An Open Letter to President Obama

By Joe Firestone

14 Responses

    1. “In all likelihood, however, a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009.”


      “Even after economic and financial conditions have returned to normal, however, in the absence of further policy actions, the federal budget appears to be on an unsustainable path. A variety of projections that extrapolate current policies and make plausible assumptions about the future evolution of the economy show a structural budget gap that is both large relative to the size of the economy and increasing over time.
      Among the primary forces putting upward pressure on the deficit is the aging of the U.S. population, as the number of persons expected to be working and paying taxes into various programs is rising more slowly than the number of persons projected to receive benefits. Notably, this year about 5 individuals are between the ages of 20 and 64 for each person aged 65 or older. By the time most of the baby boomers have retired in 2030, this ratio is projected to have declined to around 3. In addition, government expenditures on health care for both retirees and non-retirees have continued to rise rapidly as increases in the costs of care have exceeded increases in incomes. To avoid sharp, disruptive shifts in spending programs and tax policies in the future, and to retain the confidence of the public and the markets, we should be planning now how we will meet these looming budgetary challenges.
      Achieving long-term fiscal sustainability will be difficult. But unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy economic growth.”

    2. Yes Ramanan,
      I listened to the audio a bit, I recall him being questioned on sustainabilty and he said that was where interest on “debt” was equal to the fiscal deficit, when pressed for ‘a number’ he replied $300B. (Also Reinhart/Rogoff /Greece was discussed in the Q&A.) No evidence of any MMT elightenment on his part yet…he’s still part of the problem.

      Im going to try to get the c-span video linked up over at Mike’s tonight if C-span posts it. Resp,

  1. I think MMTers have lost focus. They are correct about the economy but I know where the resistance for their proposals come from.

    It is about Debt. The people see debt galore. They see the difference between private (“a household or corporate problem”) and public debt (“the governments problem”). They think they can do something about the public debt problem by not spending.

    Instead of just increasing aggregate demand as the MMTers are proposing. While it can work, it does not get rid of the debt problem.

    So the solution is what was proposed by many economists when this financial crisis finally reared its ugly head. GET RID OF the bogus debt. Nationalize, restructure, and bankrupt, reexamine this junk. AKA a debt jubilee.

    1. @ Adam,

      I would take your critique several steps further. MMT and Post-Keynesian ideology CANNOT change the rapacious nature of our global financial system. And, it is this robbery from the periphery to serve the master at the center that MUST change before fiat currency can exist to empower and enrich the lives of the “masses”. Otherwise, the employment of MMT—despite the best intnetions of the best of you—is but another in a long line of ‘kick-the-can’ strategies that will end badly for the people who comprise the fringes of the system (ummmm, 99% of us)

      1. I just checked out the other thread about Dean Baker’s views on deficits. I hadn’t taken a look at that yet and saw Steve Keen’s name mentioned. He is also taking on the Chartalists. I ask the MMTers to please listen to Steve. He is on your side. I know he is coming to the Levy Institute soon.

        There is also something else that is bothering me. It is the word deficit. It just has too many negative connotations because for the people it means having to pay back debt and lack of money. Although it is not true for the government it is true for the people. Or at least the knee jerk reaction the people have.

        I also know that the MMTers have tried to deal with this by calling for employment guarantee. But then that again gets to the heart of an American free market psyche. I think that the MMTers should channel that psyche more. And be more explicit in it. If you do that you can woo the independents.

  2. Adam,
    I agree that that debt is THE political issue. However, since the Government can create money at will and at no cost, there’s nothing to be gained by bondholders. Tsy can simply create the money necessary to pay them off as existing Treasuries expire. And yes, Thomas Edison had this figured out 89 years ago:

    “It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people. If the currency issued by the Government were no good, then the bonds issued would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charge…
    Look at it another way. If the Government issues bonds, the brokers will sell them. The bonds will be negotiable; they will be considered as gilt edged paper. Why? Because the government is behind them, but who is behind the Government? The people. Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency… instead of the bankers receiving the benefit of the people’s credit in interest-bearing bonds?”

    1. sorry, I meant to write–
      since the Government can create money at will and at no cost, there’s nothing to be gained by stiffing bondholders.

      1. Actually there may well be something to gain, if bondholders continue to insist on cutting back entitlements for working people, then the Government should certainly insist on ending their “entitlement” as well. What is gained by this is an increment of justice as fairness. Something that’s been in very short supply in America since the beginning of the 1970s.

    2. yes bonds proposal:

      June 9 (Bloomberg) — Japanese women are seeking men who invest in government bonds, according to an advertisement being run by the Ministry of Finance.

      “I want my future husband to be diligent about money,” a 27-year-old woman says in an ad being run in free magazines promoting a fixed-rate, three-year note that Japan started selling last week. “Playboys are no good.” She’s one of five women featured in the page, which says “Men who hold JGBs are popular with women!!”

      The ministry commissioned the ads to appeal to citizens for money at a time when record government borrowing threatens to outstrip demand. Prime Minister Naoto Kan, who took office yesterday, said he doesn’t have an instant fix to rein in the world’s largest public debt.

      The government’s plan to attract marrying-age men comes after a campaign aimed at retirees started last August. That push featured Junko Kubo, a former anchor on Japan’s public broadcaster NHK, in ads placed in the backs of taxi cabs. Kubo followed Koyuki, an actress and model who in 2003 appeared in “The Last Samurai” with Tom Cruise as well as posters for government bonds

  3. warren,
    think i have a pretty good grasp of monetary operations and what you are saying, but forgive me i am drunk. the hawks just won the stanley cup. you like to use the example of the fed as basically a score keeper, but in sports the rules are establishished and they measure something whether it be luck, skill or whatever but all combatants know the rules going in. with the fed and its desired secrecy are we not playing an entirely different game? is there not a risk of the fed as scorekeeper that the score detaches from the thing it actually is measuring? while you like to suggest they are just numbers, are they not actually a measure of the value of labor and what value that has? if the currency is diluted,is there not a risk that labor will actually revolt? i just do not see how the currency and hence labor can actually adjust to its intrinsic value without a major shock, and the risks i suggested above. for me to really understand your position i need to reconcile these differences. i apppreciate anything you might add.


    …in early 2009 DTE contracted with Stockton Infrared Technology Services, (now a partner with RecoverIR) to do an aerial infrared survey of 84,000 acres of populated land in the Detroit area, about one sixth of DTE’s total customer base.

    While DTE expected to find 5 percent of residents in the surveyed area with unauthorized hookups, the survey results indicated that ALMOST 20 PERCENT of the households had UNAUTHORIZED hookups to natural gas. Up to 80 PERCENT of those households had simultaneously tapped into the electrical grid.

    DTE subsidiary Detroit Edison said at the time that it would transfer a staggering $253 million in electric costs covered by BUSINESSES under the previous rate structure to RESIDENTIAL customers over the following FIVE YEARS.

    Based on the aerial infrared scan, DTE calculated that it was losing $60 million in potential revenue from households in the survey area.

    DTE operates a 61-man “revenue protection unit” targeting homes and businesses with unauthorized hookups. The company’s special unit dismantles up to 500 such connections EVERY DAY.

    In 2009, utility shutoffs in the Detroit metro area soared, affecting 221,000 households, a more than 50 PERCENT INCREASE over the 142,000 families disconnected in 2008.

    DTE is now supporting legislative efforts to make Michigan the first state to make illegal hookups a FELONY.

    As for DTE’s contribution, while the utility was able to find the money for massive surveillance of Detroit area customers, it provided a derisory $9 million dollars for heating assistance last year. This figure is less than the 2009 compensation for the company’s CEO, Anthony Earley Jr., of $9.2 million. It is dwarfed by the company’s profits of $546 million in 2009 and $229 million the FIRST QUARTER OF 2010.

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