the overall impact of DOGE is going to be.But as I said previously, right, there is this misunderstanding about what happens in one sector stays in that sector, right?What happens in one sector has repercussions for the others because one sector is spending like the government is income for the non government sector, the rest of us. Right? And there is something that economists call the multiplier.So when the government spending goes down, your national income is not going to go down by the same amount and your GDP is not going to go down by the same amount, it's going to go down by more because of that process where one person's income gets cut, they cut their spending, but their spending was income for someone else, so that someone else cuts their spending and so on and so forth and the process continues. So that means if a government reduced its spending by $100, then national income could go down by $180, something like that, right?Depends on the size of your multiplier. And so there is that to consider.And the other point to make here is that even if we were to accomplish that, even if we were to cut government spending, that's not necessarily going to reduce the deficit. Right? That's something else that MMT has always emphasized, that deficits are not a discretionary variable, right?In the sense that you can say, oh, we want to achieve a 3% of GDP deficit to GDP ratio and we're going to get there by cutting spending. If you cut spending, then there is less income and less economic activity and therefore less tax revenue.So you mentioned the state and local governments, and that's definitely true. If there's less fewer sales, then there's less sale tax, right? And if there's less income, there is less income tax at the state and local level.But that's also true at the level of the government. Now we know that those tax revenues don't fund anything, right? So in that sense it doesn't matter.But it does matter for the deficit in the sense that if you are cutting your spending but your revenues are going down because of that, then you haven't really reduced your deficit. Right?And in addition to that, if you cut somebody's job and now they're collecting unemployment benefits, well, you haven't reduced your spending on that front either. Or if they're now collecting like the SNAP benefits or Medicaid benefits and so on, right?Then you're not, you haven't necessarily reduced your deficit. So in that sense, even within the logic of the mainstream, they're not going to be successful on that front.Unless of course, they cut food assistance and they cut Medicaid unless they completely get rid of these programs. But even then the fact that tax revenues depend on your income and GDP, that's going to lead to some inconvenient results for them.But of course the state and local governments are also a worry because like you said, I think that argument is very valid that they are going to be losing tax revenues and they are financially constrained, unlike the [Federal] government.Usually in recessionary times they end up being an additional recessionary force because they themselves get lower tax revenues because of less economic activity and therefore they have to cut their own spending because they are not allowed to run deficits like the federal government can. Right? So then they're going to actually amplify the problem. So amplify that recessionary force, that is the cutting of government spending.Whether this will lead to recession or not, I think it's difficult to say, partly because we don't yet know how this is all going to play out. The bigger issue, I think, or the bigger worry is the Republican budget. The cuts to Medicaid, the cuts to SNAP, those are huge numbers.I think the last number I saw was like $2.5 trillion. Right? Of overall cuts to SNAP and to Medicaid. That's like compared to that, the DOGE thing might end up being like peanuts.So that is the bigger worry that we have to fight back on, how we do that.

: Well, you know, this brought up something else. It pivots me back a little bit to our sectoral balances conversation and it brings it to this:One of the things that has always been a challenge for me because I understand macro is talking in aggregates, but I also know that there's stratification within those aggregates. And one of the things that is concerning is when we say the non government sector, that's almost like saying GDP, right?I, I mean it's almost as nondescript as the word GDP. And if you think about where the money is going, we can see that the wealthy have gotten insanely wealthy.We're talking about thousand time increase in their wealth compared to what Main street is. I know a lot of people that do your standard project management job, your IT consulting job, you're this.All these jobs have largely stayed static in terms of the pay for those kinds of working class. Even for, you know, more PMC [professional managerial class] style jobs,  the pay has not risen dramatically like it has for the wealthy.So when you look at the non government sector and you see the deficit, I can understand where some of the Left go, well, we need to raise taxes on the wealthy.And I know MMT says we need to raise taxes on the wealthy not for funding, but for equality's sake and for not allowing them to buy whatever fake democracy we have and just turn it into an oligarchy, which it is right now. Help me understand stratification when it comes to the non government sector. How do we measure that?Because right now I think that it's so grossly out of proportion that saying non government sector kind of feels misleading sometimes.

: Well, but the non government sector isn't just about households either, right? It includes households and firms together. So again, if you're looking at the non government sector and let's say they have a surplus of 3%, right?Of GDP. Well, you can then break it down. Is it the firms who are running the surplus? Is it the households?Usually households are the ones who are running a surplus and a bigger surplus than the firms, right? Firms do need to borrow for investment purposes. So it is in some sense normal for the firms as a whole to be in that deficit position.And then you can break it down further among the households, right? Because like you said, not all households are in an equal position, right?That some of them are going to be always saving and some of them are going to be always hardly scraping by and therefore they have no saving to speak of, right? So this 3%, just because we have a surplus in the non government sector or even the private domestic sector, right?That is to the tune of 3% of GDP, doesn't mean every household is in this positive financial balance situation. It could be that a lot of them are running deficits and accumulating debt because they are in that lower end of the income distribution.So the sectoral balances don't really tell you anything about income distribution per se. So you have to look at other metrics if you want to understand what income distribution looks like.And of course we know that it's dismal in the United States in terms of both inequality of income, inequality wealth, partly because so much of the income of the wealthy accrues from asset holdings and asset prices have been inflated, right? They have been going up and up and up and therefore the wealthy have been getting wealthier and wealthier, right? Something like what?86% of all the stocks are owned by 10% of the population, some crazy number like that. So then when the stock market is doing well, some people are doing really, really well, while the rest of us may be scraping by.But on this question, I think this is where people like Pavlina [Tcherneva] and Randy [Wray] have made this important distinction between pre distribution or policies that affect the pre distribution of income versus those that affect the redistribution of income. Right?When we talk about taxes, we're talking about redistributive policies, even though we know we're not taking taxpayer money and giving it to somebody else. But you can still call it redistributive in the sense that you are taking the income away from somebody who's already earned it.And that is very difficult. Right? It's very difficult because people feel like it's their money that you're taking away from them. Right?And hence tax policies are very unpopular. You know, I complain about having to pay my taxes and maybe you do too.I have lots of friends who I would say are on the Left who don't enjoy paying taxes. Right? So it's like it's. There's this sense that it's your money and it's somebody's taking it away.So imagine if you're wealthy and you're paying like millions of dollars in taxes, even if it's a small percentage of your income, you probably feel like something is being taken away from you unfairly. So that's why things like minimum wage or Job Guarantee kind of policies, they're not redistributive. Instead they're pre distributing income. Right?So raising the minimum wage so that you can hopefully increase the wage share. Right?Or the share of national income that goes to wages rather than, say, profits, as a way to pre distribute income towards the workers rather than having to fight for it after distribution has occurred. And now we're trying to do it through taxation.So that's where the emphasis on those kinds of policies, like raising the minimum wage or doing something like a job guarantee that sets a minimum wage and a minimum standard for compensation of workers that then the private sector has to follow. Right? I think it's,our energy is better spent there. Right? Rather than on the debate about taxation, which in this country it always seems like a losing proposition.

: Absolutely. I mean, you're watching it in full display. Popular opinion is keep your hands off my money. Right? And hey, yeah, give me back my tax dollar.So, yeah, I mean, we do need to focus. I appreciate that very much.

: Power.

: Yeva, tell me honestly, what do you, I mean, obviously we don't know what will come from DOGE, but when you look at DOGE mixed with Trump's other policies, it's quite clear that they are gutting spending to the point where we could literally have not just a balanced budget, but possibly a surplus, which is the major deficit for the private sector, which is very, very negative in general, for people, what do you think the outcome of this is going to be is kind of like our takeaway?

: Well, first of all, I don't think it's going to put the budget in a surplus, right? Or even reduce the deficit. What I was saying is that it can do the opposite, right?Where the deficit actually gets bigger because we're tanking the economy as a result of these policies potentially. Right?Because as long as we have the trade deficit, right, which is that constant, and when you look at the sectoral balances, then somebody has to be financing that. Right? And I think we are not going to get into a situation where the private sector is going to do that. I don't think we're in that state right now.Now, I would say one of the thing about the Trump and Trumpism overall is that oftentimes they will take the issues that the Left identifies as issues, right? Take the situation of working class people in America, right? It's people like Bernie Sanders who've been screaming about that for a long time.Or even something like tariffs, right? There is this knee jerk reaction that because Trump said it, it must be terrible, right? But who was supporting tariffs and opposing free trade?Let's say in the 1990s when NAFTA was being negotiated, it wasn't the Right, it was the Left, right? Or people have forgotten that Obama negotiated his own NAFTA, the Trans-Pacific Partnership [TPP], right? The TPP, which then Trump came and he scrapped.And so it was another free trade agreement at the time. Labor unions were against it. People on the left generally were against it. It had provisions that would allow big corporations to sue governments.Right? And as a way to lower their environmental and labor protection standards, for example. So it was seen as a big problem at the time, right, by the Left.So then Trump comes in and he just scraps it. He's like, I'm not going to sign it, we're not going to ratify it, something like that, right?So what I'm saying is that perhaps there is an opening here, right? Perhaps in this destruction or of the neoliberal regime or neoliberal economic policies, right?Like this Washington Consensus that free trade is always good and everybody, even smaller countries, right, who have to subscribe to this free trade and financial liberalization ideology and so on and so forth, right? I'm not saying Trump is doing the Left version of that. Right? For sure he's not.What I'm saying is that he sees the problems that the Left has long identified, right? And there are issues with our economy, right? And then he's giving the wrong diagnosis. Right?Like the migrants or, you know, China is winning in trade and things like that. The wrong, wrong diagnosis. But the issues are there. Or even if you take the government, can we do it better? Like, can we spend public money better?Sure we can, right? By, for example, not paying contractors as much and instead doing a lot of things in house. Right?Can we all agree that perhaps we should cut the Pentagon budget? Right. So if DOGE is going to go after that, I don't know if that's necessarily something that we should oppose.For instance, despite all of those macro effects that we were talking about, I mean, Bernie Sanders has been advocating for cutting the Pentagon budget or military spending. Right? Like by a lot. So in a sense, it's always been the Left position that we should be cutting this particular kind of spending. Right?Like, not all government spending is good in that sense. So perhaps the Left can jump in and use this as an opening to advocate for a more leftist style reforms of our government. Right?Whether it's about what do we spend the money on and how do we spend that money, I think these are important questions.And the thing with MMT, I think the biggest thing with MMT is that MMT says we have to stop worrying about where the money comes from and instead focus on what is it that we want to do with that money. Right? [Right.] What should the government spend on? And hopefully this is something we can decide through a democratic process. Right?This is where Congress comes in.And once we decide what we should spend on, then we can then say, okay, well, how do we do it in a way where we're going to get the most amount of real resources? Because that then allows us to do more, right? To provide more affordable housing, to provide more food assistance and so on.Not because we're financially constrained, but because we are constrained in terms of the real resources. We can spend fewer of our real resources on the Pentagon, then perhaps we can use those real resources to green our economy.That was one of the arguments we made in our Green New Deal paper, that if we need room in the economy, right, for more spending because we want to implement a Green New Deal, how do we find that room?And one of our arguments was that we do it by cutting the Pentagon budget, for instance.

: Sure, yeah. What you said, that this is important. And I want to make this distinction. You said it. But I want to make it clear.You may cut something over here, but cutting something over here does not provide more money for over there. You have to actually have a spending bill in place to make spending happen. We don't save money by cutting spending on the military. What we're doing is we're freeing up available resources. But those resources, if we don't deploy them elsewhere for something that matters, it doesn't magically happen because the government saves money.To cut here requires two steps. You've got to cut and then you've got to spend. And they are not the same thing. Can you elaborate on that?

: Yeah, that's exactly right. My piece that I mentioned earlier that I wrote about this, what do we say when we cut spending mentions that. Right?That if you do reduce government spending, it means you are leaving resources idle. And in particular, we don't care if, you know, all resources remain idle. Right? Perhaps some of them we should leave idle like fossil fuels and so on.We do care if we leave labor idle. We don't want to leave labor resources unutilized because that basically means unemployment.So let's say if you were in a wartime situation, right, where you need more workers and the private sector needs more, or let's say the private sector wants to create all of these semiconductor manufacturing facilities and they don't have enough workers, or they want to green the economy and they don't have enough workers. And here is the government hoarding workers, right, for instance. I mean, not that it has ever happened.But then you could say, okay, this is a situation where we should release some of these workers from the public sector if they want, of course, to then work for the private sector to accomplish these other goals that we as a society find to be important. Right? But to just fire workers, it frees up the resources and leaves them unemployed. Right? That's as inefficient as it gets.So the Department of Government Efficiency, right? I mean, we don't really talk about, well, what does efficiency even mean in this particular context?If you are going to fire workers and leave them unemployed, that's very inefficient. That's a waste of our scarcest resource, which is labor.

: Yes, yes. See, to me, that's the game right there. I understand. We understand you got to redeploy the resources, right?But the Left that I talk to doesn't understand that if they just slash and burn military bases across the U.S. forget whether you like it or not, they are literally cutting jobs for regular Americans or regular friends or neighbors, whatever.And without having something like, you know, we oftentimes talk about a just transition for environmental stuff, but you've got to have a just transition as well whenever you cut the military, those families, and I'm not talking about oligarchs and all the bad guys that make bombs or whatever.I'm talking about regular people that have jobs. Because we don't really have a great opportunity to pick where we want to work in this world.I mean, unfortunately, that whole idea that capitalists throw at us, oh, you know, you don't like a job, just go work somewhere else. Right? That's not really reality for the average worker.

: Right.

: So without understanding that you have to have a transition there for them and that would go with fossil fuels as well. We may want to reduce that.But there are tons of working class people that work on oil derricks, rigs and so forth that do all these things that are suddenly their kids no longer have an income, their families no longer have an income, they lose their homes. This is the problem with the idea that many leftists go, we're just going to cut 50% of the military.And it's like, that's great, but how are you filling it back up? You must marry this with new spending or you will create external problems that you didn't anticipate. You did not anticipate at all.

: Absolutely. And that's why when we were doing this study on the Green New Deal, we said the comprehensive way of doing it, right?Well, on the one hand you are cutting fossil fuels and military spending. On the other hand you are creating more spending and more jobs because you are trying to advance renewables and maybe public transportation.We never talk about that right? And things like that. So yes, if you have to, if you are going to do a policy that is deflationary or recessionary, right,where you are cutting employment, you do have to do something like a just transition. If you don't have a need for those workers, right? Let's say all of our problems are solved. We don't need any more public workers, right?Then we can say, okay, how do we do this in a way where you have just transition? Of course. But of course our problems are not solved. There is a lot more that we need to spend on.And this is not just about the US. Go into any so called developed nation and walk into,  in the streets and just step a little bit outside of the city center and you will see what I'm talking about. Like the state of the streets, your housing stock, right? Especially public housing stock.Your schools, you go inside the schools and the post office and so you're like, there is so much more that we need to do. There are so many needs that go unmet.And here we have all of these resources that instead of putting them towards meeting these needs, we put them towards the military in case of the United States. Right? So if we could actually put them towards meeting the actual needs of people rather than just spend on militarizing. Right?Then that would be the ideal world.

: Yeah. Upkeep and maintenance. Who'd have thunk it'd be important to plan for? Right? Who'd have thought about it? Anyway?Well, Yeva, you've been amazing as always.And folks, you probably don't realize this, but I'm going to tell you, my guest this week cancelled at the last minute and I was trying desperately to find someone to do a DOGE conversation and Yeva last night said I can do it tomorrow and I'm sure that's not normal and that's not going to happen all the time, but I just want to thank you so much for filling that need because this is such an important topic and you did fantastic. I really appreciate you bearing with me, trying to get my, my own understanding more aligned with the proper thinking.And I really do appreciate you being gentle and patient with me. Where can we find more of your work, Yeva?

: Well, I, I'm not on social media. I think it's the third time I'm saying this.

: Yep.

: I'm not big on promoting what I do, so a lot of my stuff is on the Levy website, the policy briefs, the working papers and so on. I did write an op-ed on Obama that's in The Hill. If people just Google my name and Obama, they would find that.And I have another one on the DOGE and the inefficiencies that's trying to get placed somewhere. I don't know where it's going to end up. And then I'm working on another one on this concept of waste. Right?Like what is waste, what is efficiency, and so on and so forth.Because these terms just get thrown around without really any definitions of what, what do they mean and how do we make the government more efficient, so to speak right?

: Well, you, you're amazing as always and a lot of your writing comes with Randy Wray.  So folks, you'll be able to find all kinds of stuff if you Google her name. I find it all the time and I read it all the time.So with that, let me just do our closing here real quickly. Yeva, thank you so much for joining me today. My audience, thank you all so much for listening to us today.My name is Steve Grumbine and the host of Macro N Cheese. I am also the founder of Real Progressives. We are a 501(c)3 not for profit organization. We survive on your donations. That's all we get, folks.So if you find the information we're producing valuable, please consider becoming a monthly donor at Patreon Real Progressives. Patreon.com you can find us on Substack Real Progressives, you can find our website realprogressives.org. Go to donate.We have a webinar series that comes up on Tuesday nights at 8:00pm Eastern Standard Time, 5:00pm Pacific Standard Time where we listen to these podcasts together in segments and we discuss them as a community. Because what we're hoping to do is get active listening and active conversation and we don't cover everything in these podcasts. We try, but we don't.And so the opportunity to hear what your feedback is helps us come up with new podcasts, help us figure out who we need to talk to next and what questions we need to ask. So consider being a part of that as well.And so with that, again, on behalf of my guest Yeva Nersisyan, myself, Steve Grumbine, Macro N Cheese we are out of here.01:16:08 Production, transcripts, graphics, sound engineering, extras, and show notes for Macro N Cheese are done by our volunteer team at Real Progressives, serving in solidarity with the working class since 2015. To become a donor please go to patreon.com/realprogressives, realprogressives.substack.com, or realprogressives.org.