As much as I dislike the title of this article from Advisor Perspectives, the essay itself is a good overview of the talks I’ve been giving at national, regional and chapter meetings of the Financial Planning Association (FPA) over the past year-and-a-half. I wasn’t aware that Veras was working on a piece and didn’t see it until it was published (or I would have implored him to change the title!). I wanted to share the piece but only after this word of caution: I would not and did not say, “deficits don’t matter,” as you’ll discover if you read the entire piece. This is a touchy subject for MMTers, who’ve been (wrongly!) accused of taking the position that “deficits don’t matter.” Randy Wray made the MMT position crystal clear years ago, and I told Dan Jamieson the same thing when he interviewed me for a similar piece in Investment News:
InvestmentNews: Are MMT theorists saying deficits don’t matter?
Ms. Kelton: Deficits do matter, but not in the way people think.
In his 12/8 Washington Post column, Ezra Klein says, “Projected deficits are driven by two factors: health-care-costs and old people.” He goes on to suggest, quite logically it seems, that in order to pay for all the health-care services elderly American’s are going to require, tax rates will to have to be raised so high they’ll begin “doing real damage to the economy”, or deficits will “grow to the point that they cause a fiscal crisis.” Continue reading →
The US is broke. Government deficits are de facto evidence of a government gone wild. We’re careening toward Greece. Entitlements are the root cause of our fiscal woes, and the Chinese are coming for our grandchildren. How many Americans believe this garbage? My guess? Most of them.
Nearly everyone believes that Uncle Sam is like a family that must get money before it can spend. But that is not true. A basic function of any sovereign government is to create and run the country’s money system. Unlike a family, the US government is sovereign. It creates money and can never run out. All the words about America’s financial limits mean nothing.
The Washington Post leads the pack when it comes to generating what scientists term a “moral panic” about budget deficits. As part of that effort they generated the series of myths that Paul Ryan was “serious,” “courageous,” and “expert” about “solving” the “deficit crisis.” The newspaper’s theme is that anyone who doesn’t fall for their effort to create a moral panic is not “serious” and should be ignored. The paper runs a column by Robert J. Samuelson that is devoted to generating a moral panic about the deficit. Like Ryan, his central targets are imposing austerity and cutting Social Security, Medicare, and Medicaid. Continue reading →
The polling since the conventions shows that Democrats are doing better than expected. President Obama now apparently has a clear lead over Mitt Romney. Democratic Party control of the Senate seems likely to survive this election year of many more Democratic rather than Republican Senate seats up for election. And, even in House races, it looks like the Democrats will pick up a number of seats; though whether they can pick up enough seats to take back the House is still an unlikely prospect, and without the House President Obama’s second term is likely to be much like his last year and three-quarters, rather than his first two years.
Alan Grayson’s e-mail on Moody’s warning that it might reduce the US’s AAA rating, suggested that Moody’s was either threatening a downgrade because it wants to get the Bush tax cuts for the rich extended, or, alternatively, that “Moody’s is living in what Aristophanes called “Cloud Cuckoo Land.”” He says this because Moody’s is upset about the possibility that the US may go over the so-called “fiscal cliff,” even though if it did, it would theoretically result in $560 Billion of deficit reduction annually, without further legislative changes, and it makes no sense on the surface for a ratings agency to think that the risk of US bond default is greater when the annual deficit is being reduced by $560 B per year, than by some lesser amount, which is likely to happen if Congress doesn’t take us over that “cliff.”
Bob Woodward’s releasing a new book, so we are now seeing articles based on it. A few days back, The Washington Post published the “Inside story of Obama’s struggle to keep Congress from controlling outcome of debt ceiling crisis.” This account is a pretty downbeat one of how our political leaders and President Obama handled the debt ceiling crisis of the summer of 2011. I want to comment on what for me was the most salient point: that during the crisis, the President had no “Plan B” to get around the debt ceiling beyond negotiating a deal with Congress.