It’s by far my #1 concern for next year.
Seth Mosler wrote:
Howard dean-major liberal, progressive–msnbc-need budget cuts now and tax increases on everyone including middle class to balance budget
cut soc sec and medicare
should start in 2011 to save our children
we have no choice
and bonds keep going down
these guys are all nuts
just when it seems that the GOP owns the Democratic Party, we now have TP owning the GOP. And who owns the TP?
It’s enough to give you the DTs!
If the top economists don’t get it, when they are professionally negligent if they don’t, it’s not surprising that physicians like Dean and Coburn, don’t get it either. What is surprising is that people who know nothing because they are not trained in a field think that they can have something significant to say about it. As for the economists that don’t get it, like the president’s advisors, they are ones that are really at fault.
Tom,
The person top on my list to blame is Art Laffer. He does “get it”, he has a strong political connection, and a large media following. He could make a huge impact. But he knowingly chooses to deceive. I would list him as a traitor in my book.
Right. Laffer was advising Reagan, who had no problem with running up the deficit to further his agenda. Similarly, Cheney apparently learned this then, too, as evidenced when he said during Bush/Cheney that Reagan proved that deficits don’t matter. These folks get it but use it selectively, and then they get all deficit hawky when it comes to social spending. Unfortunately, the Dems are too stupid to see through this.
cheney does not know MMT. he is politician, not economist nor accountant. all politician are happy running up deficit to further their agenda
Don’t forget Bush in early 2003
when asked about the deficit, he said ‘i don’t look at numbers on a piece of paper, i look at jobs’
that was right after i had met with Andy Card in the White House and brought him up to speed on MMT, followed by
Bush not vetoing a single penny of spending (the right still hates him for that) and passing every conceivable tax cut he could which got the deficit high enough to turn the economy.
he also had a collection of exotic animals at his house all killed by an intruder many years ago.
As you know, many PK’ers and circuitists- who have read all the papers and attended all the conferences and edited all the journals and books – in other words, people fully predisposed in the direction of MMT – reject it or fail to promote it anyway, so it’s hard to be too upset that neither Howard Dean nor Larry Summers gets it. It’s a tough slog.
true, it’s to be expected.
from first hand experience, seems it’s just too hard for those people
Dean has always reminded me of a half-crazed wrestling coach (VT relatives assure me he’s a good guy). His background as a state governor probably doesn’t help his budget fetishism.
Here’s an analogy to try out on both Dean and Coburn (maybe even Ron Paul?):
For decades physicians and the public were taught by misguided epidemiologists and public policymakers to believe that dietary saturated fat and cholesterol were pure evil, an assertion that has been largely dismantled in the past decade or so.
Today, politicians and the public are taught by well intentioned but misguided economists that the federal govt’s budget is equivalent to a state or local govt’s, a household’s, or a business’, because they assume that money still comes from holes in the ground, even though that’s been untrue for 40 (I’d argue 80) years.
It takes enormous resources and energy to change people’s beliefs. Any good marketer will tell you that. You won’t get anywhere, politically, trying to change the public’s perceptions about debt, deficits and government spending. If you aspire to a career in politics or public policy, you speak the “party” line. If not, you get nowhere.
“It is difficult to get a man to understand something when his job depends on not understanding it” – Upton Sinclair
This hit the nail on the head for this whole crowd…..JK
I don’t follow?
🙂
And it ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.
http://www.constitution.org/mac/prince06.htm
The Kennedy team recognized that there might be some people out there who cared about balancing the budget and for them they offered the comfort that the budget would be balanced at full employment.
http://books.google.com/books?id=hJGpAT7IWhwC&pg=PA605&lpg=PA605
which is what makes full employment unsustainable. the deficit gets too small when we get there
As I mentioned on the other thread, a full employment budget should spend as if expenditures equal taxes and exports equal imports (the latter to account for trade deficit leakage).
However, the best way to make full employment sustainable is by first making it unobtainable. The Humphrey-Hawkins full employment law set a national goal of unemployment e “not more than 3% of population over 20” and “not more than 4% for population over 15”. As an aside, despite this mandate, the CBO uses a 5.2% NAIRU rate to determine potential GDP and output gap.
Anyway, the “population over 15” unemployment is based on the headline “U-3 rate”, its currently 9.8%. The broadest measure of unemployment tracked by the BLS is the U-6 rate, its currently 17.0%. It includes “under-employed workers, part-time workers, and those who have given up the job search”
http://www.csmonitor.com/Business/Paper-Economy/2010/1203/Unemployment-jumps-to-9.8-percent-highest-since-April
The CSM chart shows that when the economy is booming, the U-3 / U-6 gap is pretty tight. In 2000, when U-3 dipped below 4%, the U-6 was only 3 points higher. The gap widens as the economy weakens, its currently 7.2 points apart.
So take a page from the CBO and move the goalposts. You could stick with U-3 and target a rock bottom rate, say, 2.0% (reaching 1944’s 1.2% probably requires shipping draft-age men overseas and price controls). Better yet, track U-6 for the target rate. I have no idea what full employment for U-6 would be, but then neither does anyone else. Its what lawyers call a case of first impression. Ironically, the CBO’s “5.2%” is probably in the ballpark. It sounds plausible but its an aggressive goal (implying a U-3 of 2.0% or less). And that’s fine, a full employment target we never reach is one we’ll never overshoot.
Keep in mind that many progressives are motivated by the concept of economic justice.
In their minds, that means redistribution, i.e., tax the “haves” to give to the “have nots”.
There is a truth to distributive justice (fairness), although most don’t understand it properly. Progressive taxation does not “redistribute” wealth as most think, taking it from those who earn it and giving it to those that have not earned it, in the interest of promoting greater equality.
Progressive taxation should be designed to correct for the economic rent (value in excess of production cost, unearned revenue, or extraction in excess of real contribution in a free and fair market). Accumulation of economic rent increases up the scale. Ideally, taxation would be directed chiefly at economic rent — land rent, monopoly rent, and financial rent. This would disincentivize rent-seeking, which is parasitical, and incentivize productive investment, productivity, and income based on productivity.
Progressive taxation should ideally effect “distributive justice” by affecting income distribution and wealth share (Gini coefficient) through correcting imbalances that arise in imperfect markets, especially owing to influence, since those that garner most of the economic rent are the people with most influence, along with their cronies and minions.
the core problem is institutional structure that distributes income/consumption regressively in the first place.
like, for just one example, issuing tsy secs. that distributes incomes and consumption to people plying that trade, and in what most consider alarming quantities.
so what we fight over is what rate they should be taxed at, rather than eliminating the tsy secs, etc. etc. etc.
“the core problem is institutional structure that distributes income/consumption regressively in the first place.”
Exactly! Regressive distribution sooner or later builds up significant mis-allocation of resources in new contexts.
Historically, we survive such trends only by generating enough economic variance – never by actually knowing what we’re doing population-wide. The fundamental structural impediments causing mis-allocation change only in response to selective pressure – by bankruptcy of what doesn’t work.
That is true for all complex systems, whether in biological systems or that subset called human political systems – they’re molded ONLY by selective pressures. Few outside of the MMT camp are even having these discussions. The level of discussion in most policy venues is lost in superficial details – rather than delving into real selective pressures.
Hence, we’re doing too few key experiments, and doing them on our entire country instead of on model systems!
At this rate, Iceland may someday re-colonize the world economy. Maybe sooner than we think.
It might be better for Europe to break up into separate states and currencies. Perhaps the USA should actively run more diverse economic experiments within our 50 states.
“the core problem is institutional structure that distributes income/consumption regressively in the first place.”
Agreed. The holy grail of political economy is what a distributively ideal (high quality) society would look like socio-economically and politically, that is, conventionally and institutionally (normatively). This is expressed in the Enlightenment ideal of liberty (personal freedom and responsibility), equality (absence of privilege, fairness, justice), and fraternity (cooperation and coordination).
This is a normative challenge. Norms are the rules in terms of which people interact. Some of the norms are explicit (laws, regulation) and some are implicit (ethics, customs, conventions, traditions).
Trying to effect distributional justice chiefly through taxation or other chiefly economic means is tantamount to using a very blunt instrument for precision work. Throw some dogma on top of that, and you have a real mess.
And an economy at full employment would naturally tend to reduce the rents employers can extract from their employees. Marx was wrong about a lot of things, but not about the Capitalist class’s fondest for a reserve army of the unemployed!
So, better to think of going without the employer – employee relationship.
Everything becomes simpler. One can dispense with (literally) tonnes of economic and social writing and thinking which only seem relevant by the vice of such relationship. Ufff…-)
Sure, it appears as science fiction, but most of what surrounds us so appeared some time in the past.
too bad they think they need to balance the budget.
otherwise they’d be proposing tax cuts/spending increases far larger than their proposed tax hikes, instead of just tax hikes.
Hard to avoid when as long as they assume that money still comes out of holes in the ground.
Ironic, when lack of money comes out of holes in their thinking!