1. MMT Basics:
You Cannot Consider the Deficit in Isolation
Stephanie Kelton
Associate Professor of Economics
University of Missouri-Kansas City

2. People tend to get very emotional about the
size of the government's deficit.
MMT tries to calmly examine changes in the
size of the government's budget by focusing
on the big picture.
The following graphs reveal some important
facts about the government's budget.

3. The Following Graphs Show
 The US government is almost always "in the red".
 The BIGGER the government deficit, the BIGGER the
non-government surplus.
 Because the United States runs a trade deficit with the rest
of the world, the US government must run a deficit in order
for the private sector to achieve a surplus.
 The Clinton surpluses occurred at the expense of the
domestic private sector, which went deeply into negative
territory for the first time in post-WWII history.

4. Clinton Surpluses

5. Domestic Private Surplus Govt Surplus
10.00%
private sector We go “up”
surplus/deficit as %
GDP
Clinton
surpluses
5.00%
0.00%
19521
19532
19543
19554
19571
19582
19593
19604
19621
19632
19643
19654
19671
19682
19693
19704
19721
19732
19743
19754
19771
19782
19793
19804
19821
19832
19843
19854
19871
19882
19893
19904
19921
19932
19943
19954
19971
19982
19993
20004
20021
20032
20043
20054
20071
20082
20093
20104
-5.00%
public sector Unprecedent private
surplus/deficit as sector deficits Government
% GDP goes “down”
-10.00%
-15.00%
The so-called "Clinton Boom" was driven by an unsustainable increase
in private sector debt. Extreme leverage made possible by a bubble
economy. It ended in recession.

6. -2.00%
-8.00%
-6.00%
-4.00%
10.00%
0.00%
2.00%
4.00%
8.00%
6.00%
19521
19532
19543
19554
19571
19582
19593
19604
19621
19632
19643
19654
indicate
19671
grey bars
recessions
19682
19693
19704
19721
19732
19743
19754
19771
19782
19793
19804
19821
19832
19843
19854
19871
19882
19893
19904
19921
19932
19943
19954
19971
19982
balance
(% GDP)
19993
private sector
20004
20021
20032
20043
big government
20054
We achieved this big
deficits after the crisis
surplus because of the
20071
20082
20093
20104
0
1
0.5

7. Read and Return to Previous Slide
Notice how the private sector’s balance
(blue line) declines in the period leading up to
each recession.
It takes government deficits to prevent the decline
in private balances (or to repair private balance
sheets after a recession).
This is why MMT is not hostile to deficit spending.

8. To learn more about MMT, follow us on Twitter
@deficitowl and read our blog
www.neweconomicperspectives.org