debt-to-GDP ratio

This post is a more complete statement of my conclusions based on the analysis in Parts One and Two of this series. Read below the fold...

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 below the fold...

OK, austerity has always been about the causality. Read below the fold...

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 below the fold...

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.

From the graphic: Read below the fold...

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.

Reich begins: Read below the fold...

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 below the fold...

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 below the fold...

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 below the fold...

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 containing primarily the truths, rather than the myths. So, here's my version. Comments, criticisms, recasting in more effective form, are all welcome.

-- The US Government can't involuntarily run out of fiat money because it has the constitutional authority to create it without limit. Congress constrains and regulates this ability; but its existence is still a stubborn fact! Read below the fold...

Stephanie Kelton writes:

The US is broke. Government deficits are de facto evidence of a government gone wild. We’re careening toward Greece. Entitlements are the root cause of our fiscal woes, and the Chinese are coming for our grandchildren. How many Americans believe this garbage? My guess? Most of them.

Read below the fold...

During Part One of this series, I approached the end of my post with this paragraph.

Apart from the political opposition from the insurance companies that Medicare for All would have engendered, I think the main justification for abandoning Medicare for All and switching to the PO and eventually the PO-less ACA, was actually neoliberalism. The President, his main advisers, the Democratic leaders in Congress, and most progressives working for Washington progressive organizations were steeped in neoliberal doctrine. They viewed the Bush tax cuts and the two Wars as unpaid for. The ARRA stimulus Act was similarly unpaid for and added to deficit spending and to the debt-subject-to-the-limit. They believed and most believe today that the Federal Government can have solvency problems if the debt-to-GDP ratio increases too much, and interest rates on the national debt are driven up by the bond vigilantes.

A Medicare for All Act would have required Federal spending on health care to rise by $800 - $900 Billion per year over present levels. They were not ready to cover that with higher tax revenues, and they were not ready to deficit spend it because they viewed that as fiscally irresponsible, and believed then and still believe now that it's necessary to decrease the debt-to-GDP ratio over time.

So, they wouldn't consider spending for Medicare for All. They wouldn't look seriously at the hundreds of thousands of lives they were consigning to oblivion, at the bankruptcies and divorces they could prevent, or at the obvious fact that while HR 676 would have cost the Government $900 Billion more in money annually that the Government can create at will and at zero real cost; it would have saved the people who have to pay for health insurance, and health care out of pocket and in the form of “co-pays” $1.8 Trillion annually, thus providing a marvelous boost to the economy. Instead, they just said to everybody, that it was impractical and that the United States couldn't afford it; but that it would be able to to afford a self-supporting PO bill, and later when that was taken off the table, a deficit neutral insurance bailout like the ACA.

My friend Lambert Strether liked Part One and cross-posted it at Yves Smith's Naked Capitalism site. But the above statement bothers him because he thinks that using the label neoliberalism alone without explaining what aspects of that paradigm provided the justification for taking Medicare for All off the Table, and who the political actors are who adhere to this, makes my treatment incomplete. Even though I agree with the view that it's easy enough to google “neoliberalism” if someone doubts what I mean by the “term,” I also agree with Lambert that it would add something to Part One for me to be more specific about my thinking and show the connections between neoliberalism and the decision to take Medicare for All off the Table. Hence, this Part Two. Read below the fold...

Who else thinks the President's speech didn't include any plans to create the 29 million full-time jobs for the dis-employed? Please raise your hand!

About jobs he said:

”We can help big factories and small businesses double their exports, and if we choose this path, we can create a million new manufacturing jobs in the next four years.”

Read below the fold...

A report on protests at the Tampa convention appearing in the Hill (h/t Lambertstrether) partly focused on views about our economy and financial system of an Occupy protestor named Andrew Speirs. The report says:

“Protesters with the Occupy movement were also in full force with calls to dismantle the United States’ economic and political system.

Read below the fold...

In the shadow of the election campaign, receiving comparatively little attention from the media is another accelerating effort to prepare the way for a “grand bargain” that will legislate a long-term deficit reduction plan embodying “shared sacrifice,” including entitlement cuts that will weigh heavily on the vulnerable including, the young, the elderly, the old, the disabled and other disadvantaged groups; and that will also further exacerbate the rapidly growing inequality problem and increase the threat to our increasingly fragile democracy. Read below the fold...