Will We Be The Lamest Generation?

By Dan Kervick

Matt Yglesias is now hawking an initial White House budget proposal that is apparently being negotiated by Tim Geithner.   Predictably, the two-stage proposal involves entitlement “savings” and cuts in both stage one and stage two, and backs off a bit on higher tax rates on the rich.  In exchange, the White House gets some more stimulus spending.  Yglesias advises Republicans to tell Obama:

… he can have his stimulus and he can even have higher tax revenue if he really wants it, but that the price is giving up his obsession with higher rates. Is he more interested in soaking the rich or in creating jobs? I don’t think Obama says no to a deal like that, and if he does lots of sensible liberals (like this guy) will call him out on it. Then we can put this sorry episode behind us, proclaim the Grand Bargaining Era done for, and hopefully move on to other things.

It seems strange to endorse a grand bargain in order to move on and proclaim the Grand Bargaining Era over.  Maybe next week Democrats should propose the elimination of the minimum wage so we can then declare an end to the Era of the Fight Over the Minimum Wage?

Yglesias follows up today with a few more cautionary words for “sensible liberals”, and issues some implicit admonishments to the left.   He instructs us on the true purpose of taxation:

The reason a sensible person might want more revenue rather than less in a budget deal is that more revenue might allow you to minimize cuts in spending on worthwhile causes. But at the end of the day the budget of a sovereign state that borrows money in its own currency is all about spending levels. The proper goals of a budget negotiator are to maximize cuts to bad programs and minimize cuts to good ones. When higher taxes helps achieve the latter goal, that’s great. When it doesn’t, then who cares?

The fact is, though, that our national government doesn’t just borrow in its own currency – it issues that currency.  And so its ability to spend is not constrained by its tax revenues.   We don’t need to tax the the rich – or anyone else for that matter – in order to spend.  We only need taxes as a way of managing excess demand and preserving a stable currency while achieving other public purposes.

What are some of those other public purposes?  Well if, like me, you are a person who thinks severe income inequality is both socially and economically disadvantageous, and that the differences in political power that always accompany differences in wealth undermine democracy and distort the social choices made by our political system, then the attempt to achieve some degree of economic leveling through the tax system is a worthy goal in itself, apart from whatever additional demand management benefits you think might come from collecting more revenues. Bringing the plutocracy down out of the Olympian, thunderbolt-raining heights and forcing them to live on Earth with the rest of us is good national policy – even if it just means throwing some of their money in the ocean.   However, it would be even better to offset any demand drains created by increased taxes by more aggressive spending.

So here’s my proposal.  This is what I think Americans should be calling for our government to do:

  1. Allow the Bush tax cuts to expire but then enact a full middle class cut tax for folks under $250 K in order to offset entirely the impact of the expiration on that group of Americans.  Also extend the payroll tax holiday.
  2. Repeal of the Budget Control Act of 2011 – the “fiscal cliff” act.   Just cancel it.
  3. Dare Republicans not to pass this tax cut proposal, and thereby to declare themselves the eternal enemy of the American middle class.
  4. Expand spending dramatically on efforts to rebuild our material and human infrastructure, extend and subsidize educational opportunities, and engage the citizenry – especially young people – in an effort to save our planet.
  5. Propose NOTHING else – no additional cuts, no additional revenues. Walk away completely from budgetary grand bargaineering.
  6. Continue to run a healthy-sized deficit, one even larger than the present one. That is the stimulus we need.
  7. Stop lying to the American people about the nature of the US public debt and US government liabilities. Let them know that the US government can always pay its debts and operates under no solvency constraint.
  8. Make it clear to the US public that a bond vigilante attack can only occur if the Fed permits and encourages it; and that the latter can only occur if the Congress permits the Fed to take that step.   The debt crisis is The Big Lie of our time.
  9. Pack folks like Bowles, Simpson, Johnson, Peterson, Rogoff and Reinart in a box and ship them to northern Europe, where all of them can, to their hearts’ content, hawk their socially paralyzing budgetary gloom and doom to an audience of priggish budget moralists who are apparently fond of intentionally destroying economies, creating voluntary recessions and sustained stagnation, inflicting pain for pain’s sake and throwing their unemployed young people out on the street to be devoured.  (OK, this one is just a fantasy.)

Once these things are done, the American public will can finally wake up and understand the self-determining power it has in its hands to shape its future.  Then we can declare an end not only to the Era of Grand Bargaining but the Era of Having Our Heads Up Our Asses.

My son is graduating from college in May, and I think frequently these days about the sorry world we are depositing on his generation’s doorstep.   Most mainstream pundits, and the forces of austerity and public debt phobia, would have us believe that the problem we are creating for my son’s generation is a mountain of burdensome public debt.   But that is simply false.   Public debts are also public assets, and future generations will always be able to consume, in their own time, everything they can produce at that time.  All this budget fussiness is a sideshow. It makes no sense to be trying to micromanage public expenditures for 20 and 30 years down the road.  We need to go big on national investment projects, employ all our people and grow our economy. The budget will then take care of itself.

But here is my fear about the future:  When our children and grandchildren look back to assess our performance during this era, they will bitterly note that during a time when we should have been aggressively expanding public investment to employ all of our many unemployed people, launch bold projects for national renewal and progressive development, save our planet and light a rocket under our massively underutilized productive capacity to build a prosperous future for our progeny, we instead chose to get bogged down in ridiculous and priggish bean-counting and budgetary hand-wringing.  Right now, it looks like we will be known as the generation that chose stagnation, blinkered bookkeeping and fiscal tunnel vision over dynamic national progress – a weak, cowardly and unimaginative people – the Lamest Generation.

For me, a bold vision of nation progress and prosperity requires a new, aggressive commitment to social and economic equality.   I believe democracy is an excellent thing and the only long-term political solution to social despair, stagnation and unfreedom; and that genuine political democracy requires a significant degree of economic democracy. There is no realistic way of moving toward these ideals in a reasonable time frame that does not require taking active steps to re-work the distribution of wealth and income in our society.  I would like to see progressive-thinking Americans acknowledge these goals frankly, without embarrassment, and get to work trying to accomplish them.

Think of the anti-feudal land redistribution measures of the past as a model. The purpose of such measures certainly wasn’t to balance public budgets.  It was to change the social order and build a more equal and prosperous future for all.  That’s where we are now in our new struggle against the staggering inequality, exploitation, economic oppression and social dysfunction we face as we move into 2013.  I don’t want some sort of “bargain” with plutocrats to preserve the neo-feudal order that has been delivered by four decades of neoliberalism.  We don’t need a miserable bargain in which we sign off on plutocracy in exchange only for a few bits of additional spending that the plutocrats allow us to undertake so we might employ just a few more people out of the armies of humanity that they have driven into involuntary unemployment, and at the same miserable wages the rest of the folks at the bottom receive.  And I certainly don’t want that bargain if we have to trade away even more of the social benefits that have already been eroding for decades.

I want to fight the plutocrats and lick them – not deal with them.   After decades of having their standards of living decreased, and seeing a once-vibrant democratic political order replaced by a neo-feudal hierarchy that has frozen us all into socially immobile castes and political subordination, the US middle class, working people and the poor need to join forces to first draw a line in the sand on further cuts of any kind, and then get active in reclaiming a society based on shared prosperity, democratic citizenship and an egalitarian social contract.

33 Responses to Will We Be The Lamest Generation?

  1. So can MMT also be expressed as an acknowledgement that the fiscal/monetary policy divide is a false dichotomy loaded with political implications?

    Under a fiat currency managed according to MMT principles, fiscal policy becomes and subsumes monetary policy.

  2. Great post, Dan. I would throw in government-guaranteed healthcare/college education to that list.

    I’m not familiar with your history in the academic/business/political world, but do you see any indication from where you sit that MMT has “caught on” or is on the rise? It’s hard for me to judge objectively because I’ve become very interested in it over the past several months and a lot of the blogs/books I read are related to it, but it seems like people are talking about it a lot more at least?

  3. Dan,

    I’m strongly in favor of income leveling. Can you be more specific? What would income leveling look like? Will it end poverty? Will we tax all income above X dollars at +-90%? Will the minimum wage rise and how high? Will the social safety net be significantly expanded? Would you like to see the retirement age drop to roughly 60? Would you like to see stronger trade barriers?

    Also, more production will, at least in the near term, impact the collective carbon footprint. Ever consider a shortened workweek, say, 35 hours to mitigate this effect?

    Do you believe there should be any limits to production/growth or is life largely about producing and consuming as much as our efforts will allow? How short of the mark are we production wise, and what needs to be produced more than it is already, at least domestically?

    • Lets start with,the bush tax cuts. Then address further issues. I think the estate tax needs to be increased significantly to stop passing on wealth to the next generation and creating a society of nobles and serfs.

  4. Dan– I always love your posts, and spread your links and quotes throughout blogdom…

  5. Dan, where do I sign up?

  6. Your proposals are so wonderful. Now all we need is someone in the government to put them into practice. (Sigh!)

    • Personally, I’m trying to reach young people now. They are seemingly the only people in our society who don’t have a time horizon based on the political campaign cycle and the cable news schedule.

  7. that genuine political democracy requires a significant degree of economic democracy.

    Yeah, it does. Voters with more to risk should get more votes. Why should some lazy soap opera fan living in Section 8 housing have the same electoral input as an employer with an hundred employees? And why should government employees at any level have a vote at all?

    • charles fasola

      Your statements are among the most moronic I have ever been subjected to. You hate government so damned much you moron? How about you and I imagine together that there is none; along with all of the protections government affords those like you? Then let’s find a means to get together and make survival of the fittest our reality. Do you comprehend moron? It’s the only way those of your ilk can be taught what would be a very sobering and might I include very painfull lesson.

  8. The 12-word platform:

    1. Medicare for All
    2. End the Wars
    3. Tax the Rich
    4. A Jobs Guarantee

    Note that we want to tax the rich not to raise revenue, but to prevent them from using their loose cash to buy the government, and to prevent the development of an aristocracy of inherited wealth.

  9. Great post.

  10. Another great Post! Glad to see the collaboration w/ Lambert on the platform! All I miss is a reference to PPCS as a way to change the political environment to enable the platform.

  11. Excellent. Excellent. Excellent post. Well said, and thank you. Just the kind of engaged, politically astute commentary MMT needs to embrace in order to get to the next level.

    I too have a son who is recently out of grad school. I too have felt deep anxiety about the degree to which my generation has let itself be brainwashed and lied to for the sake of a few petty conceits and a few prejudices and a few toys from the consumer electronics show. But take heart. The election just past began the work of washing the Tea Party down the drain of history. It was a uniting and unifying experience that leaned heavily on the very themes you name – “shared prosperity, democratic citizenship and an egalitarian social contract.”

    Read: “Restore jobs and growth, Crush voter suppression by voting like your future depends on it, and Soak the crooked, lying, low-down Rich, starting with Rich-Guy-In Chief, Mitt-the-Twit Romney!”

    We have known for a while now that Barack Obama is a very imperfect instrument in the service of these goals. But, for once, a politician’s cliche has turned out to be the simple truth. In 2008, Obama said repeatedly, “It’s not about me, it’s about you!” And so it is – it’s about us, and the restoration of a progressive coalition that is just beginning to gain traction. Don’t agonize too much over the things Obama gives away in the “medium term”. We will take them all back and more, and help a newer, better generation do what they already, clearly intend to do – and that is save the world. For all generations, and all that are to come.

    • We may just do that! For example, Obama’s far too easy cave-in in offering the $400 B reduction in public health care spending won’t matter at all, if we pass Medicare for All in the next couple of years. We all have to remember that a lame duck President gets weaker and weaker as time goes on. If we get a progressive reaction to this deficit reduction nonsense, then two years from now we could have a Congress willing to override Robamney care with Medicare for All.

      • On a tangential note related to healthcare…While Medicare for All would be a great step forward, the U.S. healthcare system needs (IMHO) a lot more than that to become truly effective (including harming fewer people). I’ve recently been reading books like “Overdosed America” and “Selling Sickness” and they paint a picture of Big Pharma control over the healthcare system that’s shocking, even for someone like me who generally believed this was the case. But that’s a topic for another day.

  12. Unless I badly misunderstand the basic premises of MMT, since taxes don’t do anything but curtail private sector spending, why tax anyone? That is, until inflationary pressure builds and then yes, start taxing the upper earning levels and larger business incomes.
    My laundry list of ‘things we must do’
    0. Lower the global human population in the long run to a maximum of 3.5 billion. Tremendous education effort needed here.
    1. Eliminate carbon extraction and burning or lower it to at least 1/97th of current level.
    2. Build a global mass transit system-high speed rail now has a potential upper limit of 431 km/h (268 mph). I see personal auto use dropping by 85% -or more-once a complete mass transit system is in place.
    3. Fund life long education on a permanent basis-no cost. The only requirement for enrollment would be a willing spirit ready to learn.
    4. Health care for everyone-the medical delivery system, meanwhile, would have to be fixed. Funding a broken system makes no sense.
    5. Subsidized food and housing for everyone who needs these.

  13. @Ray P.

    Regarding:

    “… since taxes don’t do anything but curtail private sector spending, why tax anyone? That is, until inflationary pressure builds and then yes, start taxing the upper earning levels and larger business incomes.”

    A few good reasons come to mind.

    1.) In addition to curtailing private sector spending, heavy taxes on very wealthy people reduce the number of chips available to them to wager in the global neo-liberalized economic casino. It’s not like we want to take away yachts the size of destroyers, a third vacation McMansion or that fifth antique fighter plane someone has his eye on. But piling up tens and hundreds of millions of dollars over and above real spending (of any kind or magnitude) is a systemic threat to the only real economy the rest of us have got.

    2.) When people get too rich for their own or anyone else’s good, their personal psychological quirks become dangerous to things like democracy and a truth-based public discourse.

    3,) More generally, economic inequality cannot continue to grow at anything like the present rate without becoming, in and of itself, neo-feudal in character. One in seven Americans is *already* being hounded by creditors’ agents over debts which they can neither pay nor legally default upon. The trend is that plutocratic control of government, deploying ALEC-authored laws, will more or less rapidly reduce all of us to debt peonage – which only violent revolution or civilizational collapse will then be capable of ending.

    You did ask.

    Cheers

    • a third vacation McMansion

      When some filthy rich social parasite builds a McMansion a number of guys get paid for supplying materials and putting it together. They take their paychecks, cash them for fiat paper, and then pay taxes, buy groceries, make mortgage and car payments, pay for their kids school clothes, and deposit a few bucks in the church collection plate. No McMansion, none of this happens. Poor people don’t employ anybody, only people that have money can remit it to others for their labor.

      When people get too rich for their own or anyone else’s good

      And exactly how rich would that be?

      One in seven Americans is *already* being hounded by creditors’ agents over debts which they can neither pay nor legally default upon.

      There’s only one entity that can classify a person as a debtor without that person entering into a contract. That entity is the government. There is no debt if there is no borrowing, which, except in the case of the government, is done of one’s own free will. I can’t owe you money if I don’t borrow it from you, unless you’re the government.

      • Actually, Chuck poor people do create sales when they have money to spend, and when business people see sales then they make jobs. On how wealthy people should be allowed to get, there’s no way to I’d say not so wealthy that their wealth gives them too much political power. How much is that? It’s a matter of judgement, which means it’s up to people to make that judgement, discuss it with other people and try to come to a consensus. It won’t do to make the argument that “how much” can’t be “objectively” determined. First, what’s meant by objective will be a problem if discussed seriously. But second, you can say that about any judgement including the judgement that we should be relying on “the market” rather than our own decisions about how to allocate resources in our society. And third, how we decide these matters of judgement in a democratic society is through democratic processes of decision making. So, I say let’s start asking the question of how rich we ought to allow people to get and let’s start entertaining proposals. As for me, I think $100 million is rich enough for one family, and that all wealth above that number ought to be taxed away to prevent plutocratic corruption of a democratic open society.

        • , you can say that about any judgement including the judgement that we should be relying on “the market” rather than our own decisions about how to allocate resources in our society.

          “The market” is the sum of the individual decisions about how to allocate resources. You literally can’t get any more democratic than the free market, where everyone votes with their own money on the value of resources. Firms that no longer satisfy consumers, Montgomery Ward & Co. for instance, disappear and are replaced by others, like Walmart. Consumers voted with their money and Wards lost the election. Is that democratic enough for you or should some politician have defrauded the stockholders to keep the employees at work?

          all wealth above that number ought to be taxed away to prevent plutocratic corruption of a democratic open society.

          How, exactly, does a certain level of wealth produce the plutocratic corruption of a democratic open society? I hope that you’re not saying that the average citizen/voter can be led around by the nose by people with money and influence. That would demonstrate a low opinion of the common man and seems to indicate that some folks should assume the role of protector of that common man, to shield them from the wily but evil plutocrats that can so easily lead them down the garden path to penury and misery. If these common men are so naive and innocent as to be influenced by the plutocrats, aren’t they similarly vulnerable to the fairy tales produced by others? Who can these plebs believe? The BHO presidential campaign engaged in its own economic stimulus effort by directing millions of dollars to TV and other media outlets to spread a message created by highly paid spin meisters. No plutocracy there, is there?

  14. Charles Yaker

    Nice piece and great recommendations. Unfortunately. Obama is a corporate creation and Right of Center. We need someone left of center and that won’t happen until we stop voting for the lesser of two evils. Read what Michael Hudson had to say about the election (sorry I don’t have the link) but I do have Bruce Bartlett who admits that Obama is Right of Center and that he finds himself left of center. Think about what that means. http://www.theamericanconservative.com/articles/revenge-of-the-reality-based-community/

    There is no Left and we badly need a rabble rousing left to hold the Democrats accountable maybe that Left is the Green Party. More Liberals need to take them seriously. It may get the Republicans’ hopes up and worry the Democrates enough that they start moving left.

  15. Great post, Dan. I would like to see the following:
    1. the Bush tax cuts made permanent
    2. a permanent exemption of the first $40k of income from the federal income tax
    3. the abolition of the payroll tax.
    Goodbye, massive inequality!

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