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 more about An MMT Fiscal Responsibility Narrative: Some Truths
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.
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 more about Neoliberalism Kills: Part Two
Dean Baker recently posted on the closed door meetings some prominent CEOs are having on shaping austerity budgets to be used after the election to pressure Congress to arrive at a bi-partisan compromise that will cut spending much more than it raises taxes and “put us on the road to fiscal sustainability and fiscal responsibility.” Dean rightly points out that these concerns are greatly overblown since the most important problem we are facing now is growing the economy and providing for full or near-full employment. In particular, he's very opposed to entitlement cuts and is opposed to the current bipartisan impulse to sacrifice entitlements on the altar of fiscal sustainability/responsibility. He then says:
”The question is how to make it so that popular sentiment overrides the big bucks of the corporate chieftains. The obvious answer would be to make the protection of these programs central issues in the election. Members of Congress and candidates for seats should be pressed to indicate where they stand on the proposed cuts to these programs.
“That means getting them to answer specific questions, like whether they support reducing the annual cost-of-living adjustment or raising the normal retirement age for Social Security or the age of eligibility for Medicare. These are among the most important issues in people's lives and voters should not have to go to the polls not knowing where the candidates for the House, the Senate or the presidency stand on them.
“People should also be aware that politicians are true masters of evasion on these questions. A response like, "I support Social Security and Medicare," should be taken to mean that they are prepared to support cuts for these programs. All of the people running for office are smart enough to know how to say that they oppose the cuts being put on the table, and they undoubtedly would say that they oppose the cuts, if it is true.
“Similarly, a statement like, "I oppose the privatization of Social Security and Medicare" should also be taken to mean that they are prepared to support cuts to these programs. Again, they are not being asked about privatization, it's not immediately on the table, why would they give an answer about privatization except to avoid admitting their support for cuts?
“The news media should also be pressed into service in this effort. It is their job to tell us the candidates' positions on important issues and there are few issues more important to voters than Social Security and Medicare. People should harangue their local newspapers and television stations to ask candidates their positions on cuts to these programs. This is far more important than most of the gossip about the campaigns that dominates news coverage.
“The whole effort here must be focused on smoking out politicians on where they stand on cuts to Social Security and Medicare. The CEOs want to do this behind closed doors because they know that politicians who have to answer to their constituencies will never be able to get away with these cuts. The key is to force the debate into the sunlight.”
While I very much agree with the idea that we must force this debate into the sunlight and should focus on getting our Representatives, Senators, and even Presidential candidates to take a “no entitlement cuts under any circumstances position,” I also think that the methods outlined above by Dean are unlikely to be enough to carry the day. Read more about Defending Entitlements Against the Debt Terrorists
One of the most irritating things about the deficit hawk/austerity literature, is that it uses the ideas of “fiscal sustainability” and “fiscal responsibility” in an ideological way, without ever really analyzing or explaining these labels. It's almost as if the austerians know that if they clearly and directly stated what they meant by these terms, and how their meanings were actually related to the ideas of “sustainability” and “responsibility”, then flaws in their whole ideological and policy framework would be very clear to everyone else.
Of course, if you read any of the austerian literature you soon learn that they think fiscal sustainability and responsibility both relate to the impact of government spending on the federal deficit, the public debt subject to the limit, and the debt-to-GDP ratio, and to no other impacts of fiscal policy.” But the austerians never really explain why these three numbers are relevant for fiscal sustainability and responsibility. Instead, they take the relationship as obvious to all, and start evaluating fiscal policies on the basis of past and projected deficit, debt, and debt-to-GDP ratios. Invariably, regardless of the nation in which you find them, they end up advocating for lower taxes for the wealthy, less regulation for corporations, and sacrifices of Government programs and the social safety net; all this based on the ideas of fiscal sustainability and fiscal responsibility that they've never even explained to an incurious and uncritical media, but very bought media, or to the public.
Because of the very great importance of the fiscal sustainability/fiscal responsibility/fiscal crisis/solvency rhetoric, the first session of the Fiscal Sustainability Teach-In Counter-Conference covered the topic “What Is Fiscal Sustainability?” and the primary speaker was Professor Bill Mitchell of the University of Newcastle. Audios, videos, presentation slides, and transcripts for the presentation are available at selise's site and a slightly different version of the transcripts is available from Corrente as well. Read more about The Fiscal Summit Counter-Narrative: Part Two, Defining Fiscal Sustainability
[I'm leaving this sticky because our enemies don't sleep. If you end up eating Grand Bargain™ cat food because Robama concocts some sleazy deal in the lame duck session due to a Shock Doctrine-style manufactured crisis, the people who engineered the crisis will be the same people who organized this shindig. Know them, and know their lies! --lambert]
Well, it's Springtime in DC. Time for the Peter G. Peterson Foundation's annual event. The Fiscal Summit, to be held on May 15, better named the Fiscal Cesspool of distortions, half-truths and lies, is a propaganda extravaganza designed to maintain and strengthen the Washington and national elite consensuses on the existence of a debt crisis, the long-term ravages of entitlement spending on America's fiscal well-being, and the need for long-term deficit reductions plans to combat this truly phantom menace. The purpose of maintaining that consensus is to keep an impenetrable screen of fantasy intact in order to justify policies of economic austerity. that have been impoverishing people and transferring financial and real wealth to the globalizing elite comprised of the 1% or far less of the population, depending on which nation one is talking about.
The 2010 Fiscal Summit
The first “Fiscal Summit” was held in Washington, DC on April 28, 2010. It was lavishly funded by the Peter G. Peterson Foundation, and included many “big names” associated with “fiscal sustainability” and “fiscal responsibility,” including Bill Clinton, who appeared along with personalities from Peterson's stable of deficit hawks such as David Walker, Alice Rivlin. Robert Rubin, Alan Simpson, Erskine Bowles, and Paul Ryan. Its purpose was to spread the deficit hawk message of Peter G. Peterson, including various myths of the world-wide austerity movement: Read more about The Fiscal Summit Counter-Narrative: Part One
The Insanity Isn't the Deficit Spending; It's Claiming That the Government's Budget Is Like A Household Budget!
It's a trope with our politicians, including the President, his likely Republican opponent Mitt Romney, and an emerging third party candidate over at Americans Elect and NoLabels, Pete Peterson's long-time Sancho Panza, David Walker. The trope says that the Government is just a family, even though it's a very big one, and that, like any family, it has a “household” budget, called the Government budget. Read more about The Insanity Isn't the Deficit Spending; It's Claiming That the Government's Budget Is Like A Household Budget!
In a comment on another post of mine, Kelly Canfield, a blogger and commenter at FDL, asked me for the following.
What I would appreciate is a simple, 3,4 bullet point method as to why I should support, and more importantly, tell others that MMT is superior to the Keynes theories which I have pointed out and illustrated to others before this current situation.
I can easily explain that the private sector is not providing demand, and that the Fed sector should, and people would be better off with demand stimulus.
Explain to me how I EXPLAIN that MMT is superior to that basic premise, if it is?
Not sure I want to do that in three or 4 bullet points. But what I will do is to state what I think are some differences that are very significant for policy activism between a Keynesian approach employed by people like Paul Krugman, Brad DeLong, and Robert Reich and a Modern Monetary Theory (MMT) approach employed by people like Warren Mosler, L. Randall Wray, Bill Mitchell, Jamie Galbraith, Stephanie Kelton, Marshall Auerback, Scott Fullwiler, and Pavlina Tcherneva. So, here are some contrasts between the two approaches on seven important issues. Out of these contrasts, there should be much material for short explanations about why MMT is superior to Keynesian approaches. [Readers? -- lambert] Read more about Keynesian Deficit Doves vs. MMT Deficit Owls
In a debate at FiredogLake about Modern Monetary Theory (MMT) perspectives on the so-called deficit/debt crisis and the idea that there is no long-run deficit problem, powwow, a perspicacious commenter and occasional blogger at MyFDL, suggests that while MMT offers useful perspectives on how the monetary system works, and he also agrees that more deficit spending in the present employment crisis will not lead to forced, as op Read more about Spare Me the “Middle Ground” Please!
One of the most emotional issues in American politics is the sovereignty of the United States itself, and its independence from foreign powers, interests, other nations and their ruling elites, and emerging globalizing elites who place their own interests against the nation interest of America and its people. The issues of fiscal sustainability and fiscal responsibility should be discussed from the viewpoint of our national interest, not from the viewpoint of abstract financial ratios, or supposedly critical indicators that generate a lot of sound and fury signifying nothing. Read more about Why Do “They” Want To Limit Our Sovereignty In Our Own Currency?
In the big budget fight going on right now in Congress, the Tea Party conservatives rightly point out that $61 Billion in spending cuts is just a drop in the bucket compared to the $1.6 Trillion predicted deficit, and they react with a great deal of moral fervor to the suggestion that they ought to compromise on $33 Billion in cuts in order to avoid shutting down the Government. That moral fervor sounds perfectly reasonable to me as long as one agrees that Government spending causes inflation, that we now have a huge deficit, debt problem in the United States that we must solve, or face national insolvency in the not too distant future, and also if the people afire with moral fervor would also apply that to the issue of the wealthy paying their fair share of taxes. Read more about Neo-Liberalism Can't Beat the Tea Party: But MMT Can
A number of people including myself have been furiously blogging for many months now on the world-wide austerity war that most Governments are fighting against the well-being of their citizens. Read more about Bill Mitchell on the Austerity War
Arianna Huffington is calling attention to “the great budget battle of 2011,” between the President and the Republicans. She correctly points out that whichever of the two sides win, we, the people, lose. She's right, of course, and says further:
Just look at this so-called "debate" we're having. The problem ostensibly on the table is the deficit. But, without any context, the raw deficit number is meaningless. If the country's debt were, say, $50 million, that wouldn't be a big deal. If some average American suddenly found himself $50 million in debt, well, that would be a big deal. And that's because the country's GDP is a lot bigger than the average person's income. So what we're talking about is really the debt-to-GDP ratio.
Yet the debate is concentrated almost entirely on the debt side of the equation and barely at all on ways to increase the GDP side. . . .
Over the past year, I've written numerous posts about fiscal sustainability, fiscal responsibility, and the various fairy tales and myths underlying what almost all of our policy makers have to say Government finance. I continue to search for a meme that will catch fire and lead people to seriously question the false idea that the US can't: afford to put everybody back to work, see to it that all Americans have good health care; provide an excellent education for our children, reconstruct the energy foundations of our economy, re-invent our infrastructure, and take the measures necessary to solve our other major problems before they get any worse.
It's the idea that we can't afford to pay for many things that we would like to do, that makes it so hard to legislate solutions. With “the national debt” at the level that it is, many legislators who might normally do whatever they could to address our various problems just throw up their hands. The rhetoric of fiscal sustainability and fiscal responsibility is too powerful for them to oppose. They want to be “responsible.” They want to be “grown-up.” They want to be known as people who can make “tough decisions.” So, as long as they believe that Government spending costs something, and adds to a crushing debt burden that we have to do something about, they will not vote for effective measures that will solve our national problems because either the cost/debt implications of solutions involving additional deficits are too great, or the tax implications of matching the costs with additional revenue are a burden they are unwilling to face. Read more about Federal Spending Doesn't Cost Anything!