The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy

In this new introduction to the paperback edition of The Deficit Myth, published during the COVID-19 pandemic, Stephanie Kelton examines the economic impact of the crisis and uses it to illustrate key principles of modern monetary theory (MMT). The introduction positions the pandemic as both a health and economic catastrophe, while demonstrating how federal spending responses reveal important truths about government fiscal capacity.

The first section details the immediate economic devastation of early 2020. The pandemic triggered massive job losses affecting over 22 million workers, with low-income households, women, and people of color experiencing disproportionate impacts. The crisis also led to approximately 12 million Americans losing their employer-provided health insurance. While unemployment rates improved slightly by September 2020, dropping from 14.7% to 7.9%, Kelton argues this recovery was uneven: Certain sectors rebounded while others continued declining.

The author then analyzes the initial federal response, noting that Congress passed four relief packages totaling roughly $3 trillion, including the $2.2 trillion CARES Act. These measures included direct payments to citizens, enhanced unemployment benefits, and support for small businesses. According to research from Columbia University, these interventions prevented over 18 million Americans from falling into poverty. However, Kelton emphasizes that this support proved insufficient as key programs expired: Enhanced unemployment benefits ended in July 2020, and the Paycheck Protection Program concluded in August 2020.