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 public debt-to-GDP ratio is, perhaps, the most important measure used in discussions of the relative fiscal sustainability of nations. Nations with high levels of debt-to-GDP are viewed as having more serious fiscal problems than nations with lower levels. Nations having increasing ratios over time are viewed as becoming less fiscally sustainable, while those with decreasing ratios are viewed as more fiscally sustainable.
But is the public debt-to-GDP ratio really a valid measure of fiscal sustainability, or is it a measure that incorporates a neoliberal theoretical bias in its fundamental assumptions? In the United States, the total value of public debt subject to the limit at any point, is the total principal value of all the outstanding debt instruments sold by the Treasury Department. The GDP is the aggregate value of the production of goods and services in the United States within a particular period of time, adjusted for price changes.
So, the public debt is a variable measuring a cumulated stock, while GDP is a flow variable measuring economic activity within a particular period of time. Why compute a ratio of a cumulated stock to a flow within a circumscribed period of time?
Well, in this case of the debt-to-GDP ratio, neoliberal economists reason that the stock, the debt, can only be reduced if the government takes away part of the flow each year to repay a portion of the stock, the debt, leaving less of the flow to add financial savings to the private sector. After all, what other sources of government revenue are there except taxation? Read more about The Value of the Right Ratio Is Zero
The Five Worst Reasons Why the National Debt Should Matter To You: Part Four, The Three Real Reasons
This is the concluding post in a four part series on the “Top” reasons why the national debt should matter. In Part One, I considered “Fix the Debt's” claim that high levels of debt cause high unemployment and argued that this is a false claim. In Part Two, I followed with a review of the historical record from 1930 to the present and showed that it refutes this claim throughout this period, and that there is not even one Administration where the evidence doesn't contradict “Fix the Debt's” theory. In Part Three I showed that the other four reasons advanced by “Fix the Debt” also had very little going for them. In this part, I'll give reasons why the national debt does matter, and why we should fix it without breaking America, or causing people to suffer. Read more about The Five Worst Reasons Why the National Debt Should Matter To You: Part Four, The Three Real Reasons
The Five Worst Reasons Why the National Debt Should Matter To You: Part Three, The Other Four Worst Reasons
In Part One of this series, I considered “Fix the Debt's” claim that high levels of debt cause high unemployment and gave a few reasons why this is a false claim. Read more about The Five Worst Reasons Why the National Debt Should Matter To You: Part Three, The Other Four Worst Reasons
In Part One, of a critique of the most important of "Fix the Debt's" reasons for "Why the National Debt Should Matter To You," I asserted that high debt levels haven't caused high unemployment in the United States, and that, if anything causation was in the other direction. I didn't want to disturb the flow of the argument there with a relatively lengthy survey of some of the numbers in the historical record since the 1930s. But let's test the idea that High debt causes fewer jobs and lower wages in the United States by looking at that record now. Read more about The Five Worst Reasons Why the National Debt Should Matter To You: Part Two, the Record Since 1930
The Five Worst Reasons Why the National Debt Should Matter To You: Part One, High Debt Levels and Jobs
I came across a post from the “Fix the Debt” campaign last month called “The Top Five Reasons Why the National Debt Should Matter to You.” It's a post full of debt/deficit lies that cry out for correction. That's what I'll provide in this series. Read more about The Five Worst Reasons Why the National Debt Should Matter To You: Part One, High Debt Levels and Jobs
Make ‘em Prove the Causality before They Cause Any More Suffering: Part Three, Reinhart - Rogoff Retrospective
This post is a more complete statement of my conclusions based on the analysis in Parts One and Two of this series. Read more about Make ‘em Prove the Causality before They Cause Any More Suffering: Part Three, Reinhart - Rogoff Retrospective
In Part One, I asked whether the Carmen Reinhart/Kenneth Rogoff study and book didn’t show that, on average, nations experiencing debt-to-GDP ratios above 90% had negative rates of economic growth? And I said the answer to the question was “no.” But I didn’t explain why that was true. Read more about Make ‘em Prove the Causality before They Cause Any More Suffering: Part Two, the Fall and After
Warren Buffett's recent op-ed in the New York Times is making a stir because it calls for a minimum tax on high incomes above $One million annually. But I was much more interested in some deficit targeting he proposes which exposes his ignorance about the sectoral financial balances model of macro-economics, and reveals him as a deficit hawk whose advice, if followed would be unsustainable and lead the United States into another deep recession. I'll comment on a couple of paragraphs in Buffett's op-ed. Read more about More Austerity Advice From the Very Rich: Buffett On Deficits!
Obama for America, the campaign apparatus with the very large e-mailing list and great segmentation techniques that exploited Romney's weaknesses to help the President to eke out (yes, I know the electoral vote involved no “eking out,” but the popular vote was something else again) his re-election victory, is now trying to mobilize people who voted for the President to work against their own interests by supporting his deficit/debt cutting activities. So, I couldn't resist the following commentary on their mobilization e-mail.
Robert Reich has been writing a series on “the Grand Bargain” and the “fiscal cliff.” In this post, I'll do a commentary on his “The President's Opening Bid on a Grand Bargain (II): Put a Trigger Mechanism in the Legislation”, because I think it's a good example of self-defeating progressivism or “loser liberalism. Take your choice of epithet.
Like many others, I'm not worried about the so-called fiscal “cliff,” and the ravages to the economy that are likely to occur if Congress doesn't do something about it before the end of the year. That's because a lot of the impact can be cushioned in the short run by Executive Branch manipulations while negotiations continue to go on. But if measures aren't taken to reverse the contractionary effect of the sequestration-induced changes, we're looking at deficit cuts of $487 Billion over 9 months of the fiscal year. Read more about The Fiscal “Cliff” and the Real Problem
Many MMT posts and other writings on fiscal responsibility, including my own, focus on the myths of neoliberalism, pointing out why they are myths and developing an alternative MMT perspective in some detail. Off hand, and I may have forgotten something, I couldn't think of a brief positive MMT narrative related to fiscal responsibility containing primarily the truths, rather than the myths. Read more about An MMT Fiscal Responsibility Narrative: Some Truths After A Second Crowd Sourcing Revision
Many MMT posts and other writings on fiscal responsibility, including my own, focus on the myths of neoliberalism, pointing out why they are myths and developing an alternative MMT perspective in some detail. Off hand, and I may have forgotten something, I couldn't think of a brief positive MMT narrative related to fiscal responsibility containing primarily the truths, rather than the myths. Read more about An MMT Fiscal Responsibility Narrative: Some Truths After Crowd Sourcing Revision