Fact:
Every serious economic forecaster cuts his GDP and employment estimate
with tax hikes and spending cuts.
(AKA, the looming ‘fiscal cliff’!)
Fact:
Every serious economic forecaster would raise his GDP and employment estimate
with tax cuts and spending increases.
Fact:
All agree there would be no moral hazard or a waste and fraud issue with an increase in Social Security payments.
All agree that FICA is a highly regressive punishing tax on people working for a living, ideologically unacceptable to the ‘left’, and, of course, the ‘right’ is against any tax.
Fact:
Even with the presumed ‘current unsustainable path of future spending’ the Fed’s long term CPI (aka ‘inflation’) forecast remains at 2%, market participants via inflation indexed securities forecast equally low long term CPI increases, and there are no credible forecasts for any kind of ‘inflation’ problem from excess aggregate demand.
Fact:
The August 2011 debt ceiling debacle and downgrade of US credit, at the ‘worst possible time’, demonstrated that because the US ‘prints its own money’ the US government can’t run out of dollars; always has the unlimited ability to make any size dollar payment on a timely basis; is not dependent on and can never be dependent on dollar funding from foreigners, the IMF, or anyone else; pays interest rates based on rates voted on by the Federal Reserve; and is in no way is at any kind of risk whatsoever of becoming ‘Greece’.
Conclusion:
The MMT Grand Bargain for Prosperity:
1. Raise the minimum Social Security payment to $2,000 per month,
AND
2. Suspend FICA taxes
What’s so hard about this?
Feel free to distribute, particularly to your Congressmen!!!
Couldn’t disagree more. More welfare, more debt to solve a debt crisis, and delaying the inevitable. Goodbye dollar.
Just like the yen with 200% debt to gdp?
you been through the mandatory readings on this site? 7 dif?
Mr. Mosler,
Japan’s economy has experienced stagnant growth for 20 years. They’re the epitome of a weak developed economy. I know they haven’t gone bankrupt, but using Japan as an example of something good is misleading at the very least.
One could easily argue that that 200% debt to GDP is what’s holding their economy back.
It’s to make the point that there is no solvency problem, regardless of the size of the deficit.
And Japan deficit remains too small for full employment
Funny comment on NPR this morning. I am paraphrasing: “The recovery is in jeopardy so we need to cut the deficit in order to help people.” Ummmmm….huh? “Hello sir. I see that you are hungry. Well, allow me to take your dinner away in order to feed you.”
I love Randy Wray’s opening lines in today’s article An Alternative Meme for Money, Part 5: A Spending Meme
That goes right there with your thoughts!
Warren, you need to have a beer with Obama and set him straight.
set it up, thanks!
Warren –
Looking back at all your efforts to let people know how their currency works and how to recognize the Deadly Innocent Frauds, what avenue has gotten you the most “bang for the buck”? 7DIF itself?
probably the label MMT originated by a reader of Bill Mitchell’s blog
@WARREN MOSLER,
Ok, then let’s all pool our money, buy the Twinkie assets, and sell ’em with “MMT” emblazoned on every Twinkie.
sad, but it’s probably be the fastest way to proceed
@Unforgiven,
I think that what has most popularised MMT is writings on wikipedia. Page on austerity now has over 1.7 million yearly views and I wrote there basic MMT viewpoint:
“According to modern monetary theory, austerity measures by a national government are usually counterproductive because neither taxation nor bond issuance acts as a funding mechanism for the government. Instead all spending is done by crediting bank accounts, so national governments cannot run out of money unless they have fixed exchange rate to either foreign currency or gold or are part of a larger currency area like the eurozone where they do not have the right to issue money.”
Wikipedia still has many pages that would sorely need updating. Easily most ‘bang for the effort’ in popularising MMT views.
Please MMT people. Don’t waste your time on activities that have little to no effect, such as writing a blog that very few people read. Use your time productively updating pages that many many people read. On wikipedia.
@PZ,
I think the biggest thing that needs to be challenged and toppled is the notion that money is created by the private sector and private banks. Mistaking real wealth for money, I guess. That must be why a whole lot of people complain that taxes remove money from the economy when, apparently, it doesn’t even occur to them that the reverse operation of government spending should be adding money to the economy. I can’t find any other non-conspiratorial explanation for this incongruity.
Neoliberals are still at full throttle, despite their 20+ year string of failures. Thanks a lot, Mr. Peterson. 🙁
http://online.wsj.com/article/SB10001424127887324640104578163711341231922.html?mod=WSJ_article_MoreIn_Opinion
It is often said that “the best defense is a good offense.” I don’t quite agree. But, it does seem to me that when people refuse to listen to reason, it helps to be somewhat offensive. So, let me suggest that the debt limit has a precedent which we would now generally consider offensive — i.e. the chastity belt.
That’s what our old Uncle Cons are up to — trying to keep the goodies for themselves. Bunch of sadists.
I apologize in advance for my bad English. Today I saw a video where an Italian professor of economics (Alberto Bisin), with chair in New York, said that the markets had confidence in U.S. debt repayment, because the United States still had room to raise taxes. I wonder, how is it possible that this man could teach at a university in New York? The video is in italian. but Warren, Paolo Barnard can translate it better than me! I’d like to have your own opinion on it. Thank you and I apologize for the off-topic.
Here’s the video: http://www.youtube.com/watch?feature=player_embedded&v=zzYIVp7aLhc
sadly he’s representative of most US professors
@WARREN MOSLER, This is sad…
Sounds like a much better plan than what I am hearing now a further increases in unemployment benefits.
@Jon, Whatever gets money flowing through the economy! Rationing the currency has had none but negative effects.
@Monica Smith, Yes but it does matter how that money is used. There is evidence to support the idea that unemployment and other welfare benefits make labor more expensive to employers and act as a drag on employment. I think Warren’s suggestion of an employer of last resort is a healthier option.
@Jon,
From what I observe, US unemployment benefits are far from generous by Western standards, so increasing them is something that probably should be done anyway. And the best thing is that increase would reduce the number claiming it, as it would all get spent into the real economy.
Agree that direct employment into proper jobs that provide something socially useful would be much better, but plenty of people really, really, I mean really hate that idea as well.
@hamish, Why because some other country does it we should as well?
Do you have an actual study that shows increasing unemployment benefits directly reduces the number collecting?
I think you are assuming there would be an increase in total government spending with the increase in benefits while that may not be true.
I would reference Prof. Mulligan at the University of Chicago’s new book “The Redistribution Recession” as calling into question your assumption that raising unemployment compensation reduces the number of unemployed. The complex web of existing benefits we currently have while mostly well intentioned often result in unintended consequences.
Yep. Pretty easy to find someone that really really hates any proposal. Generally speaking to get anything through you need to get either a majority supporting the idea and or create the impression a majority support the idea.
What I like about this is it is easily translateable to my country Australia.
Feel free to recommend other adjustments.
Fact:
Every serious economic forecaster cuts his GDP and employment estimate
with tax hikes and spending cuts.
Fact:
Every serious economic forecaster would raise his GDP and employment estimate
with tax cuts and spending increases.
Fact:
All agree there would be no moral hazard or a waste and fraud issue with an increase in Social Security payments.
Fact:
Even with the presumed ‘current unsustainable path of future spending’ the RBA’s long term CPI (aka ‘inflation’) forecast remains at 2-2.5%, market participants via inflation indexed securities forecast equally low long term CPI increases, and there are no credible forecasts for any kind of ‘inflation’ problem from excess aggregate demand.
Conclusion:
The MMT Grand Bargain for Prosperity:
1. Raise the minimum NewStart payment to $2,000 per month (they only want to raise it by $50pw atm and govt refusing to do so)
I agree: if you print the debt dosen’t exit and gdp up with reduction of output gap and unemployment..
I doubt: on long run when global gdp will raise, summation of Fed+Boe+BoJ+may be Bce will be world inflation (no one can predict now the future).. but this price is better then great depression & chain of default now..
on the very long run I have another doubt on world sustainability of consumption of rationed commodities for 6 billion people consuming loke western today.. but I know this is a point that the great majority of people (of every political and economics view) don’t agree.. or don’t want to see..
@Piero form Italy, First of all, we don’t all consume everything at one fell swoop. It is still true that one man’s trash is another man’s treasure. Unfortunately, not nearly enough trash is being transformed into treasure. Our mountains of trash, floating islands of plastic and carbonated atmosphere are all evidence of economic failure.
Secondly, although we are only a little more than six billion, enough food stuffs to provide adequate nutrition to nine billion is currently being produced. Since a goodly number of the six billion are actually starving, nearly half of what we produce is going to waste — i.e. sustaining organisms such as microbes and vermin that are likely inimical to human well-being. That’s not just waste going to waste, but waste that is highly injurious.
And why are we not processing waste? Because there is not enough money. At least, that’s the official story. The reality is that waste has never been properly incorporated into our economic thinking. Nobody seems to agree that surplus is actually avoided waste.
@Monica Smith,
Hi Monica..
I agree with you about food & better management of trash like recycling & improvement efficienty production process..
but in my opinion in the very long run there isn’t enought iron/steel/copper/oil/gas/coke/zinc/wood/alluminium/etc to build 6 billions of cars/washmachine/etc every n° years like now in westerns countries.. and the pollution & warm effect will be greater..
is a phisics law : not an economics law.. we will facing a story without precedents with this magnitude..
thanks for you apreciated comments.. I know my is a minority view..
@Piero from Italia,
That’s why we’re going into outer space! In the very long run, we’ll use resources from all over the Sol system, not only Earth.
To infinity and beyond!
I love your suggestions but in order to satisfy the debt critics why not include stopping the government from issuing debt and just set the overnight rate at zero. I think Mitchell, Wray, and maybe you have suggested it before.
I’ve always supported a permanent 0 rate policy.
never yet seen bus tokens inflate because the bus company doesn’t pay interest on them.
Admittedly somewhat frivolous, but a somewhat light-hearted offering to spread the word.
http://www.dailykos.com/story/2012/12/11/1168899/-PPE-son-of-MMT
If, as Rachel Maddow is wont to say, I’ve got something wrong, a bit of contradiction would be welcome. 🙂
Warren, I’ve been at this for 15 years. You, probably even longer. We keep trying to explain it in simpler, easier to grasp terms, the fundamental assumption being that if we could just make it simple enough, the politicians, the media and the academics finally would see the light.
I now have come to the conclusion we have been wrong. This is not just an education problem. It is an education/motivationproblem.
The politicians don’t dare tell the truth. They are bought-and-paid-for by the .1%, who absolutely do not want the truth to be told. They want the income gap to grow. They want fewer benefits for the 99.9%.
The politicians know that telling the truth not only would mean losing contributions from wealthy donors, but also would lose votes to an incredulous public, that has been brainwashed into believing federal finances are like personal finances.
The media are owned by the .1%, so they too promulgate the BIG LIE.
And with the exception of the UMKC economics department, and a few other brave souls, the academics will not risk tenure or embarrassment by telling the unpopular truth.
In short, our efforts have been, and will continue to be wasted, unless we address the motivation side of the problem. In essence, we have to combine the economic truth with the motivation truth. We have to tell the public:
Until we start including the motivation part of the story, we will continue with our fruitless efforts to dumb down our story — all to no avail.
That is my suggestion for you, Randy, Stephanie et al. Reveal the motivation. That is what will change minds.
Rodger
@Rodger Malcolm Mitchell,
Not a bad idea. But it needs to be fleshed out in a manner that still doesn’t seem cohesive to me. And we need to make the argument that even those in the 0.1 percent can understand and accept (as Mosler and Buffett certainly do), because I don’t think this is so much a greedy conspiracy by “bad” people (who really considers themselves “bad”?) but a creeping self-reinforcing delusion.
It has to be a delusion because if the 0.1% keep moving the country at their direction, they will end up with no customers to buy stuff derived from their capital and eventually the 99.9% will hang them.
Unfortunately, our fellow countrymen’s monetary thinking is more like religion than science. It’s largely faith-based and the masses tie themselves to high priests and prophets like Beck and Limbaugh rather than learn for themselves. When was the last time you persuaded somebody to change their religion? This will be just about as hard. I suppose we could try to elevate a prominent MMTer like Mosler to become a new Messiah, but the same faith-based tactics to do that would undermine the scientific underpinnings of MMT itself – a Catch 22.
I fear things will have to get a lot worse before they get better. Most people have to be forced to think for themselves. But we also tend to be tribalistic when confronted by forces seemingly out of our control. That tribalism can be productive when it leads men and women to band together in open democratic debate. But that same tribalism has a dark side too and MMT will be competing with a lot of other niche ideas, some of which would lead to a far worse future than the status quo.
Interesting times.
@AWK, The people need an enemy. All religions have an enemy — whether it be the devil or even other “false” religions. Without an enemy, a religion has minimal power.
So far, the people think the enemy is their own greed. So you have the 99.9% criticizing themselves — the poor and middle classes, the unemployed, the “food-stamp mothers,” those who wish to climb, those who want a “free lunch,” those who join a union to ask for a raise, the homeless, those who march against the government.
Unfortunately, even the academics, who understand the economic facts, feel it is beneath them, or unscientific, to identify the enemy as the .1%.
So when the people finally awaken, and pick up pitchforks and torches, the academics will be among the first to feel the pain.
@Rodger Malcolm Mitchell, Your point is not really inconsistent with mine. I agree we need an enemy but it should be a mindset, the mindset of many but not all of the 0.1%, NOT the people themselves. We don’t want to destroy the 0.1%. We want to redeem them. We want to help them find their own redemption and save them from themselves since their philosophy can only lead to their own destruction too. This a common tactic, e.g., during WWII we would say we fought “Nazism”, not the German people. Now we both know there were evil Germans and the banality of evil was shared by all Germans who tacitly or actively supported the Nazis. But it was not productive to argue in that manner. First, it would harden the resistance of Germans both before and after capitulation if they were all labeled as evil. If you think the 0.1% behave miserably now, just imagine how they might behave as they are increasingly labelled as evil and backed into a corner. Secondly, it would have made it easier for those on our side who were pushing to actively exterminate the Germans for “starting two world wars”. Class war can be a real nasty thing. Let’s be careful.
And let’s not forget, there are many in the 0.1% who are doing wonderful altruistic things and much good outside the negatives of their economic philosophy. Many of the non-0.1%ers like myself know 0.1%ers who are nice people even though we disagree on economic philosophy. Some of the 0.1%ers are downright greedy and simply want power at the expense of others. But there are true believers who really think their philosophy is best for everyone, not just them.
Having said all that, there is nothing wrong with isolating particular individuals, like the Koch brothers, as enemies. It does help to find personifications of evil – like Hitler and his henchmen in my example above and demonize them to better condemn the mindset. It’s OK to attack them because they were not just believers in the Mindset, they actively tried to dominate others with it. I have no problem creating poster boy enemies like that and publicizing it. But you have to be very careful who you go after. It can backfire if you pick the wrong target.
I love Warren’s idea in the Huffington Post. But I hope he or somebody else takes full advantage of using this not only as “Grand Bargain” solution to the Depression but as a Grand Experiment to test MMT once and for all (I’d say “in micocosm but this is really pretty macro).
For the average American hearing this proposal I think they need to understand the following loud and clear: Our government will pay higher Social Security with no SS taxes in a depressed economy and demonstrate that this can be done simply by issuing currency without debt. The National Debt will NOT be increased. We will not add taxes until the depression is over and taxes are needed to modulate inflation.
I realize that national debt = private savings and the above statement is problematic under current MMT language. But MMT has to semantically transform it’s language to match the Greenback movement. The population much more easily grasps the latter than the former and I think, in this sense, they are functionally the same. The population is not ready to accept that somehow the huge national debt is good or benign. We need to re-express the Social Security part as OUTSIDE the national debt issue somehow.
I really think more MMTers need to learn about and rediscover the Social Credit Movement of the 1920’s and 30’s (see http://en.wikipedia.org/wiki/Social_Credit to start). A lot of the ideas and political language and expressions we need are there – as well as many examples of what we need to avoid, e.g., how the Social Credit movement was politically co-opted and destroyed in Canada.
One thing I particularly like about the Social Credit Movement is it provided a firm scientific and moral philosophy underpinning our birthright as citizens built on generations of advances by our forefathers. It’s about justified entitlement, not welfare. If we want to preserve capitalism then we need to make everybody stakeholders somehow. We should pay people not just in money but in capital. We need to go back to the idea that employees are stakeholders in their enterprises and they should always have an equity stake and a voice at the Board table like in Germany where that reform works wonderfully.
As the Young Turks put it so concisely–and the intellectuals here have a genius for muddying the waters with endless if’s, and’s and but’s–“the game is rigged.”
That’s it. The game is rigged. Keep it simple. Keep repeating it. This is how you change minds. Read the book “Propaganda” by Edward Bernays; it’s all there in black and white.
Why would rich and powerful people want to dilute their power? The game is rigged and they want to keep it rigged and they have the means to keep it rigged. In particular, they have a host of “useful idiots”, ignorant people, corrupt politicians, and a corporate-owned media, to support them and the ongoing idea that “money is scarce” and everything depends on the banking system. As Rothschild said essentially, the money power is everything. It has also now got a whole militarized security state behind it–nicely concocted after a certain date in September–in case anyone gets any funny ideas. If you think MMT has a chance against this, well…