Real Fiscal Responsibility, Vol. II: The Peterson Network, Inequality, and the Failure of Neoliberalism
This is how the mission of the President’s National Commission on Fiscal Responsibility and Reform was defined by the White House on February 18, 2010:
The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the Commission shall propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. This result is projected to stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers. The magnitude and timing of the policy measures necessary to achieve this goal are subject to considerable uncertainty and will depend on the evolution of the economy. In addition, the Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.
And here is what President Obama’s web site had to say about deficit reduction in 2012:
Right now, President Obama is working with leaders of both parties in Washington to reduce the deficit in a balanced way so we can lay the foundation for long-term middle-class job growth and prevent your taxes from going up.
We need big, big changes in the United States. Many of them will require the Federal Government to spend unprecedented amounts, including deficit spending to enable us to solve problems that have languished, creating needs, for many, many years.
How can we get these changes legislated through a political system that has been increasingly less responsive to most people over the past four decades. There’s only one way that will work without revolution.
We need a movement for change powerful enough to replace the present establishment of House and Senate legislators and presidents wanting to preserve their way of looking at how to do things, with another group that has concluded that change is desperately needed and must be accomplished come what may, whatever the cost in long established customs and traditions in both Houses of Congress and among the vested political and communications elites in the Washington, DC/New York “village.” But not just any changes will do. Read more about For US Democracy: There Is Only One Choice
Below is an excerpt from my most recent e-book: Real Fiscal Responsibility, Vol. I: The Progressive Give-up Formula. The book is volume I of II critiquing austerity politics at the Federal level in the United States. It exposes its fallacies, its closed-mindedness and futility, and especially its reliance on wrong-headed conceptions of fiscal sustainability and fiscal responsibility.
In this volume, I relate neoliberalism, the Washington Consensus, and austerity politics pushed by the powers that be among the DC Village progressives, and the ideas of fiscal sustainability and fiscal responsibility, to the perspectives of Modern Money Theory (MMT), including MMT-based ideas about fiscal sustainability and responsibility. I also explain what I mean by real fiscal responsibility, rather than faux fiscal responsibility, and apply these ideas to an analysis of the US Government during the term of Jimmy Carter. I begin my analysis of current progressive ideas and activities by examining the views of Senator Bernie Sanders, and Elizabeth Warren, and then continue by analyzing the operation of the give-up formula among Congressional and DC progressives during the period 2009 - 2010, when the Democrats had big margins in Congress. I then move to the period 2011 – the present. Next, I analyze the Campaign for the American Future and its New Populism Campaign, and then conclude by relating the give-up formula to real fiscal responsibility.
The Eurozone is an instrument of the globalization process that is setting financial elites over all nations of the world, including the democracies. The situation in Greece exposes the true nature of the Eurozone institutions as a naked fact, beyond spinning, for all to see. They are popular sovereignty-thieves and democracy-killers, with the power necessary to shut democratic governments down. Read more about Austerity, Greece’s Debt Crisis, and the Death of Democracy: A Book about Greece and Much More
Just as every Spring we can count on the Peter G. Peterson Foundation (PGPF) to do a supportive press release when the CBO issues one of its budget outlook 10 year projection reports, we can also count on being treated to public statements by Maya MacGuineas joining in the Peterson Army choir, warning about the coming debt crisis, and singing about the glories of deficit and debt reduction. And this while completely ignoring the real and sad consequences of deficit and debt reduction policies throughout the world since the crash of 2008, as well as previous applications to Latin American, Asian, and the nations of the disintegrated soviet empire, most notably Russia itself. Let's look at Maya MacGuineas latest effort; her testimony to the Senate Budget Committee. Read more about Maya MacGuineas: The Profound Fiscal Irresponsibility of Resistance to Facts
The Peter G. Peterson Foundation (PGPF) always does a press release when the CBO issues one of its budget outlook 10 year projection reports. The PGPF did another in January quoting its President and COO, Michael A. Peterson. Let's go through that press release and see how many troublesome or false statements we can find. Here's a breakdown of the press release quotation from Michael Peterson.
Today's CBO report reminds us once again that our nation has significant fiscal challenges that have yet to be solved.
It certainly does, but I doubt that Peterson and I would agree on what those challenges are. He thinks they have to do with bringing the national debt under control. I think they have to do with creating full employment with a federal job guarantee program, price stability, a robust economy, a great public and free educational system through graduate school, stopping and reversing climate change, providing everybody in, nobody out, no co-pays and no deductibles health care for all, a first class infrastructure, and a greatly expanded social safety net including a doubling of SS benefits.
He thinks the debt is a long-term problem that we have to start to solve now. I think there is, literally, no public finance-related debt problem for a fiat sovereign like the U.S., and that the problem that exists is not a debt problem, but a political problem created by Peterson and his allies across the political spectrum who have propagandized the view that there is a debt crisis since the mid-1970s, with increasing success since the 1990s. Read more about The Peterson Foundation Sings the Same Old Song
This is the fourth in a series of commentaries on Bruce Bartlett's recent testimony to the Senate Budget Committee. I appreciated his testimony and his critical evaluation of the idea that there is a public “debt crisis” in the United States. I also agree that there is no debt crisis. However, I was disappointed that his views, for the most part, did not show the across the board relevance to most aspects of the “debt crisis” of the fact that the United States is a fiat currency sovereign.
In the previous three posts, I've outlined the many contexts in which the fiat currency sovereignty of the United States is relevant to showing that the idea that the United States has or can have a debt crisis is just bunk. In this post, I'll continue my discussion of Bruce Bartlett's testimony in the same way. Read more about The “Debt Crisis” According to Bruce Bartlett: Debt Thresholds, and Wars
Today I received an e-mail from the Friends of (the very popular with progressives) Senator Bernie Sanders. In it the Senator says:
I'm joining with the members of Progressives United to send a clear message to President Obama that we will stand with him when he vetoes Republican legislation that attacks the well-being of the struggling middle class.
Join me and members of Progressives United to urge the president to VETO any Republican legislation that attacks working families.
Let's get this out of the way. I agree with Piketty's overall conclusion in Capital about inequality, that: the distribution of wealth in many industrial nations is highly unequal, wealth concentration has been increasing; and there is a high likelihood that the extent of wealth inequality will continue to grow unless appropriate fiscal policy is used to reverse current trends. However, I don't agree with:
-- the framework he uses to define and specify “capital”;
-- the way he looks at Government finance and net worth; and
-- the fiscal policy proposals he offers to reduce Inequality and put a stop to current trends of growth in the capital to income ratio. Read more about Piketty's Neoliberal Capital
The Peter G. Peterson Foundation (PGPF) and its allied army of associated deficit hawks want the Congressional Budget Office (CBO), the General Accountability Office (GAO), and the Office of Management and Budget (OMB) to do fiscal gap accounting and generational accounting on an annual basis and, upon request by Congress, to use these accounting methods to evaluate major proposed changes in fiscal legislation. Generational Accounting is an invalid long-range projection method that doesn't take into account inflation, the projected value of the Government's capability to issue fiat currency and reserves in the amounts needed to fulfill Congressional appropriations, and re-pay its debts, the projected non-Government assets corresponding to government liabilities, the likely economic impacts of Government spending, surpluses, and deficits, the impact of accumulating errors on projections, and the biases inherent in pessimistic AND contradictory assumptions. It is a green eye shade method that ignores both economic and political reality.
If you want America to end deficit terrorism and austerity, and to have the fiscal policy space it needs to begin to restore the American Dream, then you need to defeat proposed policies or legislation which puts building blocks in place to bias fiscal policy towards austerity and the economic decline it will surely produce for ourselves, our children, and for their children. Proposed policies and legislation of this kind must be defeated for the following seven reasons. Read more about Beware of Policies and Legislation Based on the Generational Accounting Scam
The deficit is now down to under 3% of GDP, and in contemplating that fact, Paul Krugman asks why the deficit hawks aren't celebrating the precipitous fall from nearly 10% of GDP a few years ago. He then explains that:
Far from celebrating the deficit’s decline, the usual suspects — fiscal-scold think tanks, inside-the-Beltway pundits — seem annoyed by the news. It’s a “false victory,” they declare. “Trillion dollar deficits are coming back,” they warn. And they’re furious with President Obama for saying that it’s time to get past “mindless austerity” and “manufactured crises.” He’s declaring mission accomplished, they say, when he should be making another push for entitlement reform.
All of which demonstrates a truth that has been apparent for a while, if you have been paying close attention: Deficit scolds actually love big budget deficits, and hate it when those deficits get smaller. Why? Because fears of a fiscal crisis — fears that they feed assiduously — are their best hope of getting what they really want: big cuts in social programs.
Before the “no” vote on Scotland's independence, The New York Times, carried a post by Neil Irwin in the Upshot making the point that the then upcoming vote “shows a global crisis of the elites.” He argues that the independence drive reflects “. . . a conviction — one not ungrounded in reality — that the British ruling class has blundered through the last couple of decades.” He also thinks that this applies to the Eurozone and the United States to varying degrees, and is “. . . a defining feature of our time.”
Irwin then updated his first post last night, expanding it and recognizing the victory of the “no” votes in the referendum. His new post did not add anything essential to his “global crisis of the elites” diagnosis, so the references and quotations below come solely from his pre-vote post. But the points made apply equally well to his update.
To summarize his argument, for decades now, the elites in major modern, industrial nations have committed leadership blunders and created great discontent among the citizens of their nations, to the point where their polices have contributed to damaging their economies seriously, and the rise of popular resistance embodied in extremist parties and independence movements. Elites have had vast power, but have not lived up to their responsibilities to serve the people of their nations. Discontent with their actions and results is so high that many are questioning the legitimacy of the very governing institutions that claim to serve them, and are exhibiting a greater and greater willingness to do something about these institutions and the policies that they and the elites are generating. Scotland is but one example of that, and his implication is that more examples are in the offing.
It's significant, some might say even remarkable, that Irwin's article appeared in The New York Times, since it is a flat out criticism of elite leadership over a number of decades and a warning to elites to improve their performance or deal with the consequences. But I think it still misses the most important question. That question is whether there is a global crisis of elites or a global crisis of democracies? I'm afraid I think that the crisis of elite leadership is only a symptom of the underlying cause of a broader global crisis of democracy. Read more about A Bottom-Up Solution to the Global Democracy Crisis
I'm interrupting my series on Government Real Fiscal Responsibility to being you this special post, on something Chris Hayes said relating to Real Fiscal Responsibility. Back in February of 2014, he tweeted:
— All In w/Chris Hayes (@allinwithchris) March 1, 2014
Recently, that tweet along with an image has been making the rounds on Facebook as an Alternet photo. The sound bite in the tweet looks great, after the manner of a logical truism.
But, logically, it doesn't follow, because one can easily say that as long as the Government implicit in the statement isn't a currency issuer, but a currency user who must acquire its funds by taxing or borrowing alone, that Government can involuntarily run out of funds. And it is conceivable that funds might be raised to fund a war, while that same Government might not have the funds available to take care of the people who fought for the nation, without defaulting on its obligations. Read more about Real Fiscal Responsibility: What Chris Hayes Said
This, the fifth post in a series evaluating the fiscal responsibility/irresponsibility of the Governments of the United States (mostly the Congress, the Executive Branch, and the Federal Reserve) by Administration periods, beginning in 1977 to 1981 with the Jimmy Carter period, will cover the performance of the Government on the environment and climate change aspect of “public purpose.” Posts 1, 2, 3, and 4, discussed some basic definitions and assumptions of the series and evaluated Government performance relating to economic stagnation, living wage full employment, price stability/inflation, implementing universal health care, and educational reform.
I've explained why fiscal responsibility is closely connected to the idea of public purpose, in this post prior to beginning the series. You'll want to read it, if you want to know what I mean by “public purpose,” and see what else that pregnant term includes, apart from enhancing the environment.
In the first post, I also claimed that the Government of the United States has been fiscally irresponsible in every Administration period since 1977, because its fiscal policies have largely worked against key aspects of public purpose. The first 4 posts supported that claim across 5 aspects of public purpose, as will this one. Future posts in this series will attempt to document it across additional aspects of public purpose. Read more about Real Fiscal Responsibility 5; Carter: Environmental Degradation