Fed Chair Jerome Powell joins the growing list of business leaders questioning some of the policies being pushed by the Democrats.
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During congressional testimony on Tuesday Powell reacted to an economic theory being considered by progressives on the left – including New York Rep. Alexandria Ocasio-Cortez – saying it is “just wrong.”
In response to a question about modern monetary theory [MMT] and whether the Federal Reserve would keep interest rates low to help battle spiraling deficits – Powell said he had yet to see a “carefully worked out” description of how this policy would work. He added that he had heard “some pretty extreme claims attributed to that framework.” Powell will appear on Capitol Hill Wednesday for his second round of questioning before the House Financial Services Committee. Ocasio-Cortez will likely have a chance to question him, as will Chair Maxine Waters [D-CA].
Modern monetary theory asserts that because the government controls its own currency, there is no need to worry about balancing the budget. The U.S. deficit is on track to surpass $1 trillion in the near future, according to the Congressional Budget Office.
"The idea that deficits don't matter for countries that can borrow in their own currency I think is just wrong," Powell said. “Our role [at the Fed] is not to provide support for particular policies … I think decisions about spending and controlling spending and paying for it are really for you [Congress]" he responded.
Ocasio-Cortez recently said during an interview with Business Insider that she was “absolutely” open to supporting MMT as a means to fund social programs – like Medicare-for-all and free college tuition. Ocasio-Cortez has also proposed a sweeping climate change proposal called the Green New Deal, which one group estimated could end up costing $93 trillion.
Powell isn't the only academic mind with reservations about the economic theory.
Billionaire businessman and Microsoft co-founder Bill Gates said during a recent podcast interview with the Verge that discussions about MMT are “some crazy talk.”