In her recent post-election piece “It’s Time to Work on America’s Agenda” Elizabeth Warren points out that the changes in Washington and in various States aren’t changing the fact that
The stock market and gross domestic product keep going up, while families are getting squeezed hard by an economy that isn’t working for them.
Or to put it another way, it’s not enough to have aggregate indicators going up. We also have to have shared gains and inequality going down, and given our current state of affairs, going down rapidly. She then says:
The solution to this isn’t a basket of quickly passed laws designed to prove Congress can do something — anything. The solution isn’t for the president to cut deals — any deals — just to show he can do business. The solution requires an honest recognition of the kind of changes needed if families are going to get a shot at building a secure future.
That’s what happened in 2009 – 2010. Democrats structured legislation in a vain search for bipartisanship, and in doing so produced:
— an inadequate stimulus bill that lowered unemployment only very slowly,
— a Credit card Reform Bill that did not limit credit card interest rates to non-usurious levels,
— a FINREG bill that still allows Systemically Dangerous Institutions (SDIs) to thrive and threaten the financial system, and that still allows trading in derivatives, and finally:
— a “health care reform” bill that, four and a half years after its passage in early 2010, covers only 10 of the 45 – 55 million people without insurance, leaves us with 35,000 to 45,000 annual fatalities due to the absence of medical care, and still leaves millions of people who have insurance in danger of bankruptcy, due to overwhelming medical bills.
So, Warren is dead-on about this. We don’t need compromise for its own sake, and legislation that creates the short-lived illusion that Congress is finally “doing something” about our problems. What we need, and have needed since the election of 2008 is that Congress actually legislate solutions to those problems, and end the kabuki theatre.
Warren thinks that people
“. . . see a government that bows and scrapes for big corporations, big banks, big oil companies and big political donors — and they know this government does not work for them.”
And again she’s right, but then she goes on with distressing vagueness:
The American people want a fighting chance to build better lives for their families. They want a government that will stand up to the big banks when they break the law. A government that helps out students who are getting crushed by debt. A government that will protect and expand Social Security for our seniors and raise the minimum wage.
I think this under-estimates what people want. In my view, they want more than a fair chance at a better life. They want a good result. That is, they want a better life, period!
Also, they don’t just want a Government that will “stand up” to the big banks. They want a Government that will enforce the law, and not make exceptions for big bankers, torturers, intelligence community members, defense contractors, and local police who violate constitutional rights and run civil asset forfeiture rackets using police state strategy and tactics. That means prosecutions, indictments, and convictions for big shots in each of these areas, because there has to be one law for all Americans, not different legal standards for big shots, the middle class, and the poor.
They also want more than a Government that will just help out students, but rather a Government that will forgive student debt, and, going forward, will provide free education for all Americans through College. They have it in Germany. Of course, we can afford it here too. Why isn’t Warren, one of our two supposedly most progressive professional politicians, advocating that.
Further, I think people want more than a “. . . government that will protect and expand Social Security for our seniors and raise the minimum wage.” I think they want a Government that will increase SS benefits by 50% or more so seniors don’t have to choose between food and medicine, and also a formula for increasing benefits annually that uses the CPI-e to determine benefit increases so that SS benefits will keep up with increases in medical costs. And in the are of the minimum wage, I think they want an increase high enough to make it a living wage.
And it can’t be the same in all areas of the country. A living wage in Kansas is not the same as a living wage in new York City, so, unlike the current minimum wage, the Federal minimum wage has to be cost adjusted across areas of the country, so that each area has a true living, as well as minimum, wage.
Americans understand that building a prosperous future isn’t free. They want us to invest carefully and prudently, sharply aware that Congress spends the people’s money. They want us to make investments that will pay off in their lives, investments in the roads and power grids that make it easier for businesses to create good jobs here in America, investments in medical and scientific research that spur new discoveries and economic growth, and investments in educating our children so they can build a future for themselves and their children.
It’s not free in real resources, including effort, innovation, and providing intelligent and ethical Administration of programs. And I also think that Warren also needs to find a way to incorporate three thoughts into what she says
:
— First, Congress doesn’t spend money. It appropriates money, and then its appropriations are implemented by the Executive Branch which actually spend the money;
— Second, all high-powered money created by the Government including, coins, currency, and reserves, is the people’s money in the sense that it is created under the people’s authority which underlies the Constitution of the United States which authorizes the creation of USD by the Congress and its delegated authorities; but
— Third, the money the Government spends is not the people’s money in the sense that it is the tax revenue collected from the people that the Executive is actually spending. Instead, when the Executive spends money, that is money that is newly created and injected into the private sector by the Government including the Federal Reserve, the Treasury, and their interacting procedures and processes that produce Government spending. Modern Money Theory research has shown that this is true time and again for 20 years now. It is time politicians learned that lesson and began to talk it up and teach the public about it
It is not accurate, and not helpful, for Warren to say or imply that Government spending, whether deficit or otherwise, comes out of funds that have been taxed away or borrowed from the private sector. That’s just not what happens, and when progressives reinforce that myth, what they are telling people is that what the Government can afford is limited to what it can tax and what it can borrow.
To reinforce that frame is to reinforce what Paul Ryan, Peter G. Peterson, and Barack Obama want to do, it is not to reinforce what progressives want to do to create full employment, a stronger safety net, Medicare for All, Environmental and climate security, reinventing energy foundations, infrastructure spending, educational enhancement for all levels of education, and all the rest of the unfinished business progressives would like to deal with.
Before leaders in Congress and the president get caught up in proving they can pass some new laws, everyone should take a skeptical look at whom those new laws will serve. . . .
Always a good rule of thumb. Follow the money!
But the lobbyists’ agenda is not America’s agenda. Americans are deeply suspicious of trade deals negotiated in secret, with chief executives invited into the room while the workers whose jobs are on the line are locked outside. They have been burned enough times on tax deals that carefully protect the tender fannies of billionaires and big oil and other big political donors, while working families just get hammered. They are appalled by Wall Street banks that got taxpayer bailouts and now whine that the laws are too tough, even as they rake in billions in profits. If cutting deals means helping big corporations, Wall Street banks and the already-powerful, that isn’t a victory for the American people — it’s just another round of the same old rigged game.
Eloquent and to the point. But those trade deals should have come in for more comment from her. Those things are more than trade deals. They are sellouts of the United States by people who wish to elevate international corporations above the laws of individual nations. Warren should be forever stating her plain opposition to Fast Track, to TPP, TAFTA, and to every so-called “free trade” deal concluded in the past, or now being proposed. Call them what they are: attacks on the sovereignty of the people of the United States and their representatives in Congress.
Yes, we need action. But action must be focused in the right place: on ending tax laws riddled with loopholes that favor giant corporations, on breaking up the financial institutions that continue to threaten our economy, and on giving people struggling with high-interest student loans the same chance to refinance their debt that every Wall Street corporation enjoys. There’s no shortage of work that Congress can do, but the agenda shouldn’t be drawn up by a bunch of corporate lobbyists and lawyers.
Hard to argue with, but again, the position on student debt, is a little too soft for my blood. Let’s just get rid of that debt, so that it’s not a burden on our future economy and on our best young people. Let’s not just refinance. Let’s just not have those debts. We can afford to pay them outright, now! They’re only in US Dollars, an unlimited resource of the US Government, after all.
Finally, it’s natural for progressives to respond to Senator Warren, she’s got great rhetoric and seems to be on the side of the people. But we need to be skeptical about her and other candidates who claim to be with the 99% and who want to lead us. We need more than rhetoric from them. We need commitments to a specific agenda of legislation that will improve our lives, and remove the scourge of extreme inequality from our democracy.
There are, of course, no such things as absolute guarantees in politics, but I think it’s the obligation of American citizens to get very specific promises from candidates, before we grant them our support and enthusiasm. We failed to get such commitments in 2008, and now we have endless debates about whether particular politicians misrepresented or lied about their positions and broke campaign promises.
We shouldn’t make the mistake of not getting specific legislative commitments in the future, or engage in cults of personality again. Politics is transactional. We need to know what all our candidates will do for us, if they run for a particular office, in exquisite detail. If only to hold them fully accountable for their actions in the next election!
Great and spot on!
But good luck with that!
Money Talks and politicians listen! But what We The People may need simply doesn’t matter to The Monied Elite!
WE exist for their benefit and we should be thankful they ALLOW US to exist!
Joe,
Thank you for this well written article. Like you, I find her words soft and sweet like a bed-time story. What is the reality? What action has been taken? Has she brought bills to the floor? Co-sponsored bills? Has she been honest with who she shills for, *hint* it is a country in the middle east, that is not Islamic.
I truly appreciate your skeptical view as it is hard to find anyone who would take these bed-time stories seriously. Just where is the accountability for those soft words? Please see if you can follow up on what has actually be proposed and accomplished.
Lastly, your remarks on what the Dems enacted when they had both branches is revealing. Anyone left thinking that DEMs party is for the “people” is actively ignoring the facts.
X
Speaking of asset seizures brings to mind a similar tactic in the UK. Several years ago the police opened six thousand safe deposit boxes and confiscated the contents in Operation Rize. There appears to be quite a lot still on the net. It’s just a matter of time before the same thing happens in the US. You have been warned. You will be required to prove legal ownership or forfeit.
http://www.standard.co.uk/lifestyle/operation-rize–the-inside-story-on-the-mets-biggestever-sting-6390281.html
Joe, perhaps you could elaborate on taxation. Is it necessary? Are their good taxes and bad taxes? How does MMT approach taxation?
Taxes are needed so the currency is accepted. They can elaborate more.
Past that I know most here say it should be set as to reach a balanced budget at full employment, Mosler has called it a political decision, so I guess we can say “this is what we want” and set taxes to fit that level.
The other need for taxes is inflation control. If it becomes an issue taxes can always be raised.
I always wonder if the payroll tax could be automatically adjusted somehow! Like set it at 0% now, come up with some inflation + other targets that when reached the payroll tax can be “turned on” and automatically “slide” with inflation. Just an idea I had. It’d be quick and easy to have this happen.
The real question are taxes for the sake of reducing inequality, or discouraging behavior. Like higher taxes on wealthy, the Financial Transaction Tax.
The definitive MMT view is given by Randy Wray in his recent series. Here’s the installment outlining the MMT approach.
Warren PIECE: NOT Our $alvation.
Pingback: Elizabeth Warren: Better, But Not there Yet | I...
Great post my main man. After the disillusionment many democrats have with Obama after all the hopes for change and unfulfilled promises, and now the new the hopes some have for Warren (or Hillary Clinton {yuck}), I’m reminded of something I learned watching a biopic of Gore Vidal; that similar progressive hopes were stoked by JFK and then dashed by his reactionary and war-mongering policies after elected. What I take from that is that Americans will get nowhere if they continue to engage in cult of personality politics, and then sit on their duffs and wait for democracy to happen. I have no sympathy for commands to just lay down and die as Jim Shannon does above (“I have no hope and neither should you have any.”) The nation needs reform that cuts to the bone such as a new constitution. I don’t know how else to get the nation to make a decision about what they believe in.
Just curious, anyone here on NEP know what has been up with private savings? The sectoral balance chart of course ends at 2011 I think? Since gov deficits have really fallen, and we’ve been having SOME recovery, I am worried about what is happening to private savings.
Good article as always, sadly we know 1. Most progressives while sincere simply live in the traditional ideas, so more gov means we need the higher taxes. 2. I think many would be sympathetic to the ideas of job programs, free university and etc but it would be a damn tough sell. Thus 3. The time may have passed. It was a great window in 2009 to push for changes but it’s passed, Congress and people are far less open. Not to be grim but we may need to wait for the next crisis to push for change. Especially if it’s worse than our last…
Though I have spoken to regular people about some of these MMT/Post Keynes ideas and they seem accepting. If you sell the job program as a way to reduce welfare or “put people to work” I’ve gotten conservatives to at least be open to it “Come on, what do you prefer a welfare state or putting people to work like you want?” It’s all about how it’s sold. Also silly as it sounds using “investment” over spending helps. I’ve had people open to the ideas of job programs, boost wages, education and energy rebuilding etc when I said “government investment”. It’s totally silly I know, that people are A OK with gov investment but opposed to “spending” but it seems to be a good buzz word. We gotta try to sell this stuff to those who don’t want to learn/keep clinging to beliefs.
I’m not at home, so I don’t have easy access to my spreadsheet, but my memory tells me that private sector savings were falling som time ago. With the deficit falling to 2.8%, and the trade deficit at about the same level, I’d guess that private sector savings have now once again turned negative or are about to. With economic and political power as hierarchical as it is, I’d guess that household savings is once again taking a beating as it was for the lasy years of Clinton’s presidency and most of Bush’s. Look for either a credit bubble or a downturn in the short-term, whichever comes first.
Pingback: Joe Firestone: Elizabeth Warren – Better, But Not There Yet | naked capitalism
Excellent. Send this along to the DNC with a note that says “drop the Third Way nonsense and “Me Too” economics emulating the Republicans.”
There is one thing that troubles me. Most progressives want universal health care and free education. Improved SS and infrastructure and environmental improvements are also needed. The problem is those things are expensive. Without some taxes to offset them, the deficits could trigger inflation. I think what progressives really want is a bigger government including spending and taxes. The tax end could support the large spending increases and, assuming any added taxes are progressive, help to reduce inequality.
Progressives have to stop being afraid of the label ” Big government, spend and tax liberals. ” That is quite literally true. By not acknowledging that we will always be fighting a rear guard action. Cut spending here to open up opportunity there. We don’t want that. There is far too much that needs to be done. That is the DLC/Third Way motto, “me too economics.” And we see where that got us this November. Keep on this path and look for lower tax rates and inequality and cuts and/or privatization of SS and medicare and little or no improvement in Obamacare. And there will be more bankruptcies due to egregious interest and extensive medical and education bills while the environment and minimum wage is ignored. Whatever was the Democratic Party will be no more. It needs to STOP!
John, Mr. Firestone posted a sort of political science essay here, but this site is devoted to promulgating Modern Monetary Theory, a radically truthful real-world economic theory, that assesses the financial system as it actually exists. I recommend that you search the site for information about hyperinflation and “response to critics,” because your concept of America’s financial limitations and the need for taxes to offset expenditures is incorrect. This site is meant for you!
These things are expensive, but household balance sheets are still in a bad way and foreign nations still want to accumulate USD. So, that tells me that we have at least 10$ of GDP to make up in deficit spending before we reach full employment because if the money is there people will want to save 6% of GDP and foreign nations will probbaly want to sell us at least 4%. That 1.75 T in deficit sepnding available over the next year. Assuming GDP growth of $2.1 T resulting from that deficit spending, we’d need a deficit 1.96 T in the second year, and so on for the third and successive years, before hitting the likely demand-pull inflation barrier. Stll think these things are too expensive?
If you/we were to be so fortunate as to get this programs enacted in a short period of time the deficit would be extensive. So there arises two considerations. We may believe that deficits are relatively meaningless below full employment but we should not underestimate the ignorance and political propaganda out there. So the big government tax and spending liberals meme will strike many ears as truthful. And secondly, if the economy expands rapidly and inflation results there may be little time to get a tax increase through congress. Again the political fall out from such an event could set us back years. So, either we slow it all down or we put in a small tax to account for some potential. I would say also that some spending like health care is multi year and very expensive and others like infrastructure can be smaller and controlled. So, on balance, I would suggest a tax with any long term program, especially anything like free education or health care.
Like the proverbial frog in boiling water, the American public does not realize how severely depressed our way of life is. I say “way of life” to be more real than the abstract “the economy is depressed.” The economy has no self-awareness so who cares how “it” feels. Because our way of life is so depressed or better yet; oppressed, when expansionary fiscal policies give some blood to our 90-lb economy, our wheelings and dealings should begin to heat up and some inflation will result. Although the public is alarmed about inflation, it’s not entirely bad (for property owners) as it increases home prices, interest rates will probably be raised so savers can finally get some interest. But this is where my understanding of the matter ends. You may have noticed that the Fed, the bank of Japan, and the ECB have been struggling to “provoke” some inflation but have instead been accosted by deflationary conditions due to fiscal policies. Remember when you could buy something at the corner store for 5¢? Do you remember such thing as “the corner store?” Were the Italians in 1990 astonished that their 80¢ lira notes were “huge” number (1,000 lira)? It’s all relative. To imagine the outcome of progressive proposals, consider China, where cumulative real GDP growth from 2007-2012 has been %55 compared to America’s %4. they have not succumbed to deficit hysteria, but they are a Texas Republican’s wet dream, little regulation and poisoned air-water, food, products until the producer gets caught and then death penalty.
Finally, progressive taxation yes. A simple venerable proposal.
I’m not that certain that strictly limiting credit card interest rates is the way to go. Very often the problem with credit is that people who shouldn’t be getting it get it. It seems pointless to try to tackle this problem by focusing legislation at the borrower. BAPCPA made bankruptcy more stringent for borrowers, which has the unfortunate effect of making lending less risky, which reduces the incentive of lenders to take on the expense of proper underwriting. Without such underwriting, financial instability is assured.
Easy to get around. If the banks won’t lend because the interest gain is too low, then nationalize them and have the Government provide the credit. Back in the 1950s banks were happy with 6% interest interest. I say give them 5 points over prime now, and if they don’t lend for the profit in that then put them out of business.
My concern with Elizabeth Warren (who at this point I will support if given the opportunity) is whether she is experienced enough and tough enough to take on the monumental task of reducing corruption in our political system as well as introduce policies that would not only be more equitable, but more successful. I hope she is. Hillary has no problem putting on the brass knuckles.
Bill, have you ever thought of offering your services to Elizabeth Warren? Is it too early for you to pick a horse? Would you be willing to get into politics?
Am I Bill, or am I Joe?
Joe and those who commented, let’s stand back and think about this a bit. What Elizabeth Warren said comes closer to what MMTers want than any other important leader’s statements. And she has more experience in trying to make major changes in the face of strong opposition than those who write and comment on nep.
I think that MMTers should decide what they really want to do in the short run–advance a technical explanation of how the US economy works or change the course of events on Main Street. If the second, she is an ally to be supported and MMT doesn’t have many in high places. It won’t help her or the MMT cause to criticize her or make her spend time defending what she has not said. Let not the best become the enemy of the good.
She knows that that broad coalitions can only be built around strong sound bites that stand on their own, have broad appeal, unify the members, and put opponents on the defensive. As readers of this site know, MMT has yet to produce those sound bites. The full message is too different from what most people believe and too complex to be convincing. Promoting MMT in its present form is like shoveling dry sand uphill against the wind. She doesn’t have time for that.
If she is going to advance MMT and benefit from it, she needs a few powerful factoids to use over and over again like Occupy’s 1 percent. In my opinion, which may not be right, the strongest case is that the sectoral balances show how the federal government is the reverse of all other entities, that it has run deficits during two thirds of the past 200 years, that deficits lead to growth, and rather than being things to fear, deficits are the unsung ingredient in our success as a nation. Good sound bites can be drawn from that, and more would be too much.
Tip– Absolutely.
MMT needs to get practical if its proponents want it to be influential.
Tip, forgive me, but this is Stalinist, and all too common these days. I reject “Democratic Centralism” and also the idea that just because I criticize Warren that means I’m against her. What I’m saying here is that we need her to commit to specifics before we support her. This is a democracy, in theory at least. So that’s the way things ought to be. If she doesn’t like it, then she shouldn’t be running.
Sure, I forgive you Joe, but I don’t know for what. The Stalinist comment doesn’t seem to fit much of anything. But there is a leadership question here. You say, “What I’m saying here is that we need her to commit to specifics before we support her.” But what specifics do you want, specific programs or economic theory?
If you want the first, be patient as she tests the ground to measure the support for each one. Each has its own cluster of supporters and opponents. She dare not overload her truck lest it breaks down on the road.
If you want the latter, you may have the approach backwards–she may need to decide that MMTers collectively support her before taking the time to learn their script well enough to say it in public and defend it against strong opponents.
As a matter of interest, I wonder how long most denizens of this site took to accept MMT’s main ideas. I may be slow, but it took me years, as Randy and Stephanie can attest. If Senator Warren is at all similar, she needs first to trust those who want to help her, and then she needs bite-sized pellets of knowledge to digest and put to use. Demanding acceptance as a pre-condition doesn’t seem like a winning formula, Stalin or not.
Tip, All I’m saying is that you can help people with critiques provided they’re open-minded enough to learn from them. I pay Warren the compliment of thinking she’s the kind who can learn more from a strong critique, than from one that is subtle. So, I’m looking to help her, and also to jog her into showing whether whe’s with the 99% or not.
Well ah, MMT is both (practical and influential). Not influential enough, even though even conservative economist’s alleged disagreements with MMT evaporate upon cross-examination, because MMT describes how the money creation system actually works and have the most robust accounting of inflation. In effect, MMT can be considered a democratization of money-creation, so the theory can be frightening because the implication is that all the work that everyone can do can be funded by fiat money without the prospect of hyperinflation. …which can imply that America could have an even bigger military-industrial complex AND a superb social security system. So the practical implications are actually difficult to avoid because MMT opens up a whole new world of possibilities which the contributors to this site regularly propose. As to the comment about credit abuse by the little guys — which is baloney when considering the context — Warren has a lot of credible responses to counter that bit of anti-poor people rhetoric.