Modern Monetary Theory and Fiscal–Monetary Policy Frameworks

Abstract The U.S. federal government fiscal–monetary policy framework is the organizational and operational structure that ties the state’s budgeting to the means of payment. There have been eras of government activism and eras of restraint. Policy frameworks either facilitate action or restrain action. The modern era has seen frequent use of fiscal and monetary tools to combat cycle downturns and financial crises, but orthodox thinking concerning government action and framework design hinder effective policy. An additional impediment to public spending arises from finance capital political pressure. This paper advocates for a new fiscal–monetary framework in the U.S. The paper examines the policy framework suggested by modern monetary theory (MMT) and makes the case for reform in the U.S. government’s fiscal–monetary framework to fully operationalize MMT’s framework.