Government Spending Not Limited by Ability to Tax or Borrow - On MMT (1)

I am trying to acquaint myself with a number of propositions advanced by MMT that are new and, at least, initially hard for me to comprehend. MMT stands for Modern Money Theory, also known as Modern Monetary Theory, a heterodox economic doctrine associated notably with Warren Mosler, Bill Mitchell, L. Randall Wray, Stephanie Kelton and others.

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The first of these propositions is stated by Warren Mosler as a presumptively erroneous tenet:

The federal government must raise funds through taxation and borrowing in order to spend. In other words, government spending is limited by its ability to tax and borrow.  (p.13)

All quotes are taken from "Seven Deadly Innocent Frauds of Economic Policy."

On the contrary, the correct statement, according to Mosler, is:

Federal government spending is in no case operationally constrained by revenues, meaning that there is no "solvency risk." In other words, the federal government can always make any and all payments in its own currency, no matter how large the deficit is, or how few taxes it collects.  (p.13)

What made me hesitant to accept, or even understand, the proposition at first, were assumptions added on my part to the Mosler contention. Thus, I insinuated that Mosler is suggesting that there are no limits of any kind and no detrimental consequences at all to uninhibited government spending. But this is not what Mosler is saying. 

He does not deny that spending may be funding inimical purposes, nor does he rule out that a certain level or intensity of spending might have a direct negative impact, such as giving rise to inflationary effects.

I believe, Mosler is right in contending that government's ability to spend is not constrained by the need to tax or borrow. However, what spread a premature layer of haze over the proposition, to me at least, is the whole apparatus of arguments and counterarguments relating to the effects of government intervention.

But what Mosler is really saying is that (1) the ability of government to spend, which is unlimited as far as the provision of funds is concerned, is one thing, while (2) society's ability to politically deal with and economically digest any such spending is another matter. 

What he is driving at ultimately is that if government spending is capable of helping the economy at a certain juncture and under certain circumstances, in order to provide such support the state is never constrained by its capacity to tax or borrow.

Why? 

Because the government, unlike all other participants in the economy, originates the money in question. It is not revenue-constrained. It does not have to work and offer a desired product or service to obtain additional money. Nor does it have to get some good or service from someone backing its ability to spend.

All government has to do is to make some accounting changes. What sort of accounting changes? Well, that is another source of inhibited insight, with me. I do not know much about the way in which taxing, borrowing, spending and lending are documented in terms of accountancy.

More on that in the sequel: Government Spending Not Limited by Ability to Tax or Borrow - On MMT (2)