We define poverty, I suppose, as that living condition which is unable to acquire enough dollars to purchase some, or most, of the basic necessities of life. It also seems to be an accepted notion that a certain amount of “poverty” is a necessary condition of our modern market economy—that a certain segment of the population will always be “unemployable” by the profit-oriented business community, either because they lack skills or because the business community simply does not need their services in order to generate its profits. Nobody really knows what to do with these “unneeded” people. We talk about “retraining” them—but there is no guarantee the profit-seeking business community will need them even with their newly acquired skills. In the meantime, these “unneeded” people don’t know what do with themselves either. This is, perhaps, the biggest problem of all—though I will not, in this short essay, go into the details of that (except to say that it is contributing to a tragedy that is now disrupting the lives of too many of us). The point is this: It is time to begin imagining specific, concrete solutions to what is becoming a fundamental dilemma of our time.
By William K. Black
December 22, 2017 Bloomington, MN
As Brad DeLong aptly puts it, John Cochrane was once an economist. Cochrane is now a right wing ideologue surrounded by similar ideologues at Hoover. He is pushing his new chapter in a Hoover book entitled American Exceptionalism in a New Era. His chapter’s title is “Law and the Regulatory State.” I will be writing several articles responding to Cochrane’s chapter, but this first piece concentrates on one key belief that Cochrane said he held that we all agree with. My point is that Cochrane is not living up to his claimed beliefs, which he summarized in his introduction.
To be a conservative—or, as in my case, an empirical, Pax-Americana, rule-of-law, constitutionalist, conservative libertarian—is pretty much by definition to believe that America is “exceptional”—and that it is perpetually in danger of losing that precious characteristic. Exceptionalism is not natural or inborn but must be understood, cherished, maintained, and renewed each generation—and its garden is always perilously unattended.
This first column shows that under Cochrane’s own reasoning the “danger” to the “precious” “rule of law” has never been greater in the last 50 years. Instead of “cherish[ing]” and “maintain[ing]” the “garden,” Cochrane has chosen to leave it “perilously unattended” because of his fanatic partisanship. Trump is ripping up and sowing salt in Cochrane’s “precious” “garden” and Cochrane stirs himself primarily to attack Trump’s critics. Brad’s description requires amendment. Cochrane was once an economist and once a self-described “rule-of-law constitutionalist, conservative libertarian.” Now, he is an unexceptionable apologist for Trump’s authoritarianism, venality, and corruption. Whatever remains of Cochrane is what you get when you burn a substance and retain only its most noxious waste gases. Continue reading →
Lawrence J. Christiano was the lead author of the article announcing the Dilettante doctrine that I discussed in the first column in this series. His ‘dilettante article’ claimed that modern macro got the last crisis so wrong because it ignored the ‘shadow’ financial sector. I have found a 2008 article by him and two Minneapolis Fed co-authors that illustrates modern macro’s blindness to the shadow financial sector. The article is entitled “Facts and Myths about the Financial Crisis of 2008” and the first footnote says that they wrote the article based on information available on October 25, 2008. The purpose of the article was to demand that proponents of fiscal and monetary stimulus prove a specific “market failure” justifying stimulus. Christiano and his co-authors agree that the Nation is in a “financial crisis” and that it could lead to a serious recession, but see no reason for the government to act.
The Republican tax reform will be criticized on many fronts. It is a battle of criticisms that will likely become as chaotic, ill-informed, and counter-productive as the tax reform process itself has been. This is because it will surely ignore the only strategic battle-front that ultimately matters: the basic premise of what taxes are for and why they’re necessary.
Before the Republican tax reformers even said a word, their arguments and proposals were packaged in the tired and tiresome macro-economic assumptions that misguidingly underpin our entire political discourse. Namely: (a) The federal government collects taxes in order to pay for federal spending; and (b) it cannot collect enough taxes to meet the spending needs of the budget it annually produces. To solve this conundrum some combination of reducing the budget and increasing taxes is therefore required. The magic Republican formula to simultaneously accomplish both of these goals is to dramatically reduce taxes on the wealthiest class of corporate operatives—which is made palatable to the voting masses by attaching to the corporate coat-tails some colorful snippets of tax-relief for lower and middle-class working families.
The truly exceptional thing about ‘modern macroeconomics’ devotees is not that they are so consistently and horrifically wrong or that they persist in their errors – but their exceptional combination of arrogance and disdain for those who have dramatically better records and broader and more relevant expertise. Kartik Athreya, the Richmond Fed’s Research Director, led the modern macro parade on June 17, 2010 with his blog (which he later withdrew in embarrassment) when he announced the Athreya Axiom of Absolute Arrogance.
So far, I’ve claimed something a bit obnoxious-sounding: that writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy. Taken literally, I am almost certainly wrong. Some of them have great ideas, for sure. But this is irrelevant. The real issue is that there is extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading.
What follows is a to-do list for the next political power generation―the Millennials in whose hands the operation of America will begin soon, thankfully, to be grasped. The Boomer and GenX generations have succeeded in guiding America to the brink of social chaos and environmental disaster. Thankfully, the Millennials actually have the critical tool necessary to build anew what the 1% power-structures of the Boomer/GenXers have so greedily destroyed. All that is required is for the Millennials to step into their political power, grasp the tool, and begin the work.
The Millennial Agenda, as I think of it, encompasses a broad scope of specific, concrete, public and collective goods and services. Underlying each of the specific agenda items is the same essential proposition―the “tool” I just made reference to. This tool is already in place and operational, though it has been willfully misunderstood, misused and gummed up by the Boomer and GenX logic of economic power. The tool is “sovereign fiat-money.” And the proposition which will underpin each of the Millennial Agenda items is this: public and collective goods in America are to be purchased from American businesses and citizens with sovereign fiat-money―rather than U.S. tax dollars.
The Consumer Financial Protection Bureau is in limbo as two people claim to be its new acting director. The outgoing head tapped Leandra English as his successor, but Donald Trump then appointed Mick Mulvaney, who has called the CFPB a “sick, sad” joke. NEP’s Bill Black appears on The Real News Network discussing the attack on CFPB. You can view here with a transcript.
It is literally painful to watch our political leaders’ efforts to rethink and restructure how we are going levy taxes on ourselves as a collective society. It is like watching a family member struggling with mental illness: the demons being wrestled with are imaginary—yet they have the palpable force somehow of a granite wall. And as the struggle with this palpable monolith unfolds, even we—the clear observers of reality—forget that it is imaginary; when we do remember, the pain becomes excruciating for the simple reason that we know it is completely unnecessary.
Why does our political system choose to believe and struggle with the imaginary constraint that taxes must pay for sovereign spending? How can we explain to ourselves, in the face of this rock-solid demon, that the simple logic of fiat money demonstrates that sovereign spending must occur first, with taxes collected after? How can we reassure our terrified and confused representatives in congress that if our sovereign government collects back fewer dollars than it issues and spends, the difference is not our collective “debt”—it is, in fact, our collective savings? But the demon will not allow us these explanations.