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Real Fiscal Responsibility: What Chris Hayes Said

By: letsgetitdone Monday September 8, 2014 7:18 am

I’m interrupting my series on US Government Real Fiscal Responsibility since the Carter Administration to write about something Chris Hayes said relating to Real Fiscal Responsibility. Back in February of 2014, he tweeted:

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.

So, assuming that the Government is one that can involuntarily run out of money, the rich are saying that they think fighting a war using deficit spending is worthwhile and one’s patriotic duty; but that there are more important priorities than taking care of the people who fought it for their country. So, what are those priorities and what are the moral judgments in back of them? That is really the issue in a situation of limited Government financial resources!

The rich often believe, that lowering the risk of inflation which, they think, would cost them money, or avoiding taxes, which would also cost them money, are more important priorities than taking care of the people who fought the wars for us and them. They don’t think they owe them a thing. Or alternatively, they think that what is owed to them should come out of other people’s pockets, so that it should be “paid for” by increased taxes on the poor and the middle class, or perhaps by cutting Government programs that serve them.

This view is morally reprehensible, of course, and it is also despicable when you consider that they and theirs also make sure that they don’t have to fight the wars, so that burden too falls on the poor and the middle class. So, Chris’s statement makes political sense because it sounds like an undeniable moral proposition, a moral truism.

On the other hand, a Government like the US’s with the authority and capability to create unlimited currency if it needs to, can always afford to both deficit spend on a war, and also deficit spend to take care of those who fought it. So, in that situation, the US’s current one, it is a truism that the Government can afford to deficit spend to fight a war and also to take care of the people who fought it for us. But, here, there are no “ifs” about it.

We can do both. And we can also expand Social Security benefits, and deficit spend on new energy foundations, and deficit spend on an enhanced Medicare for All program. We can do all these things and more without running out of money, because, as the currency issuer, the Government can do all sorts of things and never run out of money.

 

Real Fiscal Responsibility 5; Carter: Environmental Degradation

By: letsgetitdone Friday September 5, 2014 5:59 am

Love Canal Emergency Declaration Area Plaque at site of 93rd Street School, the school had been knowingly built on top of Hooker’s toxic landfill.

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 One, Two, Three, and Four 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.

Real Fiscal Responsibility 4; Carter: Education Reform

By: letsgetitdone Tuesday September 2, 2014 6:41 am

If you’re reading this you’ve landed near but not at the beginning of my very lengthy 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 – 1981 with the Jimmy Carter period. My first post explained why I chose to start my evaluation with the Carter period, and also laid out my related definitions of fiscal sustainability, and fiscal responsibility.

It explained why fiscal responsibility is closely connected to the idea of public purpose, which I laid out in this post prior to beginning the series. You may want to consult that post, if you want to know what I mean by “public purpose.” I also claimed that the Government of the United States has been fiscally irresponsible in every Administration period since 1977.

In my second post, I began by examining the problems of ending economic stagnation, and providing full employment at a living wage, and, I hope, by showing that the Government, during the Carter period, failed to solve either problem because of its commitment to deficit reduction, and budget balancing, in the service of hoped for inflation moderation. The third post in the series, examined how the US Government failed in its efforts to create and maintain price stability, and also failed to provide a solution to the problem of providing the right of receiving health care to every American in need. So, thus far in the first three posts in the series we’ve seen how the Government during the Carter period failed to 1) end economic stagnation; 2) failed to create and maintain full employment; 3) failed to maintain price stability; and 4) failed to maintain price stability. It did not fail however, to reduce the Federal deficit, which is not in itself an aspect of public purpose, but a presumed means of preserving government solvency, and avoiding inflation. So, I suppose congratulations are due the Government for solving a faux problem and failing to directly address the real ones.

So, from 1977 – 1981, the Government of the United States is thus far 0 for 4 when it comes to achieving real fiscal responsibility through fiscal policy in accordance with key aspects of public purpose. The remaining posts in this series will continue to document the claim that all the US Governments since 1977 have been fiscally irresponsible. In this, the fourth post in the series, I’ll evaluate the Government’s efforts at educational reform during the Carter period. Will the Government go 0 for 5? We’ll see!

Real Fiscal Responsibility 3; Carter: Inflation and Health Care

By: letsgetitdone Monday September 1, 2014 6:36 am

Here’s the third post in my 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 with the Jimmy Carter period. My first post explained why I chose to start my evaluation with the Carter period, and also laid out my related definitions of fiscal sustainability, and fiscal responsibility.

It explained why fiscal responsibility is closely connected to the idea of public purpose, which I’ve laid out here. I also claimed that the Government of the United States has been fiscally irresponsible in every Administration period since 1977.

In my second post, I began by examining the problems of ending economic stagnation, and providing full employment at a living wage, and, I hope, by showing that the Government, during the Carter period, failed to solve either problem because of its commitment to deficit reduction, and budget balancing, in the service of hoped for inflation moderation. The remaining posts in this series will continue to document the claim that all the US Governments since 1977 have been fiscally irresponsible. This, one, the third in the series, will examine how the US Government failed in its efforts to create and maintain price stability, and also failed to provide a solution to the problem of providing the right of receiving health care to every American in need.

Creating and Maintaining Price stability

The Carter Administration sought price stability, and was convinced, mistakenly, that reducing the deficit and eventually balancing the budget would also bring the cost-push inflation in oil prices under control. In the pursuit of price stability, the President used his veto power (p. 40) on a heavily Democratic Congress of supposed allies when he vetoed a public works bill providing for $5 Billion in water projects in 1978, because be thought it was inflationary and full of pork. In addition, he vetoed or pocket vetoed a number of other bills passed by the Democratic Congress in pursuit of smaller Federal deficits and Government frugality.

Not that the Government ran very large deficits in those days in light of current ideas about large deficit spending. In fact, Congress, the President, and the Federal Reserve combined to reduce deficits very quickly after the Ford Administration. After 8 quarters when the Federal Government deficit ranged from 2.88%* of GDP to 6.50%, with 7 quarters exceeding 3% of GDP, the deficit was reduced during the Carter Administration to under 3% of GDP in the first quarter of 1977 and remained in the 0% to less than 3% range, with a low of 0.47%, for the rest of President Carter’s term.

These small Federal deficits were accompanied by small trade deficits by contemporary standards, ranging from a high of 1.21% of GDP to a low of 0.10%. In addition, there were five quarters of small trade surpluses during the Carter Administration, as well. In spite of this generally favorable context, the Government could not achieve price stability because its leaders in all branches were ideologically biased against using the right methods to control the cost-push oil inflation being caused by the spike in oil prices due to Saudi policy during these years. In fact, the Government mostly executed a textbook case of what not to do.

Cost-push inflation cannot be eliminated without killing the economy if one relies on increased taxes, reduced Government spending and high interest rates, which is the deficit hawk prescription. All that will and did do is to move toward macroeconomic and microeconomic austerity. The way cost-push inflation has to be fixed is through bringing alternative sources of supply, wage and price controls, and rationing online.

We know these last two measures are hard to take for Americans and hard to enforce. But they worked during WWII (pp. 95 – 120) even in a time of full employment, and would have worked again if the Congress and the Carter Administration would have employed them sufficiently vigorously. But even though the Administration and Congress did implement wage and price “guidelines” in 1978, and then moved on to tighter controls later, implemented by a Council of Wage and Price Stability, the prices affected were limited in scope, amounting to about half the prices in the economy, and the enforcement of standards wasn’t thoroughgoing, in part because the regulatory staff implementing the program was only 10% of the size of a comparable staff during the Nixon Administration.

As for bringing new supplies online, that is the best cure for cost-push inflation, but the problem with it is that it can take a good deal of time to work. Ironically, Jimmy Carter did initiate this cure for Saudi-induced oil inflation during his Administration, when he de-regulated natural gas production. The problem was that the new supplies did not begin to have an impact for some time. Eventually they did, but only after President Carter was defeated by Ronald Reagan, and only after the availability of more natural gas created an international oil glut, the primary reason for the fall of inflation in the Reagan Administration.

The secondary reason for the fall of inflation was Volcker backing off the Federal Funds rate. The Reagan recovery couldn’t have occurred without that; but, on the other hand, Volcker’s move wouldn’t have been effective if the oil price hadn’t already fallen.

So, the bottom line here, is that the Government did mostly fiscally irresponsible things in seeking price stability during the Carter Administration, while wrapping itself in the moral sanctimony of preaching the necessity for sacrifice. The one clearly good thing it did was to de-regulate natural gas. That eventually worked, and if Congress and the President had combined that with oil rationing and strict enforcement of price controls on domestic supplies, export controls on domestic oil, application of price controls on oil imports, and perhaps limited wage controls, then the economy could have survived without Paul Volcker’s Fed drying up the credit flow and producing a prolonged recession.

Implementing the right of health care for everyone

Carter promised passage of a national health insurance plan during his campaign, but when he was elected he backed off that idea as soon he was warned about the perceived likely inflationary impact of such legislation. This fear dogged his Administration and was a major factor in his inability to come to agreement with Teddy Kennedy and Russell Long on a bill that all three could support.

As his term passed, hesitation and delay resulted in his chance of passing a Medicare for All or other national health insurance bill slipping away, even though he had enormous Democratic majorities in both Houses during his first two years, and healthy majorities in his last two. His fear of inflation and concerns for fiscal responsibility as he defined it, prevented him from making a deal with Democrats supporting a single-payer system. He also insisted that any health reform bill had to safeguard a role for the private insurers.

At the time spending on health care amounted to 9% of GDP. Now that figure is at 18%. In retrospect, it is clear that the same beliefs about fiscal responsibility bothered him in this area as in the economic stagnation, full employment, and price stability issue areas. And also that his insistence on his mistaken fiscal responsibility notion, led to fiscally irresponsible policies, that, in turn, eventually led to the health care sector doubling the proportion of GDP it consumes on an annual basis, and also to many years of unnecessary fatalities, bankruptcies, foreclosures, and family breakups due to lack of universal health insurance.

In retrospect, this is one of areas of the Government’s biggest failures during the Carter Administration. The President was reluctant to make changes that excluded private interests, and to use the Government’s recently acquired greater policy space existing because the Government was now a sovereign fiat currency issuer to spend for the public purpose. His lack of faith in the ability of the Government to do things well, and his ideological faith in the superiority of the private sector to the Government as an agent of change, undermined his effectiveness in this as well as the other areas discussed thus far. It also has bestowed a very high cost on most Americans since 1981.

The Government, led by Carter during this period, could not even conceive of just letting the twin deficits (Trade and Budget) float, and accommodating the trade and import desires of the private sector. Had he been able to do so, he might have been been able to overcome stagflation, create prosperity, and produce low-cost universal health insurance for everyone.

Watch for my next post on the Government’s failure to legislate enduring educational reform during the period 1977 – 1981.

*My thanks are due to Professors Scott Fullwiler and Stephanie Kelton for kindly providing me with their quarterly time series data on Sectoral Financial Balances which I’ve drawn upon for the deficit, and GDP numbers I’ve used in this post.

(Cross-posted from New Economic Perspectives.)

Real Fiscal Responsibility 2: Carter, Stagnation and Unemployment

By: letsgetitdone Sunday August 31, 2014 11:30 am

The economy during the Carter period never operated at full capacity or near full capacity. Deficit and inflation reduction were emphasized above all other domestic concerns, and substantial output gaps were simply accepted as something that it was very difficult for Government to do anything about.

This post continues my 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 with the Jimmy Carter period. My first post explained why I chose to start my evaluation with the Carter period, and also laid out my related definitions of fiscal sustainability, and fiscal responsibility.

It explained why fiscal responsibility is closely connected to the idea of public purpose, which I’ve laid out here. I also claimed that the Government of the United States has been fiscally irresponsible in every Administration period since 1977. The remaining posts in this series, and they will be many, will document that claim with analysis.

In this second post, I begin my evaluation of the extent of fiscal responsibility or irresponsibility of the Federal Government during the Carter Administration by covering two of the primary problems reflecting public purpose, and what the Federal Government did or did not do about them with its fiscal and monetary policies. The two are: ending economic stagnation, and creating full employment at a living wage.

Replacing a stagnating economy with one operating at its full potential; closing the current output gap

The economy during the Carter period never operated at full capacity or near full capacity. Deficit and inflation reduction were emphasized above all other domestic concerns, and substantial output gaps were simply accepted as something that it was very difficult for Government to do anything about. This was true during a period in which the presidency and the Congress were both in Democratic hands with substantial majorities.

In addition, the President was able to appoint his choice to head the Federal Reserve on two occasions. During the early part of his Administration he was dealing with a Republican appointee, Arthur F. Burns, who was far from a fiscal hawk on inflation. When Burns resigned, Carter appointed G. William Miller to head the Federal Reserve. Miller was, if anything, more dovish on interest rates than Burns. But later when he moved Miller to Treasury, he appointed the fiscal hawk Paul Volcker as Federal Reserve Chairman, and in doing this shot both himself and the United States economy in the foot; condemning himself to defeat in 1980; and the economy to a multi-year recession with high levels of unemployment from 1980 – 1986.

In spite of his favorable political situation (at least until he appointed Volcker) for active deficit spending-based fiscal policy, President Carter and leaders in the other branches of Government chose to emphasize inflation moderation, rather than facilitating an economy that used its full productive capacity for the public purpose. The outcome of this orientation was characterized as “stagflation” in the popular press, and the term came to stigmatize the Carter period in Government and his Administration, in particular.

Why did the leaders of the Congress, the Executive and the Federal Reserve choose inflation moderation above other goals during the period 1977-1981? Partly because President Carter was very serious about attempting to reduce the Government’s deficit, and eventually balance the Federal budget by 1981, and he implemented a variety of Executive Branch cost-cutting measures across the Federal Government to try to reach his goal, while using the power and bully pulpit of the presidency to bring others along the path of “sacrificing for the public good.”.

Congress both collaborated with and sometimes opposed Carter’s cost-cutting proposals, when they related to infrastructure spending. But generally, they supported him in his broad-based deficit cutting activities, because they bought into the fiscal responsibility as deficit cutting and budget balancing notion, and also accepted that as political virtue in a time of uncertainty and stagflation.

Real Fiscal Responsibility I: Preliminaries

By: letsgetitdone Saturday August 30, 2014 6:25 am

In 1976, Carter ran, in part, on a platform of “fiscal responsibility,” a virtuous “adult” behavior, while also promising to restore full employment. He did not, either during the campaign or afterward, state his policy using today’s neoliberal fiscal responsibility/austerity doctrine.

This is the first in a lengthy blog series that will evaluate the US Government’s record on RealFiscal Responsibility, Administration period by Administration period, since the Administration of Jimmy Carter in 1977. In evaluating the US Government’s record, it’s important to state clearly that I will be evaluating more than just each Administration and its activities.

The record of fiscal responsibility is not the product of the Executive Branch alone. It is the outcome of the interaction of the Executive with the two Houses of Congress and the Federal Reserve System, even on occasion the interaction of one or more of these with the Supreme Court. All bear joint, though not equal responsibility for the record of Government fiscal responsibility or fiscal irresponsibility, as the case may be, during each Administration period.

Why start this series with Jimmy Carter; since, after all, other Presidents before him have been concerned about balancing the budget and deficit reduction? Well, first, such concerns had justification before President Nixon closed the gold window in 1971, and left the United States with a non-convertible currency, with a floating exchange rate, and no debts payable in other currencies. But after that, and with the passage of enough time to give people a chance to understand and digest the significance of that change for increased policy space in the fiscal and monetary areas, it is reasonable to expect that orientations toward deficit spending and balanced budgets among the parts of the US Government should have changed with the change in the realities of the Government financing system.

How much time is enough time for this to happen? That is debatable, of course. But I will assume that given the pressures on them, it is probably too much to expect that the Nixon/Ford Administration could have come to a changed understanding of the newly existing space for fiscal policy. Also, neither of these Presidents appear to have established deficit reduction as a goal, essential in itself for good government, so much as an expedient concern to meet the dual challenges of high unemployment and OPEC-induced inflation. But with Jimmy Carter, we get something new in the post-WWII period.

In 1976, Carter ran, in part, on a platform of “fiscal responsibility,” a virtuous “adult” behavior, while also promising to restore full employment. He did not, either during the campaign or afterward, state his policy using today’s neoliberal fiscal responsibility/austerity doctrine, nor did he trouble to define what he meant by “fiscal responsibility”, and to provide a rationale for his definition, but he appeared to believe, in common with today’s austerians, that 1) achieving small deficits, or, even better, balanced budgets, would create full employment, and also 2) that the public debt-to-GDP ratio needed to be decreased over time to moderate inflation. So, because of this change in orientation and also the fact that he took office nearly 6 years after Nixon dispensed entirely with the gold standard, it seems to me right to view him as the first modern president who could reasonably have been expected to figure out that Real Fiscal Responsibility isn’t a matter of reducing deficits or balancing budgets, but rather of spending or taxing for the public purpose, and to have acted accordingly.

The same goes for the heavily Democratic post-Watergate Congress that served along with him, and the Board of Governors of the Federal Reserve. All had enough time to figure the new reality out, all were responsible for not taking advantage of the new fiscal reality in which they live. But they didn’t take advantage of it; instead they acted with fiscal irresponsibility; as year after year, up to the present, has every succeeding President, Congress, and Federal Reserve. And in so doing, they have made themselves, every government of the United States since 1977, responsible for the decline of economic, social and political equality, and repeated episodes of economic stagnation the United States has had since that time.

fiscal sustainability is:

the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purpose, and

fiscal responsibility is fiscal policy intended to achieve public purpose while also maintaining or increasing fiscal sustainability.

Proceeding from these definitions, and also a specification of public purpose you will find here, it may be fiscally responsible, in theory, to both implement fiscal policy based on its expected economic impact while also targeting managing the size of the deficit, the public debt, and the debt to GDP ratio; but, only in cases where an economic system is using a currency that it cannot issue in unlimited amounts to maintain its solvency. That includes all economic systems using currencies that are convertible to a commodity, or systems whose political authorities peg the value of its currency to the currency of another economic system, or systems whose political authorities have adopted a foreign currency. But it doesn’t include those systems whose political authorities (including central banks) can issue their own currency and reserves at will; more formally, systems with convertible fiat currencies, floating exchange rates, and no debts in currencies they do not have the authority to issue.

These last economic systems, fiat currency sovereigns such as the United States, the United Kingdom, Japan, Canada, and Australia, to name several, have no need to target the levels of public debt or the debt to GDP ratio to maintain fiscal sustainability, and only need to be concerned about the deficit if it grows large enough in a single time period to impact an important component of public purpose such as the inflation rate. For these nations, in fact, it is irresponsible to target levels of public debt, and the debt-to-GDP ratio, and in any way to prioritize or trade-off changes in these levels over fiscal policy impacts on full employment, price stability, health and well-being, environmental sustainability, climate sustainability, energy foundations, educational attainment, public facilities, or any of the other components of public purpose, since no fiscal sustainability goal would be served by doing so.

Indeed, the opposite is the case, since the sustainability of the capability to freely issue fiat sovereign currency and reserves without undesirable effects such as hyperinflation, depends on the continuing productive capacity of the economic system whose political authorities are issuing such a currency. It is only when such systems have or can easily generate the goods and services needed to meet demand generated by Government deficit spending that the full freedom of such systems to spend in order to respond to economic cycles and to adapt to other problems can be realized. So, one of the most fiscally irresponsible things a Government can do is to target deficit reduction and budget balancing at the expense of maintaining and expanding productive capacity, including both the constructed capital providing that capacity and the competencies, skill, and knowledge, of the human beings who can use it to generate goods and services.

And yet, in pursuing Government austerity through policies targeting deficit reduction and budget balancing, that is what most Governments having fiat currency systems have done since shortly after the world followed the United States and went entirely off the gold standard in the 1970s. In particular, by almost never achieving full employment and by, instead, using an unemployed buffer stock as a hedge against inflation, they have frequently damaged and wasted skills, competencies, and knowledge of their own citizens who want to work, and have decreased real national wealth compared to what might have been created.

In this series, I’ll analyze and evaluate in detail each Administration period since 1977, from the viewpoint of fiscal responsibility I’ve defined above, and relative to the specification of public purpose I’ve outlined here, and will use in each blog. Readers may not agree with my specification of public purpose and so may disagree with my evaluation. But I think there is less room to disagree with the idea that Government taxing and spending in a democracy ought to align with some specification of public purpose, rather than aligning with mere private purposes of elites. So, it remains for those who will disagree to offer their own ideas of public purpose and then explain why these require the kinds of deficit reduction, budget balancing and austerity policies that each US Government, to lesser or greater degree, has pursued since 1977.

(Cross-posted from New Economic Perspectives.)

Neither “Manic,” Nor Monetary, Nor Just a Theory

By: letsgetitdone Monday June 9, 2014 9:27 pm

 

A closeup of adollar

A reply to a Firedoglake post on “Manic” Monetary Theory

When I saw Dan ps’s latest post, I set out to reply in the comments, but found myself unable to because the reply links were no longer there. Hence this post in reply.

My thanks to Boo Radley, stratocruiser, caleb36, bluedot12, sihlkee, and TarheelDem for their comments making common sense points about MMT. I think you set the stage well for what I’ll say below.

My main reservation with Modern Monetary Theory is probably this: It is named a monetary theory, yet its proponents expand its scope – in all directions, it sometimes seems – to include topics that have nothing to do with monetary theory. I think it’s reasonable to expect a monetary theory to describe the way money works, and nothing else. Here is how money is created. Here is how it is destroyed. Here is how it gains value. Here is how it loses value. Here is what governments must do to increase its value, here to decrease it.

Another name for the Modern Money Theory (MMT) approach is neo-chartalism. It is also sometimes called “functional finance” because it follows the orientation, emphasized so strongly, by Abba Lerner in earlier times. That said, Modern Money Theory, or alternatively, Modern Monetary Theory isn’t a name its developers chose. It is a label given the approach by others, which over a period of time in the 1990s, stuck. Once that happened its developers decided not to fight it, but to just live with it. Right now, some of us are using “Modern Money Theory,” in an effort to get away from the implication that MMT is about monetary policy, because the most important emphasis of our approach is on fiscal policy, rather than monetary policy.

Next, MMT is not, as Dan ps says above, a monetary theory. It is an approach to the subject matter of macroeconomics. The approach contains all sorts of propositions and sets of propositions. Definitions, value statements, conceptual frameworks, descriptive (fact) statements, theories, accounting identities, normative propositions, etc. So, when Dan ps objects to the proponents of MMT encompassing a lot more in their writings than just “monetary theory,” his objection, while based in part on fact, is just a reflection of his view of what the scope of something called MMT ought to be. But, unfortunately, his view is a purely personal one and is not shared by MMT, developers, practitioners, or writers.

So, what can one say about this? Only that MMT people think differently than Dan ps about what MMT ought to be and is about. So, who’s right about this, the guy who’s a “casual reader” of MMT work, or the various people who do MMT? :) :) :)

Yet proponents insist that other things, things that have nothing whatsoever to do with monetary theory, are part of Modern Monetary Theory. I’ll illustrate using my exchange with letsgetitdone since it’s fresh, but I think it’s also representative.
He writes that ’economics ought to be practiced, as Galbraith, the elder said, to fulfill the public purpose,’1 that Modern Monetary Theory ‘is an approach and not a theory’ (!!) and that ‘public purpose is core to MMT.’ Public purpose may be core to economics, but not a monetary theory. A monetary theory exists to describe how money works. One may advocate for public purpose, as one understands it, and show how it works under a given monetary theory – but that is no longer monetary theory.

Well, again, this argument may sound plausible, but it is based purely on Dan’s misinterpretation of MMT as a narrow value-free descriptive theory about money. If one actually looks at the MMT literature, something Dan as as “casual reader” has done to only a limited extent, then you will find that all the main MMT developers, as well as some less important writers such as myself, continually refer to MMT-based policies compared to alternative policies, such as neoliberal ones, in the context of the idea of public purpose.

We all agree that when we talk about “public purpose” proper we are not talking monetary theory or monetary policy. We know we’re talking about the purpose of macroeconomic policy and about fiscal and monetary policies in relation to public purpose. But so what? We think that’s what we should be talking about.

When Dan says: “. . . Public purpose may be core to economics, but not a monetary theory,” I say first, that MMT isn’t just a monetary theory, and second that public purpose isn’t core to most approaches to macroeconomics and particularly not to neoclassical and neoliberal approaches, but it is core to MMT, and that is one of the ways in which MMT differs from the other approaches.

Are We An Oligarchy Yet?

By: letsgetitdone Tuesday April 29, 2014 9:17 am

Matt Stoller believes that the recent pre-publication release of a study by Martin Gilens and Benjamin I. Page doesn’t support the idea that the United States is an oligarchy yet. He says:

A lot of people are misreading this Princeton study on the political influence of the wealthy and business groups versus ordinary citizens. The study does not say that the US is an oligarchy, wherein the wealthy control politics with an iron fist. If it were, then things like Social Security, Medicare, food stamps, veterans programs, housing finance programs, etc wouldn’t exist.

What the study actually says is that American voters are disorganized and their individualized preferences don’t matter unless voters group themselves into mass membership organizations. Then, if people belong to mass membership organizations, their preferences do matter, but less so than business groups and the wealthy.

Well, it’s true that Gilens and Page never say that United States is an oligarchy, and perhaps it’s also true that they don’t believe it. But they do say this:

What do our findings say about democracy in America? They certainly constitute troubling news for advocates of ‘populistic’ democracy, who want governments to respond primarily or exclusively to the policy preferences of their citizens. In the United States, our findings indicate, the majority does not rule — at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover, because of the strong status quo bias built into the U.S. political system, even when fairly large majorities of Americans favor policy change, they generally do not get it.’

And they’re right. Their data refute the idea that the preferences of the majority are, by-and-large, or even frequently, enacted into law in today’s United States. Insofar, as that’s a necessary condition for having a constitutional democracy, it’s hard to avoid the conclusion that right now the United States doesn’t have one. That finding has further implications.

First, the US doesn’t have either mob rule or constitutional democracy. Nor does the study show that the political system is paralyzed, in spite of all the complaints about excessive partisanship and stalemate in Washington. So someone is ruling. Who is it?

Second, it shows that, mostly, economic elites and interest groups representing them, many of them virtual puppets of the economic elite and corporations, are getting their way. Also, it doesn’t show that one individual is getting his/her way. That means there’s no King or Queen ruling, and also that there isn’t a single tyrant ruling. So, we can conclude that, mostly, the economic elites and their interest groups are ruling. How are they ruling?

Well, third, even though there are legislative and judicial forms specified in the Constitution being followed; there are many elements of current elite rule that are neither constitutional nor legal. For example, is it legal and/or constitutional for the Executive Branch to use prosecutorial discretion as a tool to refuse to go after the big banks for their blatantly illegal behavior leading to the mortgage crisis, the failure of major financial institutions, and the world economy? Is it constitutional and legal for the President of the United States to use drones to kill US citizens without legal or constitutional due process? Is it legal or constitutional for the President to use drones to violate the sovereign territory of other nations through drone strikes without the consent of the authorities of those nations?

Is it legal or constitutional for the big banks to use fraudulent documents to implement foreclosures? Is it legal or constitutional for the Administration to refuse to prosecute officers and employees of the big banks for committing these frauds? Is it legal or constitutional for local governments and the DHS to violate the rights of free speech and free assembly of Occupy protestors across the country in order to protect elite financial interests? Is it legal or constitutional for Justices of the Supreme Court to interpret the 14th amendment as conferring the liberties of biological individuals on organizations whose legal existence is an artificial legal construct? Are the Justices who are doing this not the products of influence previously exercised by the economic elite?

Is it legal or constitutional for State legislatures to enact and attempt to enforce laws to suppress voting rights of minorities and other groups across the country; as well as laws effectively removing the right to choose to end their pregnanicies of women with limited financial resources to exercise that right? Is it legal or constitutional to apply the law harshly to racial and ethnic minorities, and the poor, while refusing to apply it at all to members of the economic elite and their companies?

The answers to all these questions suggest that the non-democratic, non-monarchical rule validated by the Princeton Study is also rule by the economic elite that is a good deal less than constitutional or just. In my book, that makes it rule by the relatively few that is unjust, and isn’t that the definition of oligarchy, whether Gilens and Page say so explicitly or not?