Introduction Throughout U.S. history, Congress has created advisory commissions to assist in the development of public policy. Among other contexts, commissions have been used following crisis situations, including the September 11, 2001, terrorist attacks and the 2008 financial crisis. In such situations, advisory commissions may potentially provide Congress with a high-visibility forum to assemble expertise that might not exist within the legislative environment; allow for the in-depth examination of complex, cross-cutting policy issues; and lend bipartisan credibility to a set of findings and recommendations. As Congress considers its range of responses to the coronavirus pandemic, the creation of one or more congressional advisory commissions is an option that could provide a platform for evaluating various pandemic-related policy issues over time. Past congressional advisory commissions have retrospectively evaluated policy responses, brought together diverse groups of experts, and supplemented existing congressional oversight mechanisms. Policymakers may determine that creating an advisory commission is unnecessary and instead prefer to utilize existing congressional oversight structures, such as standing or select committees, or already established oversight entities. This report provides a comparative analysis of five proposed congressional advisory commissions that would investigate various aspects of the COVID-19 pandemic. The five proposed commissions are found in H.R. 6429 (the National Commission on COVID-19 Act, sponsored by Representative Stephanie Murphy), H.R. 6431 (the Made in America Emergency Preparedness Act, sponsored by Representative Brian Fitzpatrick), H.R. 6440 (the Pandemic Rapid Response Act, sponsored by Representative Rodney Davis), H.R. 6455 (the COVID-19 Commission Act, sponsored by Representative Bennie Thompson), and H.R. 6548 (the National Commission on the COVID-19 Pandemic in the United States Act, sponsored by Representative Adam Schiff). The overall structures of each of the proposed commissions are similar in many respects, both to each other and to previous independent advisory entities established by Congress. Specifically, the proposed commissions would (1) exist temporarily; (2) serve in an advisory capacity; and (3) report a work product detailing the commission's findings, conclusions, and recommendations. That said, each particular proposed commission has distinctive elements, particularly concerning its membership structure, appointment structure, and time line for reporting its work product to Congress. This report compares the (1) membership structure, (2) appointment structure, (3) rules of procedure and operation, (4) duties and reporting requirements, (5) powers of the commission, (6) staffing issues, and (7) funding for each of the proposed COVID-19 commissions. Table 1 (at the end of this report) provides a side-by-side comparison of major provisions of the five proposals. Membership Structure Several matters related to a commission's membership structure might be considered. They include the size of a commission, member qualifications, compensation of commission members, and requirements for partisan balance. Size of Commission In general, there is significant variation in the size of congressional advisory commissions. Among 155 identified congressional commissions created between the 101 st Congress and the 115 th Congress, the median size was 12 members, with the smallest commission having 5 members and the largest 33 members. The membership structure of each of the five proposed commissions is similar to previous independent advisory entities created by Congress. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 would each create a 10-member entity. H.R. 6455 would create a 25-member entity. Qualifications Past legislation creating congressional commissions has often required or suggested that commission members possess certain substantive qualifications. Such provisions arguably make it more likely that the commission is populated with genuine experts in the policy area, which may improve the commission's final work product. H.R. 6455 would provide that commissioners "shall be a United States person with significant expertise" in a variety of fields related to public health and public administration. H.R. 6440 , H.R. 6429 , H.R. 6431 , and H.R. 6548 would provide "the sense of Congress" that commission members should be "prominent U.S. citizens" who are nationally recognized experts in a variety of fields relevant to the pandemic and response efforts. In addition, H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 all prohibit the appointment of federal, state, and local government employees and officers. H.R. 6455 would prohibit federal employees from being commission members. Compensation of Commission Members Some congressional commissions have compensated their members. For example, the National Commission on Terrorist Attacks Upon the United States (9/11 Commission) and the Financial Crisis Inquiry Commission provided that commission members could be compensated at a daily rate of basic pay. Nearly all have reimbursed members for travel expenses. Those that have provided for commissioner compensation most frequently provided compensation at the daily equivalent of level IV of the Executive Schedule. Each of the five proposals would provide that commission members be compensated at a rate "not to exceed the daily equivalent of the annual rate of basic pay" for level IV of the Executive Schedule, "for each day during which that member is engaged in the actual performance of duties of the Commission." Members of three proposed commissions would receive travel expenses, including a per diem. Partisan Limitations Each proposal provides a limit on the number of members appointed from the same political party. H.R. 6455 would provide that not more than 13 of its 25 members may be from the same party. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 would provide that not more than 5 (of 10) members are from the same party. Most previous advisory entities created by Congress do not impose formal partisan restrictions on the membership structure. It may also be difficult to assess the political affiliation of potential members, who may have no formal affiliation (voter registration, for example) with a political party. Instead, most past advisory commissions usually achieve partisan balance through the appointment structure; for instance, by providing equal (or near-equal) numbers of appointments to congressional leaders of each party. Appointment Structure Past congressional commissions have used a wide variety of appointment structures. Considerations regarding appointment structures include partisan balance, filling vacancies, and the time line for making commission appointments. The statutory scheme may directly designate members of the commission, such as a specific cabinet official or a congressional leader. In other cases, selected congressional leaders, often with balance between the parties, appoint commission members. A third common statutory scheme is to have selected leaders, such as committee chairs and ranking members, recommend candidates for appointment to a commission. These selected leaders may act either in parallel or jointly, and the recommendation may be made either to other congressional leaders, such as the Speaker of the House and President pro tempore of the Senate, or to the President. Each of the five commission proposals would delegate most or all appointment authority to congressional leaders (including chamber, party, and committee leaders; see Table 1 for details). Additionally, H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 provide for one appointment to be made by the President. H.R. 6429 , H.R. 6431 , and H.R. 6548 would have the President appoint the commission's chair. H.R. 6455 has its membership appointed by the chairs and ranking members of designated House and Senate committees, and the Joint Economic Committee. H.R. 6455 does not provide any executive branch appointments. Attention to the proper balance between the number of members appointed by congressional leaders and by other individuals (such as the President), or to the number of Members of Congress required to be among the appointees, or to the qualifications of appointees, can be significant factors in enabling a commission to fulfill its congressional mandate. In general, a commission's appointment scheme can impact both the commission's ability to fulfill its statutory duties and its final work product. For instance, if the scheme provides only for the appointment of Members of Congress to the commission, it arguably might not have the technical expertise or diversity of knowledge to complete its duties within the time given by statute. Similarly, if the appointment scheme includes qualifying provisos so specific that only a small set of private citizens could serve on the panel, the commission's final work product may arguably only represent a narrow range of viewpoints. None of the proposed COVID-19 commissions specify whether Members of Congress may serve on the commission. Partisan Balance in Appointment Authority Most previous congressional advisory commissions have been structured to be bipartisan, with an even (or near-even) split of appointments between leaders of the two major parties. By achieving a nonpartisan or bipartisan character, congressional commissions may make their findings and recommendations more politically acceptable to diverse viewpoints. The bipartisan or nonpartisan arrangement can give recommendations strong credibility, both in Congress and among the public, even when dealing with divisive public policy issues. Similarly, commission recommendations that are perceived as partisan may have difficulty gaining support in Congress. In some cases, however, bipartisanship also can arguably impede a commission's ability to complete its mandate. In situations where a commission is tasked with studying divisive or partisan issues, the appointment of an equal number of majority and minority commissioners may serve to promote partisanship within the commission rather than suppress it, raising the possibility of deadlock where neither side can muster a majority to act. Each of the five proposals employs a structure where leaders in both the majority and minority parties in Congress would make appointments. H.R. 6429 , H.R. 6431 , and H.R. 6548 would provide for five majority and five minority appointments, including one for the President. H.R. 6440 would include two each by the Senate majority leader, the Senate minority leader, and the Speaker of the House, with one appointment by the House minority leader and one by the President, and the chair appointed by the Speaker and vice chair appointed by the Senate majority leader. H.R. 6455 would have 12 majority and 12 minority appointments made by the 12 committee chairs and ranking members and one member jointly appointed by the chair and vice chair of the Joint Economic Committee. Vacancies All five proposals provide that vacancies on the commission will not affect its powers and would be filled in the same manner as the original appointment. Deadline for Appointments Three of the bills propose specific deadlines for the appointment of commissioners. H.R. 6429 and H.R. 6548 provide that appointments are made between specific dates in January or February 2021. Further, H.R. 6429 provides that commission members could be appointed in September 2020, if there is no longer a COVID-19 public health emergency in effectâas determined by the Secretary of Health and Human Servicesâas of August 31, 2020. H.R. 6440 would require all appointments be made by December 15, 2020. H.R. 6455 would require appointments to be made within 45 days after enactment. H.R. 6429 , H.R. 6440 , and H.R. 6548 would start the commission's work in early 2021, as the commission cannot operate without the appointment of members. H.R. 6429 , however would provide that the proposed commission's work would begin no later than October 31, 2020, if members are appointed in September 2020. H.R. 6431 does not specify a deadline for the appointment of members. Typically, deadlines for appointment can range from several weeks to several months. For example, the deadline for appointments to the Antitrust Modernization Commission was 60 days after the enactment of its establishing act. The deadline for appointment to the Commission on Wartime Contracting in Iraq and Afghanistan was 120 days from the date of enactment. The deadline for appointment to the 9/11 Commission was December 15, 2002, 18 days after enactment of the act. Rules of Procedure and Operations While most statutes that authorize congressional advisory commissions do not provide detailed procedures for how the commission should conduct its business, the statutory language may provide a general structure, including a mechanism for selecting a chair and procedures for creating rules. None of the five COVID-19 commission proposals contain language that directs the process for potentially adopting rules of procedure. For a comparison of each proposed commission's specified rules of procedures and operations, see Table 1 . Chair Selection Each bill provides for the selection of a chair and/or vice chair of the commission. H.R. 6429 , H.R. 6431 , and H.R. 6548 would have the chair appointed by the President and the vice chair appointed by congressional leaders of the political party opposite the President. H.R. 6440 would have the chair appointed by the Speaker of the House (in consultation with the Senate majority leader and the House minority leader) and the vice chair appointed by the Senate majority leader (in consultation with the Speaker of the House and the Senate minority leader). H.R. 6455 would have the chair and vice chair chosen from among commission members by a majority vote of the commission, and would require the chair and vice chair to have "significant experience" in areas to be studied by the commission. Initial Meeting Deadline As with the timing of commission appointments, some authorizing statutes are prescriptive in when the commission's first meeting should take place. Three of the bills analyzed here provide specific time lines for the commission's first meeting. H.R. 6429 would require the first meeting to be no later than March 15, 2021, unless members are appointed in September 2020 (if no public health emergency exists). H.R. 6455 would require the first meeting within 45 days after the appointment of all commission members, which isâgiven the 45-day deadline for appointmentâeffectively a maximum of 90 days after enactment. H.R. 6548 would direct the commission to hold its initial meeting "as soon as practicable," but not later than March 5, 2021. H.R. 6431 and H.R. 6440 do not provide for an initial meeting deadline. Instead, they direct the commission to meet "as soon as practicable." Quorum Most commission statutes provide that a quorum will consist of a particular number of commissioners, usually a majority, but occasionally a supermajority. All five bills would provide for a quorum requirement. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 would define a quorum as 6 (of 10) members. H.R. 6455 would provide that a quorum is 18 of 25 members (72%). Public Access All five commission bills would require commission meetings to be open to the public. Each bill would also require that reports be made publicly available. Formulating Other Rules of Procedure and Operations Absent statutory guidance (eithe r in general statutes or in individual statutes authorizing commissions), advisory entities vary widely in how they adopt their rules of procedure. In general, three models exist: formal written rules, informal rules, and the reliance on norms. Any individual advisory entity might make use of all three of these models for different types of decisionmaking. The choice to adopt written rules or rely on informal norms to guide commission procedure may be based on a variety of factors, such as the entity's size, the frequency of meetings, member preferences regarding formality, the level of collegiality among members, and the amount of procedural guidance provided by the entity's authorizing statute. Regardless of how procedural issues are handled, protocol for decisionmaking regarding the following operational issues may be important for the commission to consider at the outset of its existence: eligibility to vote and proxy rules; staff hiring, compensation, and work assignments; hearings, meetings, and field visits; nonstaff expenditures and contracting; reports to Congress; budgeting; and procedures for future modification of rules. None of the five COVID-19 commission proposals specify that the proposed commission must adopt written rules. FACA Applicability The Federal Advisory Committee Act (FACA) mandates certain structural and operational requirements, including formal reporting and oversight procedures, for certain federal advisory bodies that advise the executive branch. Three proposals ( H.R. 6429 , H.R. 6431 , and H.R. 6548 ) specifically exempt the proposed commission from FACA. Of the remaining two, FACA would also likely not apply to the commission proposed in H.R. 6455 because it would be appointed entirely by Members of Congress, although it only specifies that its final report is public, not whether it is specifically sent to Congress and/or the President. It is not clear that FACA would apply to the commission proposed in H.R. 6440 . Although it includes a presidential appointment and its report would be sent to both Congress and the President, its establishment clause specifies that the commission "is established in the legislative branch," and a super-majority of its members would be appointed by Congress. Duties and Reporting Requirements Most congressional commissions are generally considered policy commissionsâtemporary bodies that study particular policy problems and report their findings to Congress or review a specific event. General Duties All five of the proposed commissions would be tasked with duties that are analogous to those of past policy commissions. While the specific mandates differ somewhat, all proposed commissions are tasked with investigating aspects of the COVID-19 pandemic and submitting one or more reports that include the commission's findings, conclusions, and recommendations for legislative action. H.R. 6440 would specifically require the commission to avoid unnecessary duplication of work being conducted by the Government Accountability Office (GAO), congressional committees, and executive branch agency and independent commission investigations. Reports Each proposed commission would be tasked with issuing a final report detailing its findings, conclusions, and recommendations. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 would provide that the commission "may submit" interim reports to Congress and the President, but do not provide time lines on when those reports might be submitted. In each case, the interim report would need to be agreed to by a majority of commission members. H.R. 6431 would also require the commission to submit a report on actions taken by the states and a report on essential products, materials, ingredients, and equipment required to fight pandemics. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 also specify that final reports shall be agreed to by a majority of commission members. H.R. 6455 does not specify a vote threshold for approval of its report. None of the bills make specific provisions for the inclusion of minority viewpoints. Presumably this would leave each commission with discretion on whether to include or exclude minority viewpoints. Past advisory entities have been proposed or established with a variety of statutory reporting conditions, including the specification of majority or super-majority rules for report adoption and provisions requiring the inclusion of minority viewpoints. In practice, advisory bodies that are not given statutory direction on these matters have tended to work under simple-majority rules for report adoption. Report Deadlines H.R. 6429 would require a final report one year after the commission's initial meeting. H.R. 6431 and H.R. 6440 would require a final report not later than 18 months after enactment. H.R. 6455 would require a final report to be published not later than 18 months after the commission's first meeting. H.R. 6548 would require a final report by October 15, 2021. This deadline could be extended by 90 days upon a vote of no fewer than 8 (out of 10) commission members. The commission could vote to extend its final report deadline up to three times, and would be required to notify Congress, the President, and the public of any such extension. While such a deadline would potentially give the commission a defined period of time to complete its work, setting a particular date for report completion could potentially create unintended time constraints. Any delay in the passage of the legislation or in the appointment process would reduce the amount of time the commission has to complete its work, even with the opportunity for the commission to extend its own deadline up to three times. The length of time a congressional commission has to complete its work is arguably one of the most consequential decisions when designing an advisory entity. If the entity has a short window of time, the quality of its work product may suffer or it may not be able to fulfill its statutory mandate on time. On the other hand, if the commission is given a long period of time to complete its work, it may undermine one of a commission's primary legislative advantages, the timely production of expert advice on a current matter. A short deadline may also affect the process of standing up a new commission. The selection of commissioners, recruitment of staff, arrangement of office space, and other logistical matters may require expedited action if short deadlines need to be met. Report Submission Of the five proposed commissions, four ( H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 ) are directed to submit their reports to both Congress and the President. H.R. 6455 requires that the report is made public. Most congressional advisory commissions are required to submit their reports to Congress, and sometimes to the President or an executive department or agency head. For example, the National Commission on Severely Distressed Public Housing's final report was submitted to both Congress and the Secretary of Housing and Urban Development. Commission Termination Congressional commissions are usually statutorily mandated to terminate. Termination dates for most commissions are linked to either a fixed period of time after the establishment of the commission, the selection of members, or the date of submission of the commission's final report. Alternatively, some commissions are given fixed calendar termination dates. All five commission proposals would provide for the commission to terminate within a certain period of time following submission of its final report. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6455 would each direct the commission to terminate 60 days after the submission; H.R. 6548 specifies a time line of 90 days after submission. Commission Powers Each of the five proposals would provide the proposed commission with certain powers to carry out its mission (see Table 1 for specifics). One general issue for commissions is who is authorized to execute such powers. In some cases, the commission itself executes its powers, with the commission deciding whether to devise rules and procedures for the general use of such power. In other cases, the legislation specifically authorizes the commission to give discretionary power to subcommittees or individual commission members. Finally, the legislation itself might grant certain powers to individual members of the commission, such as the chair. Hearings and Evidence All five bills would provide the proposed commission with the power to hold hearings, take testimony, and receive evidence. All five commissions would also be provided the power to administer oaths to witnesses. Subpoenas Four of the bills would provide the commission with subpoena power. H.R. 6440 would not provide subpoena power to the commission. H.R. 6429 , H.R. 6431 , and H.R. 6548 would provide that subpoenas could only be issued by either (1) agreement of the chair and vice chair, or (2) the affirmative vote of 6 (of 10) commission members. H.R. 6455 would require that a subpoena could only be issued by either agreement of the chair and vice chair or an affirmative vote of 18 (of 25) commission members. All four bills that would provide subpoena power contain substantially similar judicial methods of subpoena enforcement. Administrative Support All five of the bills would provide that the commission receive administrative support from the General Services Administration (GSA). The GSA provides administrative support to dozens of federal entities, including congressional advisory commissions. Each of the five bills would provide that GSA be reimbursed for its services by the commission. Each bill also provides that other departments or agencies may provide funds, facilities, staff, and other services to the commission. Other Powers Without explicit language authorizing certain activities, commissions often cannot gather information, enter into contracts, use the U.S. mail like an executive branch entity, or accept donations or gifts. All five bills direct that federal agencies provide information to the commission upon request. H.R. 6429 , H.R. 6431 , and H.R. 6548 would also provide that the commission could use the U.S. mails in the same manner as any department or agency, enter into contracts, and accept gifts or donations of services or property. Staffing The proposed COVID-19 commissions contain staffing provisions commonly found in congressional advisory commission legislation. Congressional advisory commissions are usually authorized to hire staff. Most statutes specify that the commission may hire a lead staffer, often referred to as a "staff director," "executive director," or another similar title, in addition to additional staff as needed. Rather than mandate a specific staff size, many commissions are instead authorized to appoint a staff director and other personnel as necessary, subject to the limitations of available funds. Most congressional commissions are also authorized to hire consultants, procure intermittent services, and request that federal agencies detail personnel to aid the work of the commission. Director and Commission Staff Four of the bills provide that the commission may hire staff without regard to certain laws regarding the competitive service; H.R. 6440 does not specifically exempt the commission from such laws. Four bills ( H.R. 6429 , H.R. 6431 , H.R. 6455 , and H.R. 6548 ) would authorize, but not require, the commission to hire a staff director and additional staff, as appropriate. Four proposals would limit staff salaries to level V of the executive schedule. Three of the bills would specifically designate staff as federal employees for the purposes of certain laws, such as workman's compensation, retirement, and other benefits. Detailees When authorized, some commissions can have federal agency staff detailed to the commission. All five bills would provide that federal employees could be detailed to the commission. Four bills would provide that the detailee would be without reimbursement to his or her home agency. H.R. 6440 would allow detailees on a reimbursable basis. Experts and Consultants All five bills would provide the commission with the authority to hire experts and consultants. Four of the bills limit the rate of pay for consultants to level IV of the Executive Schedule. H.R. 6440 does not specify a specific limit. Security Clearances Four bills would provide that federal agencies and departments shall cooperate with the commission to provide members and staff appropriate security clearances. H.R. 6440 does not contain a security clearance provision. Funding and Costs Commissions generally require funding to help meet their statutory goals. When designing a commission, therefore, policymakers may consider both how the commission will be funded, and how much funding the commission will be authorized to receive. Four of the five proposals specify a funding mechanism for the commission. How commissions are funded and the amounts that they receive vary considerably. Several factors can contribute to overall commission costs. These factors might include the cost of hiring staff, contracting with outside consultants, and engaging administrative support, among others. Additionally, most commissions reimburse the travel expenditures of commissioners and staff, and some compensate their members. The duration of a commission can also significantly affect its cost; past congressional commissions have been designed to last anywhere from several months to several years. Costs It is difficult to estimate or predict the potential overall cost of any commission. Annual budgets for congressional advisory entities range from several hundred thousand dollars to millions of dollars annually. Overall expenses for any individual advisory entity depend on a variety of factors, the most important of which are the number of paid staff and the commission's duration and scope. Some commissions have few full-time staff; others employ large numbers, such as the National Commission on Terrorist Attacks Upon the United States, which had a full-time paid staff of nearly 80. Secondary factors that can affect commission costs include the number of commissioners, how often the commission meets or holds hearings, whether or not the commission travels or holds field hearings, and the publications the commission produces. Authorized Funding Three of the bills ( H.R. 6429 , H.R. 6440 , and H.R. 6548 ) would authorize the appropriation of "such sums as may be necessary" for the commission, to be derived in equal amounts from the contingent fund of the Senate and the applicable accounts of the House of Representatives. H.R. 6429 and H.R. 6548 would provide that funds are available until the commission terminates. H.R. 6455 would authorize the appropriation of $4 million for the commission, to remain available until the commission terminates. H.R. 6431 does not include an authorization of appropriations. Comparison of Proposals to Create a COVID-19 Commission Table 1 provides a side-by-side comparison of major provisions of the five proposals. For each bill, the membership structure, appointment structure, rules of procedure and operation, duties and reporting requirements, proposed commission powers, staffing provisions, and funding are compared.


Introduction Traditional macroeconomic theory addresses two main questions. First, macroeconomic theory and policy seek to mitigate short-term economic fluctuations (or stabilize the economy) that leave productive resources idle for a time. Second, macroeconomists seek to recommend public policies that maximize living standards (economic growth) over the long term, while keeping debt at sustainable levels. The role of monetary policy and the maintenance of a stable price level are embedded in both issues. In the past few years, the U.S. economy has experienced persistently low interest rates despite near-full employment and federal deficits and debt significantly above their historical averages. These characteristics have led to debate over the optimal trajectory of long-term federal debt in an economic environment with relatively low borrowing costs. Recently, an economic theory outside of mainstream economic views, called Modern Monetary Theory (MMT) by its proponents, has been receiving attention in the public debate. Interest in this theory may in part reflect concerns about the deficit financing needed for new spending programs in health, education, infrastructure, and other areas. MMT suggests that deficit financing can be used without harmful economic effects in circumstances of low inflation rates and low interest rates, conditions that currently exist despite indications that the country is at full employment. This report first explains mainstream macroeconomic theory. It then surveys the available MMT literature to provide a basic understanding of the differences (or lack thereof) between the defining relationships established in MMT and mainstream economics. It next discusses whether MMT can be used to justify deficit financing. Finally, it discusses how existing government institutions may present barriers in adopting the prescriptions of MMT for managing the economy. Unlike mainstream macroeconomic theory, where consensus has been reached on how core relationships translate into mathematical equations, there is no comparative mathematical statement of MMT. Some academic economists have translated MMT into a mathematical framework, and the explanation of the differences between mainstream and MMT theory are based on those discussions. Proponents of MMT do not necessarily accept that framework, however. Explaining Mainstream Economic Views Although basic macroeconomic models vary in many ways, any macroeconomic model that allows for fiscal and monetary policy to influence the economy has three relationships in the economy that must be in balance: (1) the asset market where investment equals saving (called the IS curve ), (2) the money relationship where the supply and demand for money must equate (commonly called the LM curve ), and (3) the economy-wide relationship where aggregate demand equals aggregate supply. The first two of these equations compose what is referred to as the IS-LM model . These three relationships, in turn, determine output, prices, and the interest rate in the economy. Macroeconomic models formalize the relationship between economic variables, allowing researchers to quantify the effect of a change in one variable on the rest of the system (also called comparative statics ) and to observe how economic patterns align with model predictions. The IS-LM model is characterized by a limited role of expectations of future economic conditions and sticky prices . While there are a number of different macroeconomic models, especially those that add expectations, this section uses the simplified model, which forms the core of forecasting models as well as models used by government agencies in projecting the economy. More sophisticated forecasting models of the economy have many equations that capture variation in types of goods, investments, and assets, but this simplified model can be used to explain the standard model and provide a foundation for interpreting MMT. Most academic research is directed toward more complex models (sometimes referred to as modern macroeconomic s ), which are discussed briefly below. The basic IS-LM model is useful for illustrating the differences in MMT and mainstream models. Short Run: The Business Cycle In mainstream macroeconomic models, the short run is characterized by fixed capital investment, or that the equipment and nonlabor resources available to firms are fixed. Output decisions are therefore a function of productivity, employment, and IS-LM outcomes. The Investment-Savings Balance (IS) The IS curve begins with the recognition that output (or income) is the sum of its components: private consumption, investment, and government spending. For simplicity, this models a closed economy; in an open economy there would be a fourth component, net exports. If consumption and government spending are subtracted from output, the result is saving; thus, this relationship could be restated as savings equals investment. Consumption is a fraction of disposable income, which is income minus taxes. Therefore, consumption rises when disposable income rises (which occurs when income rises and/or taxes fall). While consumption depends on income and taxes, investment depends on the interest rate, rising when interest rates fall and declining when they rise. As a result, there are a series of pairs of income levels and interest rates where this relationship is in balance, and income is higher when interest rates are lower. It is through this relationship that fiscal policy can be used to expand or contract the economy. If government spending is increased, or if taxes are decreased (which increases disposable income and therefore increases consumption), demand increases. The recipients of these increased amounts of income then spend a portion of that income, which leads to successive rounds of spending that are called multipliers . Money Supply and Demand (LM) Another critical relationship is that between money supply and money demand, which must be equal for markets to clear. Money is composed of cash, including checking accounts, and its close substitutes. Holding prices constant for the moment, and with a fixed money supply, there are two uses of money. First, some money is needed to carry out transactions in the economy, and thus more money is demanded as income (output) increases. Second, money is needed as a liquid form of asset holdings, and the higher the interest rate, the less money is held because it earns no interest and is exchanged for other forms of assets that earn interest. Similar to the IS curve, this relationship also creates pairs of interest rates and output levels where money supply and demand balance traces out a curve (the LM curve), this time with income higher as interest rates increase. In this case, however, a fixed amount of money demand occurs when both output and interest rates are high or when both are low. When interest rates are high, less money is desired as an asset and more is freed up to support a higher level of transactions (and therefore income). Determination of Output and Interest Rates Where the IS and LM relationships intersect is where income and interest rates will be determined in the economy, holding prices constant. With significant unemployment, any fiscal or monetary stimulus would be transmitted into output effects, moving the economy closer to the output achieved under full employment. The effects of expansionary fiscal policy in the IS-LM model are shown in Figure 1 . When expansionary fiscal policyâthrough increased spending, decreased taxes, or some combination of the twoâoccurs (IS 1 to IS 2 ) and the money supply remains fixed (LM), interest rates (r) will rise (point A to point B). This rise occurs because when more money is needed for transactions, money held as an asset must be reduced and interest rates must be higher. This rise in interest rates offsets some of the effects of increased income by reducing investment. Thus, holding money supply fixed, increases in income (Y) that would have occurred if interest rates were fixed is now reduced as investment decreases. The monetary policy implications in an IS-LM model are illustrated in Figure 2 . With expansionary monetary policy (LM 1 to LM 2 ), more money is available to support income and transactions at every interest rate (point A to point B). However, that level of income is inconsistent with the level of income that balances the investmentâsavings (IS) relationship, and interest rates fall, leading to more investment, with some of the increased money supply used to hold more money as a liquid asset. That is, by interacting with the investmentâsavings (IS) relationship, output and interest rates fall below the amount implied by the money expansion alone. Output (Y) is higher than it was previously, and interest rates are lower. Thus, a monetary expansion increases output and lowers interest rates. Note that while the basic model uses monetary supply as the primary monetary policy tool, due to difficulties in measuring the money supply, monetary authorities generally target interest rates when making policy choices. Figure 3 , Figure 4 , and Figure 5 show the basic ways monetary policy can respond to a fiscal policy shift (in these examples through a contractionary fiscal policy shift) in an IS-LM model. Monetary policy may be neutral ( Figure 3 ) with respect to a fiscal contraction (IS 1 to IS 2 ) if there is no change in the money supply, so that some of the output effect is mitigated (point A to point B) relative to an accommodating policy. Monetary policy may be accommodating ( Figure 4 ) if the money supply also contracts (LM 1 to LM 2 ) to keep the interest rate constant, allowing maximum output effects (in this case, reducing output) to occur (point A to point B). Monetary policy may be offsetting ( Figure 5 ) if the money supply expands (LM 1 to LM 2 ) to return output to its original level (point A to point B). Demand and Supply (AD-AS) The LM curve actually has a third variable, the price level. The real money supply depends on the price level; if prices rise and nominal money supply is fixed, the real money supply falls. Thus, there is a third relationship in the system. This relationship requires an equilibrium between aggregate demand and aggregate supply (AD-AS). In the short run, the capital stock is fixed, and the output in the economy depends on hiring unemployed labor. (There is also an underlying labor supply and labor demand relationship.) The effects are captured in the aggregate supply equation. As prices rise, the supply of output increases and the demand decreases. Thus, this relationship shows an equilibrium aggregate price level and output in the economy. As shown in Figure 6 and Figure 7 , the effect of fiscal and monetary policies on output (Y) and the price level (P) is a function of aggregate supply and demand. Either a fiscal or monetary expansion will shift the aggregate demand curve toward more output at every price level. The supply curve is relatively flat when there is significant underemployment in the economy, meaning that output can increase without affecting prices. When the economy is at full employment the supply curve is almost vertical, and a shift in the demand curve will increase prices and not output. An increase in the price level will decrease the real money supply. If the initial stimulus were a fiscal stimulus, the real money supply would contract, at full employment, to restore the old output level, but with higher interest rates. In effect, the fiscal stimulus would have substituted consumption or government spending for investment (referred to as crowding out ). If the stimulus were originally a monetary stimulus, the real money supply would shift back to its old position and neither the output nor its composition would change. Continual attempts to provide stimulus at full employment would result in a continually increasing price level and, in the case of a fiscal stimulus, continued crowding out of investment. Extensions of the Basic Model: Open Economy This basic model can be expanded in many ways with increased complication and detail. As suggested above, multiple sectors, multiple types of investments, and other details can be introduced. One important element is to allow for an open economy, with exports and imports, foreign investment in the United States, and U.S. investment in foreign countries. Expanding the model in this way, in its simplest form, requires a new relationship, the balance of payments, which requires equal supply and demand for U.S. dollars. This additional relationship requires a new variable, the exchange rate. It also requires net exports in addition to consumption, investment, and government spending, to be added to the IS equation. An open economy tends to diminish the effect of fiscal stimulus. As interest rates rise in the United States, foreign capital is attracted into the United States. To make those investments, foreigners demand dollars and supply foreign currency. The increased dollar demand increases the price of the dollar in foreign currency, and this higher price makes exports more costly and imports less costly. This results in a decrease in net exports, reducing the increase in output. In the extreme, if international capital were perfectly mobile and the United States were a small country, any effect of a fiscal stimulus would theoretically be completely offset, leading to a substitution of consumption and government spending for net exports. Because capital is not perfectly mobile and the United States is a large country, fiscal policy should still be effective in stimulating or restraining the economy. Monetary policy theoretically becomes more powerful in an open economy: as an increase in the money supply causes the interest rate to fall, capital flows out of the country, causing net exports to rise. Extensions of the Basic Model: Investment and the Accelerator Another modification to the model is to recognize that investment can respond to expected demand. With this extension, as the economy expands and that expansion is expected to be sustained, firms will increase investment in capital goods (known as the accelerator effect ), thereby increasing their capacity. The rate at which capital accumulates in an expanding economy will therefore reflect the rate at which capital investment increases in response to output and the rate of capital depreciation (or how much capital value is lost in any one period) over time. Extension of the Model: Consumption and Labor a Function of the Interest Rate, and Rational Expectations Economists had long been concerned that the IS-LM model does not fully account for expectations of future behavior, and lacked the microeconomic foundations where individuals allocate consumption and leisure over time. One way to incorporate such an idea is to make consumption determined by the interest rate as well as disposable income, reflecting the idea that as the interest rate rises individuals want to save more (and consume less). This effect has also been extended to the allocation of leisure and labor, and is most formally contained in dynamic stochastic general equilibrium (DSGE) models. DSGE models include a demand block, a supply block, and a monetary policy relationship. In general, while modifications could easily allow consumption to depend on interest rates, use of a full-blown DSGE model is more common among academics than among private forecasters or government forecasters. The model has been criticized by a number of mainstream academics. The Long Run: Economic Growth Over the long run, economic business cycle models converge into economic growth models. Economic growth in the longer term is assumed to be at full employment, and the economy grows with the labor force, capital accumulation, and technological advances. The long run, unlike the short run (where the economy can gain from reducing unemployment), is characterized by fixed resources and tradeoffs. What is most relevant to fiscal and monetary stimulus is that mainstream economic theory suggests that using fiscal stimulus may be good for growth in the short run, but can be harmful in the long run. If fiscal deficits allow consumption to increase at the expense of investment, as would be the case with running the deficit that causes the debt to grow faster than GDP, the economy will continually experience slower growth as the capital stock fails to grow at a quick enough pace. Excessive monetary stimulus, meanwhile, would lead to price level increases that, if followed persistently would lead to an inflationary spiral. The most common growth model is one that reflects a more or less steady-state growth (although that growth pattern may reflect growth in the labor supply). Modern Monetary Theory This section explores MMT's basic macroeconomic principles and distinctive characteristics and discusses how to interpret the model into the more conventional IS-LM framework. Because MMT is an emerging ideology, definitively identifying the research that encapsulates it can be difficult. Publications and other works from both proponents of MMT and mainstream economists used in this report are listed in the references section. Though some MMT proponents have expressed caution in viewing MMT through a traditional macroeconomic framework, this approach is consistent with work found both elsewhere in the MMT literature and in mainstream economic analysis, including research with theoretical elements aligning with some of MMT's central assertions. MMT's theory does not take into account self-imposed constraints (i.e., those other than resource constraints), such as lack of a sovereign currency, or of other institutions, such as independence of the monetary authority (the Federal Reserve in the United States) and the Treasury that allows the creation of money to finance government spending. As will be discussed subsequently, U.S. institutions may limit the application of MMT to the management of the economy. As with all macroeconomics, some of the theory is about description and some about prescription, but MMT varies by including prescriptive points that restrain monetary policy to keep a fixed interest rate (this policy will leave fiscal policy as the only tool to address the business cycle). According to the model, when fiscal stimulus produces no inflation, there are still unused resources in the economy, and when fiscal stimulus leads to inflation, the stimulus will be reduced or reversed, thereby reducing the deficit or converting it to a surplus. The Investment-Savings Balance (IS) Just as with the basic macroeconomic model, analysis of MMT's macroeconomic principles may begin by accounting for all the choices available with output in a closed economy, which are private consumption, investment, and government spending. In equilibrium (when aggregate expenditures are equal to output), this accounting identity can be reframed to show that the difference between national saving and investment is equal to the difference between government spending and government taxes (or the federal budget deficit), which can also be found in the basic approach. One notable distinction between MMT and the basic macroeconomic structure is that MMT assumes private investment levels are insensitive to changes in the interest rate (or the rate of return that investment would offer), at least when the economy is below capacity. The insensitivity of investment to interest rates means that unlike the basic model, where there are a series of output and interest rate combinations where the investment and savings levels are in balance, with MMT desired investment and savings are equivalent at a single level of output, regardless of the interest rate. This relationship alone (which may be described as having a vertical IS curve) is possible in certain permutations of the basic macroeconomic model. As with the basic approach, consumption may be a positive function of income with the MMT investment and interest rate assumption. Fiscal policy may still be used to influence economic outcomes in the short run with an investmentâsavings relationship consistent with MMT. In the basic model, the effect of expansionary fiscal policy (or an increase in the deficit, or spending more than received in taxes) would, all else equal, increase interest rates, which would thereby reduce private investment and influence present and future saving and consumption patterns. Under the MMT condition, investment levels would be unaffected by the change in interest rates caused by the shift in government activity. Expansionary fiscal policy (as seen in Figure 1 ) would therefore still increase income and output in a given period, with a decrease in government deficits having the opposite effect. Even if the IS curve is sensitive to interest rates, the same outcome could be achieved by an accommodating money supply response that keeps the interest rate fixed (which is also a part of the MMT approach, as discussed below), although this outcome would be the result of a policy choice rather than of fundamental economic factors. Money Supply and Demand (LM) As with mainstream macroeconomic theory, equilibrium in MMT requires equivalence between money supplied and money demanded. The concept of money, however, is applied differently in MMT than in mainstream macroeconomics, which has ramifications for money's relationship with other economic variables and how it may be managed by monetary and fiscal policy. Rather than taking money as the cash and close substitutes created by a central bank, MMT proponents believe that money in a financial system is legitimized as the government accepts it as payment for taxes. In this view, government spending may be thought of as "creating" the money that circulates in an economy. At the simplest level, assuming the Federal Reserve and the Treasury are the same entity (ignoring self-imposed constraints), the monetary authority provides the money to finance government spending (i.e., by depositing money in the Treasury checking account) which injects money into the economy which is, in turn, used to pay taxes. In a more complex model where the Federal Reserve supports the aims of the Treasury, the money would be lent to the Treasury, directly or indirectly, and thus some discussions also speak of the government lending money into existence. This distinction in the concept of money alone does not generate differences in the beliefs about the viability of long-term deficit financing (which is discussed further below). MMT proponents assert that the interaction of market operations undertaken by banking institutions and Federal Reserve actions that are designed to meet interest rate targets effectively allow banking institutions to make their own lending choices independent of reserve requirements and other restrictions. In their view, this greatly restricts the ability of the Federal Reserve (or any central bank) to control the supply of money, even if they can influence market interest rates. Assuming the central bank affects interest rates without direct control over the money supply is not necessarily inconsistent with the mainstream macroeconomic approach. The LM curve is horizontal because the target is the interest rate, although even if the interest rate changed, it would not affect output ( Figure 8 may be used as a reference). The central bank can set any rate, but could set a low rate, perhaps near or at zero, which would lower the cost of government borrowing (in situations where the central bank cannot directly add funds to the government's checking account). Again, the LM curve is not necessarily horizontal because it is naturally that way (MMT discussions do not present a formalized LM curve), but it is horizontal if a fixed interest rate is targeted. The level of that fixed interest could be chosen at any rate, although many adherents support a zero nominal interest rate. Such an interest rate could be made consistent with a low and stable rate of inflation by changing fiscal policy (e.g., if inflation is increasing, taxes should be increased and spending cut). Setting a determinable price level requires a contractionary fiscal policy when demand exceeds potential output to prevent continuing inflation. MMT's notion that monetary policy can maintain any chosen interest rate over an extended time period is a significant deviation from mainstream monetary theory. That assertion requires the absence of any other significant economic force influencing interest rates, including the effects of expected inflation. The existence and impact of inflation expectations is well documented and supported in the economic literature. If there are such nonmoney influences, the adoption of a chosen interest rate may only be maintained with constant injections of money that cause consequent inflationary pressures. Contractionary fiscal policy may not by itself be able to constrain these pressures. The notion that a sovereign government can generate as much money as it chooses without inducing inflation is another notable deviation of MMT from conventional economic analysis. In examining writings by MMT proponents, it is not always clear whether the reliance on fiscal policy (rather than monetary policy) to address an underemployed economy is descriptive (only fiscal policy works) or prescriptive (only fiscal policy should be used because it is too difficult to undertake monetary policy). Proponents appear to believe that the monetary authorities can influence interest rates, including through the buying and selling of bonds as well as directly setting certain interest rates. It is also not clear whether the vertical IS curve is relevant only in an underemployed economy. If the rule for monetary policy is not prescriptive and investment is always insensitive to interest rates, it is difficult to square the theory with the use of monetary policy in the early 1980s to contract the economy and squeeze out inflation, an event widely accepted by economists and consistent with mainstream theory. Determination of Output and Interest Rates The MMT assumption of investment being insensitive to interest rates means that only fiscal policy can be used to shift an underperforming economy to full output in the short run. Under those assumptions, deficit financing in a recession would be an effective way of closing the corresponding gap in output and income, and the Federal Reserve would be tasked with restraining any subsequent increase in interest rates. This combination has been described as an "extreme Keynesian" approach in the mainstream literature. The IS-LM curves generated by MMT assumptions are shown in Figure 8 . Because under the MMT model the selection of an interest rate plays no role in investment or consumption decisions, proponents call for an interest rate that is more or less fixed at a lower level than current targets. Providing for a low level of interest would reduce federal borrowing costs, although fixing rates too close to zero raises questions about how the government and other borrowers would convince creditors to lend money when the relative costs of holding more liquid assets are lowered. Demand and Supply (AD-AS) With interest rates assumed to be fixed and monetary policy largely taken out of business cycle management, the MMT equilibrium output where aggregate demand meets aggregate supply is a function of total factor productivity (as before, the capital stock is assumed to be fixed), fiscal policy choices, and employment. If fiscal stimulus occurs in an underemployed economy, output will increase. If the economy is at full employment, fiscal stimulus will not increase real output, but rather induce inflation, which is a signal to undertake contractionary fiscal policy. With no investment sensitivity to interest rates, or if the interest rate is fixed by the monetary authorities, a fiscal stimulus at full employment will under the MMT model theoretically lead to an inflationary spiral. This effect means that it would be crucial to be able to exert fiscal discipline if inflation appears. Again, these effects are a function of MMT's IS and LM assumptions and mirror the fiscal policy findings in the "extreme Keynesian" mainstream view. Unlike the mainstream model, where an increase in demand at full employment leads to a contraction of the real money supply which chokes off demand (leaving the level of demand fixed but its mix changed), there is no link between the IS-LM curve and AD-AS curve that produces an equilibrium in prices and output. Instead, excess demand produces an increase in the price level that must be met with a contractionary fiscal policy in MMT. (In effect, explicit action must also be taken in the mainstream model where the Federal Reserve is managing business cycles, but the Federal Reserve targets interest rates rather than money aggregates. The Fed must recognize the inflationary pressure and take explicit action to offset it with higher interest rates.) Proponents of MMT also advance a federal job guarantee. A job guarantee is not integral to the MMT theory described above, because such a theory would presumably hold, according to MMT advocates, regardless of the presence of the job guarantee. Nevertheless, it is widely advocated by MMT proponents. Although how the jobs guarantee is structured is largely undefined, such a policy would likely reduce the fluctuation in employment levels across business cycles and increase government deficit financing. It would presumably be designed to largely eliminate certain types of unemployment (circumstances where individuals willing to work cannot find a job at a reasonable wage either because of the business cycle or a mismatch of skills and labor demand), although frictional unemployment (where individuals are engaged in job searches) would remain. The specific characteristics and implementation process of any job guarantee would likely play a significant role in determining its ultimate effect on output, employment, and price levels. Because there is cyclical fluctuation in unemployment, the size of the guaranteed job workforce would fluctuate, making a match between workers and needed tasks difficult. Unlike the market economy that determines jobs and products based on consumer demand, the assignment of work and output would have to be determined largely by fiat. When goods provided by the government are not explicitly based on the needs for collective goods or goods with public spillovers (such as a military force or highways), misallocation of resources may be more likely to occur. Some resources would, theoretically, be diverted from the private sector with a higher effective minimum wage through the government job alternative. The job market in the United States is not uniform, presenting additional challenges for a proposed job guarantee. For example, there could be considerable difficulties satisfying the guarantee in sparsely populated rural areas, filling jobs requiring background checks, or because some applicants may not be suitable for certain jobs (such as home health care or child care). There are also issues about how to treat workers who violated the terms of employment (such as persistent tardiness). Finally, jobs may need capital inputs (e.g., construction equipment) and supplies, and workers in rural areas may have problems finding transportation. The Open Economy With an open economy the IS curve contains an additional element, net exports, which is sensitive to interest rates. Mainstream economic theory postulates that if interest rates rise, capital investment in the United States rises, increasing the demand for dollars, raising the price of the dollar, and decreasing net exports (by both a decrease in exports, which are more costly to foreigners, and an increase in imports). Applied to the MMT model, this would mean that the IS curve would no longer be vertical because investment activity would respond to interest changes. In that case, monetary policy that allowed the interest rate to rise would offset a fiscal stimulus. However, the same output effects of fiscal policy as in the closed economy would occur if the monetary authorities kept the interest rate fixed. An open economy means that some U.S. debt is held by foreigners and adds to concerns that the relatively low interest rates may make the financing of the debt more difficult, since the central bank and the Treasury are independent. The low interest rates would make Treasury debt less attractive to investors. This is important because Treasury must raise funds by selling bonds if tax revenues are insufficient for expenditures, and the Federal Reserve cannot lend directly to the Treasury under current law . Does MMT Justify Deficit Financing? Much of the analysis in MMT literature and related research focuses on its application in the short-term, or in managing business cycles. Less discussed is how the MMT model applies to long run economic variables, including growth and debt sustainability. This section discusses MMT's generally short-term view of deficit financing and contrasts it with mainstream economics, which is usually focused on the longer term. Mainstream economics does not call for balanced federal budgets, and is broadly supportive of deficit financing in managing sufficiently large economic shocks. It does, however, recognize limits on the amounts that the federal government (or any economic actor) may borrow: constraints determined by the availability and willingness of investors to finance its borrowing needs at normal interest rates. In the mainstream view, this borrowing is constrained by the total amounts available for investment (savings in dollars) at a given point in time and the attractiveness of other borrowing options available on the market. In the long term, this constraint means that the amount of federal debt relative to output cannot rise indefinitely. In a basic macroeconomic model this constraint is violated when the long-term interest rate exceeds the long-term economic growth rate, as the general return on investments generated from expansionary policy will be smaller than the interest payments required to finance that activity. MMT proponents have generally called for a more active fiscal policy role in managing negative economic shocks. Moreover, the MMT claim that sovereign governments that issue debt in their own currency (like the United States) cannot be forced to default leads to the general perception that an MMT-driven economic structure would involve larger deficits and higher debt levels than those experienced in an economic structure shaped by mainstream economic thinking. This belief is supported by the call for a central bank that consistently sets interest rates near or at zero, which, all else equal, would support deficit financing at lower economic growth rates rather than with higher interest rates if mainstream economic thinking was applied. The notion that a sovereign government cannot be forced to default appears to be a central tenet of MMT because of the view that money creation can substitute for taxes or borrowing to finance government. There have been, however, many instances of sovereign governments defaulting explicitly, or implicitly either by inflating the currency, renegotiating terms, or using other measures to address a difficulty in financing debt. These other options might be considered default by another name. While the United States does not appear to face any current concerns about the ability to sell its debt, were a collapse in the market to occur, it might be impossible or at least extremely costly to undertake the needed measures (higher taxes to stem the inflation appearing with money creation). In meeting its statutory mandate of minimizing long-run federal borrowing costs, Treasury may redeem and reissue debt at levels that far exceed the amounts required strictly from new deficit-financing activity. For example, Treasury issued $11.7 trillion in marketable debt in FY2019, which represented more than 70% of the federal marketable debt portfolio. Any dramatic increase in interest rates accompanying a debt crisis would thus likely generate higher interest rates not only for debt generated by new federal deficits, but also for a significant portion of the existing debt stock that is redeemed and reissued. For example, net interest payments during the Greek debt crisis (described below) increased by amounts equivalent to roughly $200 billion in FY2019 dollars, which would require significant tax rate increases, base broadening, or both if needed to meet a sudden change in interest obligations. If the federal debt position were viewed by the market to be unsustainable, it could lead to a collapse in the demand for Treasury securities that would cause a "debt cycle." In this case, an observation by some investors to sell or avoid federal debt issuances before they defaulted would raise federal interest rates, which would require more federal borrowing and could lead to further investor avoidance and interest increases. Beyond the significant effects on the federal borrowing position, such a process could also have ramifications elsewhere in the financial markets, as federal securities are often used as a currency substitute for overnight interbank lending and other activities central to general financial operations. MMT proponents also claim that government deficits must be small enough to limit inflation. It is unclear how this claim distinguishes MMT in a practical sense from the mainstream view, as mainstream macroeconomics would also support fiscal or monetary intervention to avoid significant increases in interest rates in response to rising debt. In the mainstream and MMT case, there is concern that by the time actors identify an urgent debt sustainability problem, it may be difficult to address. Such a situation would likely be accompanied by a negative economic shock that would make immediately raising taxes (net of spending) difficult, while increasing the money supply risks entering a debt spiral. In the MMT case, such a concern does not arise because of the assumption that the Federal Reserve could finance spending (an assumption at odds with institutional constraints discussed in the next section). Further questions arise when examining the applicability of MMT policies to the United States and other nations that already have relatively high real debt levels. In its most recent long-term budget outlook, the Congressional Budget Office (CBO) estimated that federal debt held by the public would rise from 78% of GDP in FY2019 to 92% of GDP in FY2029 and 144% of GDP in FY2049, well beyond the historical peak. It is possible that a high existing debt stock could practically restrict the availability or effectiveness of MMT-supported fiscal policies in managing business cycles, given the institutional constraints discussed in the next section. However, currently there are no signs that the federal borrowing capacity is near exhaustion in the short term or medium term, as interest rates remain below Fed-targeted levels. Recent international experiences speak to the complexity of borrowing capacity. Both Greece and Japan experienced rapid growth in government debt in the past decade. Organisation for Economic Co-operation and Development (OECD) data on general government debt (including municipal government debt) indicate that Greek debt rose from 115% of GDP in 2006 to 189% of GDP in 2017, while Japanese debt rose from 180% of GDP to 234% of GDP over the same time period. A loss in market confidence in Greek debt led to a severe recession there, with GDP contracting by 9 percentage points in 2011, and long-term interest rates reaching 22% in 2012. Japanese borrowing was viewed to be more sustainable despite being higher, with relatively flat GDP levels and long-term interest rates close to zero in recent years. Applying MMT to Federal Institutions When weighing the merits of structural changes, it may be useful to consider the characteristics of the institutions with power to address business cycles in the current system. Members of the Federal Reserve Board of Governors have typically been chosen without regard to political affiliation. The Federal Reserve's Federal Open Market Committee meets at least every six weeks to adjust open market operations as needed, allowing for a relatively quick and efficient way of implementing monetary policy modifications. Fiscal policy decisions managing business cycles are largely made through enactment of new legislation, and thus may be affected by the legislative calendar and other political considerations. In practice, these factors may make the evidential threshold for a fiscal policy response higher than that for action by the Federal Reserve. The Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ), for instance, was enacted in part to alleviate effects of the Great Recession in October 2008, 10 months after the start of the recession as identified by the National Bureau of Economic Research. In contrast, the Federal Reserve also undertook significant action in fall 2008, but was also able to begin taking countercyclical actions as early as September 2007. One may also wish to be mindful of the current independence of the Treasury and the Federal Reserve. In MMT, these groups are treated as a single entity, which is equivalent to assuming that the Federal Reserve can make funds available to the Treasury to spend as it needs. Present laws prohibit the Federal Reserve from lending or allowing overdrafts to the Treasury, so the Treasury must sell bonds at whatever interest rate prevails when revenues are inadequate to finance spending. The Federal Reserve faces no statutory limits on how much federal debt it may purchase in the secondary market, however, so that it can lend indirectly. The degree of independence between the Federal Reserve and the Treasury has varied over time, however, with periods of relatively high cooperation. Even if the Federal Reserve can lend indirectly to the Treasury, it has different objectives than cheap financing of the debt. The Federal Reserve acts under a statutory mandate of "maximum employment, stable prices, and moderate long-term interest rates." If the Federal Reserve determines, for instance, that such a mandate warrants contractionary policy, it has the authority to enact contractionary policy, even if such actions would negate expansionary fiscal policy efforts. It is possible, therefore, that MMT-supported policies may need the support of both federal policymakers and Federal Reserve actors to take full effect. Economists have justified delegating this authority to the Federal Reserve on the ground that an insulated institution is more likely to choose policies consistent with low inflation. If correct, subordinating the Federal Reserve could result in a choice of policies under the MMT framework that removes this check against high inflation. References Barro, Robert J. "On the Determination of the Public Debt." Journal of Political Economy 87, no. 5 (October 1979): 940. Bell, Stephanie. The Hierarchy of Money. The Jerome Levy Economics Institute, Working Paper Series 231, April 1998. ââ. 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Introduction U.S. Energy Information Administration (EIA) has forecast U.S. coal production to decline through 2050, with the sharpest reduction to occur by the mid-2020s. Consequently, the coal industry's decline has contributed to economic distress in coal-dependent communities, including increased unemployment and poverty rates. In response, the Obama Administration launched the Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) Plus Plan, which addressed the coal sector's decline through funding for (1) economic stabilization, (2) social welfare efforts, and (3) environmental efforts. The economic elements were organized within the POWER Initiative, a multi-agency federal initiative to provide economic development funding and technical assistance to address economic distress caused by the effects of energy transition principally in coal communities. Although the initiative began as a multi-agency effort as part of the POWER Plus Plan, the POWER Initiative currently operates as a funded program administered by the Appalachian Regional Commission (ARC) in its 420-county service area. This report considers the background of the POWER Initiative and the broader effort of which it was originally a part, the POWER Plus Plan. It broadly surveys the state of POWER elements in the current administration, including elements of the initiative in the Economic Development Administration (EDA), the Appalachian Regional Commission (ARC), and funded efforts for abandoned mine land reclamation. The Appalachian Regional Commission's POWER Initiative program is the largest of these, and the only program to retain the POWER Initiative branding. This report considers its scope and activities as well as its funding history. The POWER Initiative is supported by Congress as reflected by consistent annual appropriations. The POWER Initiative may also be of interest to Congress as an economic development program that actively facilitates and eases the repercussions of energy transition in affected communities in Appalachia. More broadly, in light of the projected continued decline of the coal industry, as well as proposals to address greenhouse gas (GHG) emissions from hydrocarbon combustion, congressional interest in programs to address economic dislocations as a result of energy transition is likely to accelerate. Background The POWER Initiative was launched in 2015 as a multi-agency federal effort to provide grant funding and technical assistance to address economic and labor dislocations caused by the effects of energy transitionâprincipally in coal communities around the United States. The POWER Initiative was a precursor to a broader effort known as the POWER Plus Plan (dubbed POWER+ by the Obama Administration). This latter plan was launched using preexisting funds, and was intended to develop an array of grant programs across multiple agencies to facilitate energy transition and ameliorate the negative effects of that transition. Most legislative elements of the POWER+ Plan were carried out under existing authorities rather than new legislation. Certain features continue to be activeâparticularly elements of the POWER Initiative within the ARC and the EDA. The POWER+ Plan The POWER+ Plan was organized to address three areas of concern: 1. economic diversification and adjustment for affected coal communities; 2. social welfare for coal mineworkers and their families, and the accelerated clean-up of hazardous coal abandoned mine lands; and 3. tax incentives to support the technological development and deployment of carbon capture, utilization, and sequestration technologies. The POWER+ Plan was proposed in the FY2016 President's Budget as a multi-agency approach to energy transition. As proposed, the POWER+ Plan involved the participation of the Department of Labor (DOL), the Appalachian Regional Commission (ARC), the Small Business Administration (SBA), the Economic Development Administration (EDA), the Department of Agriculture (USDA), the Environmental Protection Agency (EPA), the Department of the Treasury, the Department of Energy (DOE), the Corporation for National and Community Service, and the Department of the Interior (DOI). The FY2016 President's Budget requested approximately $56 million in POWER+ Plan grant funds: (1) $20 million for the DOL; (2) $25 million for the ARC; (3) $6 million for the EDA; and (4) $5 million for the EPA. In addition, a portion of USDA rural development fundsâ$12 million in grants and $85 million in loansâwere aligned to POWER+ Plan priorities. Also, the plan sought $1 billion for abandoned mine land reclamation and an additional $2 billion for carbon capture and sequestration technology investments. The POWER Initiative The Obama Administration described the POWER Initiative as a "down payment" on the POWER+ Plan, and focused on the Plan's economic development elements using existing funding sources ( Table 1 ). Those existing funding sources (or "Targeted Funds" in Table 1 ) refer to funds that were set aside by the respective federal executive agency in support of the POWER+ Plan in FY2015. These funding amounts are only those funds made available initially, and do not account for additional appropriations or set-asides made available as the program progressed. The EDA was initially designated as the lead agency for the POWER Initiative, with significant funding elements from the ARC, SBA, and DOL. While led by the EDA, POWER Initiative grants were determined by the individual awarding agency. Grants were divided into two funding streams: (1) planning grants; and (2) implementation grants. The POWER Initiative was announced in March 2015, with the first tranche of grants awarded in October 2016. With the exception of certain parts of the POWER Initiative and funding for reclaiming abandoned mine land (AML), broad elements of the POWER+ Plan were not enacted by Congress. Since the end of the Obama Administration, the ARC is the only federal agency with a POWER Initiative-designated program. POWER Elements in the Current Administration As of November 2019, the POWER Initiative exists solely as a funded program of the ARC, and is no longer a multi-agency initiative. However, certain other elements originally included in the POWER+ Plan and the POWER Initiative continue to receive appropriations and continue to be active, but they are not designated as such by the Trump Administration. These elements are discussed below. The EDA Assistance to Coal Communities (ACC) Program The EDA continues to receive appropriations for its Assistance to Coal Communities (ACC) program. The ACC program was a grant-making element launched as a part of the EDA's role in the POWER Initiative. In FY2019, $30 million was designated for the ACC program as part of appropriations to the EDA. The FY2019 appropriations represent the fifth consecutive fiscal year of funding for the program, and reflect 300% growth from approximately $10 million appropriated in FY2015. However, the Trump Administration's FY2017 Budget sought to eliminate the ACC program; and subsequent Administration Budget requests have proposed eliminating the EDA entirely, including the ACC program. While the ACC is an active outgrowth of the POWER Initiative and POWER+ Plan, it is no longer associated with the POWER Initiative and instead is identified as a separate program drawing on Economic Adjustment Assistance (EAA) funds. Because it draws on EAA funding, ACC investments may only be used for projects located in, or substantially benefiting, a community or region that meets EDA distress criteria. EDA economic distress is defined as "An unemployment rate that is, for the most recent 24-month period for which data are available, at least one percentage point greater than the national average unemployment rate; Per capita income that is, for the most recent period for which data are available, 80 percent or less of the national average per capita income; or A Special Need, as determined by EDA." Abandoned Mine Land (AML) Reclamation Investments One of the pillars of the POWER+ Plan was funding for the social welfare of miners and for cleanup and reclamation of former mine and other coal-related "brownfield" sites. While certain legislative proposals for these purposes were never enacted, Congress has approved annual funding since FY2016 for economic development grants to states for Abandoned Mine Land reclamation. The FY2016 appropriation of $90 million directed funds to be divided equally among the three Appalachian states with the greatest amount of unfunded AML needs ( P.L. 114-13 ). The $105 million appropriated for FY2017 set aside $75 million to be divided this way, with the balance of that amount being available more broadly to other eligible AML reclamation applicants ( P.L. 115-31 ). FY2018 appropriations of $115 million set aside $75 million for the three states demonstrating the greatest unmet need ( P.L. 115-141 ). For FY2019, the Department of the Interior, Environment, and Related Agencies Appropriations Act, 2019, Division E of the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), appropriated $115 million, which was subdivided further: $75 million for the three Appalachian states with the greatest amount of unfunded needs; $30 million for the next three Appalachian states with the "subsequent greatest amount of unfunded needs"; and $10 million for federally recognized Indian Tribes. The ARC's POWER Initiative The Appalachian Regional Commission (ARC) is the only federal agency that continues to receive regular appropriated funding for energy transition activities under the POWER Initiative designation. While the POWER Initiative was launched as a multi-agency effort, only the ARC chose to designate its contributions as the POWER Initiative. About the ARC The ARC was established in 1965 to address economic distress in the Appalachian region (40 U.S.C. Â§14101-14704). The ARC's jurisdiction spans 420 counties in Alabama, Georgia, Kentucky, Ohio, New York, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia ( Figure 1 ). The ARC is a federal-state partnership, with administrative costs shared equally by the federal government and member states, while economic development activities are federally funded through appropriations. Thirteen state governors and a federal co-chair oversee the ARC. The federal co-chair is appointed by the President with the advice and consent of the Senate. Scope and Activities The ARC's POWER Initiative program prioritizes federal resources to projects and activities in coal communities that exhibit elements that produce multiple economic development outcomes (e.g., promoting regional economic growth; job creation; and/or employment opportunities for displaced workers); are specifically identified under state, local, or regional economic development plans; and have been collaboratively designed by state, local, and regional stakeholders. The ARC funds three classes of grants as part of the POWER Initiative: (1) implementation grants, with awards of up to $1.5 million; (2) technical assistance grants, with awards of up to $50,000; and (3) broadband deployment projects, with awards of up to $2.5 million. For FY2019, $45 million in grant funding was made available, of which $15 million was reserved for broadband projects. POWER investments are subject to the ARC's grant match requirements, which are linked to the Commission's economic distress hierarchy. Those economic distress designations are, in descending order of distress distressed (80% funding allowance, 20% grant match); at-risk (70%); transitional (50%); competitive (30%); and attainment (0% funding allowance). Special allowances at the discretion of the commission may reduce or discharge matches, and match requirements may be met with other federal funds when allowed. Designations of county-level distress in the ARC's service area are represented in Figure 1 . POWER investments are also aligned to the ARC's strategic plan. The current strategic plan, adopted in November 2015, prioritizes five investment goals: 1. entrepreneurial and business development; 2. workforce development; 3. infrastructure development; 4. natural and cultural assets; and 5. leadership and community capacity. Given its programmatic breadth, POWER investments may link to any one of these investment goals. POWER investment determinations are made according to annual objectives outlined in the request for proposals, as well as broader investment priorities, which are building a competitive workforce; fostering entrepreneurial activities; developing industry clusters in communities; and responding to substance abuse. The ARC has designated $50 million annually ("activities in support of the POWER+ Plan" ) for POWER activities ( Table 4 ). According to the ARC, over $148 million in investments have been made since FY2016 through 185 projects in 312 counties across the ARC's service area, leveraging an estimated $772 million of private investment. Figure 2 is a representation of the ARC's POWER Initiative projects tallied by state. Funding History While the POWER Initiative does not receive appropriations separate from that of the ARC as a whole, congressional intent is signaled in House Appropriations Committee reports, which specify amounts to be reserved for the POWER Initiative. In committee report language, it is described as activities "in support of the POWER+ Plan." Table 4 shows appropriations set aside for the POWER Initiative from FY2016 to FY2019, and for the ARC as a whole. The ARC received approximately $610 million in requests for POWER Initiative grant funding from FY2016 to FY2018 ( Table 5 ). This suggests that there was unmet demand for the POWER Initiative in the Appalachian region alone (the ARC's service area, as depicted in Figure 1 ). Policy Considerations The Energy Information Administration projects that coal production overall will continue to decline as a consequence of falling market demand. In particular, the EIA forecasts coal to account for 24% of U.S. electric energy generation in 2019 and 2020, down from 28% in 2018. By 2050, coal is projected to decline to 17% of U.S. electricity generation, nuclear is projected to account for 12%, renewables 31%, and natural gas 39%, according to EIA projections. Coal's decline is a function of market forces, particularly its higher cost relative to natural gas and renewable energy options. In the future, under current policies, coal's cost disadvantage is expected to continue, and could be accelerated if policies are adopted to reduce GHG emissions that contribute to climate change. Even with federal incentives to invest in carbon capture, utilization, and storage as a means to mitigate fossil fuel-related emissions, coal may still not be competitive in many situations. As a result of falling demand, noncompetitive coal producers and their communities are expected to face continued economic dislocation. Should it wish to broaden or intensify federal efforts to address energy transition in local communities, Congress may have several options. In the past, Congress has demonstrated bipartisan interest in the federal government providing assistance to populations adversely affected by the ongoing energy transitions. It has done so through its appropriations for the ARC's POWER Initiative, the EDA's ACC program, and the AML investments. In combination with evidence of unmet demand for federal assistance, as measured by unfunded requests to the ARC ( Table 5 ), Congress may consider reviewing the balance among needs, appropriations, and effectiveness of past efforts. Congress could conduct a review of the POWER Initiative and the efficacy of its performance and resources. This potential review suggests some particular considerations: Geography : While the ACC is available for the nation as a whole, the ARC's POWER Initiative is restricted to the ARC's service area in the Appalachian region. Congress may consider expanding the POWER Initiative to be available more broadly across the nation, or in a more targeted fashion as demonstrated by the ARC's program. Alternatively, funding could be made available nationwide to any eligible coal community, such as through other federal regional commissions and authorities and/or EDA regions. Funding : Projections of U.S. coal production (cited earlier) suggest that the ongoing transition in U.S. energy systems may lead to further localized economic distress without the development of new regional opportunities. Congress may consider the level of funding for POWER Initiative programs in the context of those economic needs. Funding levels could be tied to the overall scale of the challenge, allocated to areas with the greatest need, and made in consideration of data-driven evaluations of the program effectiveness. In assessing scale, Congress may consider macroeconomic factors as well as social and environmental policy objectives. Energy Type : Congress may also consider expanding the POWER Initiative program beyond the coal industry to other energy industries or regions perceived to be in decline. For example, economic strain and job losses following the closure of other electrical generating units, such as aging nuclear power plants, may signal additional types of displacement. EIA forecasts anticipate a modest decline in nuclear power generation by 2050 as older, less efficient reactors are retired. Nuclear-industry communities may face similar issues of economic distress and labor dislocation. Congress may also consider other public policy goals, such as reducing GHGs, to assist in promoting renewable energy types and carbon capture technologies. Should Congress consider such efforts, the ARC's POWER Initiative program could serve as a potential model to be scaled or replicated as needed. In addition, other models have also been proposed in bills introduced in the 116 th Congress that would assist coal communities in transition. Concluding Notes Although the POWER+ Plan was not enacted in its entirety, some of its legacy programs continue to receive annual appropriations and remain active. The persistence of such programs suggests support among many policymakers for federal efforts to rectify, or at least attenuate, economic distress as a consequence of energy transition. In addition, were Congress to pursue policy efforts reflective of broadening concern for climate issues, a POWER Initiative-type program could be developed to also facilitate energy transition from fossil fuel-based energy sources to a mix of renewables and other alternatives. Although the POWER+ Plan did not continue beyond the Obama administration, several constituent programs have continued to receive congressional backing, and applicant volumeâat least in the case of the ARC's POWER Initiativeâmay suggest further demand for additional federal resources in addressing energy transition issues. More broadly, these mechanisms could also be purposed to facilitate federal resources for other related issues, such as related to ecological/environmental resilience and adaptation. The POWER Initiative, as originally conceived or in its current form as a program of the ARC, has not been subjected to a formal evaluation by the U.S. Government Accountability Office (GAO) or other research organization of its effectiveness as either a mechanism for alleviating community economic distress caused by the declining coal industry, or economic development more broadly. One recent GAO report mentioned the Assistance to Coal Communities program, but did not seek to analyze its activities or efficacy. Similarly, older GAO reports exist that feature the Abandoned Mine Land Reclamation program (prior to its current configuration), and the Appalachian Regional Commission, but may be of limited relevance when evaluating current programming, including more recent activities such as the POWER Initiative. Meanwhile, a number of anecdotal and media reports appear to tout the POWER Initiative's success and viability. The ARC, for its part, reports that the POWER Initiative has "invested over $190 million in 239 projects touching 326 counties across Appalachia." According to the ARC, those investments are "projected to create or retain more than 23,000 jobs, and leverage more than $811 million in additional private investment." In the ARC's 2018 Performance and Accountability Report, the ARC reported that the annual outcome target for "Students, Workers, and Leaders with Improvements" in FY2018 was exceeded by 55% "likely due to" investments from the POWER Initiative; similarly, the ARC reported the outcome target for "Communities with Enhanced Capacity" in FY2018 was exceeded by 125%, "due in part to priorities established for the POWER Initiative." The same report also noted that the ARC launched a new monitoring and evaluation effort on the POWER Initiative in September 2018 encompassing "approximately 135 POWER grants" in FY2015-FY2017. The results of that assessment have not yet been released.