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Real Fiscal Responsibility

This series is being written partly in support of a fund raiser for producing pilots for a TV/radio show intended for a cable network. For the next 40 or so days you'll find the fund-raiser at the crowd funding site. If you like the posts, then please consider making a contribution to our project, a joint effort of Alice Marshall, Lambert Strether, and myself. MMT badly needs to popularize its view of fiscal responsibility in opposition to the conventional austerian propaganda, a constant stream of which, with massive reach, is coming from the Peter G. Peterson Foundation, the think tanks and projects it funds, and its political and media allies. Their view of fiscal responsibility, which we call faux fiscal responsibility, needs to be replaced by the MMT view, which we will represent in our planned TV/radio show and in this blog series, which we call Real Fiscal Responsibility. You can help us to make its replacement reality by following the series, contributing to the discussion, and donating to the project. Now, here's the introduction to the series.

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This is how the mission of the President’s National Commission on Fiscal Responsibility and Reform was defined by the White House in 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.

And this is a statement made by Maya MacGuineas, President of the Committee for a Responsible Federal Budget, on “the debt” problem in 2012:

A fiscal cliff or a mountain of debt. It will require presidential leadership to avoid either threat. While the likely approach will be to replace the slated policies with a gradual debt reduction plan that would bring the deficit down and leave the debt so that it is no longer growing faster than the economy, there are many different ways to achieve this -- all with pros and cons -- and many specifics that need to be filled in.

And finally, consider this statement by President Obama on the Buffett Rule:

. . . . And it’d be nice if we didn’t have to pay for them. But this is the real world that we live in. We have real choices and real consequences. Right now we’ve got significant deficits that are going to have to be closed. Right now we have significant needs if we want to continue to grow this economy and compete in this 21st century hypercompetitive, technologically integrated economy.

All of these statements and many, many others like them are false. And all reflect a Washington Consensus about the desirability of austerity that is driving economic policy in America toward a stagnating economy, a plutocratic feudal social order, extremes of economic inequality, and the death of American Democracy.

This series is about a counter-narrative to austerity politics. 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 series, I relate austerity politics pushed by the powers that be in the DC Village, and much of the world, and the ideas of fiscal sustainability and fiscal responsibility to the perspectives of Modern Money Theory (MMT), including MMT ideas about fiscal sustainability and responsibility.

I'll do this by analyzing and evaluating the performance of the US Government by presidential administration periods, beginning in 1977. My standard of evaluation will be the relationship of the Government's (the Congress, the Administration, the Federal Reserve Bank, and where relevant, the Supreme Court) fiscal policy to “public purpose.” My view of “public purpose” relevant for fiscal policy is given here.

I’ll show that austerity politics, and its foundational ideas of fiscal/sustainability and responsibility are both intellectually bankrupt, and also that austerity policies based on its flawed notions of fiscal sustainability/responsibility have not only failed to perform as advertised by their advocates, but have also produced the opposite of their promised outcomes, including producing stagnation which has exacerbated economic inequality.

In even a minimally rational America, the negative outcomes of austerity-based deficit reduction/faux fiscal responsibility including its failure to produce full employment, and a healthy economy in which all can share, and its all too successful production of economic stagnation and increasing inequality, would be plain to all and would be at the center of political debate. But in an America where public debate is subject to a continuous cacophony of distracting, contradictory, and confusing messaging from large and powerful corporate interests and from a small group of extremely wealthy individuals, cognitive manipulation of large numbers of people is all too successful at distorting perceptions of reality. So, the mass of people remains easily distracted and persuaded by myths and rationalizations for fiscal and other policies that have failed time and again across the world.

This series is intended to contribute to an effort to dispel the austerian myths about fiscal sustainability/responsibility that prevent Americans from understanding what fiscal policies can contribute toward fulfilling public purpose and what policies only take us further away form that goal. A great struggle for the future of American Democracy and for the heritage of the New Deal is now underway. I hope that the perspectives I develop here will help us to secure and extend our democracy in all its dimensions and also FDR’s Economic Bill of Rights. If that hope is fulfilled to even a small degree, then this series will have been worth writing.