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Neo-Liberalism Can’t Beat the Tea Party: But MMT Can

8:12 pm in Uncategorized by letsgetitdone

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.

Neo-liberal believers in the power of the bond markets, the idea that Government money must come from taxing or borrowing, and the need for Government to avoid exploding interest rates on the national debt, can try to oppose tea-partiers by saying that it’s better economics not to cut public spending while unemployment is as high as it is right now; but when you agree with the tea party that we have a long-term deficit/debt problem that can destroy the credit of the United States and its access to the bond markets, you’re then on very thin ice, when you oppose this “small down payment” on coping with a very serious problem that both you and the tea party agree we have.

So, when you’re very committed to austerity to solve the long-term problem, are the neo-liberal deficit doves, all you can do in opposition to the goal of drastically cutting Government sending over a period of years, is to argue about the details of discretionary spending cuts, and to find a place to compromise, rather than simply saying that the current tea party campaign to cut deficit spending is just silly, because there is no deficit/debt problem, and so there is no economic need to cut any Government program whose outcomes are accomplishing public purposes.

A big, big advantage of adopting the MMT approach to economics, is that it provides a political basis for going straight at the tea partiers, Hooverites, Peterson cohorts, and deficit hawks. Michelle Bachmann and Mike Pence may stand up in front of a pitiful tea party rally of 100 people in Washington, DC and thunder about how the United States is about to fall off a fiscal cliff and ruin the lives of our children and grandchildren by imposing an intolerable of burden of debt of $45,000 on each of them; and that to forestall that catastrophe, the Government has to stop spending money we don’t have. But an MMT-informed politician can just come right back and say:

I hate to have to tell you this, but you folks don’t have the slightest idea of what you’re talking about. Where do you think money comes from? It comes from the Federal Government. The Federal Government has the constitutional authority to supply as much money to the private sector as is necessary to see to it that our economy is performing well. The Federal Government cannot run out of money unless silly Congressmen become powerful enough to prevent the Government from spending. Then and only then will we see the financial collapse you tea partiers are afraid of.

If the American public listens to your insanity, and the Government does what you want it to do to avoid a financial crisis, that very thing will cause what you fear most – a collapse in the value of the American currency to happen.

So, I, as someone who does understand that the Government is the source of all American Dollars, and always has the capability to create more simply by spending, hereby pledge that I will not vote for one $1 Dollar in spending cuts to programs on grounds that there is a Government deficit, or that the national debt is something we cannot afford. Since the Government can always add money to the private sector by spending, if it chooses to do so, these are nonsense reasons to vote for cuts, and I was not elected to compromise with, or vote for, nonsense. And I will not allow you to continue to hold the voters I represent hostage to your idiocy and inability to understand our fiat currency system and our national monetary sovereignty.

On the other hand, I will be happy to vote for eliminating programs that worsen the condition of the American people, or that kill people for no reason, or that loot the Treasury for the benefit of a few wealthy people. So, if you tea partiers want to cut out some of those programs, I’ll vote with you.

But otherwise, I’ll vote no on your proposals, and if you and your Republican colleagues continue to try to cut programs that I think a majority of the American public want, and this results in the shutdown of our American Government, then f__k the Republican Party, because it will be on you. You will suffer the wrath of the American people in 2012, and no amount of money or propaganda will protect you from it. You’ll be lucky to escape the fate of the Whigs. Oops! I’ll guess you’ll have to explain who the Whigs were to Bachmann, Palin, and the other tea partiers.

Yes, Modern Monetary Theory (MMT) can be a powerful political weapon against tea partiers, Republicans and deficit hawks in both parties, and also deficit dove Democrats who think the Government can become insolvent. This isn’t a reason to believe in MMT. The only reason to believe in it is if you think it’s the best approach to economics available today.

But, conversely, it is a reason to question other economic approaches. It is a reason to question neo-liberalism. It is a reason to refuse to accept it without thoroughly testing it against the evidence and alternative approaches to neo-liberal economics like MMT. And, if you are a progressive, it also is a reason to take the trouble to learn MMT, and to decide for yourself how it compares to other approaches to economics.

In some of the replies to recent posts criticizing Paul Krugman’s remarks on MMT, some have asked what all the fuss is about. They’ve pointed to the areas of agreement between MMT and Krugman’s brand of deficit dove economics, and have noted that both sides seem to agree that more economic stimulus is necessary now and that measures to contain inflation may be needed later.

This is true, but as I’ve pointed out in previous posts and comments I’ve made on this subject, the fuss is about the difference in the world views of deficit hawks and deficit owls, their analyses of whether a risk of insolvency exists, and whether there’s a long-term deficit/debt problem; what this difference means in terms of how fiscal policy should be managed by the Federal Government, what fiscal sustainability means, what fiscal responsibility means, and also, as I’ve emphasized here the content of political communications and appeals that can be used to advocate for progressive economic policies.

Deficit dovism is all about defense against the modern know-nothings and Hooverites. Deficit owlism or MMT is all about a political offense against them relating to what we ought to about the economy and America’s future.

As a real progressive, I’ll take a good offense, anytime! How about you?

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

A Fiscal Sustainability “Teach-in” Counter-Conference?

5:12 pm in Uncategorized by letsgetitdone

On April 28, 2010, the Peter G. Peterson Foundation is sponsoring a “Fiscal Summit” in Washington, DC. The purpose of the Conference, which is scheduled for the day after the first meeting of the President’s recently constituted National Commission on Fiscal Responsibility and Reform (btw, where the Conference is happening is a mystery not cleared up on the PGPF web site) is:

”. . . to further a national dialogue on solving America’s fiscal challenges through several moderated discussions with leaders on the issue from across the political spectrum. In addition to President Bill Clinton, who will be interviewed by George Stephanopoulos, we will hear from a range of experts, including Paul Volcker and Alan Greenspan, Former Chairmen of the Federal Reserve; Bob Rubin, Former Secretary of the Treasury; Alice Rivlin, former OMB Director and Member, National Commission on Fiscal Responsibility and Reform; Senator Judd Gregg (R-NH), Member, National Commission on Fiscal Responsibility and Reform; John Podesta, President and CEO of the Center for American Progress; John Castellani, President of Business Roundtable, and others."

Robert Kuttner’s comment on the Conference is very apropos:

”This is billed as a "national dialogue on solving America’s fiscal challenges," but spare me. This is a propaganda event. For the most part, the featured speakers follow the Peterson line. John Podesta, the closest thing to a liberal playing a headliner role, accepts that there is a serious deficit problem, but would entertain a value-added tax as part of the remedy. But the speakers’ list is clearly stacked and there is no one to Podesta’s left.”

And for good measure, the left-right paradigm is not even very applicable here at all, because everyone listed above whether “liberal” or conservative, shares the neo-liberal assumption that Government spending in the United States is operationally constrained by the ability to tax or to borrow money from non-Government sources. Given this false assumption, all the participants in this so-called “national dialogue” will share the assumption that fiscal sustainability has something to with Government deficits, debts, and the ratio of debt held by the public to GDP. There will be disagreements among them about how long the Government has over time to bring deficits down, or to moderate the trend toward increasing debt, or about what a “responsible” ratio of debt held by the public to GDP ought to be. But none will entertain or discuss the idea that deficits, debts, and debt to GDP ratios are inappropriate tests of fiscal sustainability, irrelevant measures of the degree of fiscal challenges we face, and, in fact, nothing more than a by-product of the real fiscal challenges facing us, namely achieving renewed economic growth and full employment.So, this Conference will take “off the table” any ideas about what fiscal sustainability, that don’t center around Ben Bernanke’s neo-liberal definition of the idea as:

“… as achieving a stable ratio of government debt and interest payments to gross domestic product, and setting tax rates at levels that don’t impede economic growth."

It will also, by virtue of this definition “take off the table” any “solutions” that address other goals than the ones mentioned in Bernanke’s very limited idea of fiscal sustainability, and, also, it will begin to set up a public debate over public sustainability analogous to the one we’ve just been through on health care, a debate that constrains and leaves out the best alternative solutions to the fiscal sustainability problem, because these solutions are literally “unthinkable” in the neo-liberal paradigm of economics.

The Fiscal Summit Conference is meant to call attention to and magnify the significance of the first meeting of the President’s National Commission on Fiscal Responsibility and Reform, and to propagandize the line of thinking and the course of action that the Peterson Foundation thinks the Commission should take. The Peterson Foundation, in other words, means to create a reality in which the President’s Commission would become popularly known as “The Steal Our Retirement Commission.” We need to do what we can to stop that. It will be a long fight, and it will dog our efforts at progressive change, because everything we want to do will be subject to the false tests of “fiscal responsibility,” and “fiscal sustainability” put forward by the deficit hawks, unless we can carry out a campaign of our own that persuades the public of our view that the neo-liberals idea of fiscal sustainability are a fantasy, and that if we continue to give them credence, they will only exacerbate our economic situation ad create a dark future for our children and grandchildren.

I know that time is short between now and April 28th. But nevertheless, I propose that we organize a counter Fiscal Summit "Teach-in" Conference in Washington DC, on that day. Such a "teach-in," depending on how many people we could get to attend, could steal media attention from the Peterson-sponsored event, and introduce an opposing narrative to the ones coming out of the deficit hawk events on the 27th and 28th. To have such a Conference would take money. Speaker expenses would have to paid, as would hotel expenses if it were possible to get a hotel site at this late date. On the other hand, it would not be hard to think of high-level speakers for such a Summit. Here’s my list of speakers who could do a really good job delivering a Modern Monetary Theory counter to the neo-liberal paradigm: L. Randall Wray, William K. Black, James K. Galbraith, Warren Mosler, Marshall Auerback, Bill Mitchell, Rob Parenteau, Yeva Nersisyan, Scott Fullwiler, and some other very good top-level participants who would question the neo-liberal paradigm to at least some degree are: Yves Smith, Simon Johnson, Joseph Stiglitz, Robert Johnson, Robert Reich, Robert Kuttner, and Dean Baker. Finally, someone who ought to be invited, since he’s expressed frequent and very explicit criticism of the neo-liberal paradigm is George Soros. It would be valuable to get him into direct discussions with others on the relationships between hedge fund traders and nations with unencumbered fiat monetary systems

Who should hold this counter-conference? I propose that Firedog Lake, The Huffington Post, New Deal 2.0, and The American Prospect jointly sponsor and provide financial backing for this Conference. If the Conference could be planned and implemented over the next three weeks, it could go a long way toward beginning to blunt the impact of the Peterson Foundation Event and the first meeting of the President’s Commission. We need to blunt that impact if we expect to have any material success in getting progressive legislation on a host of issues in the coming decade. “We must make this commission politically radioactive.”

(Also posted at the Alllifeisproblemsolving blog and Correntewire.com where there may be more comments)

Samuelson’s Hooveritis: A Religious Belief That Won’t Go Away

10:01 pm in Uncategorized by letsgetitdone

In my last post I discussed the Washington Post’s Hooverite anti-deficit campaign and Fred Hiatt’s recent piece in the deficit hysteria genre. Now, let’s look at the latest effort of Robert Samuelson, a well-known WaPo columnist to frighten us some more.

Like Fred Hiatt, Samuelson wants President Obama to pivot from health care reform and do something serious about “deficit control,” regardless of whether this will hurt economic recovery and leave us with high unemployment rates for a long time. He says:

Read the rest of this entry →

The Washington Post’s Hooverite War on Economic Recovery

12:16 pm in Uncategorized by letsgetitdone

Last weekend that so-called epitome of liberal media bias called The Washington Post continued its on-going war on economic recovery and the American people with two salvos on the “crisis” in Government finances created by our “unsustainable” deficits, written by Fred Hiatt and Robert Samuelson. Hiatt and Samuelson are not the only deficit warriors in the WP army. Others of note include David Broder, Dana Milbank, Steven Pearlstein, and Lori Montgomery. Together, and along with the absence of any writers who write about deficits from a positive point of view, the WaPo reflects a determined Hooverite position on deficits, advocating that the Administration now “pivot” toward deficit reduction, even though their writing recognizes that such a pivot can only come at the cost of a delayed or a denied economic recovery, and even at the cost of a renewed plunge into deeper recession or even depression.

This position is not liberal or “progressive.” Some may call it neo-liberal. I’d prefer to call it Hooverite, because it is a renewed application of the economic philosophy of Herbert Hoover to the 21st century American economy. But, in any case, whatever the label used to characterize it, any Newspaper or other publication taking such a position cannot be characterized as liberal, or progressive, or “left.” But in our modern context must, be seen as “right,” corporatist, “neo-liberal” and globalist, because it demonstrates that it cares nothing for working people and their well-being, but only cares about defending the interests of the already well-off, the financial institutions, and the predatory economic globalists. Let’s take a look at the latest efforts of Hiatt and Samuelson to frighten us over the deficit, beginning with Hiatt’s in this blog post, and then following with Samuelson in my next one.

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Losing Ground: Neo-liberalism and Hope

7:48 pm in Uncategorized by letsgetitdone

Important changes in societal economic philosophy and policies occurred in the United States during the 1980s, after a transition period covering the Carter Administration, and accelerating after the accession of Ronald Reagan to the Presidency. It’s now nearly three decades later, and we can ask how well the transition from Keynesianism to Neo-liberalism has worked. It’s common knowledge that this period has seen wage stagnation for working Americans, and also growing inequality. In this post I want to present a simple table showing certain changes in key indicators across the decades and discuss its significance for evaluating the performance of neo-liberalism compared to the earlier Keynesian orientation and policies. Here’s the Table. Read the rest of this entry →