The date: Aug. 5, 2011. This columnist had just celebrated his 22nd birthday. Those in the Obama administration were far less cheerful: S&P Global Ratings announced it would downgrade America’s credit rating for the first time ever, even though lawmakers had finally agreed to a hard-fought compromise on raising the debt ceiling.

“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” S&P said in its statement. Market strategists warned that “sovereign credit quality is going to remain under pressure for years to come.”

This episode could be considered a crowning achievement of the Tea Party movement, which traces its name back to a rant against the federal government from CNBC’s Rick Santelli in February 2009. It ushered in a wave of hard-line Republicans in the 2010 midterm elections, like Senator Mike Lee of Utah and Senator Rand Paul of Kentucky, who vowed to save the U.S. from “a mountain of debt that is devouring us.” Grover Norquist, president of Americans for Tax Reform, praised the debt-limit deal, saying that “in five to 10 years it will lead to a different country.”

Norquist was right. But probably not in the way he expected.

Since August 2011, the U.S. public debt has increased by almost $9 trillion, to $23 trillion, and virtually no one has batted an eye, S&P included. Benchmark 10-year Treasury yields are lower, not higher. Main Street hasn’t faced any hint of runaway inflation. Government debt hasn’t crowded out companies from borrowing and investing. Simply put, nothing the Tea Party warned about has come to pass.

Perhaps this is why, in what may ultimately be seen as a watershed moment, the House Budget Committee last month held a hearing titled “Reexamining the Economic Costs of Debt.” The session included testimony from four economists, including Randall Wray, a senior scholar at the Levy Economics Institute of Bard College and a leading thinker in Modern Monetary Theory. Though he wasn’t given much time to speak, when he did, he told lawmakers this: “We do not have to repay the debt — what we have to do is make the interest payments.”

If there were one sentence that captured the drastic change in economic thought over the past decade, that might just be it. (As a reminder, MMT argues that sovereign governments with their own currency can’t go broke and can spend until inflation becomes an issue.)

The shift from the Tea Party to MMT reveals two crucial and interrelated themes of the past 10 years. First, it shows that former Federal Reserve Chairman Ben S. Bernanke was right: “Monetary policy cannot be a panacea” to cure all that ails developed-market economies. Second, relying solely on central banks tends to create financial-asset distortions that foster income inequality and dissatisfaction among broad swaths of the world’s population.

Wray says Americans don’t seem to have confidence in their elected representatives to do the right thing when it comes to the economy. And perhaps Congress doesn’t believe in itself, either. “In the aftermath of the global financial crisis, there was a tremendous overreaction against fiscal policy in favor of putting all the trust in monetary policy,” he said in a phone interview. “It caused unnecessary suffering and secular stagnation in the U.S. and abroad. We can’t continue this way.”

Consider the Atlanta Fed’s wage-growth tracker for prime-age U.S. workers, currently at 3.9%. It bottomed out at a record low 1.6% at the end of 2010, down from 4.2% before the recession began. It didn’t reach 3% for another four years and still hasn’t reached the levels seen from 1999 through 2001.

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