How to Restore the Good Name of Government

By Joe Firestone

Why is it that Washington village “progressives,” and their associates in other parts of the country who are nevertheless part of the Washington village culture, often ask useful questions, but, almost always deliver, underwhelming answers? Here’s an example from Richard Eskow, probably the best writer at Campaign for the American Future.

How do we restore the good name of government spending, which is especially important during periods of high unemployment and slow growth like these? First, by supporting those politicians who are unafraid to make the case. Second, by demanding that the reluctant ones take a bolder stand – without mixing their messages between spending and premature austerity. Third, by rejecting the insanity that today’s Republican Party represents. Some in the GOP are even opposing infrastructure spending – as America’s bridges, schools, highways and dams decay around us.

Underwhelming, right? Why? First, because there aren’t too many politicians who are unafraid to make the case. Second, because people who are reluctant aren’t likely to respond to only “demands” from people who fiercely desire more government spending. Third, because merely rejecting Republican insanity is very unlikely to cut it, since that is what Democrats have been doing and it seems to be having little or no effect. And fourth, because the only way to restore faith in Government spending is to take actions that have consequences that are highly visible and unambiguously good for the vast majority of people. In other words, those who want to restore faith in Government spending have to get the Government to take actions delivering things for people that they see as important. So, how can this be done?

At this juncture, little can be done that involves the Congress because Republicans and Democratic corporatists won’t let it happen. They won’t legislate anything useful before the election.

Nor will they legislate anything useful after it unless 1) Democrats get a majority in both Houses and 2) Democrats who constitute those majorities are willing to move away from corporatism and legislate in the interests of people. So, if something can be done in this area, it must be done by the President. There are four very important things he can do before the elections of 2014 that would help to restore some faith in Government and, as a by-product, at least tentative trust in the possibility that renewed Government deficit spending may help people.

1. The President can re-institute the rule of law in the area of national security and secrecy by ending mass surveillance of the US population immediately, ceasing all investigations and attempts at prosecutions of journalists who have been trying to tell the public about the overreach of our intelligence agencies, beginning investigations and prosecutions of intelligence operatives who have broken existing laws in gathering intelligence, ending current prosecutions of whistle blowers, and issuing pardons for those who already have been tried, convicted, and jailed.

2. The President can re-institute the rule of law in the area of FIRE sector control and mortgage frauds by beginning investigations and prosecutions of high level executives at too big to fail FIRE sector organizations who have committed fraud including those that caused the financial collapse of 2008, which, in turn, led to the Great Recession and the destruction of so much middle class wealth.

These first two initiatives are supremely important because they will deliver a very visible presidential message that the Government is re-instituting honest government and a single system of law, which, in turn, will give people some reason to believe that renewed spending by the Government will be carried out honestly for the benefit of people, and not for the benefit of FIRE, health care, energy and other elite corporations. Giving people this is an essential step in restoring faith in additional spending, since from their point of view, it looks like the financial power of Government has been used to save big corporations and Wall Street and see to it that they prosper, while leaving working people and home owners to twist slowly in the economic winds of “the long depression” (Eskow’s memorable phrase). How can they believe that renewed spending will help them if they believe that the Government promising good results from new spending is a corrupt government, in the pocket of the 1% or perhaps even the 0.001%?

3. The President can next do something that is very essential to developing widespread support for renewing spending, because it will make plain that the US Government has and always will have whatever amount of funds it will take to create full employment and to finally end the long depression. The President has to remove the perceived problem of the national debt from the consciousness of the public by paying off a large proportion of it WITHOUT running economy-destroying surpluses. There’s only one way that can be done by the President acting alone right now, in time to affect the campaign environment in the 2014 election by eliminating the debt as an issue backing continued austerity propaganda.

That way is to cause the US Mint to create and deposit a platinum coin with a face value high enough to repay the debt subject to the limit entirely as it falls due, and to cover deficit spending for a long period of time thereafter. If the President does that, and sees to it (as he has the power to do) that the Mint’s account, and ultimately the Treasury’s spending account are credited with reserves equal to the value of the seigniorage resulting from the Mint’s deposit at the Fed; and also, if he follows that up by immediately paying off a large percentage of the debt, then everyone will know that the seigniorage is being used to get rid of the debt quickly.

When people know this they will know two other things. One, that the Treasury is easily paying off the debt, and two, that it has and always can easily create whatever funds it needs to follow through on its promises to end the long depression without either cutting spending or raising taxes. This will be a revelation to people which the President and the Democratic Party must drive home.

4. The White House and the Democratic Party must then run a campaign advocating a list of programs people will immediately view as likely to solve their economic problems. These must promise full employment recovery within a year using full payroll tax cuts and a Job Guarantee program at a living wage with good fringe benefits, strengthening social security and other trust fund programs by guaranteeing their annual spending regardless of the size of their trust fund balances, and by greatly increasing the size of safety net benefits and the protections they afford in case of inflation, truly universal and comprehensive health care using enhanced Medicare for All, revenue sharing for states on a proportional basis by population, fixing US infrastructure over 5 years, fixing the Housing crisis with various specific measures redressing the injustices done to homeowners by the big banks since 2007, fixing the student loan crisis with a “debt jubilee” and a grant program covering post-secondary education, and, lastly, dealing with environmental, climate change, and sustainability issues with a massive 5 year transition away from fossils fuels and nuclear and to renewable energy.

Democrats must then meet the cynicism and ridicule greeting these campaign promises by guaranteeing that if people give them a victory, then they will get rid of the Senate filibuster and other impediments to rapid action, and will legislate their program within the two year period of the next Congress without fail. These guarantees must be backed with a further promise not to run for re-election if they break any of their promises. Only then will some of the cynicism greeting their promises be dispelled.

Finally, these Democratic promises will surely be met with a campaign emphasizing the bogeyman of hyperinflation. Democratic promises will be estimated in a primitive way totaling up what will they cost over the two year period. The assumption will be made that they won’t be countered by automatic stabilizers producing increasing fiscal drag as the US approaches full recovery.

Democrats will have to respond with their own projections estimating that drag. It will come from gradual and automatic re-imposition of payroll tax cuts calibrated to kick in gradually as unemployment decreases, and gradual shrinking in Government spending on the Job Guarantee (JG) program as the private sector responds to increased demand by hiring people from the JG rolls.

In addition, it will come from increasing private sector savings and increasing trade deficits as recovery moves forward. It will also come from the White House working with Congress to phase in some of the programs I’ve mentioned gradually and in response to increasing fiscal drag.

The bottom line is that if the Democrats are successful in winning the Congress in 2014, and in legislating these programs, then faith in Government will be restored. But, there will be a fly in the ointment, as there is always is in life. The debates over fiscal policy will shift to debates about the likelihood of inflation, and managing the economy to avoid inflation at full employment will become a prime concern. We will have traded increasing government illegitimacy, chronic unemployment, stagnation, and “long depression” problems for renewed faith in government, full employment, prosperity, and inflation concerns.

That’s a great trade-off for all of us, I think. And I will take it anytime over the current neoliberal evolution toward a feudal/fascistic order.

63 Responses to How to Restore the Good Name of Government

  1. The lack of faith in government spending comes not from the amount of spending, per se, but from what it is spent on.

    I agree with many of your ideas, like prosecuting the TBTF bank executives. But others must also be prosecuted, like those responsible for the IRS scandal, and Fast and Furious. And corrupt government officials must lose their jobs for directing money to their cronies and future bosses in the private sector. People to be pardoned and released from jail should include the guy who made the video that didn’t cause the terrorism and deaths in Ben Gazi. Congress itself is not immune, with its subsidies to Big Ag, and bridges to nowhere. Not until government cleans up its act will it again be worthy of faith. And once the faith is restored, you can talk about the macroeconomic reasons why spending is too low. Until then, pleas for increasing spending, based on macroeconomic arguments, sound like disguised pleas for more of the same waste and corruption.

    Mere promises by the White House and Democratic Party will be laughed off the stage. After so many broken promises, there is no longer any faith in promises by this President or his lackeys. The Senate could pass the laws you ask for today, or the President could enact them by executive action without Republicans, even if Republicans win the Senate in November. Action might restore something, but promises are too cheap.

    Or mint the coin, and the level of faith in government is irrelevant.

    • Hi John,

      The lack of faith in government spending comes not from the amount of spending, per se, but from what it is spent on.

      That’s true, but I don’t think I said anything different. In fact, I proposed many worthwhile things to spend Government money on.

      But others must also be prosecuted, like those responsible for the IRS scandal, and Fast and Furious. And corrupt government officials must lose their jobs for directing money to their cronies and future bosses in the private sector. People to be pardoned and released from jail should include the guy who made the video that didn’t cause the terrorism and deaths in Ben Gazi. Congress itself is not immune, with its subsidies to Big Ag, and bridges to nowhere. Not until government cleans up its act will it again be worthy of faith. And once the faith is restored, you can talk about the macroeconomic reasons why spending is too low. Until then, pleas for increasing spending, based on macroeconomic arguments, sound like disguised pleas for more of the same waste and corruption.

      First, I suggested three concrete things the President could do to help to restore some faith and trust. Among them was enforcing the laws on everyone and particularly on banksters, fraudsters, and those who have failed their oaths of office to the Constitution. But, of course, everyone means, everyone. If there was any wrong doing at Ben Ghazi, or in the IRS, or in connection with Fast and Furious, then I am in favor of prosecuting it. However, I want to make two points. First, the two areas I highlighted are far more important than the F and F and Ben Ghazi incidents. The first threatens our democracy, and the second threatens the world economy. So that is why I called them out and not the others.

      As far as the IRS is concerned, from what I know about this, the fault at the IRS is that they haven’t been enforcing the language of the social welfare organization exemption legislation. That legislation says that you don’t get an exemption against your organization performs SW activities exclusively. No politics allowed at all.

      During the Eisenhower Admnistration, the IRS promulgated regulations replacing “exclusively” with “primarily,” something it clearly had no right to do. Then over the years they have even loosened that standard so that “primarily” is supposed to mean at least 51%, and lately they haven’t even enforced that or Karl Rove’s Crossroads GPS would not have an exemption. So, that’s the scandal, not what current employees did to try to enforce the law against obviously political organizations whose names had “tea party” in the title.

      Mere promises by the White House and Democratic Party will be laughed off the stage. After so many broken promises, there is no longer any faith in promises by this President or his lackeys.

      That ought to apply to both parties since both are constantly breaking their promises. But the truth is that if parties are willing to go out on a limb by advocating specific policies and promising to resign if their party wins and they fail to deliver, then I think they will not be laughed off the stage for the simple reason that no one has done that in a very long time, and people will recognize that it is different behavior.

      The Senate could pass the laws you ask for today, or the President could enact them by executive action without Republicans, even if Republicans win the Senate in November. Action might restore something, but promises are too cheap.

      The President can’t enact the laws I specified above with executive action. Both Houses of Congress have to pass them. Also, the three of the things I mentioned above are actions and are more than promises. That’s why they will work.

      Or mint the coin, and the level of faith in government is irrelevant.

      Not irrelevant, because the President can only pay back debt with the coin unless Congress appropriates deficit spending.

    • Golferjohn, you seem to be watching way too much Fox news. I really dislike Hillary Clinton, but when I watched those Congressmen grilling her about Benghazi, I became outraged on her behalf. When Ambassadors go into what is essentially war zones, sometimes they get killed. This petty arguing over whether it was, in fact, an anti-Islamic video that sparked it all, or as Clinton said, maybe just a bunch of people who hated Americans and saw a chance to off them, what does it matter? As she said, the important thing is to take steps that it not happen again. Obviously, the people who killed them hated Americans, or thought of themselves as freedom fighters, or who knows what? As an American, I would try to stay out of a lot of countries right now, because our foreign policies for the last thirty years have been such to invite outraged and unbalanced people to strike at any American in the same spirit as the old adage “if you can’t get a man, you kick his dog.” So what are you saying? Susan Rice said it might have been due to a video (information provided to her by intelligence officials), and on the very day Obama in the rose garden said something to the effect of it being an act of terror. What is it exactly you are wanting them to say? Do you think they sent in hit men or something? Do you think Clinton murdered the ambassador a la Vince Foster? What is it that you are trying to prove exactly? I for one would hang Clinton up by her heels, but it would be for helping to change the bankruptcy laws so that students could never bankrupt against student loans before the banks were sicced on our kids. I could think of a million and one reasons why I dislike Clinton, but the Tea Parties’ obsession with Benghazi seems like lunacy, unless I am missing something here, and I am open to hearing what it is. I am all ears.

      Furthermore, where was all the outrage (which I still feel) of George Bush lying about WMDs in Iraq, and the administrations’ trying to make everyone think that Iraq had something to do with 9-11? Then, Bush got in front of the whores in the Press Club and made fun of stupid Americans. “There are no weapons of mass destruction under here,” he said as he lifted the lily white tablecloth, with the expensive china on. Ha ha ha, the joke is on the American people! And elsewhere he says, I never said Iraq had anything to do with 9-11. Yet the Bush administration constantly lead the more gullible to believe just that. Five thousand Americans dead and a multitude wounded for life not to mention the millions of Iraqis dead. Google Bush at the press club party and seeing if what I am saying isn’t true. Well, I should like him to have to pick up the corner on one of those flag-draped coffins that came back with a 19-year old kid in, and joke and laugh and tell the families of the slain that there were no weapons of mass destruction. No “mushroom clouds” as Condelezza Rice and Cheney kept emphasizing. The coffins contain kids who were just starting life who were nothing but cannon fodder for a military industrial complex–for all the “we appreciate your service BS.” Where is your outrage? By the way, I despise Clinton for that, too. “Well,” she says, “I was lied to or I never would have voted for that war.” Well, I was lied too, also, but I had enough sense to figure out what was going on. If she is that damn stupid, she doesn’t need to be president, senator, or dog catcher. Obviously, she isn’t that stupid, she is a very bright woman, but she works for the bankers and the military industrial complex, just like all the rest of them up there do. Which is why none of these proposals by Joe will ever get off the ground. The bankers and the military contractors like things just the way they are. The people who print the money “out of thin air” hold all the cards. I’d be very surprised if we could shake any of them loose from all that power without mass outrage–and like Henry Ford is reported to have said: if the people ever figure out how the banking system in this country works, they will be out in the streets with pitchforks. (paraphrase) But this obsession with Benghazi is just beyond me. How many marines were killed in the barracks in Lebanon when Reagan was president? Wasn’t it 200? Did everyone call for a Congressional hearing? What did he know? When did he know it? Was it a video that sparked the violence? Why weren’t the marines better protected? One could go on and on. But why bother?

  2. Joe…I’d like to see the fourth item on your “to do” list include federal support for investments in community-controlled open-access fiber networks and programs designed to maximize the potentially enormous public benefits that these networks can support–especially when combined with a broader program of investment in job creation, public service and local economic development.

    As you’re probably aware, recent developments on the Internet access front (e.g., a court decision related to network neutrality, the planned Comcast-Time Warner cable merger, concerns about privacy, etc.) are increasing public awareness of issues related to Internet/communication policy. This is an issue I’m personally involved with, and would love to see it linked to an MMT-informed perspective on federal spending. The time may not be ripe for an alliance between these two “movements,” but I’ll keep suggesting it to anyone in either camp willing to listen.

    • Mitch, that’s a great proposal. I couldn’t be more enthusiastic! When I do future to do lists I certainly will include this essential item as part of the program.

  3. “enforcing the laws on everyone”

    Including administration officials lying in Congressional testimony? If not, it won’t help on the faith issue.

    By promises, I’m not referring to campaign promises. Those are mostly dismissed anyway. I mean the in-office statements that turn out later to be false, and turn out that they were known to be false when they were uttered. “You can keep your health plan”, for example. There are many others.

    “The President can’t enact the laws I specified above with executive action”

    Why not? He has made 300 changes to the ACA without Congressional action, while threatening to veto laws that made the same changes he wanted. Are there limits anymore? What are they? The Constitution doesn’t matter.

    “far more important than the F and F and Ben Ghazi incidents”

    The dead people and their families might disagree.

    “So, that’s the scandal, not what current employees did to try to enforce the law against obviously political organizations whose names had “tea party” in the title.”

    If you’re right about the legalities, the scandal was trying to enforce the law only against obviously political organizations whose names had “tea party” in the title. It’s Nixonian.

    All these things destroy the credibility of government. A few public works projects won’t fix that.

    “the President can only pay back debt with the coin unless Congress appropriates deficit spending.”

    Most of federal spending is on autopilot, not appropriated. The President could easily ignore the laws of eligibility for “entitlement” programs, just as he already ignores selected provisions of immigration law and ACA. He could redeploy the idled eligibility watchdogs to aggressive recruiting of new beneficiaries. Never mind that the President could simply spend as he wishes without need to worry about debt limits or bond sales. Who will stop him?

    In addition, paying back debt reduces interest expenditures, and the resulting budgetary effect gives Congress more policy space. It’s worthwhile budget policy even if government remains distrusted.

    • “enforcing the laws on everyone”

      Including administration officials lying in Congressional testimony? If not, it won’t help on the faith issue.

      Yup!

      By promises, I’m not referring to campaign promises. Those are mostly dismissed anyway. I mean the in-office statements that turn out later to be false, and turn out that they were known to be false when they were uttered. “You can keep your health plan”, for example. There are many others.

      OK. My view is that deliberate lying to the public is a big issue and should be grounds for impeachment. Democracy relies on a modicum of honesty. It ought to be enforced.

      “The President can’t enact the laws I specified above with executive action”

      Why not? He has made 300 changes to the ACA without Congressional action, while threatening to veto laws that made the same changes he wanted. Are there limits anymore? What are they? The Constitution doesn’t matter.

      Why don’t we go through the list of “changes” and see which of them are not a matter of interpretation. Congress does tell the Executive exactly how to implement any law. So there are always interpretations that look like “changes.” But there is often room for disagreement on whether they are or not. In addition, if the President does put in changes Congress clearly has the power to do something about that. So, do the courts for that matter.

      “far more important than the F and F and Ben Ghazi incidents”

      The dead people and their families might disagree.

      They might. But the dead people and families of all those who have suffered from the travesties I pointed to far outnumber them and you know it. So pointing to these is a distraction. In fact, these are Republican talking point distractions. That said I’d be perfectly willing to look into them further AFTER we take care of the far more serious offenses I mentioned. Don’t become the victim of the false equivalence merchants.

      “So, that’s the scandal, not what current employees did to try to enforce the law against obviously political organizations whose names had “tea party” in the title.”

      If you’re right about the legalities, the scandal was trying to enforce the law only against obviously political organizations whose names had “tea party” in the title. It’s Nixonian.

      All these things destroy the credibility of government. A few public works projects won’t fix that.

      I agree. That’s why I’m for enforcing the “exclusive” language of the law on everybody. Are you?

      “the President can only pay back debt with the coin unless Congress appropriates deficit spending.”

      Most of federal spending is on autopilot, not appropriated. The President could easily ignore the laws of eligibility for “entitlement” programs, just as he already ignores selected provisions of immigration law and ACA. He could redeploy the idled eligibility watchdogs to aggressive recruiting of new beneficiaries. Never mind that the President could simply spend as he wishes without need to worry about debt limits or bond sales. Who will stop him?

      In addition, paying back debt reduces interest expenditures, and the resulting budgetary effect gives Congress more policy space. It’s worthwhile budget policy even if government remains distrusted.

      Not sure the point you’re trying to make. The President is forbidden from spending on things that have no been appropriated. If Congress thinks he is doing that with faulty interpretation of the laws, then the constitution has provided them and the courts with sufficient authority to stop it. So, it is up to them to do that.

      • “Why don’t we go through the list of “changes” and see which of them are not a matter of interpretation.”

        Let’s just do a couple. Maybe you know more about this than has been in the press.

        What I’ve heard is that the law requires employers with 50 or more employees to provide health insurance starting in 2014.

        Obama has said that it’s 2015, not 2014. That’s one.

        Now he says it’s 100 employees until 2017, then 50 again.

        Please explain how this is within the President’s Constitutional powers, and not the Congress’ powers. Is the law written so obtusely that “50” and “2014” are a “matter of interpretation”?

        • Obama changed it to 100 employes because so many of the businesses with 50 or more begged and pleaded with him to give them a stay–they said it was costing them a lot of money to install new computer programs to keep track of the employees and the reporting mechanisms to the IRS, and they needed more time. Obama can’t win. If he tries to accommnodate small businesses, he is a lawbreaking unfair Kenyan. If he tells them they don’t deserve a break and he’s going to bring the heavy hand of the law down om them and impose $2000 fine per employee, he is a no-good dictator.
          Personally, I am a little more upset with the drone thingy then 50 or 100 employees this year or next. Why in God’s name do employers provide health care anyway? We should have a national system or an expansion of Medicare. Why should my access to health care or lack thereof depend on a boss.? IF I manage to get a good job, and IF he negotiates a good deal, then my daddy the employer, gives me access to health care. Otherwise, I am own my own. This system was put into effect during the war, when wages were frozen. It is time to do away with employer-provided insurance. At least Obama has stirred up the waters of the health care debate. For years the Republicans have done nothing but say, “well if you are dying the hospitals have gotta take you.” Or “let’s give everyone a voucher”. Or “Health savings accounts work for me and my rich buddies, why won’t they work for you?” So, Obama enacts their stupid, corporate (as Bill Maher says BJ for the insurance companies) Romney Plan and the Republicans still aren’t happy. 50 or 100 employees seems like another Benghazi distraction. Who gives a flying goose?

          • Ruthie, it’s not about what the policy should be, it’s about our process for changing it. We’re not a totalitarian state. Maybe it’s not a good law, and needs to be changed, as you say. The Congress is the one who changes the laws, not the President.

            When the President disregards the Constitution, even if he does something good, he undermines faith and respect for the government — the topic of this article. If he can change this law, and even if everyone says it is a good change, then he can change any law he pleases, whether or not you or I or the Congress agree.

            • I take it you felt the same way about the 291 executive orders issued by George W. Bush? I take it you were calling for his impeachment as undermining the Constitution?

              In looking back over the history of executive orders, I see that every president has used them, some more than others. Obama has a way to go before he catches up with most of them, including Bush, the younger.

              I take it you were all up in arms when the following happened:

              ” President Ronald Reagan used the direct power of executive orders to peel back layers of government regulation that he and his administration believed were hampering economic growth. President George W. Bush signed executive orders that approved more aggressive surveillance after 9/11 and limited public access to presidential documents. And President Obama has increasingly relied on executive orders to forward his agenda in the face of an intransigent Congress.

              “President George W. Bush issued several controversial executive orders surrounding the gathering of intelligence in the war on terror. Arguably the most controversial was a secret executive order he signed in 2002, authorizing the National Security Agency (NSA) to eavesdrop without a warrant on phone calls made by U.S. citizens and others living in the United States. The NSA had previously been limited exclusively to intelligence gathering operations outside of the country [source: Risen]. Critics of Bush’s executive order accuse the NSA of conducting unconstitutional searches under the president’s authorization. The Bush administration defended the secret program as necessary to root out homegrown terrorist plots. The 9/11 attackers, after all, had lived in the U.S. while making the final preparation for their hijacking plot.” http://people.howstuffworks.com/executive-order3.htm

              So, were you equally outraged when the above happened? Seems like Bush could have given two hoots for the fourth amendment. You were equally outraged? Are you now?

              I would agree with you that the Constitution should be followed. The president is an executive, he is there to enforce the laws. It could be argued that even an executive, such as a policeman, has a certain amount of leeway when enforcing laws made by the legislature. For example, he might “with the stroke of his pen” write you a warning ticket. If he fails to write you a speeding ticket, has he failed to uphold his oath to the Constitution? “By golly the law says you gotta write someone a ticket if the speed limit is 50 and they are going 55– or 60? or 70? Suppose a guy is trying to rush his pregnant wife to the hospital and he is stopped going 70? Should the policeman write him a ticket and “uphold his oath to the state constitution?” Or perhaps he might give him a police escort instead. An executive always has a certain discretion in enforcing laws. To blindly enforce a law regardless of consequence is to be a Barney Fife. Yes, Barney always went by the book, but can one say that justice was always served?

              If Obama gives some small businesses a stay of execution of an order because to do otherwise might cause great financial harm to the business, shall we object because he is not behaving as Barney would? On the otherhand, when Bush tells the NSA it is OK to spy on all Americans because there might be some danger some where some time, in total violation of the 4th amendment, who is committing the greater “crime?” I agree with Ben Franklin, those who give up their liberty for a little bit of security deserve neither.

              So are you angry at all Executive Orders? Do you want them all done away with? Do y ou want the executive branch to always be Barney? Or do you want them to use discretion where discretion is called for? Can you tell me what section of the Constitution Obama is breaking by giving the businesses a stay on enforcement? I can tell you the specific one Bush violated.

              If an executive gets out of hand, the congress and the courts are, theoretically, there to reign him in. Obviously, the majority of Congress are not upset at his behavior in this regard. In th past, the Supreme Court has said that as long as the executive orders are not contrary to the will of congress, then an executive may issue orders such as this. So, explain to me again, please how Obama is behaving unconstitutionally in this regard?

              If you want to go after him for drone attacks and the killing of people without trial (Bills of Attainder) I’m with you. But to go after him for cutting some small businesses a break seems petty and unreasonable.

              • Executive order is one of the ways the President carries out the law. Regulation is the duty of the executive, not the legislature. Regulations are issued by agencies like IRS and FDA, not by Congress. Changing regulations put in place by previous executive action is no infringement on Congress.

                I was most disappointed when W went into Iraq without a declaration of war, and without an act of war by Hussein. Starting with Vietnam, or even Korea, we’ve been getting more and more loose with that sort of thing, and it has come back to bite us, as terrorist states no longer feel bound by international law either.

                The way we use drones now is more like assassination than war. I suppose the CIA might have gone into 3rd countries during peacetime or undeclared war and taken out enemies, but we would have denied it, not publicized and bragged about it.

                The “majority of Congress” is quite upset. The majority party in the Senate is not, so nothing will pass. The House passed a law to delay the employer mandate, to make Obama’s action legal. The Senate refused to consider it, and Obama said he would veto any such law, but would do it anyway.

                There were plenty of people in Congress in 2009 who didn’t think the employer mandate was a good idea, but it’s in the law anyway. Now it turns out it is not a good idea. The law should be changed, not ignored. It’s not a matter of discretion like giving a warning instead of a ticket. It’s more like saying “Yes, the speed limit is 45, but I’m going to let all the red cars go as fast as they want and not stop them. Everyone else gets a ticket at 55 or over.”

                • “The Senate refused to consider it”

                  And in so doing expressed its will that the law should not be changed, and that employers with over 50 employees should provide insurance in 2014.

                • “The “majority of Congress” is quite upset. The majority party in the Senate is not, so nothing will pass. The House passed a law to delay the employer mandate, to make Obama’s action legal.”

                  The last I heard the House had voted some 40 times (I quit counting) to repeal ObamaCare; and the last time I heard the Senate was a part of “Congress” so no, the majority of Congress is not quite upset. Regulations maybe written by the IRS and other agencies, but these regulations are always subject to clarification or downright nullifcation by Congress, providing Congress can agree to do it. The fact that Congress constantly abdicates it power in every venue (its power to make war, its power to print money, its power to ride herd over administrative agencies) shows how the legislative branch has been weakened; but the military industrial complex has found ways to pursue its wars around the law, and thep presidents seem to be puppet in their hands.

                  I think we could both agree that the process of Executive Orders is something that is totally out of hand, but Congress is the only one who can do anything about it. But they were equally out of order for the last one hundred and fifty years, and the Congress kow-towed to Bush and his minions, and those who did not and who spoke out against the Patriot Act, for example, received a little packet of military-grade anthrax in the mail.

                  When I read my own comments, I wonder why I am bothering about the money system at all. My propensity to conspiracy theories is enhanced when I realize that there are those conspiring against us, and I don’t necessarily think it is Arabs with box cutters.

                  • All the votes are strictly along party lines, so with 234 House members and 45 Senators, 279 out of 535 voting members of Congress (52%) are Republicans who don’t like what Obama is doing. I think some Democrats might also admit that they agree, in private.

                  • Golfer, you aren’t playing fair again. “Majority” means majority of the House and majority of the Senate. Under the rules of the game, a majority of the House and a majority of the Senate must agree. Using your logic, it is fair to say that more Democrates voted for more members of the House by about two million votes, yet the Republicans control the House by gerrymandering. Therefore, those Republicans who won should not have, so under either scenario, a majority Congress does not and would not have agreed.

                  • Sorry, I read it the other way.

                    Still I disagree with your statement that the majority of Congress is not upset. At least half (a majority of the House) are upset.

      • ” if the President does put in changes Congress clearly has the power to do something about that. So, do the courts for that matter.”

        Congress (Harry Reid) won’t do anything about it. That’s what I meant by “who will stop him”. Congress has abdicated. As long as this President’s party has 40 votes in the Senate, he can ignore the will of Congress. It didn’t used to be like that. It’s a big part of the decline of faith in government.

        How do the courts get involved? Who has standing to sue?

        • “As long as this President’s party has 40 votes in the Senate, he can ignore the will of Congress.”

          It is my understanding that it would take 51 votes in the Senate to pass a bill undoing Obama’s executive order. I should very much like to see that one:

          “Be it resolved, we in the Senate, wishing to uphold the letter of the law, hereby revoke Obama’s stay on the small businesses of America. Even though it may cause great financial hardship and chaos to many of these small businesses, actually putting them out of business and costing many jobs, we must enforce the law in order to appease Fox News watchers who have a great sense of justice, requiring that all laws be applicable to all people and all times. Therefore, effective immediately, if these business cannot transport sufficient financial records proving that each and every one of their employees has purchased said insurance, that insurance was offered to said employees, and that their payments are current and up to date, said company shall be fined $2000 dollars for each employee, and any other penalties– after the IRS pulls an audit at each of these businesses. Never let it be said that we are unfair or that we ever treat anyone any differently under the law.” Disclaimer: exceptions being ExxonMobile, Shell, Monsanto, GE, and any and all Big Pharma, Big Banks, etc.– Nope, never let it be said that we treat anyone differently under the law, ever.

          • The House passed a law implementing Obama’s “stay of execution”. The Senate and Obama didn’t like it. They prefer to operate outside the law.

            • Why don’t you be honest about the bills that the House passed? Obama’s “stay” was just on the reporting mechanism–in other words, small (50-100) businesses do not have to REPORT to the IRS in 2014 all the individual information regarding employer-based insurance. They still must provide the insurance. This is just giving them time to get the reporting mechanism in place, the IT requirements.

              The House bill repealed the mandate that those employers provide the insurance at all. It also repealed the individual mandate that required individuals to purchase insurance, a main staple of RomneyCare–I mean ObamaCare. So to say that the House tried to pass a bill to make Obama’s executive order legal is disingenuous.

              • “Obama’s “stay” was just on the reporting mechanism”

                Not according to CNBC http://www.cnbc.com/id/101393331

                “The government will now exempt companies employing between 50 and 100 full-time workers from complying with the mandate that they offer employees affordable health insurance by another year, until 2016.

                Companies that have 100 or more full-time workers, defined as employees who work more than 30 hours per week, still will have to begin complying with the mandate to offer such coverage in 2015 or face financial penalties of at least $2,000 and up to $3,000 per worker.

                Monday’s announced delay for smaller employers comes after last summer’s bombshell announcement by the Obama administration that the so-called employer mandate compelling companies with more than 50 full-timers to offer them insurance would be delayed from 2014 until 2015.”

                In the USA Today account of the change http://www.usatoday.com/story/news/nation/2014/02/10/aca-no-longer-applies-to-50-employees-and-under-in-2015/5370055/

                “Republicans, many of whom co-sponsored a bill asking that the employer mandate be delayed until 2015, immediately denounced the move and called for the delay to be extended to individuals.”

                Or maybe these right-wing media outlets got it wrong, and you’re right.

  4. Overall, I’m pretty much in agreement with Joe on this. I think the IRS “scandal” is just as Joe described. There were Democratic organizations that were also put on hold for exempt status, but they didn’t complain probably because they knew that eventually they would be approved since that’s the way it’s always been done (at least in the recent past). The tea party groups, on the other hand, are both paranoid and could see an opportunity to play the victim with their allies in Congress more than willing to leap to their defense. More theater of the absurd.

    • That isn’t how the incident was described, nor how the administration responded to the accusations.

      Groups were selected for audit by searching for keywords in their names, not at random and not because all such organizations were being investigated in a change of policy toward stricter enforcement.

      The defense was not “this is BAU, liberal groups are also being investigated”. It was “Somebody in Cincinnati overstepped his authority, and we apologize and will make sure it doesn’t happen again”.

      If it is theater, then why is the administration participating in it? They never hesitate to deny deny deny when it suits their purpose.

      • My understanding is that there was a large increase in the number of 501-C4 applications after the Citizens United decision and the IRS was overwhelmed with no increase if funds to dispense with the backlog. Under these circumstances, some form of triage was needed, or all applicants would be delayed. Since the IRS is charged with approving or denying applications for tax exemption based on information it gathers about an organization’s activities, particularly its political activities, it seems to me that sorting applicants for further questioning regarding their planned activities needed to be accomplished by some type of screening. If you have a better suggestion about how to sort organizations than the one the IRS used, I for one would like to hear it, but I think they probably hit upon one that was effective (that’s why the fuss) although it is not PC at least in the tea circle. As far as I know, no organization was denied tax exempt status because of its name, just that ones with some key words were asked to provide further information. To me, that falls into the same category as political appointments and campaign promises.

        • If it is good policy, then why apologize? Why promise not to do it again? Why blame it on an unnamed lackey in Cincinnati?

          • Sorry, I forgot to respond to that part of your comment. I think one word might summarize the reason: ACORN. Obama seems to have extremely thin shin for a politician, especially for a president. The Republicans see politics as blood sport, Obama sees it as a parlor game.

            • So you’re saying the IRS investigated ACORN, too? I must have missed that.

              • No, I was giving ACORN as an example of how Republicans used a trumped up scandal to beat up Obama who, rather than defending the group, simply threw them under the bus as a political expedient. Registering disenfranchised voters and self reporting some obviously fraudulent names submitted by a few paid (by the name submitted) employees are commendable actions, in my opinion, and should have been defended by the president. Instead, Obama sacrificed ACORN and allows Republicans to pass laws restricting voter registration almost without a fight.

                • “some obviously fraudulent names submitted by a few paid (by the name submitted) employees”

                  Doesn’t sound “trumped-up”, if they confessed.

                  And paying them by the name submitted, rather than by eligible voter name submitted is analogous to paying loan officers for loans originated, not for profitable loans originated. Bill Black calls that a “criminogenic environment”, and puts the blame on the designers of the compensation scheme, which is obviously intended to encourage bad behavior.

                  • I agree the pay per name scheme was a recipe for fraud, but ACORN did self report that there were fictitious or suspicious names on their lists. I assume these lists were handed over to local election officials who would ultimately be responsible for verifying names, signatures, and addresses. I doubt very many Mickey Mouses got a ballot.

                    I don’t know for a fact, but I suspect ACORN hired low income workers to get them some cash as much as it did to find eligible voters, probably assuming election officials would separate the wheat from the chaff. It’s unlikely any of their “employees” had the training or resources to screen voters, and ACORN did have to live with (actually die from) the consequences of its folly.

      • “That isn’t how the incident was described, nor how the administration responded to the accusations.”

        So, what? The Administration is full of it and would never tell people that the IRS has been imposing its own law since 1958. We have to address the reality of the situation, and let the Administration say what it wants to.

        Take a look at the law yourself. It says “exclusively,” not “primarily” and certainly not 51% or even less than that as in its application to Karl Rove’s group and other right wing fund aggregators.

        • The “so what” is that if the administration were trying to enforce the law in an honorable way they would not have hesitated to say so. There will not be general faith, nor trust, nor respect for government unless it acts, consistently, in a way that deserves and earns them.

          • I am no fan of the IRS. However, these groups filed for tax-exempt status under an exemption for social work groups. They had another tax-exempt status they could have filed under, but that was for political activity, and they would have had to list their contributors. They were trying to hide their donor list. They don’t want any sunshine on that. If you put “Teaparty” in your name and you try to pull off that you are a social organization just trying to better the society around you and try to claim that you are not political, then it looks like you are asking for an audit. What was the IRS supposed to think: “oh, these people must be little ol ladies having teaparties, planning how to bake cookies for the next church social?” Yes, the IRS employees said they were sorry for looking at the name and if they saw something like “teaparty” in the name, they targeted the group for investigation. Frankly, they should not have said they were sorry. Seems reasonable to me. Suppose I started such a group called “Old Communists of America” and tried to pass myself off as a social group? Should I whine and say “oh, it’s not fair! They’re just targeting me!

            What gets to me is that no one is upset because the Constitution only allows for certain taxes (direct and indirect), and wages weren’t a part of that, and still aren’t. But that doesn’t stop the IRS from asking you to “voluntarily” pay your taxes on every dollar you earn in wages. If you want to be upset about something, how about being upset about that? Is it any wonder that the first income tax was passed by Lincoln during the civil war when it would be unpatriotic to oppose it? It was also repealed later. Doesn’t that tell you something? Do you really think a government would wait that long to impose a tax it might legally, constitutionally impose? Again, give me a break. People strain at a gnat and swallow a camel.
            Disclaimer: I am in no way suggesting or advocating that people not pay taxes on wages as the IRS will definitely come down on your head as they are paid to extract money. Even though the term “income” was never meant to include “wages” (wages initially being taxed in some Federal jurisdictions such as public parks or DC), the IRS does not recognize that fine nuance. Until such time as someone in Congress or the courts grow the cojones to change directives to the IRS, the unconstitutional theft will continue, and Congress likes it just fine. Power and money dontcha know and the Constitution be damned.

  5. That coin crap will never happen. Never. Whatever its theoretical merits.

  6. The French scared Nixon off the gold standard. Didn’t matter much for a couple of decades, as the .1% just continued business-as-usual and retained their gold standard belief that fiat currencies will inevitably hyperinflate because politicians always offer more services and less taxes to the voters. They thought they needed to keep government small to stop the inevitable hyperinflation. Then along comes Mosler with MMT, the BIGGEST THING in economics since Marx. Here was an investment banker with descriptive proof that a sovereign currency issuer like USA could safely issue vastly more currency than previously thought. Luckily, the .1% got in on the ground floor with MMT, via Mosler to Rumsfeld to Laffer. It’s documented by Mosler himself. The rest is history. Two major wars financed “off the books”, TARP, and the continuing QE. During all the progressive media criticism of the sequester we still hear progressives bragging that Obama is reducing the deficit. No one, not even progressive media sources, is criticizing the continuing QE. Everyone seems to have agreed with the .1% that QE is needed somehow to prevent global economic collapse. Even MMT bloggers don’t complain about QE! What could the 50 state governments have done with $80 billion a month distributed to them for the past few years? And, BTW, WTF, how did they manage to collect $32 trillion in off-shore accounts?

    • BTW, I am not suggesting any conspiracy. Wall Street really did paint themselves into a corner with derivatives. When the sky started to fall and they needed a way out – MMT was there. Off-budget financing of two major wars without a recession or hyperinflation seemed to validate MMT, so why not use it to bail themselves out? They did, and it worked – but only for them. There is no “trickle down” to the people, only “trickle out” to Swiss and off-shore accounts.

      • There’s no MMT without public purpose and MMT policies. It is a profound misunderstanding that those who don’t recognize either one are practicing MMT. What they’re doing is just using fiat money for their own purposes. That’s not MMT!

        • OK, you got it! They are “just using fiat money for their own purposes.” Of course it isn’t MMT. The point I am trying to make is that the .1% are telling us they understand MMT when they use fiat money for their own purposes, with no apparent fear of hyperinflation – the bugaboo they have warned us about for decades. If MMT has one singular TRUTH that stands out, it is the revelation that the old song “we can’t afford to fix it” is the one singular LIE that sustains the wealth/equity and political power gaps. What the .1% are doing with TARP & QE tells the world that the USA can safely use fiat money to spend hundreds of billions on pretty much anything. The argument to restore faith in government could be that QE has given real world PROOF that there IS enough money to fix the problems of poverty, global warming, etc.. Stop talking about deficits & debt. The greed of the .1% has shown even more clearly than Mosler that fiat money can be a lifesaver for humanity. That is why MMT is the biggest thing in economics since Marx. Let’s start talking about replacing QE with monthly $80 billion block grants to the states!

          • There’s a big difference between QE that goes only to reserve balances, substituting one asset for another, and a fiscal stimulus that would add to demand. $3T of additional deficit would have brought about a robust recovery, possibly even too robust, whereas $3T of QE has had little effect, possibly a small effect in the wrong direction.

            • QE has shored up a lot of bad debt left over from the mortgage derivatives binge and is encouraging further bingeing on any new “investment product” that analysts can invent. While the sequester tears holes in the safety net of the 99%, the .1% is using QE to build a safety net under their potential losses in the modern casino world of investments. I would say that this is a HUGE effect of QE, not a little effect. It just seems like no effect because we (the 99%), are only getting a wider wealth/equity gap, and subsequent loss of political power, from QE. An effect in the wrong direction, and maybe not a small effect either.

          • Beshiva, you are exactly right. It is just as Dr. Wray says in his lectures. It is all about priorities. Bernanke showed us his priority was bailing out the banks to the tune of 24T dollars. It has propped up the system and made the too big to fail even bigger–as Bill Black points out. Yet, there is no massive inflation. There are higher food prices because of speculation in the food and oil commodities, again possibly because of all that money that has been transferred to the banksters (and hedge funds). Can’t say I understand all of this, but it is pretty apparent that MMT has worked extremely well for the 1%. Republicans and Democrats say all sorts of schizophrenic things such as something must be done about the possible trillion dollar shortage in Social Security in 2035 (knowing QE spent 24 times that) and of course, by then all of us baby boomers will probably be dead anyway and won’t be a drain on that system at all. But they say the demographics won’t hold up as there will be one worker for every two old people–yet at the same time something must be done because there are 11-20 million illegal aliens working in the country. They say we are in debt to China, but when it is pointed out to them that the Chinese hold dollars for goods sold to us, they complain that China can buy up stuff from the U.S.–and Mosler points out that they also complain that China doesn’t buy enough from us. Everything about what we are told is of a madness, but there is a method to it, in that enriches the 1% and keeps the 99% fighting amongst themselves about Benghazi, or abortion, or homosexuals. Divide and conquer. It is if they are saying “think of football, abortion, Benghazi, think of anything but the money system.”

            Professor Guy Standing says he, for one, was glad for the bailouts because there are a whole lot of people in the good ole USA with guns, and they would be very unhappy if they went to the ATM and found it didn’t work. Which isn’t to say, if things don’t improve for the working classes, something like that might not happen. Don’t blame me for being a conspiracy theorists because it seems to me the 1% conspire against us all the time. Don’t you think they are aware of that possibility as well? Would it be prudent for them to think of ways to curb the “home-grown terrorists” and have a means of keeping the unhappy in line–I think it was called Bills of Attainder in the Constitution–but in modern parlance, it is an executive order to send drones to get “enemy combatants.” I doubt Obama has really killed anyone with a drone, yet, even though he claims to have done so. I think what they are doing is acclimating the general public to the idea that it is acceptable to do for enemies of the state. If I am paranoid, well, let’s just say, I wasn’t born that way.

  7. I have no faith that Obama will act on any of these items. He has amply demonstrated since he was still a Senator that his words don’t match his efforts. He will continue to cater to the corporatists who have to have such excesses in place to defend them from the consequences of their actions, not the least because he doesn’t want to lose that Hawaiian retirement home and all those contributions for his library to be based at the Leo Strauss School of Neocon “Thought” once known as the University of Chicago. He is -and aways has been- a sell-out – and to hell with the public he conned into electing him.

    • Right! But the point of the Post isn’t any of that. It’s about what Obama can do and ought to do. After the that it’s up to him and the Democrats is they want to do it!

  8. I have a question, I read on this blog that the Federal deficit is government net contribution to the private sector. I also read that the Federal deficit is the private sectors financial assets. Well this week I heard US senator Bernie Sanders bragging about the Clinton budget surplus and he also said that if we got rid of the 17 trillion dollar deficit that it would be a good thing. My question is if the federal deficit is the private sectors financial assets and we got rid of it does that mean that the private sector would have no financial assets which would mean everyone would be broke? I really like this MMT blog and I feel that I am learning a lot of important information that every one should be aware of.

    • Don’t confuse deficit and debt. The deficit is one year only. If it were zero, the existing private sector NFA don’t disappear, they are just not added to. The $17T is the debt, not the deficit.

      Depending on how the debt were reduced, it would not necessarily also reduce private sector NFA. For instance, if we mint the $60T coin and use it to pay down the debt, and still have annual deficits, then private sector NFA continue to increase. If, instead, we were to run budget surpluses in order to reduce the debt to 0, that would reduce NFA each year by the amount of the surplus. We did that in 1835, and caused a depression.

    • The short answer is yes. If taxes were to be levied to pay off the debt, that $17 trillion would come out of the private sector. Without injecting (spending) assets either from the Treasury of the Federal Reserve economic activity would be greatly curtailed or even halted. FR injection is no guarantee that the economy would revive as QE 1-3 has shown.

  9. The trouble with the cut in tax RATES during the Reagan/Bush/Bush era is that it did away with the automatic stabilizers to prevent inflation that take effect when the economy is in full recovery. A marginal tax rate of 80% to 90% then in effect is a far cry from top rate in the 30’s that is now prevailing.

    There is a real reason to have high nominal tax rates with loopholes that kick in in times of recession. Nobody is explaining this to people. When the Republicans emphasize the high nominal corporate tax rates to other countries, the Democrats only explain that the effective tax rate is actually very low. They never explain why this method is advantageous. So you get all these calls to simplify the tax system with no explanation of what would be lost if we enact some of the simplifications.

    There are probably very few politicians that even think about this and would be in a situation to provide an explanation.

    • It is not the top rate that is the automatic stabilizer that prevent inflation. The people in the top rate mainly pay their taxes by reducing their savings (reduce their additions to savings and pay their taxes instead) not by reducing their consumption. What slows recovery and inflation is people in the 0% and 10% and 15% brackets getting to the 10-15-25% brackets during the boom, and being forced by the increased taxes to spend a smaller portion of their income.

      And the automatic stabilizer is still too strong, not too weak, for stopping recovery, ending the recoveries of the 1990’s and 2000’s before reaching full employment, and before any danger of inflation. And it’s happening again now, as increased taxes are reducing the deficit to below the amount needed to offset leakages.

    • Excellent point. There are very few economist that are in a position to explain this, though many who understand it. If we have to rely on politicians for understanding, then its no wonder we are in the mess we are in now.

    • I don’t really agree with the notion that inflation has been all that low in the tax cut era. Asset prices have clearly climbed rapidly. There have been pullbacks in those prices, but they’ve quickly shot back to new highs. Compare the price of a home in 1980 and in 2014. Compare the price of a Picasso in 1980 to 2014. Compare the prices of business machinery.

      Then, compare asset prices to consumer prices. Who buys assets? Mostly, the well-off. Whose taxes have been reduced? The well-off’s. The end result of all that tax cutting has been to cause significant inflation in the prices of those items that the wealthy buy and trade amongst themselves.

      As for houses, the wealthy also trade in that, but changes in lending and interest rate policy seem more important in driving up the price of residential real estate.

      • I was being charitable by saying that the cut in rates was only a future problem. As you pointed out, even if overall rate of inflation has not been extremely high, the inflation in certain sectors has been high.

        If raising top marginal tax rates is not enough of an automatic stabilizer, what about a wealth tax? I have only found three articles on this blog that mention a wealth tax. The two that I have read so far are startlingly good.

        http://neweconomicperspectives.org/2013/01/americas-deceptive-2012-fiscal-cliff-part-3.html

        and even more so

        http://neweconomicperspectives.org/2013/01/americas-deceptive-2012-fiscal-cliff-part-4.html

        While most of the MMT conversation focuses on movements of money between the government sector and the private sector, we should not forget that there are important societal effects involving transfers among the segments of the private sector itself. If those transfers need to be improved only by a detour through the government sector, we should not ignore them because they have no net effect on the balance between the government and private sectors.

        • Interesting stuff. I also seem to recall a passage by Mosler about another impact of tax policy on mainly market-determined interest rates (spreads from discount rate). Something about a proliferation of tax advantaged retirement savings programs encouraging strong demand for financial assets, leading to higher prices and lower yields (rates).

  10. Here is some more things i wrote about that I learned from this web site. I like to hear your comments for I can educate myself. The United States has had sovereign fiat currency since 1971 when Nixon took us off the gold standard to pay for the Vietnam war. Google Nixon shock for more information. This means that the US can not go broke our run out of money. Sovereign means unlimited, fiat means get it done, and currency is legal tender for goods and services. When the US government spends or hires this is how US currency is created which is a good thing because the currency then goes to the private sector which saves or spends on goods and services. The Federal Reserve which is the Central Bank creates the currency out of thin air by a computer keystroke. The currency gets its value from taxes so the public needs it to pay taxes and for goods and services. This also creates Jobs which we need more of. The US does not borrow money from China which some people seem to believe. The US does sell Treasury Bonds to China and we pay interest on them. China buys these from the goods we buy from them. Also the US does not borrow money from private banks like Bank of America, Chase, Citibank or etc. So why are we paying interest on our own money? It is time for the public to wake up and realize how we are getting hurt by our current banking system. We need a public Banking system that is not selling out to the media and politicians and would get things done for the people. Also the Federal Debt is the private sector financial assets to the penny. What hurts us is our trade deficit which is part of the private sector and the income inequality in the US. So the rich and foreign country’s are holding US currency and little is left for the middle class. So when congress cuts spending or austerity this hurts the middle class because they are taking more currency [goods and services and jobs]out of the private sector. Some people also think that the US is like a household, you always hear people saying I balance my household budget why cant the US do the same. Well the answer is the US is the issuer of the currency and they are not a household. Local governments States, city’s and counties are like a household because they are not issuers of the currency and must balance their budgets. The bottom line is the federal government spending is net contribution to the private sector which is a good thing and there is so much that needs to be done. If you cut the 17 trillion dollars from the federal debt there would be nothing left for the private sector meaning goods and services, jobs, savings and other financial assets. People need to wake up and understand what money is and where it comes from.

    • I like your analysis. However, you say “What hurts us is our trade deficit..” Warren Mosler, I think, would disagree with you. He says that China sends us all sorts of neat products and we give them money printed out of thin air. He says the important thing to do is to make sure consumers in this country have enough money to consume what China sends us AND our own production–if I understand him correctly. ( Of course, the Chinese are not fools. They are also getting technology transfers through all of this.) Also, the debt and the deficit are two different things. The deficit is the shortfall of spending to taxes in one budget period–like a year. If the government spends one hundred dollars and taxes back ninety, then that leaves ten dollars in the private sector. The debt is all the government owes combined, interest on bonds, etc. over many years. This is why MMTers say the government could just mint a coin to pay the debt off as the interest comes due on each instrument. The minting of the coin is just to get across the fact that this is how the money system operates. People confuse money with a real thing instead of a means of measuring the encomy like inches. This is why Warren uses the sports scoreboard as an analogy. Where do the points come from? Out of thin air. Where do they go if points are deducted, back into thin air. You say: “If you cut the 17 trillion dollars from the federal debt there would be nothing left…” I think what you mean to say is “if you taxed the 17 trillions dollars out of the economy to pay the debt it would harm the economy.” I think MMTers would say, if you minted the coin to cover it, it would not. I am rather new to MMT myself, but this is how I would see it.

  11. http://www.c-span.org/video/?317632-1/hearing-us-economic-outlook

    The video of Yellen’s testimony to a Congressional committee a week back or so. The discussion at the 59:00 mark is interesting. I just love how nonchalantly Rep. Bachus tries to extract financial trading information. Either he’s got a good chunk of his funds in CLOs or someone important with whom he is associated does.

    • I had to look up CLO, and found that it is a way for businesses with less than stellar credit to get loans from investors (via banks) that they would not be able to get from banks in the traditional way. The issue is that the Volker rule might prohibit banks from engaging in such arrangements, leaving them to non-banks only, and that if it were to be applied in such a fashion as to make banks divest their current portfolios of CLOs all at once, it could lead to a “crash” in the CLO marketplace. Bachus is probably concerned for the small businesses in his district, rather than looking for an opportunity to short sell banking stocks based on insider information. Or making sure that Yellen is aware of the dangers of a sudden drastic change in the regulation. I agree banks should not be involved in such things, but the rule could be “no new ones anymore, 1 year to divest any that are not the AAA tranche, and 3 years for the AAA tranche”.

    • I don’t understand CLOs, but Bachus let’s you know right up front where he stands.

      http://www.rawstory.com/rs/2010/12/13/incoming-gop-chairman-congress-exists-serve-banks/

      Senator Shelby always has something like a $20 million dollar war chest, and he represents the big banks, too. Alabama’s finest.

  12. thank you for responding i am learning