Modern Monetary Theory, the notion that huge federal deficits don’t matter much if at all, has a new detractor: Warren Buffett.
“I’m not a fan of MMT—not at all,” the Berkshire Hathaway chief told Bloomberg. He said the theory, if put into practice as many on the left of the Democratic Party are advocating, would bring “spiraling” inflation.
The storied financier, who is far from a conservative (he once lamented that he paid a lower tax rate than his secretary), added: “We don’t need to get into danger zones, and we don’t know precisely where they are.”
A supporter of the presidential runs of Bill Clinton, Hillary Clinton, and Barack Obama, Buffett has called for greater federal health coverage and is no deficit hawk. In a 2011 fight over raising the federal debt ceiling, he called not lifting it “asinine.”
In his recent comments, he elaborated on his views about federal debt: “It’s just ridiculous to be able to use the debt ceiling as a weapon in terms of other fights. The problem with having a debt ceiling is that it can be used for extraordinary mischief or, in effect, the blocking of government.”
That said, he pointed out that he thought consistently raising the ratio of federal debt to gross domestic product was a bad idea.
The concept has been embraced by several 2020 Democratic presidential aspirants. MMT holds that, since the US prints its own money, it need not concern itself with a large deficit expansion. The theory is a way of expanding government spending to pay for such goals as a Green New Deal and Medicare for all.
MMT has attracted criticism from other financial figures, not all of them Republicans: Federal Reserve Chairman Jerome Powell, former US Treasury Secretary Larry Summers, BlackRock CEO Larry Fink, and DoubleLine Capital chief Jeffrey Gundlach.
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Tags: federal deficits, Modern Monetary Theory, Warren Buffett