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Stephanie Kelton. Photo via Stephanie Kelton

America should run deficits without issuing debt. That's the message from Stephanie Kelton, a member of the Democratic Party's economic task force whose new book, The Deficit Myth, argues that money spent by Congress does not need to be "paid for" with taxes or borrowing.

Why it matters: Monetizing the deficit involves simply printing money and handing it out to individuals, businesses, states, or anybody else, without issuing Treasury bonds or raising new taxes. It has been a fringe idea up until now.

What they're saying: Kelton — who is best known as the face of modern monetary theory, or MMT — spoke to Axios' Felix Salmon for an episode of his Slate Money podcast airing tomorrow, June 20. He asked her whether she would fund the current deficit by issuing Treasury bonds. Here's her reply:

I'm very open to the idea of having the deficits without the debt. We can do that. We can run fiscal deficits without increasing the debt, if we don't issue the Treasuries.
  • Kelton fears a re-run of what happened in 2009-10:
In the moment of the coronavirus, my great fear is that we'll see a repeat of something like what we saw in the early years of the Obama administration, where the run-up in the deficit and the additions to the debt gave people cold feet and led Congress to withhold fiscal support, to withdraw fiscal support too soon and to leave us with an economy that really languished for a long period of time.
We could have had a much more robust recovery, but we got anxious about the deficit and we didn't stick with the fiscal support.
  • Monetizing the debt won't cause inflation, says Kelton.
Selling bonds is almost surely more inflationary than not selling bonds.
If you just run the deficit then you're spending more money into the economy than you're subtracting out. Leave those dollars in the system, where they will earn zero. That's non-interest-bearing currency. If you replace those dollars with Treasuries, you're replacing them with an interest-bearing currency, and that's got to impart a higher inflationary bias than just leaving the non-interest-bearing dollars in the system.

The bottom line, per Kelton:

We would have a much harder time falling into panic mode if the CBO wasn't producing that graph that shows the debt-to-GDP ratio increasing very sharply because of the deficits. You just have a commitment to provide fiscal support to the economy without the national debt rising.

Go Deeper: Inside the Bernie economy

Go deeper

Dion Rabouin, author of Markets
Sep 2, 2020 - Economy & Business

A credit upgrade cycle may be coming

Illustration: Aïda Amer/Axios

U.S. companies have taken on a historic amount of debt this year, with investment grade corporates already issuing a record $1.5 trillion in bonds, more than any full-year total ever. But many have also upped their holdings of cash, making net debt burdens far lower than expected, data from Bank of America Securities shows.

Why it matters: Lower indebtedness means companies will have stronger balance sheets and better ratings. That could mean not only do fewer companies default on debt than expected, but it "ultimately should lead to an upgrade cycle" in credit ratings, BofA analysts say.

3 hours ago - Politics & Policy

Trump to issue at least 100 pardons and commutations before leaving office

Photo: Mandel Ngan/AFP via Getty Images

President Trump plans to issue at least 100 pardons and commutations on his final full day in office Tuesday, sources familiar with the matter told Axios.

Why it matters: This is a continuation of the president's controversial December spree that saw full pardons granted to more than two dozen people — including former Trump campaign chair Paul Manafort, longtime associate Roger Stone and Charles Kushner, the father of Trump's senior adviser and son-in-law, Jared Kushner.

  • The pardons set to be issued before Trump exits the White House will be a mix of criminal justice ones and pardons for people connected to the president, the sources said.
  • CNN first reported this news.

Go deeper: Convicts turn to D.C. fixers for Trump pardons

Schumer's m(aj)ority checklist

Senate Minority Leader Chuck Schumer. Photo: Tasos Katopodis/Getty Images

Capitalizing on the Georgia runoffs, achieving a 50-50 Senate and launching an impeachment trial are weighty to-dos for getting Joe Biden's administration up and running on Day One.

What to watch: A blend of ceremonies, hearings and legal timelines will come into play on Tuesday and Wednesday so Chuck Schumer can actually claim the Senate majority and propel the new president's agenda.