What did the pandemic response teach us about government spending?

The COVID-19 pandemic response provided a dramatic real-world demonstration of several MMT insights.

First, we learned that money is not the constraint. When emergency hit, Congress appropriated trillions of dollars within weeks. The $2 trillion CARES Act passed almost unanimously. Nobody asked 'how will we pay for it?' in the conventional sense - the money was simply created and spent. This showed that 'we can't afford it' is always a political choice, not an economic necessity.

Second, the pandemic exposed real resource constraints. Even with unlimited money, we couldn't conjure up masks, ventilators, and hospital beds overnight. Supply chains failed. Workers got sick. These real constraints - not financial ones - were the actual limits on response.

Third, direct payments worked. Stimulus checks and expanded unemployment benefits kept the economy afloat and prevented a depression. Giving money directly to people, rather than hoping it would 'trickle down' from other policies, proved effective.

Fourth, the predicted inflation didn't immediately materialize. Despite enormous deficits, inflation remained low through 2020 and into 2021 because the economy had slack. When inflation did rise in 2021-2022, it was driven largely by supply constraints (pandemic disruptions, supply chain issues, war in Ukraine) rather than excessive demand.

The pandemic showed that when we face a real crisis, we suddenly find the money. MMT asks: why do we only recognize this during emergencies?