NEP’s Stephanie Kelton Has Op Ed Piece in LA Times

Look, up in the sky! It’s a “fiscal cliff.” It’s a slope. It’s an obstacle course.

The truth is, it doesn’t really matter what we call it. It only matters what it is: a lamebrained package of economic depressants bearing down on a lame-duck Congress.

Read the entire piece here.

12 Responses to NEP’s Stephanie Kelton Has Op Ed Piece in LA Times

  1. I got an ‘error’ on the link.

  2. Speaking of “framing” — I don’t think these arguments about government spending and general prosperity can really change any minds.

    As a thought experiment, consider asking a far right billionaire or a grass roots Tea Party true believer if they agree that government spending can drive employment, GDP growth, and infrastructure improvements that would expand the productive capacity of the nation. I think that the billionaire and the average Joe Tea Partier would agree with all of that. They already accept all of that.

    The problem in persuading them lies elsewhere. Their objections include things like: (a) Using government to direct that much spending is immoral because government relies on a monopoly on force for that authority; (b) Using government to direct that much spending is stupid (to the point of immorality) because government is not competent to spend that much; (c) Using government to direct that much spending is suicidal because it can only drive up the price of domestic labor at a time in history where, to compete with the rest of the world, labor needs to reduce its demands, toughen up, and work harder; (d) Government stimulus deprives people of a struggle to survive but that struggle is a necessary motivator for people to improve their skills and to morally progress; (e) while certainly the gov’t could kite more checks to kick the can down the road and create the illusion of growing prosperity for a time, in fact it is our nation’s divergence from the above principles that is the root cause of these recurring problems — it is worth neglecting human suffering in our time, today, if it leaves future generations a tougher, more stand-up, moral society.

    (To be clear, that list of objections isn’t mine — it’s my understanding of what the far right is pushing for these days and why.)

    A lot of MMT rhetoric, like Kelton’s piece linked here, simply ignores all that skepticism of gov’t-as-organizer and gov’t-as-spender. It seems to me to rely on a not very critical belief in gov’t's capacity to spend for stimulus without creating much larger problems. Who’s mind will ever be changed by that?

    And it’s worth noting that the far right has to its advantage here the direct, lived experience of most people of government institutions. Going to the DMV or post-office is always a drag. Getting grandma’s medicare benefits in order is a maddening process that never quite fully works. The school district keeps hiring idiots to run the show. They built another bridge to nowhere. They’re building a lot of useless tanks and letting them rust. They’re threatening to stop building tanks which will mean layoffs for everyone in Pleasentville. They paid $500 for a hammer and $300 for an ashtray. They’re paying farmers to not grow food. Social security isn’t even enough to keep grandpa in his home. A woman at the grocery store bought a bunch of junk with foodstamps and then left in a car much nicer than mine. And you want the government to spend more?

    (Again, it’s not my argument — I think the debate is over how to administer gov’t spending and set goals and monitor it — but it’s the argument that I think is propping up the GOP in this fiscal cliff thing and that MMT arguments are failing to even acknowledge, let alone meet.)

    • Thomas, you are spot on. the republinuts continue to ignore facts and create vicious FUD to suit their agenda in order to shape perceptions of those who are less informed. They use soundbites that resonate with a lot of people. Keltons piece actually makes sense if one took time to dig into some rather boring logistical details, but most will not.

      A good point you make is a big part of the real agenda is who gets to determine how the spending pie gets split up and who pays how much back in taxes.

      Either way, the fact of the matter is that under our current monetary operating structure, deficit spending is necessary for economic growth. Who gets the benefits and who pays how much in taxes is what the debate ultimately becomes about.

  3. (d) Government stimulus deprives people of a struggle to survive but that struggle is a necessary motivator for people to improve their skills and to morally progress;

    That brings to mind some observations Corey Robin makes about conservatism:

    …the conservative valorization of capitalism envisions the marketplace as a kind of heroic battlefield, where genius warriors (called entrepreneurs) destroy their enemies, create new worlds, destroy old ones, and so on. And that everyone can be engaged in this Darwinian struggle — and wants to be engaged in it.[link]

    and, along the same lines

    I’ve been reading and writing all morning about Hayek, Mises, and Menger. And it occurs to me: the moral secret of capitalism, its existential fundament, is not that we are free to choose but that we are forced to choose. Only when we are confronted with the reality of scarcity, says the Austrian economist, only when we must reckon with the finite resources at our disposal, are we brought face to face with ourselves. In deciding how to deploy those limited resources—whether they be time, money, effort—we’re compelled to answer the great questions of life: What do I value? What do I believe? What do I want in this life, in this world? [link]

    Battling in the marketplace, confronting scarcity—sacrifice!—they’re not only necessary, they’re desirable, the conservative subtext goes. (That the sacrifice falls invariably disproportionately on those who can least afford it may not be, in this view, a defect but a feature —who better to benefit from its ameliorating effects?)

    I think the real resistance to MMT lies not in “misunderstanding” that “we’re going broke” or that “the government is like a household” (statements that I’ve never thought some of the speakers themselves—either President Obama or Speaker Boehner—believed) but, rather, at least partly, in more fundamental values regarding scarcity and abundance, sacrifice and excess, hardship and ease. Proponents of MMT seem to take at face value and address statements about what “can’t” be done—but it seems to me many of the objections to MMT and its policy recommendations are really about what “shouldn’t” be done.

    • Then why don’t they frame their arguments like that instead of telling us we’re running out of money so we need to lose our jobs and public services.

      Doesn’t wash.

  4. Thomas Lord and JeffW,

    Interesting comments. Those are issues that are ‘outside’ of the economic scholarship. Nevertheless, they are extrememly relevant and worthy of consideration in this battle of ideas. No easy answers here.

  5. Way to go, Stephanie! This is a link I can and will forward to all of my friends. Beautiful, lucid writng, clear exposition, perfect tone – an adult in the room making perfect sense.

    Thank you – Rich

  6. Letter in LA Times:

    http://www.latimes.com/news/opinion/letters/la-le-1225-tuesday-fiscalcliff-20121225,0,5312924.story

    Thank you for publishing Kelton’s explanation of the “fiscal cliff” and the need for deficit spending. It is sad to see Americans quarreling over whether to cut off one or two of their fingers to avoid cutting off a whole arm.

    Larry Kazdan

    Vancouver, Canada

  7. Craig Howard

    As a thought experiment, consider asking a far right billionaire or a grass roots Tea Party true believer if they agree that government spending can drive employment, GDP growth, and infrastructure improvements that would expand the productive capacity of the nation.

    Stop right there. Government spending cannot drive employment. It certainly can increase GDP growth because the GDP equation is rigged to include government spending.

    Economic growth is not a result of consumer spending; it comes from entrepreneurial investment. And entrepreneurs will not invest in expansion if the government threatens them with increased taxes on their efforts. This should not be hard even for liberals to understand.

    • So if the government builds a road it isn’t an investment, but if an entrepreneur builds a road and then puts a toll of on it, suddenly we have economic growth.

      If a government hires labor to work in a laboratory at the centre for disease control researching cures to serious illnesses this doesn’t drive employment. But if an entrepreneur hires a janitor to clean the beds at a tanning salon suddenly we have employment.

      Sounds rigged to me…

  8. John Rosenfield

    As an economic theory there’s nothing wrong with MMT. Some Keynesian and Post-Keynesian theorists such as Paul Krugman have stated their objections to part of MMT, but I leave those debates to academic economists. What is clear from MMT as well as Paul Krugman is their lack of clear recognition of the uncertainty in any economic theory or proposal due to the psychology of group behavior. The economist John Harvey has begun to recognize this important area of economics, but he has only scratched the surface in this area. Robert Shiller was one of the first economists to explore this complex area of economics. As he said in one of his writings, he turned to the Psychology Department at Yale to try to understand the economics in our modern era. Trust me that simply looking at some cognitive-behavioral theories in psychology about group behavior will prove to be insufficient. Psychodynamic as well as cognitive-behavioral psychology principles are important in understanding the total picture of economics. I can easily defend this statement to economists as well as psychologists.