Does MMT then argue that governments can simply spend whatever they like? This is perhaps the nub of the issue. There are certainly some who think that MMT is indeed a “magic money tree” and that, for example: “as a sovereign nation, the UK can always afford high quality universal NHS healthcare.”
The problem is obvious. Bangladesh is a sovereign nation just as much as the UK is (meaning, in this context, that it has its own currency managed by a central bank that is under the ultimate control of the government). But, no matter how large a deficit it ran, Bangladesh couldn’t afford universal NHS-quality healthcare for its people. It simply isn’t rich enough—it doesn’t have the doctors, nurses, or hospitals it would need. And this is the crucial point—if it tried to buy them and printed money to do so the result would mostly be inflation, with more money chasing a restricted supply of doctors and so on.
And the same applies to the UK. Yes, the UK can afford a high quality NHS. And education, and welfare system, and so on. But the idea it can do so without raising taxes is for the birds. Sure, the UK could run very large budget deficits, even with unemployment low. But the result would still be the same as that predicted by conventional economists. Inflation would rise. You can create money out of nothing, but you can’t create doctors, schools, or consumer goods.
