An increasingly popular theory about progressives that the government can continue to borrow to fund social programs like Medicare for everyone, free college tuition and a conversion to renewable energy in the next decade is unworkable, Federal Reserve Chairman Jerome Powell said Tuesday.
"The idea that deficits don't matter for countries that can borrow in their own currency I think is just wrong," Powell said during congressional testimony in the Senate.
The notion behind what is called "Modern Monetary Theory" is that as long as the Fed can keep interest rates low without speaking inflation, the national debt and budget deficit won't be an issue. MMT has been espoused by politicians including Rep. Alexandria Ocasio-Cortez (D-New York) and Democratic presidential candidate Sen. Bernie Sanders.
Powell conceded that he has not read up on the theory but said he has heard some "pretty extreme claims" about how it might be implemented.
Earlier in the hearing, the central bank chief issued another warning about U.S. fiscal policy, which he again called "unsustainable" over the long run.
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