By Joseph Hykan
Another great video developed for Eric Tymgoine’s modern money course.
By Dan Kervick
Matt Yglesias has described three popular contemporary political approaches to the challenge of maintaining our national commitment to “providing health care services to the elderly, the disabled, and the poor and also to bolstering the general incomes of elderly people.” One is Congressman Paul Ryan’s approach of reducing the level of the future commitment in order to bring it in line with “historic norms about the level of taxation.” The second is the liberal approach of preserving our existing level of commitment into the future, even if that means raising taxes in the aggregate. The third is “the hazy Obama/Simpson-Bowlesish center that wants to raise taxes and cut programs.”
Perhaps this short list characterizes the main political answers reasonably well, if the main political question is how to tame the budget, and shrink or control the deficit. But I would like to point out that all three answers have something in common: Not a single one of these approaches, as usually presented, contains any call for the national government to engage seriously in what one might call “investing in our future”. All three of them reflect the defeatist mindsets of different camps of worn out oldsters, each promoting a different way of giving up, making do, or just hanging on. They are all pathologies of the dismal “No, we can’t!” era in which we now live.
The promoters of these three variations on the theme of austere, hard news pessimism no doubt fancy themselves realists and responsible grownups. But they are nothing of the sort. They are burned-out casualties of neoliberalism, afflicted with dead imaginations or ideological blinders, who have forgotten what it means to grow a country and build a society. We need to move beyond their miserable and dismal trilemma. If the die-hard adherents of these schools of thought want to mope around the shuffleboard courts at the End of History Home for Final Surrender, let them. But it’s time for the rest of us to reject all three approaches and reignite our history.
By Dan Kervick
In a small, peaceful town there once lived three people: Abbie, Baker and Carlie.
Abbie was a very wealthy aristocrat, and also a philanthropist. Her fortune and position in the town were the fruit of the hard work of her ancestors, but her life was dedicated now only to managing that fortune. She lived to make the common people of the town happy, especially Carlie, who was her personal favorite.
Baker was much more selfish, and looked out for his own interests. He wasn’t terrible and mean, just obstinately self-interested. It seems he was born that way; it was in his DNA.
Abbie frequently lent money to Baker, and Baker frequently lent money to Carlie. But in accordance with the ancient and venerable laws of the town, enacted to maintain a decorous distance between the aristocrats and common people, Abbie was forbidden from loaning money directly to Carlie. Nevertheless, Abbie was usually able to help out Carlie indirectly when necessary. She found that when she lent money to Baker, Baker was sometimes more willing than before to lend money to Carlie. And if Abbie loaned the money to Baker at lower rates of interest than previously, Baker would usually reduce the rate of interest he charged Carlie in turn.
By Dan Kervick
The Unites States government operates a fiat currency system. The government is therefore the monopoly supplier of the final means of payment in our dollar-based economy, and is ultimately responsible, in one way or another, for any net increase in dollar-denominated financial assets in the private sector.
And yet, we continue to hear bipartisan expressions of fear and angst about the budget deficit and the national debt. Both major parties seemingly agree that we are “out of money”. They wrangle over various competing approaches to shrinking the gap between tax revenues and government spending. They appoint commissions to study the government budget and recommend some combination of slashed spending and higher taxes in order to close that budgetary gap. They warn us that we will transform ourselves into banana republic status if we do not urgently address our public debt problems.
This situation should be perplexing. Why does a government that is the issuer of the national currency have to borrow that currency back from the public to which the currency is issued? And how could such a government ever experience the kinds of budgetary squeezes and debt burdens that can pose severe problems for households and businesses?
I wish to make a radical suggestion: Public borrowing is an outdated practice, and we could dispense with it entirely. Borrowing by the public treasury and the accumulation of government debt obligations are legacies of the era that preceded the development of modern fiat currency, an era when governments were primarily users of traditional means of payment that lay outside their control, and not the producers and issuers of the primary means of payment. That pre-fiat era is now dead in the US, and the chief remaining role of government borrowing in our time is to bamboozle the public, and to obscure the true nature and effects of government fiscal and monetary operations under a bewildering maze of bookkeeping ink and financial legerdemain. Eliminating public borrowing, and replacing it with operations that are simpler, more direct and more transparent, would advance the cause of informed democratic debate over public spending and taxation. Above all, the change would eliminate needless obscurity and confusion and help us all understand exactly whose bread is being buttered by the budgetary decisions made by politicians.
There have been many job creation programs implemented around the world, some of which were narrowly targeted while others were broad-based. The American New Deal included several moderately inclusive programs such as the Civilian Conservation Corp and the Works Progress Administration. Sweden developed broad based employment programs that virtually guaranteed access to jobs.
The JG posts here at MMP have generated a huge number of comments. I have focused my responses at the comments more-or-less directly directed to the actual posted blogs. I can understand the impatience: many questions have not been answered. However many of these questions and comments concerned upcoming topics.
Let us move on to macro stability issues. I have given JG talks all over the world and the two main objections raised always refer to inflationary impacts and exchange rate impacts. It seems to me that those who respond with these fears have not paid attention to the set-up of the program and to the MMT arguments.
Thanks for the comments, many of which get ahead of the story.
I’d like to remind readers that we are ADDING the JG onto the EXISTING system. So the correct comparison is NOT against some UTOPIAN IDEAL in which we all live like Wall Street’s finest in some sort of Ayn Rand blissful Fountainhead. But RATHER to compare the existing system against one in which the JG is added. I realize this is a difficult mental gymnastic. I hope this will be clear as I respond to seven comments (the others concern upcoming topics; indeed, even these really are about topics we have not explored in detail but they are worth discussing).
This will be the final part of this series. Next week we turn to the Job Guarantee/Employer of Last Resort.
The answer to both questions posed in the title is, I think, a big fat no.
I’m not going to go deeply into methodological debates. First, I’m no methodologist. Second I don’t think many readers here are that interested in such debates. And, third, it really isn’t necessary.