Tag Archives: modern money theory

Elizabeth Warren: Better, But Not there Yet

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:

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Piketty’s Neoliberal Capital

Let’s get this out of the way. I agree with Piketty’s overall conclusion in Capital about inequality, that: the distribution of wealth in many industrial nations is highly unequal, wealth concentration has been increasing; and there is a high likelihood that the extent of wealth inequality will continue to grow unless appropriate fiscal policy is used to reverse current trends. However, I don’t agree with:

— the framework he uses to define and specify “capital”;

— the way he looks at Government finance and net worth; and

— the fiscal policy proposals he offers to reduce Inequality and put a stop to current trends of growth in the capital to income ratio.

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Beware of Policies and Legislation Based on the Generational Accounting Scam

The Peter G. Peterson Foundation (PGPF) and its allied army of associated deficit hawks want the Congressional Budget Office (CBO), the General Accountability Office (GAO), and the Office of Management and Budget (OMB) to do fiscal gap accounting and generational accounting on an annual basis and, upon request by Congress, to use these accounting methods to evaluate major proposed changes in fiscal legislation. Generational Accounting is an invalid long-range projection method that doesn’t take into account inflation, the projected value of the Government’s capability to issue fiat currency and reserves in the amounts needed to fulfill Congressional appropriations, and re-pay its debts, the projected non-Government assets corresponding to government liabilities, the likely economic impacts of Government spending, surpluses, and deficits, the impact of accumulating errors on projections, and the biases inherent in pessimistic AND contradictory assumptions. It is a green eye shade method that ignores both economic and political reality.

If you want America to end deficit terrorism and austerity, and to have the fiscal policy space it needs to begin to restore the American Dream, then you need to defeat proposed policies or legislation which puts building blocks in place to bias fiscal policy towards austerity and the economic decline it will surely produce for ourselves, our children, and for their children. Proposed policies and legislation of this kind must be defeated for the following seven reasons. Continue reading

Paul Krugman Still Believes That “the debt” Can Be a Problem for the U.S.

The deficit is now down to under 3% of GDP, and in contemplating that fact, Paul Krugman asks why the deficit hawks aren’t celebrating the precipitous fall from nearly 10% of GDP a few years ago. He then explains that:

Far from celebrating the deficit’s decline, the usual suspects — fiscal-scold think tanks, inside-the-Beltway pundits — seem annoyed by the news. It’s a “false victory,” they declare. “Trillion dollar deficits are coming back,” they warn. And they’re furious with President Obama for saying that it’s time to get past “mindless austerity” and “manufactured crises.” He’s declaring mission accomplished, they say, when he should be making another push for entitlement reform.

All of which demonstrates a truth that has been apparent for a while, if you have been paying close attention: Deficit scolds actually love big budget deficits, and hate it when those deficits get smaller. Why? Because fears of a fiscal crisis — fears that they feed assiduously — are their best hope of getting what they really want: big cuts in social programs.

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Yes We Can Pay for Increasing Social Security Benefits

Some time ago, in the pages of USA Today, Duncan Black, better known to some as Atrios voiced the immediate need for increased Social Security benefits of 20% or more even if it means raising taxes on high incomes, or removing the payroll tax cap on salaries.

Black is right about the need for increased benefits; but legislating that increase doesn’t require increasing taxes. In fact, Congress should both increase benefits and remove the payroll tax entirely.

But how is that possible without greatly increasing “the national debt”? The answer to that one is easy. Don’t tax or borrow to pay for it. Just mint a single one oz. platinum coin at the beginning of each fiscal year with a face value large enough to cover expected the cost of SS payments. Doing it that way will both take care of retirement needs and also provide a huge shot in the arm for employment, since the increase in Social Security benefit payments and the ending of the payroll tax won’t be offset by tax increases elsewhere that will depress aggregate demand. Continue reading

Equality, MMT, Real Fiscal Responsibility, and Re-inventing Democracy

Inequality and MMT

For some time now, MMT has been receiving criticism from self-identified progressives charging that MMT economists and advocates aren’t concerned about one of the most pressing problems in modern democracies and especially in the US, namely, increasing and often extreme inequality. MMT supporters have responded by citing much previous work on inequality, a lot of it done at the Levy Institute, by pointing out their great concern over the problem, and their work in advocating for a Federal Job Guarantee that would do more than perhaps any other single piece of legislation to ameliorate both poverty and inequality.

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The Re-invent Democracy Platform and MMT

The MMT Uptake Problem

Proponents of the Modern Monetary Theory (MMT) approach to macroeconomics have had many successes since the approach was first synthesized in coherent form by Warren Mosler. There have been successful predictions of economic conditions: much work showing that the historical record accords with the MMT point of view, rather than the views of other approaches and paradigms, and also many instances where representatives of other approaches to economics have suddenly begun to use economic views first put forward by MMT economists.

So, it’s surely true that MMT has been making progress in its quest to become the dominant economic paradigm guiding macroeconomic and fiscal policy in nations. But for some of us writing about issues relating to MMT progress seems painfully slow. A big part of the reason for slow progress is the difficulty of getting MMT views into the mass media consistently, which is seen as a necessary step in getting them popular currency.

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A Bottom-Up Solution to the Global Democracy Crisis

Before the “no” vote on Scotland’s independence, The New York Times, carried a post by Neil Irwin in the Upshot making the point that the then upcoming vote “shows a global crisis of the elites.” He argues that the independence drive reflects “. . . a conviction — one not ungrounded in reality — that the British ruling class has blundered through the last couple of decades.” He also thinks that this applies to the Eurozone and the United States to varying degrees, and is “. . . a defining feature of our time.”

Irwin then updated his first post last night, expanding it and recognizing the victory of the “no” votes in the referendum. His new post did not add anything essential to his “global crisis of the elites” diagnosis, so the references and quotations below come solely from his pre-vote post. But the points made apply equally well to his update.

To summarize his argument, for decades now, the elites in major modern, industrial nations have committed leadership blunders and created great discontent among the citizens of their nations, to the point where their polices have contributed to damaging their economies seriously, and the rise of popular resistance embodied in extremist parties and independence movements. Elites have had vast power, but have not lived up to their responsibilities to serve the people of their nations. Discontent with their actions and results is so high that many are questioning the legitimacy of the very governing institutions that claim to serve them, and are exhibiting a greater and greater willingness to do something about these institutions and the policies that they and the elites are generating. Scotland is but one example of that, and his implication is that more examples are in the offing.

It’s significant, some might say even remarkable, that Irwin’s article appeared in The New York Times, since it is a flat out criticism of elite leadership over a number of decades and a warning to elites to improve their performance or deal with the consequences. But I think it still misses the most important question. That question is whether there is a global crisis of elites or a global crisis of democracies? I’m afraid I think that the crisis of elite leadership is only a symptom of the underlying cause of a broader global crisis of democracy. Continue reading

Real Fiscal Responsibility: What Chris Hayes Said

I’m interrupting my series on US Government Real Fiscal Responsibility since the Carter Administration to write about something Chris Hayes said relating to Real Fiscal Responsibility. Back in February of 2014, he tweeted:

Recently, that tweet along with an image has been making the rounds on Facebook as an Alternet photo. The sound bite in the tweet looks great, after the manner of a logical truism.

But, logically, it doesn’t follow, because one can easily say that as long as the Government implicit in the statement isn’t a currency issuer, but a currency user who must acquire its funds by taxing or borrowing alone, that Government can involuntarily run out of funds. And it is conceivable that funds might be raised to fund a war, while that same Government might not have the funds available to take care of the people who fought for the nation, without defaulting on its obligations. Continue reading

Real Fiscal Responsibility 5; Carter: Environmental Degradation

By Joe Firestone

This, the fifth post in a series evaluating the fiscal responsibility/irresponsibility of the Governments of the United States (mostly the Congress, the Executive Branch, and the Federal Reserve) by Administration periods, beginning in 1977 to 1981 with the Jimmy Carter period, will cover the performance of the Government on the environment and climate change aspect of “public purpose.” Posts 1, 2, 3, and 4, discussed some basic definitions and assumptions of the series and evaluated Government performance relating to economic stagnation, living wage full employment, price stability/inflation, implementing universal health care, and educational reform.

I’ve explained why fiscal responsibility is closely connected to the idea of public purpose, in this post prior to beginning the series. You’ll want to read it, if you want to know what I mean by “public purpose,” and see what else that pregnant term includes, apart from enhancing the environment.

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