Typical moronic Boehnalities:

“the deficit is a drag on the economy”

“can’t continue spending money we don’t have”

55 Responses

  1. “can’t continue spending money we don’t have”

    But apparently there is no problem issuing Treasuries they don’t have.

    Logical consistency isn’t their strong point is it.

  2. Sounds like Obama to me. If I recall, a couple of days ago the president took credit for reducing the deficit. I’d say Boehner’s a step above Obama, who thinks he can close the deficit with another tax increase. Warren, why don’t you get in touch with Obama?

  3. “the deficit is a drag on the economy”

    Perhaps it could be if enough people think that it’s something to be afraid of. Corporations that buy the deficit hysteria and subsequently stash their profits away instead of investing or hiring new workers, for example.

    Perhaps something like this is going on in Japan? People become afraid of the deficit/debt and so start cutting back on spending even more?

    1. @y,

      You are getting close to the effect identified by Ricardo (“Ricardo Equivalence”) – that deficit spending has no effect on output because rational people increase savings to pay for expected increases in taxes (to pay off the debt). The theory has been thoroughly debunked by empirical reality and Post Keynesian theory (like MMT for example). Bill Mitchell discuses it all the time – one example: http://bilbo.economicoutlook.net/blog/?p=8252

      However, I do think that all the fear mongering via comparisons to Europe does not help with “animal spirits” (risk taking leading to investment, etc.) and can produce a small drag on the economy. I’m glad Obama does not get involved in this doom and gloom (in general) and instead is more upbeat like a president should be (which didn’t help him in the election when his up-beat (and unrealistic) estimates of economic growth did not come to fruition).

      Overall, in my opinion, the simulative effect of deficit spending far outweighs any Ricardo Equivalence type effect. With that said I disagree with Warren and believe deficit spending should be our last resort to obtain full employment.

      1. personally, for a given size govt, I kinda like the lower taxes approach to the ‘cut the savings desires’ approach.
        and a permanent 0 rate policy, of course
        but that’s just me

      2. @WARREN MOSLER,
        Yes, I believe we disagree about whether the current distribution of income is fair. I guess we also disagree on whether there are issues with consumption & investment as well. I think that your recommendation treats the symptom not the fundamental cause of our problems.

        RyanVMarkov – Saving desires of foreigners in US$ is a major leakage in the spending-income cycle – they are not part of our democracy. Further, deficit spending has distributional ramifications that are difficult to undo.

      3. how about my recommendation that the tsy sell nothing longer than 3 mo bills?
        is it unfair to alter the distribution of income away from t bill traders and their ‘support networks?’

        and my narrow banking proposals? ok to alter distribution of income away from things currently govt supported that don’t support public purpose?

      4. @WARREN MOSLER,

        I presume you are referring to these proposals:


        I need time to fully digest these, but at first glance I think they look excellent. You should mention these more. I’m not sure what proposal #4 is meant for – perhaps the shadow banking system? The shadow banking system and derivatives (other than CDS’s and MBS’s) are two areas that, at first glance, look unaddressed. It is certainly a shame you will not be going to congress to get these proposals moved forward (although I guess there are other ways you can do this).

        To be clear I think your contributions to economics is immeasurable and I am extremely thankful for everything you have taught me. My disagreements with you about policy do not diminish these facts.

        RyanVMarkov – First, your comment was about “the fairest democratic option” – which I interpreted as pertaining to fairness and US citizens, and thus pointed out that deficit spending is not easily made fair. To expand on this, unless we want to introduce consumption taxes, some type of weird savings taxes or inflation (a very blunt tool) the owners of government debt are able to carry income from one time period to another time period which may have a higher tax rate (in the event that AD needs to be adjusted downward). MMT’s suggestion of tax mediated AD thus has the potential to be unfair.

        I fundamentally disagree with the “imports are a benefit” position as I believe that this is extremely myopic. I think this is only true if the foreign party NEVER spends the proceeds. I also think that Ramanan (and others) point to real challenges in dealing with currency flows that are magnified with large foreign owned stocks of money.

      5. @CDNDC,

        “Saving desires of foreigners in US$ is a major leakage in the spending-income cycle – they are not part of our democracy. Further, deficit spending has distributional ramifications that are difficult to undo.”

        Foreigners’ saving desires have nothing to do with our democracy. US voters set the size of US government (here is the democracy part) and then federal government, using taxation as a thermostat, maintains full employment and prize stability. The bigger foreigners’ saving desires, the smaller taxation burdens on US private sector. Which group of American people will be taxed less or more is also part of the democratic political process, no?

      6. The key point about the zero interest rate proposal for my money is that it tries its best to discourage excess savings.

        Zero interest rate just says that the government sector won’t be paying any interest on financial assets stored there. So the cost of storage is essentially inflation.

        To me that is exactly the same as paying to store gold (or any other valuable asset) in a vault.

        If you want a financial return, then you have to get that from the instruments created by the non-government sector.

      7. but the full employment deficit is somewhat higher at 0 rates than at positive rates?

        so net savings will be higher, but, to your point, income from savings will be lower.

      8. Oh yes. The effective subsidy we currently have would go. And I struggle to see how anybody could defend it.

        But you can’t eliminate that injection. It’s going to have to move somewhere else where it would have more real impact.

      9. Regarding the elimination of interest income on government securities – I believe the full employment deficit would be lower (even assuming borrowing rates stayed the same) because there would be a shift in government deficit spending from individuals that have a low propensity to consume (holders of bonds, who have higher than average income levels & age) to others that would have a higher propensity to consume (assuming incremental progressive government spending/tax changes), thereby decreasing overall saving desires. [I’m assuming interest on government debt is considered deficit spending because Treasury needs to “borrow” these funds from the Fed, right?]. However, I don’t believe that lowering the opportunity cost of spending would diminish saving desires much at all since I don’t believe this is the criteria most people use to decide on whether to save. I argue that the lifecycle hypothesis is more relevant here (that folks save for consumption smoothing – the young borrow more while the older (<65yo) save more). This driver for savings is not greatly influenced by the savings interest rate (if anthing the effect works in the opposite direction with savings up when the return of savings falls). This would help explain what is happening in Japan. I strongly support your 0% interest proposal.

  4. One policy that would help create jobs would be to end the employer matching contribution for FICA, and instead let the government match employee contribution. Are stated simpler the government replaces the employers role in FICA.

    Also make the SS account more savings like have the ability to borrow or redeem a portion for certain items like down payment on a home.

    One challenge on any proposed policy have to present through political prism.

  5. A typical comment from the Boehner, but doesn’t make it any less odd. What evidence is there that leads him to come to this conclusion? The fact that the economy recovered post-stimulus? No that can’t be it … The correlations are all wrong for him … Perhaps it is because the deficit has caused domestic and foreign investors to avoid buying Treasury bonds, imperilling the so-called financing of said deficit? Hmmm, that can’t be it either, because bond yields have been moving irritatingly lower, and even he can’t pretend otherwise.

    Something tells me not to hold my breath waiting for him to impart his secret wisdom to ‘educate’ us. Even within his own paradigm it doesn’t make sense.

    1. @Apj,

      The “evidence” is that the economy has been moribund for over 3 years after the recession ended (and 3.5 years since the absolute bottom). Even job creation that the media touts as good news is not even sufficient to keep up with population growth. And median income has fallen over the last 4 years.

      So there is evidence. Of course, the relationship is most likely correlative rather than causative, but Boehner’s claim is as plausible as any other economic claims from politicians we hear these days.

      And, by the way, Boehner is just playing politics to help him negotiate his way through the fiscal cliff. The last time Boehner cut a deal, he held the line against tax hikes and managed to get a whopping $34B in spending cuts over 2 years. He is not the guy who is hurting the economy. The narcissist-in-chief is, and it would be nice if Warren actually said so once in a while.

      1. @ESM,

        Obama has proposed quite a few spending increases and tons of tax cuts, typically labeled “JOBS ACT” and such, and Boehner has shot them all down. Obama managed to get (part of) his first stimulus through despite Boehner’s resistance, but since then the Boehner side has prevailed. MMT says all of those measures would have boosted the economy. So there you go.

      2. @Chaz,

        In theory, various stimulus programs should be helpful. In practice, though, there are good ones, there are bad ones, and then there are ones that stink so badly that they sour the public on the entire idea.

        Here’s the problem with what Obama did. The original stimulus was slow, back-loaded, and heavily weighted towards funneling money to Democratic constituencies. Do you remember Obama joking that the shovel ready jobs the stimulus funded weren’t really as shovel ready as he had expected they would be? Ha ha. Very funny.

        So instead of doing something quick and uncontroversial (but unfortunately too small) like Bush’s Economic Stimulus Act of 2008, which gave tax rebates to lower income familes, Obama instead allowed Pelosi and Reid to craft a spending package that amounted to a Christmas wish list for Democratic lobbyists.

        So in 2011 when Obama goes back to Congress with a Jobs Act proposal that looks and smells like more of the same, he can’t even get all of the Democrats in the Senate to support it. In fact, Harry Reid initially tried to scuttle the bill by attaching tax increases to it. Really, it was designed to be nothing more than a talking point for the 2012 campaign.

        And what the hell was Obamacare? To make it look deficit neutral, it actually front-loads taxes and back-loads spending so that when it was passed 10 years of revenues could offset 6 years of spending within the initial 10 year budget window.

        Look, I have a hard time being objective. I am inclined to find fault with Obama, and I both realize that and freely admit that. But I can at least tell when I’m having an easy time finding fault or a hard time. And, frankly, finding things that Obama has screwed up is a piece of cake.

      3. That was my criticism of Obamacare as well, if I recall correctly? Are the taxes and fees, etc. still front loaded? Does it have deficit reduction in it for 2013?

      4. @Chaz,

        I hadn’t heard that it was slanted toward Democratic constituencies; it wouldn’t really surprise me though. I’m sure they would have been happy to add in goodies for Republican constituencies or make it less porky in it brought Republicans on board. Obama was still in his post-partisan phase back then so he really wanted bipartisan support. Plus I do believe the majority of the stimulus money was tax cuts, grants to state government/federal funding of Medicaid costs, and increases to unemployment benefits and food stamps, which aren’t district-specific.

        Also if your goal is just plain economic stimulus even porky or badly targeted spending is helpful, much better than nothing.

        The shovel-readiness stuff isn’t as important as people thought. As long as it gets spent before the end of the recession it’s at least helpful. As of now the stimulus spending is all done and the economy’s still lousy.

        I guess I agree on Obamacare. Obama wasn’t thinking about it in terms of stimulus at all; he was on a serious balanced budget kick by then. Pretty much all the Dems and Reps in Congress were screaming about deficits too so I don’t single out Obama for blame there. Product of his times and all that.

        Above all, if Boehner had proposed a second stimulus of extra spending not focused on Dem districts, or of more grants to the states, or even of just tax cuts (not mostly targeted for the rich) I am literally 100% confident Obama would have jumped on board. A lot of Democrats were pushing for that stuff and Republicans were dead set against it. Don’t recall if Obama pushed it himself, but if not it’s arguably because Republicans (and a few conservative Dem senators) had already shot it down.

        Plus recall Boehner demanding cuts in annual spending “in exchange” for increases in the debt ceiling. Seriously not helpful.

      5. @Chaz,

        P.S. I’m not super inclined to defend Obama either. I think he’s just okay. But I think Boehner is terrible and made things a lot worse.

  6. The Capitol Hill Gang are not morons. They are fighting to retain their illusory power and show the citizenry, which has been most unruly in electing and re-electing a chief executive who describes himself as a servant of the people, who is actually the boss. The concentration of monetary wealth in the hands of the financial engineers is not a happenstance. Congress, whose “powers” are threatened by populism or the rise of the grass roots, has recruited Wall Street as henchmen to sequester the currency and make credible the argument that there just isn’t enough money to carry out all the obligations involved in providing for the general welfare — only just enough to defend against foreign military forces and enforce the culture of obedience at home. The size of the incarcerated population isn’t a happenstance, either. Incarceration serves the same function in any totalitarian system — as visual and visible evidence of what happens to individuals who fail to comply with the culture of obedience. In other words, some people are locked up so other people will, as the recently departed Breitbart ranted, “behave yourself.” People not behaving are very upsetting to authoritarians, both the order givers and the order takers. If other people don’t follow orders, then the moral value of one’s own obedience is suspect.
    Anyway, Congress is on the ropes. The 85 freshmen in 2010 were not good news. The Tea Party assault on earmarks, with which Congress had traditionally bribed constituent corporations that could deliver votes, was not welcome. The power that is attached to longevity in office is undermined when incumbents are summarily replaced. 19 of the people dispatched in 2010, some in Republican primaries, had been in office a decade or more. How many old timers were retired or fired this time around is as yet unknown, but it is undoubtedly scary. It seems, for example, that Lundgren in California escaped being sacked by the skin of his teeth. Mary Bono Mack was just replaced by s fellow named Ruiz, after occupying a seat in the House for 14 years. New Hampshire just retired two Republicans elected in 2010. Bass’ seniority from having been in Congress from 1995 to 2007 did not help him.
    2010 will turn out to have been an anomaly because the citizens were (falsely) persuaded they were voting for grass roots candidates in the Tea Party, which had actually been arrogated by private corporate money and interests. If the private corporations had become fed up by a Congress jerking them around with legislative promises that routinely failed to materialize, it should not come as a surprise.
    Why is the President going along with theis farce? He really has no choice. The Congress, despite protestations to the contrary, controls the purse and the executive can only spend money that has been authorized. So, if Capitol Hill wants to punish the electorate again because it voted wrong, there is little he can do. When Willard Romney promised that his election would encourage investment in economic growth, he was not just blowing smoke. After all, the banksters have been whining about the need to feel encouraged by Washington for several years now. If not courage, they were looking for certainty, less risk and more security. Bunch of wimps. Congress’ lap dogs.
    Comes now Boehner and promises not to tax (beat) them.

    1. @Monica Smith,
      Mostly true. One thing, why would corps would help the earmark cutting tea party in 2010? What do lower taxes matter if you’re not making any money.
      My take on Obama is different. I think of him as a fascist sympathizer: He loves business, but the bigger the better, and just as long as they know who’s boss.

      1. @vincent, It wasn’t all the corps. The earmarks were bribes to target corps to ensure that the affected workforce votes right. It’s my sense that the initial Tea Party folk were motivated by a desire to emulate the real grass roots which had achieved electoral change in 2006. That impulse was then arrogated by the moneyed corps whose legislative interests kept being undercut by promises of tax cuts which just rile everybody up.
        The Koch Brothers, for example seem to have made a significant investment in mineral purchases that, in combination with coal, produce “clean coal.” Then, all of a sudden, natural gas extraction from deep underground took off, to a significant extent because sub-surface water protection from chemical contamination is lightly regulated by the states, or not at all. So, natural gas producers got an advantage that the coal producers resent. Indeed, they got to dispose of chemical wastes underground without any restrictions under the guise of “proprietary information.” Talk about a two-fer!
        The energy industry beef with the EPA is well-founded because the agency is still proceeding from the assumption that enterprise is good and Mother Nature is the appropriate repository for waste (human and industrial), unless and until there is proof of gross harm to human health and welfare, in the development of which proof they are subject to enormous testing and information collection regimes which hardly ever produce any usable data. The conservative promise to throw all the regulations out sounds attractive, but it never happens. Because legislators are using their power to legislate and their power to tax to keep themselves in the driver’s seat. Even with 85 new faces in 2010 Capitol Hill didn’t get the message. It is not yet clear what the numbers for 2012 are. New Hampshire threw out two of the Koch Brothers’ fellows. Scott Brown, who made a show of being their Senator, was sent packing.

  7. There are 47.1 million Americans on Food Stamps. Food Stamps are also simply government money printing.

    We should expand the food stamp program and simply provide each American $1 million dollars in food stamps each year.

    This way all Americans can be millionaires and happy. No one would need to work and the MMT crowd would be proven correct.

      1. @y,

        I think Alexi understands well enough, although he is obviously a detractor and is using sarcasm to make a point.

        But his point is interesting. Suppose that we had surplus agricultural capacity (e.g. unused farmland). A reasonable extrapolation of MMT reasoning would lead the government to expand the food stamp program until food production was maximized. Does that make sense? No, I don’t think it does. There are tradeoffs, and I doubt anybody agrees that society’s economic goal should be to maximize food production, especially given the fact that, in the US at least, obesity is a much bigger problem (no pun intended) than malnutrition.

        Do similar issues arise when it comes to maximizing employment by issuing little green pieces of paper? Yes, I think they do.

        And just as an interesting aside, food stamps trade in the black market at 70 cents on the dollar. I am happy that such a black market exists, but it’s pretty good evidence that the program has a lot of room for improvement. My recommendation is to get rid of it altogether and give needy families cash instead.

      2. @ESM, I believe the system runs electronically in most places… it is reported the fraud comes in where the grocers offer cash at a discount to what they put through on the debit cards…. then the needy can go to “soup kitchens” where fortunately there are plenty of “Paul Ryan Types” 😉 who volunteer to wash already clean dishes… err I mean to provide the missing nutrition. rsp,

      3. @ESM,
        It means that food stamps do not include alcohol and drugs, a lot of these people have addiction and they would starve to death but they have to feed their addiction. It also means that more efficient detox/rehab programs should be offered instead of pushing the rubbish “war on drugs”.

        The real issue emerges: is it wise to maximise output of these industries which quicken the depletion of non-renewable natural resources or magnify negative environmental side-effects of the economic activities? Is the macroeconomic market allocation mechanism good enough to redirect financial capital towards investment in new technologies which can severe the dependence on coal and oil? If we have a leaky bucket, does it really make sense to increase the inflow with the hope that it will fill up?

        MMT as a means to increase the rate of useless churn of resources within the current paradigm is actually evil, it’s better to introduce austerity, have higher unemployment and lower consumption.

        It is better to produce less carbon dioxide, have fewer oversized cars, waste less food and damage less topsoil. This is the reason why some “Greenies” wholeheartedly support austerity and reject MMT.

        If we consider Functional Finance as a tool of promoting technological progress then fighting for it is worth all the hassle.

        In the previous edition I was talking about not losing the technological race with China. It is still better to invest in sophisticated weapon systems than not invest in science and technology at all.

        Any reason to divert more real resources to R&D is good, we cannot keep expanding the 50 years old consumption model in the not-so-near future because our civilisation will choke on its own vomit.

        (Disclosure: personally I don’t have much financial interest in that change as I am already “fully employed”)

      4. @ESM,


        “… we cannot keep expanding the 50 years old consumption model in the not-so-near future because our civilisation will choke on its own vomit.”

        I think you’re wrong about that.

        In any case, my view is that the Earth’s temperature will do what it will do. Short of engaging in a little geoengineering, we can’t have much effect. At least global warming is better than global cooling. Also, an increased concentration of CO2 is good for plant growth. And reliance on cheap energy helps us adapt to any climate change.

      5. @ESM,


        The claim that Paul Ryan was washing already clean dishes has been debunked. I hope you didn’t know that.


        There is no stigma today. It is an entitlement that people think they are entitled to (no surprise there). In any case, my point is that the program artificially boosts the demand for food, which seems harmful in the aggregate. It’s creating an externality rather than correcting for one.

      6. “how about everyone getting food stamps, thus removing the stigma?”

        Doesn’t that move into ‘Basic Income Guarantee’ territory and therefore represents a potential risk to the currency?

      7. yes, with free food fo all no one would work!

        So you need to give food stamps only to those who can’t work and those who do work.

        And with a transition job for anyone willing and able to work that job can include food stamps and it would
        mean no marginal nominal charge for food and currency stability.

      8. @ESM,

        “Suppose that we had surplus agricultural capacity (e.g. unused farmland). A reasonable extrapolation of MMT reasoning would lead the government to expand the food stamp program until food production was maximized. Does that make sense? No, I don’t think it does.”

        I don’t think it makes sense either nor does it seem a reasonable extrapolation of MMT.

        The point isn’t to consume every last resource possible, the point is to have an economy that provides some basic level of service to all the participants. A reasonable extrapolation of MMT is to fund the usage of real resources to meet real needs.

        If there is unused farmland after everyone has a job and food on the table, that’s not a problem.

      9. @ESM, I believe the program provides about $138/mo. or over 30 days is $4.60 per day or $1.53 per meal … (and there are some going around suggesting we should cut this amount substantially….)

        I dont know what kind of proteins and/or fresh fruits and veggies could be provided (if any) if this amount was cut substantially… 75 cents per meal??? (3 eggs and that’s it? if that) rsp,

        PS Ryan was washing a couple of clean pans and a pot…there is video of it which does not lie the kitchen is already clean (check out his poor wife in the background, she isnt buying it either):

        He cost the GOP the election… “compassionate conservatism” won 2 recent elections for the GOP. Ryan (social Darwinist) does not represent “compassionate conservatism”.

      10. @ESM,


        I’m disappointed in you Matt. The video not only doesn’t prove what you claim it proves, but it has clearly been cutoff in the middle of the “washing,” which is actually evidence in the opposite direction. For example, here is a photo of Ryan washing a pot which doesn’t appear in the video. Also, why would there be clean dishes in the bottom of a sink? If they’re clean, wouldn’t you take them out of the sink to dry?

        Finally, there is this, which is dispositive enough. I don’t think we really need to depose witnesses and see if anybody was pressured to lie.

        ” I believe the program provides about $138/mo. or over 30 days is $4.60 per day or $1.53 per meal…”

        It is a supplemental program where the benefits phase out with income. The base benefit for a family of four is $668/mo. That goes down by 30% of the gross monthly income net of various expenses (including rent, child care expense, medical care, and a standard deduction).

        That strikes me as sufficient, even though it is not intended to be.

        “He cost the GOP the election…”

        Ridiculous. The VP doesn’t matter as long as he isn’t an incompetent boob. And even then, he usually doesn’t matter (see Biden, Joe).

      11. @ESM,

        Demand for food’s got to be pretty inelastic. Anyone who is currently eating less food then they’d like to because of lack of money is probably very poor and at risk of malnutrition. I would speculate that if we provided unlimited food stamps to everyone–made food totally free, the median person’s food consumption would change very little. So not much of an externality.

        Now there would probably be an increase in wasted food, and there would be a shift toward more expensive food. However the latter is in many ways a good thing. The cheapest food available (not requiring extensive preparation) is generally very unhealthy. It’s fast food and TV dinners. If poor people started buying more expensive food with their super-duper food stamps a lot of them would end up eating healthier, which would give huge benefits to society. Middle class and rich people aren’t affected because we pretty much buy whatever food we want already, aside from not being able to eat out every night.

        Unlimited food stamps for all sounds like a really good idea to me. Much more efficient than soup kitchens and food banks. I’d probably put on one restriction: exclude very expensive luxury foods. Those are unimportant for health and do have very elastic demand, so they shouldn’t be free.

      12. @ESM,


        I disagree. Demand for food is extremely elastic, not because people can easily live with fewer calories (although obviously most Americans would actually do better with fewer), but because there are so many different kinds of food. For example, beef requires something like 10x the resources to develop as a nutritionally equivalent vegetarian option.

        People make price-sensitive substitutions in their diet constantly. Chicken is the cheap substitute for beef, beans the cheap substitute for chicken, etc. Water from the tap is a perfectly good (and much cheaper and environmentally friendly) substitute for bottled water. The list goes on and on.

        Sometimes I am amazed at how cheaply one can really eat. There are some days where I am perfectly satisfied with PB&J, all day long. Marginal cost is about $0.30 per 300 calorie sandwich. So call it $1.80 to feed a fully grown man for a day (plus a penny for water from the tap).

        Of course, on normal days I spend 10x that amount.

        Main point is I’d rather have a basic income guarantee than food stamps. We probably consume (or waste) way too much in resources on food production in this country as it is.

    1. @Alexi, Food stamps are a subsidy to the ag industry and to industrial food processors. They also sustain an eleemosynary bureaucracy which “teaches” families how to shop well and encourages the use of coupons as supplements. Providing school children with breakfast and wholesome lunches is more effective and efficient, but there too money collection bureaucracy in the schools is undermined. Indeed, the proposal to phase out individual family certification for free lunches is one of the industrial irritants, if only because it also involves the removal of soft drink dispensing machines from the school premises. Oh, and it calls for providing fresh water drinking fountains and in the cafeteria. Coke and Pepsi and bottled water merchants are not happy.

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