An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
i know that chart well. and what it says to me is dem party propaganda.no mention of the reason why big deficits were needed (unproductive private sector dis-saving especially during the clinton boom).the dems have a good case for where the deficit spending has gone (when the republicans were in charge)... and yet that's not the case they are making (probably because the dems don't have a good track record either).but the dems are on message implying (when not outright stating) that fed govt deficit spending is bad and that they are the "fiscally responsible" party.of course it's all bs. dangerous bs. this is part of the reason, as you wrote in a comment on an earlier thread:"This is the obstacle to most MMT policy solutions. The public is so programmed that they cannot recognize what is in their interest. That's what propaganda is designed to do, after all."we have bipartisan propaganda telling us up is down.
@ seliseMMT-wise, I agree, of course. But practically speaking, the budget deficit is the dominant meme now because the public believes that it is crowding out investment and costing jobs. The GOP narrative that the cause is "runaway spending" and "waste, fraud, and abuse." The chart blows that away. In my view, if we are going to have austerity anyway, then the way to do it is to reduce the deficit by the lowest multiplier, which is raising marginal tax rates at the top and is used for further rent-seeking rather than productive investment.There is no way that the politicians and public are going to suddenly get MMT in this budget cycle. Not that we should stop trying. But we also need a plan B that will do less damage than cutting social spending, which has a high multiplier. That involves taxing economic rent, and most economic rent gathers at the top. Progressive taxes tax that away from rentiers. Modern capitalism is chiefly rent-seeking and has spawned a rentier class that has garnered an inordinate proportion of income and wealth. That is adversely affecting demand.
is a DEM false narrative the only way to blow away a GOP false narrative? especially a false narrative that works to further the neoliberal frame?no way.i have no intention of knowingly conceding to a neoliberal frame.it's the lies we're being told -- and the damage they've done -- which is what has got us into this mess where we citizens have no idea -- or worse, wrong ideas -- about what we can do and who we can trust."In my view, if we are going to have austerity anyway, then the way to do it is to reduce the deficit by the lowest multiplier, which is raising marginal tax rates at the top and is used for further rent-seeking rather than productive investment."i've got no problem with that. but that's not something i'm willing to actively support. "There is no way that the politicians and public are going to suddenly get MMT in this budget cycle. Not that we should stop trying. But we also need a plan B that will do less damage than cutting social spending, which has a high multiplier. "do you really think there is any thing we citizens can individually do today to influence the outcome of what is coming out of congress and the oval office? without popular resistance we're going to lose. even your plan B.that was certainly made clear when congress voted for the bankster bailout (aka tarp) right before elections when the public was so outraged the response took the house email system down (not that our representatives cared). every legislative action since has just provided more evidence.this is not the only round of austerity that the elites want to impose. we've got much worse coming at us and there is value in principled fighting right now, and every step of the way, for what we believe... which i hope, at the very least, is that each of us has the right not to be intentionally deceived.at some point the public may have had enough and act to throw the bums out. if the only ideas or actual popular resistance out there are cryto-fascist, i think we can guess where that will lead.
sorry for the rant. i've had a bad day. i'll just leave you with some of galbraith's talk before the ADA last fall -- you've probably seen it, but i think it's worth reading again from time to time.http://www.netrootsmass.net/2011/02/james-k-galbraith-we-need-to-make-an-honorable-fight-the-fate-of-the-entire-country-is-at-stake/galbraith:...it seems to me that we as progressives need to make an honorable defense of the great legacies of the New Deal and Great Society—programs and institutions that brought America out of the Great Depression and bought us through the Second World War, brought us to our period of greatest prosperity, and the greatest advances in social justice. Social Security, Medicare, housing finance—the front-line right now is the foreclosure crisis, the crisis, I should say, of foreclosure fraud—the progressive tax code, anti-poverty policy, public investment, public safety, and human and civil rights. And the environment. We are going to lose these battles—let’s get used to it. But we need to make an honorable fight, to state clearly what our principles are and to lay down a record that is trustworthy for the future.Beyond this, bold proposals are what we should be advancing now; even when they lose, they have their value. We can talk about job programs; we can talk about an infrastructure bank; we can talk about Juliet Schor’s idea of a four-day work week; we can talk about my idea of expanding Social Security and creating an early retirement option so that people who are older and unemployed or anxious to get out of the labor force can leave on comfortable terms, and so create job openings for younger people who, as we’ve heard today, are facing very long periods of extremely aggravating and frustrating unemployment; we can talk about establishing a systematic program of general revenue sharing to support state and local governments, we can talk about the financial restructuring we so desperately need and that we’ll have to have if we are going to have a country which has a viable private credit system and in which large financial power is not constantly dictating the terms of every political debate.We are not going to get these things, but we should begin to have a clearly defined program so that people know what they are. And then frankly, as was also said earlier today, I think most eloquently by Jeff Madrick, in the long run we need to recognize that the fate of the entire country is at stake. Running a large country isn’t easy work and it can’t be done indefinitely by incompetents, hacks, and lobbyists. Large countries can and do fail, they have done so in our own time. And the consequences are very grave: drastic declines in services, in living standards, in life expectancies, huge increases in social tension, in repression, and in violence. These are the consequences of following through with crackpot ideas such as those embodied in the Bowles-Simpson deficit reduction commission, as Jeff Madrick again outlined, the notion that we should as put arbitrary limits on the scale of government, or arbitrary limits on the top tax rate affecting the wealthiest Americans.This isn’t a parlor game. The outcome isn’t destined to be all right. It will not necessarily end in progress whatever happens. What we do, how we proceed, and how we effectively resist what is plainly about to happen, matters very greatly for the future of our country, of our children, and of every generation to come. We need to lose our fear, our hesitation, and our unwillingness to face the facts. If we thereby lose some of our hopes, let’s remember the dictum of William of Orange that “it is not necessary to hope in order to persevere.”
"do you really think there is any thing we citizens can individually do today to influence the outcome of what is coming out of congress and the oval office? without popular resistance we're going to lose. even your plan B."Then we are already lost. The majority of the public wants deficit reduction. MMT could change this is this cycle? I'll believe it when I see some people in the streets. No one in the street yet, except the homeless living there, and this with depression level unemployment.The task now is to get the best deal possible knowing it is going to be a rotten deal.
"Then we are already lost."TODAY we're going to lose.what we do today matters because we can either contribute to building a foundation for future battles-- ones that might be winnable -- or not. that's the choice before us. and that's the fight what i'm not willing to concede. "The task now is to get the best deal possible knowing it is going to be a rotten deal."with what leverage? by what means do we, the people, have any influence TODAY for your plan B:"That involves taxing economic rent, and most economic rent gathers at the top. Progressive taxes tax that away from rentiers. "great stuff. i'd love to have that too. but do you really think that the rentiers are going to go along with this because we ask? do you think we have any leverage at all ? i don't see it, but if you've got some insight i'm missing, please share.with respect... no. that's not right. with deep respect, i don't think what you are proposing in via plan B is practical in any way that i understand the meaning of the word. we, the public, are not in a negotiation where there is a mutual desire for compromise let alone a win-win. if we're not in a position to make demands, our interests are not going to be represented. there's a reason that austerity is the name of the game -- and always is in neoliberal land. it's not just privatization of the public commons. it's because austerity when pushed hard enough or long enough brings on a great fire sale of private property and productive or otherwise useful assets.think we have an oligarchy now? just wait..
I think that we should continue to educate the economics profession and the financial community, the media, politicians and the public about MMT in every way possible, recognizing that this is a longterm project that will take time to gather a critical mass.In the meanwhile, we should also recognize that politics is the art of the possible. The public is already overwhelmingly against cutting certain social benefits, in particular, Social Security, Medicare and Medicaid. They are also overwhelmingly in favor of progressive taxation as part of the mix. Many also think that defense should be on the table, too. No need to convince these people, but rather to show them how their intuitive sense is well-founded. These are things that play a role in the MMT analysis. No only can we support these desires, but also explain the underlying rationale in a more coherent light. I don't see this as a distraction from MMT, but rather an opportunity to emphasize the role of aggregate demand and the importance of discouraging rent-seeking behavior and encouraging productive contribution.There is huge dissatisfaction with the unemployment situation. I think that there is also room to promote an ELR proposal along the lines of the WPA and CCC, which were very effective programs.It would be nice if we could reverse public perception about deficits, but I don't see that as a practical consideration in this election cycle, at least, not at this point. I'm willing to be convinced that I am wrong about this, but I don't see any indications of it yet. The momentum is going in the other direction.
This discussion makes me wonder if we are destined for the 80-100 year dance?What I mean by that is The Fourth Turning: http://www.fourthturning.com/I am not sure if this is scholarly or the researchers were simply making sense out of randomness but the researchers of this work put forth the hypothesis that every society, current and historically, has a series of four generations that always cycles. For example, each generation labeled 1 has very much the generational personality, temperament and outlook of other past generation 1s, and same for 2s, 3s and 4s. These four generations cycle and fairly similar because kids tend to be the opposite, at their cores from their parents, especially in what is perceived as the weakness in their parents. Generation 1 is the parent of 3 and 2 the parent of 4. Generation 1s and 3s tend to be weak and usually have little influence on society, basically just going along with 2 and 4. Generation 2’s strengths are they are strongly team oriented, and builders of society but their weakness tends to be they place little emphasis on individualism and 4, 2’s children, tend to turn toward that weakness and become strongly individualistic and then rebel against what their parents built. The cycle usually ends, before it repeats, with generation 4 tearing down society in some way and then the next generation 2 has to rebuild it. The researchers found this pattern in all societies, even going back 1000s of years in history of western and eastern societies. America’s Generation 4s where the ones in adult leadership age during the American Revolution, Civil War and Great Depression. America’s generation 2s were the ones that rebuilt after those ordeals. America’s last Generation 2 in power, was the Great Generation (very team and society building focused) after World War II. Their children, Baby Boomers, became their opposite (individualistic at their core) and, accordingly to these researchers, destined to tear down many of society’s institutions built by their parents. Whether you find this work scholarly or not, it makes for fascinating reading and while written in the mid to late 1990s, it seems to explain a lot about what is happening now (Baby Boomers, in political power, tearing down the norms and institutions of society.) The researchers warn that the actual catalyst of the fourth turning (the upheaval of society) comes fast and usually cannot be seen in detail until it is already upon us and playing out. This debt reduction craze, and its solution (cutting spending drastically) leading to economic collapse, might very well fit that bill and if carried to an measurable action, would likely cause an upheaval that would probably last a generation and need to be rebuilt by the Baby Boomers’ children as that generation reaches adult power age (late 40s plus.)
"In the meanwhile, we should also recognize that politics is the art of the possible."this reminds me of thatcher's TINA. imo it's a false meme that acts as a road block to further analysis and imagination. social movement politics is the work of making impossible things possible. and yes, the work takes far more than an election cycle. but that's beside the point for the purposes of our current discussion. i'm trying to argue that your plan B is NOT possible during the time frame of this election cycle. and i'd go further, that plan B, at any point in the foreseeable future, is actually depended on plan A.it's not just that our political system so broken that bad ethics drives out good ethics (h/t black re gresham's law dynamic). this election cycle we have citizen's united and in the senate there are twice as many D (20+sanders) as R (10) seats up for election.without addressing and challenging the dominate narratives (in my case this means first in myself), we're stuck. i know you already know this, because you've written some great comments on it. a quick google get's me this one:"...the conscious mind is only the tip of the iceberg of brain functioning. There is a reason that myths are so persistent and hard to change. Memes function like genes, being structured in neural pathways through use, They underlie linguistic norms and rules that structure mental events and get expressed in social behavior as conventions, which become the basis for institutions that structure social life not only mentally and emotionally but also socially, politically and economically. So changing these ingrained patterns involves not only changing minds but also altering brains.That means that it is not merely a matter of educating people to “see the light.” An enormous amount of resistance and inertia needs to be overcome through constant exposure and proper framing, including not only logical argumentation but also rhetorical persuasion, in order to break down the myths embedded in the established narrative that have become ingrained. Conservative intuitively realize this and use it (talking points, keep on message) but most progressives haven’t gotten it yet. Progressive need a simple to understand, emotionally gripping message that will stick. The problem with a lot of progressive thinking is that it is just too wonky for wide appeal and the proponents don’t present it in a simple, compelling message that is repeated over and over until it becomes a meme. This is what it takes."the chart, and in general the work i've seen from the CBPP, is worse than a distraction. it perpetuates many (most?) of the false neoliberal narratives of fed govt spending. as far as i can tell, they work hand in glove with podesta's CAP in packaging neoliberal doctrine under a progressive label. (i'll post a couple of examples in a follow-on comment.) these groups (CAP and CBPP) get TONS of exposure via party channels.... and their narrative is a big part of what needs challenging.
examples for previous comment:from CAP's website, on their sept 2009 conference: Progressives and the National Debt Consequences and Solutions“If we remain on our current course … deficits and debts will grow at unprecedented levels that jeopardize the ability of the federal government to do its job and meet critical national needs,” said Robert Greenstein, director of the Center on Budget and Policy Priorities at a conference hosted by Greenstein’s organization and the Center for American Progress last Wednesday. The conference participants sought ways to control the long-term national deficit. John Podesta, president and CEO of CAP, said it was important to “come together as progressives to try to forge a shared approach to the national debt problem.” He thought that doing so would allow progressives to present a strong, unified plan for correcting the deficit in a way that aligns with progressive values.and from CBPP's website: Testimony: Robert Greenstein Executive Director, Center on Budget and Policy Priorities, on the Need to Implement a Balanced Approach to Addressing the Long-Term Budget Deficits Before the Committee on Ways and Means, Subcommittee on Select Revenue Measuresthere's this summary:While current budget deficits are not themselves a problem — large deficits are needed in a deep economic downturn such as this one — our current fiscal path is simply unsustainable over the longer term. Federal deficits and debt will rise to unprecedented and dangerous levels if current policies remain unchanged.Digging ourselves out of this predicament will require action on both sides of the budget — spending and revenues. We will not be able either to finance the kind of government that Americans want with revenues near their historical level of 18 to 19 percent of gross domestic product (GDP) or to leave current programs unchanged.Congress should try to get deficits down to about 3 percent of GDP by mid-decade. Deficits at that level would keep the debt from rising as a share of the economy and thus would go a long way toward reassuring our creditors and putting the budget on a more sustainable path. Congress will face some crucial decisions in the months ahead that will have a large bearing on its ability to attain this goal......to quote bill mitchell, with friends like these....
Good discussion. I have to agree with Tom on this one. While I understand that, from an MMT perspective, taxes serve to regulate aggregate demand, and that therefore raising (or lowering taxes) on the super rich shouldn't have too much impact on aggregate demand (given their fairly low marginal propensity to consume), I also think there are other good economic reasons to tax the rich. For example, see this article by Henry C.K. Liu: http://www.henryckliu.com/page213.html
" I also think there are other good economic reasons to tax the rich."amen.my objection to the chart is the neoliberal deficit narrative. (not to taxing the rich!)p.s. thanks for the link... will take me some time to try to think it through.
I agree with Tom. Like they would say on ESPN, you can't stop deficit hysteria, you can only hope to contain it.1. The public actually supports tax hikes on the wealthySeventy-two percent of respondents... support raising taxes on people who make $250,000 or more, while 27 percent said they'd oppose it.http://tinyurl.com/3zscmxj2. The strongest opening offer is a tax hike only plan, which would mirror GOP spending cuts only plan.To that end, the second smartest professor at UT-Austin (tax Prof Calvin Johnson) wrote a great paper, "How to raise a $1 trillion without a VAT or a rate hike" and yes that's per year and all from the wealthy and corporations. Whatever number the GOP throws out for deficit reduction (over 10 yrs), $2, $4 or 6 trillion-- fine just go down Johnson's list and hand them an identically sized tax bill. I have no doubt which party's plan the public would support and it would stop the spending cuts cold, since it would make crystal clear that the GOP doesn't really care about the deficit.http://tinyurl.com/42wu64o3. The above is just playing defense, in terms of playing offense-- what Democrats should campaign for next year-- deficit dove Bob Reich has exactly the right message; cut payroll taxes, extend Medicare to everyone, expand EITC and much more besides.http://www.huffingtonpost.com/robert-reich/post_1408_b_794177.html
beowulf, jlc, tom,ok. no more lerner's law. if readers and writers of the blog that has "The number one MMT site on the web!" as it's subtitle support CBPP's messaging without offering an MMT analysis, i give up.
selise, the oft-mentioned problem with implementing MMT solutions is that they involve fiscal policy. That means that the entire political thrust today would have to reverse. With the GOP in charge of the House, which writes the budget, and a budget already passed by the House, it is unreasonable to think that Congress will be converted to new way of thinking in the next couple of months. Right now, the practical course is to try to avert disaster.Of course, the sectoral balance approach shows that given the domestic private desire to save/delever the government fiscal deficit has to offset that to the degree that net exports don't, and the US is still a net importer so they won't very soon. Therefore, the budget deficit has to offset both the domestic private desire to save and the desire of the ROW to save in USD. The deficit can be targeted to achieve the highest possible multiplier that politics will permit. It would be nice if this approach were adopted sooner rather than later, but the prospects for 2011 don't look promising, since no one is even talking about it on Capitol Hill or the WH. But, I agree that this would be the preferred solution, and we should keep pushing for it.
I am with selise on this - no compromises with MMT position needed. Democrats and Republicans are the same - doves and hawks, they have to be on the same side of the table, the opposite belongs to MMT. It might be cynical to say but one more big economic downturn, predicted in advance by MMT, might finally start the healing process in peoples' minds. Let the crazy cutting all over the world continue...
rvm, the radical in me agrees with you, but another global depression would be catastrophic, and the outcome is extremely uncertain politically. The outcomes is not guaranteed, and we could get Hitlers and Mussolinis as easily as FDRs and Churchills.While I think that the prudent path is to avert disaster, I also think that on balance this, too, is not going to be possible. The world is heading in a very precarious direction politically and economically, and I don't see any practical way to avert the danger in a timely enough way.Activists should do their best to shift the course, and others should take steps to get out of the way, although this will be difficult to avoid since it the scale is likely to be global. People that are well networked are going to be able to get by better than others if things get rough. There is already a pretty huge underground alternative community and economy, which began in the Sixties and Seventies, and it is global. These people will be more isolated from a meltdown than others.
Tom, I don't think there is a chance, nowadays, another Hitler to be born. If Hitler wasn't crazy and did what he did, he would have left his name in German history as one of their greatest statesman - he mobilized all German resources and took Germany out of depression, creating jobs for all unemployed. I think this was the reason German people followed him after that in his madness. They saw him as a savior, he mobilized them to save themselves without help from outside, and they were unable to see the deadly path he took after.
rvm, when I say "another Hitler or Mussolini, or another FDR or Churchill," I don't mean that history will repeat itself, but rather rhyme.My point is that many people assume that an event like a depression would make space for another left-of-center populist political revolution like the New Deal. But that is not necessarily the case, as Naomi Klein's Shock Doctrine attests. It creates space, and it's not a given what will fill that space. I am particularly concerned now with the existence of a national security/total surveillance state, and all the legal apparatus in place for a dictatorship based on a national emergency.While this may sound far-fetched now, I am pretty sure that most people in depression Germany and Italy were quite behind Hitler and Mussolini, who were populist leaders. There are even a lot people now who are behind there ideas and not only in Germany and Italy. Given recent developments, it seems impossible to marginalize something as fringe. What is now happening in the US was unimaginable not so long ago.
Lets state the facts here, only the rich pay taxes: 86% of all federal income taxes are paid by the top 25% of earners. The top 50% pay 97% of income taxes. The top 1% pay 37%. Source Data - Released by the IRS latest tax year. In fact, after the Bush Tax cuts the rich pay more taxes. I'm not sure that raising taxes is the answer here folks...
Surprise, the rich have most of the money so they pay most of the taxes. Most of the money that the wealthy make comes from economic rent — land rent, monopoly rent, and financial rent rather than productive investment. Taxing economic rent discourages parasitic rent-seeking and encourages productive investment. Rent seeking increases savings rather than broadly distributed incomes, whereas productive investment result in increasing worker income creates the effective demand to purchase the output of increased productive capacity.The wealthy are not doing their best to shift the tax burden onto workers by taxing incomes and exempting gains from rent-seeking and wealth earned from rent at the same time that businesses are not distributing gains from increased productivity. In addition, the push is also on to cut worker benefits and protections.This is killing the goose that lays the golden egg by crimping nominal aggregate demand. Effective demand is the signal to invest.
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