Election 2020 Open Thread: BS Economics

And when we run out of the right paper to print currency, we’ll have the Treasury fax some more over! This is not actually fair to the Sanders campaign; reading the article, Kelton is identified as just one of Sanders’ economic advisors, and mostly interested in promoting her own messianic interest in M.M.T. (modern monetary theory):

Kelton is the foremost evangelist of a fringe economic movement called Modern Monetary Theory, which, in part, argues that the government should pay for programs requiring big spending, such as the Green New Deal, by simply printing more money. This is a polarizing idea…

One the other hand, that the Sanders campaign is willing to embrace such a polarizing idea — or, at least, that the campaign hasn’t made an effort to either explain M.M.T. or stand Kelton back a tad — doesn’t really soothe our lowly Democratic anxieties about being labelled the party that wants to steal voters’ money and give it to unworthy third parties…






133 replies
  1. 1
    ola azul says:

    Sigh.

    Sad truth is: If yer a Repub in power, prolly *could* get away with just printing more mun. If yer a Dem in power, yer responsible for DEMonstrating axiomatic proofs of all economic theorems, just so long’s they all conform to Gooper orthodoxy.

  2. 2
    Baud says:

    MMT sounds fishy, but it’s not a Bernie exclusive. I believe AOC subscribed to it.

    I’m also not sure how the cost of Bernie’s programs stacks up to the cost of Warren’s programs.

    My main issue with Bernie is with his character and capability, not his policies.

  3. 3
    Starfish says:

    I am unimpressed by all the people who were willing to accept the Laffer curve as sound economic policy saying that MMT is absolutely ridiculous. These are people who have been unharmed by existing policies.

    You may think that is completely unserious, but the people who go on the job market in an economic downturn never make up the difference financially in their entire lifetime. I am sitting here with a sibling who had to sit out a year and a half after the housing bust who is worried that it might happen again and saying that maybe she will leave her field, which she has an advanced degree in, if she loses her job again this time.

    We have had Republicans repeatedly go into deficits-don’t-matter mode as soon as their person is President expecting the entire job of the next Democratic President to be cleaning up the mess. This pattern needs to stop.

  4. 4
    NotMax says:

    Whackjob Wilmer strikes again. Maybe we can outsource the printing overseas to save on production costs.

  5. 5

    @Baud: If you increase the money supply, you end up with money chasing goods and hence inflation.

  6. 6
    Baud says:

    @🐾BillinGlendaleCA:

    Yeah, but MMT people supposedly have a response to that problem, although I’m not sure I could explain it. What I have read so far on it didn’t sound convincing, but I haven’t read that much.

  7. 7

    @Baud: Yeah, I’ve read their response, it usually amounts to a bunch of hand waving, sort of like the Laffer curve.

  8. 8
    NotMax says:

    What, no bitcoin? Paper money is so last century. //

  9. 9
    Spanky says:

    @Baud: Printing more money is literally a textbook example of inflationary practice. This is what happens when you get 30 plus years without a real run of inflation. Either they never experienced inflationary times, or they’re aiming their pitch at the youngs who haven’t. I’m betting it’s both.

    Pop pop pop pop. That woke me out of troubled sleep. First I thought it was someone pounding on a neighbor’s door – it seemed kind if distant. Then when I was awake it repeated. Guessing it was a fox or something getting his while hunting chickens, or something. That was an hour ago and no cops, so …

    Anyway, sleep is now elusive. Again. And dawn is coming.

  10. 10
    Baud says:

    @🐾BillinGlendaleCA: I don’t have an economics background, so I lot of the debate on this is above my head The main thing I haven’t seen from the MMT folks is a limiting principle. How much of the budget can be paid for by MMT without causing economic harm? They should be able to offer a number.

  11. 11
    NotMax says:

    @Spanky

    Yup. F*ck with M1 at your our peril.

  12. 12
    Raven says:

    I wrote about this last night but the morning crew should be more interested. A neighbors 9 year old red healer was startled by a smoke alarm and ran off ten days ago. She was spotted on a busy street last week and someone saw her hit by a car but kept running. There has been a big effort to find her but it was not looking good. Last night, right before a big storm someone spotter her in a back yard and posted it on a listserv. A fellow who had just finished a renovation on Rosie’s house went out to look and, miraculously, found her huddled between two fences. It is so fortunate that it was him because, obviously, she spooks easily and more so because she’s hurt. He got her out and Rosie is home!!!

  13. 13
    mrmoshpotato says:

    Bernie Sanders’s economic advisor says they can pay for his plan by just printing more money.

    Bold caps incoming.

    OH FOR FUCK’S SAKE!

    Nothing more needs to be said. Back to watching cartoons (where things make sense).

  14. 14
    mrmoshpotato says:

    @Raven: ❤️ 🎉. Hope she recovers quickly.

  15. 15
  16. 16
    Raven says:

    @mrmoshpotato: I seems like the lucky pup just has “road rash” and is a bit undernourished. It’s been so damn hot but I guess she just found shade and holed up. It’s a mile or so from where she was seen and where she was found and it seems like she was trying to make it back home. It really is a great set of circumstances that led to her recovery.

  17. 17
    mario says:

    I don’t comment very often, but the people ranting against MMT should maybe learn something about it before opening their mouths and showing their ignorance. Because I’ll tell ya, some of the “economics” I’ve seen in this thread is downright embarrassing.

  18. 18

    @Spanky: Young people are generally net debtors, so inflation impacts them less than older folk. Also quite a few older folk are on fixed incomes so inflation hits them by reducing the purchasing power of their income and reducing the value of any assets they have.

  19. 19
    Raven says:

    @mario: HELL YES! I don’t have a clue but I have great stories about other shit!

  20. 20
    satby says:

    Good morning all! I slept through my alarm so I won’t be hanging around, but at least some up to @Raven: ‘s nice story. I hope Rosie wasn’t seriously hurt and has a quick recovery.
    And of course it’s always a good day when someone calls Wilmer’s bullshit out clearly.

  21. 21

    @Baud: Generally from what I’ve seen from the NMT folk, they don’t recognize any side effects, they wave their hands about any inflationary impact.

    (I have a MA in Economics.)

    ETA: On that note, I”m going to sleep.

  22. 22
    Raven says:

    And yay for a Dvr and watching the Braves beat the Mets in 14!

  23. 23
    satby says:

    @🐾BillinGlendaleCA: Wilmer’s entire routine is to hand wave and bluster, so the MMT folks are a natural fit.

  24. 24
    Chyron HR says:

    “Massive tax hikes! Beautiful hyperinflation, too!”

    *Wins election. Now has immense power.*

    You missed a step in your master plan, B-wad.

  25. 25
    Betty Cracker says:

    Notable manslaughter conviction in the Tampa Bay area yesterday. A man who attempted to use the Stand Your Ground law to justify shooting an unarmed man is going to prison. The shooter was an armed big mouth with a history of picking fights with people over parking violations and making threats. Hopefully his conviction will have a chilling effect on other aspiring George Zimmermans.

    @Raven: So glad they found her!

  26. 26
    Chyron HR says:

    @mario:

    Translation: “I never heard of this site before but I got a blast email from Bernie telling us to punish you for your blasphemy.”

    Buckle up, kids, it’s going to be a noisy, whiny day.

  27. 27
    satby says:

    @Baud: I don’t have any background in anything 😉, so I went looking for what an expert like Krugman says about MMT. Turns out he’s written lots about it, but I can’t really read them because I refuse to give the garbage Times any money and I’m not going to do incognito battle over it this morning.

  28. 28
    satby says:

    @Betty Cracker: I saw that and am glad about it, just a small glimmer of sanity.

  29. 29
    Ten Bears says:

    Because the belittling, condescending denigrating Republican Lite crap worked so well last time.

  30. 30
    OzarkHillbilly says:

    @Ten Bears: I want my magic pony too!!!

  31. 31
    Anne Laurie says:

    @Raven:

    A neighbors 9 year old red healer was startled by a smoke alarm and ran off ten days ago.

    Dog-related nitpick: that’s heeler, as in ‘short-legged dog who drives cattle by nipping at their heels.’ The theory is that when the cow kicks backwards, its hoof sails over the dog’s head. (Yeah, it sounds ridiculous, but I have met a number of corgis whose ancestors haven’t met a bovine for many generations, but who still nip at peoples’ /other dogs’ feet to herd them… and then automatically lean backwards, as if avoiding a high kick!)

    P.S. Three cheers for a dog who’s back home where she belongs, regardless!

  32. 32
    JPL says:

    @Raven: Good news.

  33. 33
    Chyron HR says:

    @Chyron HR:
    @Ten Bears:

    Called it.

  34. 34

    @Chyron HR:
    One thing I’ve noticed that unites Republicans and Sandersites is how pissed off they get when they’re not praised for their whiny, idiotic bullshit. “You have to treat us with respect!” is a constant refrain from both groups. People who do something stupid, like having an economic policy that’s obviously unworkable even if you could pass it, or voting in a way that enables a Nazi to become president, get treated with disrespect. We don’t spare other Democrats. But Trumpists and Sandersites both whine that they’re being condescended to if they’re criticized on anything.

  35. 35

    @Raven: Oh yay. Poor Rosie. I’m so glad she’s home.

  36. 36
    Butter Emails says:

    Not a big fan of Bernie, but the post about OMG 50 trillion in taxes is BS. 32 trillion of that is his Healthcare proposal which would actually cost less than what we are spending now on healthcare (and it’s for multiple years, not a single year). Most of the rest of the 50 trillion is the 16 trillion dollar climate change proposal. Are we now pretending like Republicans that Global Warming isn’t something that is threatening the continued ability of the planet to sustain human life, or do we just think it can be done on the cheap?

  37. 37
    Fair Economist says:

    MMT is, properly, just the factual realization that money is created by the government and so it can never “run out”. The constraint on printing is that, once the economy reaches full employment, additional printing creates inflation.

    There is no serious version of MMT that claims we can print without limit.

    MMT in combination with standard economic rational expectation assumptions (which is that everybody knows all the consequences of all possible actions into the infinite future) does lead to the conclusion that government debt can be replaced with cash without consequences. This is factually false and used as the excuse for standard economists rejecting MMT, but the problem is not the MMT currency fact (which is a fact, not an assumption) but the standard rational expectation assumption, which is patent nonsense. Standard economists don’t want to admit that is nonsense because then most of macroeconomics goes out the window.

  38. 38

    @Chyron HR:
    I’ll add that we are fine with actual arguments about why we’ve misjudged a policy, although there’s plenty of arguing back. Being able to back up your position does get respect.

  39. 39
    Chyron HR says:

    @Butter Emails:

    Are we now pretending like Republicans that Global Warming isn’t something that is threatening the continued ability of the planet to sustain human life, or do we just think it can be done on the cheap?

    No, but apparently Bernie does since he’s the one promising to do it all for free.

  40. 40
    Fair Economist says:

    @Butter Emails:

    Not a big fan of Bernie, but the post about OMG 50 trillion in taxes is BS. 32 trillion of that is his Healthcare proposal which would actually cost less than what we are spending now on healthcare (and it’s for multiple years, not a single year). Most of the rest of the 50 trillion is the 16 trillion dollar climate change proposal.

    A leftist proposal is misrepresented. What a shocker.

    I will point out that 50 trillion over 30 years is 1.6 trillion per year, which is certainly a lot of money, but it’s less than 10% of current GDP and probably more like 6% of expected GDP over the period. We *could* pay it. It would certainly be worth it to save the planet.

    I’d still rather have any of the other lefty Democrats become President. I trust their planning and political realism more.

  41. 41
    Starfish says:

    @Betty Cracker: This is not particularly notable. It is same-as-it-ever-was. The second amendment, and its expansion, only applies to white people.

  42. 42
    Starfish says:

    @🐾BillinGlendaleCA: In a world where we are keeping interest rates very low, some inflation would probably help contain the crazy gains in housing prices that make them unaffordable.

  43. 43
    SenyorDave says:

    The logical extension of MMT is no taxes, jut print up $4 trillion every year to cover the federal budget. While they are at it, print up an additional $1 million per person annually so every person in the US can be a millionaire. It is a total BS theory. Economics may be an inexact science, but MMT is a joke.

  44. 44
    Boudica says:

    Chris Hayes had Kelton on his podcast a few months ago. I didn’t totally buy it but it was an interesting episode: https://www.podtrac.com/pts/redirect.mp3/traffic.megaphone.fm/NBCN8395218830.mp3

  45. 45
    Mike J says:

    The squares are keeping it down man, because it like, throws away fascist chemistry and physics. They invented a car that runs on water but Detroit is hiding it from you! Free your mind!

  46. 46
    John S. says:

    @Frankensteinbeck:

    It’s quite impressive, really.

    The comment by Mario above is a great example. After several folks criticize the Lafferble economics of MMT, he breezes in to tut-tut everyone for their poor grasp of economics without mentioning one word as to why MMT is a sound theory.

    Political personality cults are a hell of a drug.

  47. 47
    Another Scott says:

    Morning, everyone.

    I haven’t looked at the numbers, but I would be very careful about accepting a Twitter-based characterization of these things. Twitter doesn’t do nuance.

    E.g. What’s the timeframe for Bernie’s “$16T for Climate Change”?

    “$Big-Scary-Number” is meaningless without context.

    Dean Baker likes to relate $Big-Scary-Number to percent of GDP. The BEA says that the US annual GDP was $20.9T at the end of 2018. Over 10 years (the time frame of Sanders’ GND plan), assuming 2% annual growth, that would be a total of roughly $260T. $16/$260 = 6.2% of GDP.

    And that money wouldn’t be simply burned, it would be recycled in the economy (~ 25% back in taxes, used to pay people’s wages who buy other stuff, etc.). And, of course, the money is going to be spent anyway – we simply have to decide what we’re going to spend it on. If not on a GND, it will be spent on something else.

    Similarly, the “$33T for health care” would be over 10-11 years (to 2031). And that also wouldn’t necessarily be new money – since that’s a GOP number, you can bet they’re spinning it to make it as large as possible (e.g. ignoring savings and redirected spending).

    tl;dr – Sanders’ numbers may be bogus – I wouldn’t be surprised if they are in some respects. But critics need to show their work. And not on Twitter.

    Cheers,
    Scott.

  48. 48
    oldster says:

    I think the OP is unfair to MMT theory, and the TrinityMustache tweet about 50T is very misleading, since it compares revenue for one year with expenditures spread over many years. (You might even say that its author doesn’t understand basic math).

    Look — I really, really dislike Bernie, and I would like him to withdraw from the race right now and make way for Liz or Kamala (I’d prefer Liz).

    But MMT is not a Bernie-bro creation, and it is not crankery. It is not intellectually bankrupt in the way the Laffer curve is. It is actually more responsive to real-world, empirical economics than the view that we are constantly on the edge of Weimar hyperinflation, which is how the allegedly serious debt-scolds and Sunday Pundits always act.

    So I think the OP takes some cheap shots that are ill-informed. Yes, Bernie is bad. Really bad. Yes, some of his advisors like MMT. That does not mean that MMT is bad.

    Unlike most OPs on this site, I think this OP makes its readers *less* informed about important issues. That’s a shame, and you might think about fixing it.

  49. 49
    Fair Economist says:

    @SenyorDave:

    The logical extension of MMT is no taxes, jut print up $4 trillion every year to cover the federal budget. While they are at it, print up an additional $1 million per person annually so every person in the US can be a millionaire. It is a total BS theory.

    Actually, that’s a total misrepresentation. MMT theory says money is valuable because it has to be used for taxes, and explains hyperinflation as caused by inadequate taxation rather than excessive printing. So according to MMT that plan is an express road to hyperinflation.

    The MMT explanation for hyperinflation matches actual hyperinflation episodes better than standard theory because the inflationary effects typically *lead*, not follow, the money increases. As a result the real value of the money supply declines precipitously during hyperinflation and so hyperinflation is usually accompanied by a depression, not a boom, which also conflicts with standard theory.

  50. 50
    Baud says:

    I still haven’t heard an explanation of what an MMT-based budget would look like.

  51. 51
    Sister Rail Gun of Warm Humanitarianism says:

    @Fair Economist:

    There is no serious version of MMT that claims we can print without limit.

    OK, but I’m not really sure if Kelton is pushing a “serious version of MMT”. I think I’d want better models to guide putting the theory into practice, because we do have historical examples of nations dipping their toes into that water and then being swept away by the side effects.

  52. 52
    Boudica says:

    My concern with MMT is that Richie Riches and corporations are hoarding cash now. How do you prevent them hoovering up the extra printed cash and keep it from circulating?

  53. 53
    Fair Economist says:

    @Baud:

    I still haven’t heard an explanation of what an MMT-based budget would look like.

    I don’t think anybody has tried. MMT says the government should increase its deficit up to just below the point that inflation takes off. Actually knowing that number isn’t easy. In a practical sense it would need “automatic stabilizers” to cut back spending and/or raise taxes once inflation started to increase. In a Green New Deal context maybe they could have a suite of proposed projects and put them up for bid each month in an appropriate amount.

    In the context of current budgeting mechanics, the main takeaway from MMT is “austerity is stupid”. When you’re in a depression, increasing the deficit is not a problem.

  54. 54
    Ken says:

    @Baud: Really? You didn’t find one in any of the comments by all the fresh new faces that showed up for this post?

  55. 55
    Baud says:

    @Fair Economist:

    That seems problematic when it comes to actually using it to establish policy and enact legislation. Also, it seems to leave no room for external shocks to the system.

  56. 56
    Another Scott says:

    @Fair Economist: Thanks.

    Along these lines, it’s my understanding (I’m not an economist, either, just someone who worked for one in college and has done some reading over the years) that it’s irresponsible not to run ~ 3% of GDP annual deficits because it’s leaving money on the table that could be used productively by the national economy. (Dreaded analogy alert!) Just as it makes sense for people to buy houses by taking out a loan rather than using cash (since most people would have to save all their lives to buy a home), it makes sense for governments to borrow more than they take in in taxes so that they can provide extra goods and services (especially those that the private sector will not provide). That’s why “OMG!! Teh Debt is going to kill our children and grandchildren in their beds!!1” is senseless scare-mongering. Of course, huge deficits – especially in an expansion – are another matter.

    (3% of GDP would be about $630B a year now.)

    I don’t think MMT is crankery, but I’m sure that it has problems and can be twisted and mis-used. It is an imperfect human construct after all.

    Thanks again.

    Cheers,
    Scott.

  57. 57
    Starfish says:

    @Boudica: Because the policy would create more money, existing piles of cash would be worth less than they currently are. That is why you see so many retirees upset in this thread.

  58. 58
    Baud says:

    @Starfish:

    Now I’m confused anew. I thought MMT proponents say they solved the inflation problem. If money is worth less, that sounds inflationary.

  59. 59
    zzyzx says:

    @Chyron HR:

    Everyone is. I mean there’s a good electoral reason for it, but no one is acknowledging that actually addressing global warming means either a massive scientific breakthrough – which might happen but can’t be expected – or a serious, serious reduction in our standard of living. No easy international travel. No 2 day shipping on Amazon. No just in time delivery of goods. Limited produce in winter.

    Inslee and Sanders’s policies rely heavily on “Assume that these scientific discoveries have already happened.” The Green New Deal is too vague to really know, but probably is doing the same. Everyone else is trying to just bring us back to the Paris accords which at least slows down the problem, hopefully enough so we can fix it when we all go into crisis mode. And since any of this requires 50 votes in the Senate, this has to become policy that Manchin or Jones or whoever would win in Iowa can support without never being able to win an election again.

    Yeah, I’m not very optimistic right now. We have to find a way of selling this before anyone can see any impact, which gives us the options of lying (“This won’t affect you at all!”) or being honest and having the Republicans go to town with scare tactics that will win elections because people don’t like having less, and will be willing to listen to those who say that this is a hoax. I’m just glad that I’m old and don’t have kids, because I don’t see a way out of this.

  60. 60
    Another Scott says:

    @Baud: Dean Baker:

    I don’t consider myself an MMTer, but there is a basic Keynesian concept which has been associated with MMT, which is both true and important. For the federal government, taxes are not about raising revenue, taxes are about reducing consumption to prevent inflation.

    The point is that the federal government does not need taxes for revenue since it can just print money. It instead taxes to create the room in the economy for government spending. This view is sometimes wrongly taken as a “get out of jail free” card, where the government can spend whatever it wants without worrying about raising revenue.

    That could be true in a deep downturn. However, if the economy is near its full employment level of output, where additional demand will lead to rising inflation, we are pretty much back in the world where we need taxes to offset spending. Any major increase in government spending will lead to higher inflation unless we have higher taxes or have some other mechanism to reduce demand in the economy.

    […]

    tl;dr – The rules are different when the economy is running at full capacity compared to when it isn’t. Right now, and just about every period since 1980, the US economy isn’t.

    HTH.

    Cheers,
    Scott.

  61. 61
    Baud says:

    @Another Scott:

    I can’t stay, but I’m not understanding why the tax money the government spends is any less inflationary than the spending would be if taxes and spending are low.

  62. 62
    Starfish says:

    @Baud: I thought that if they are generating money in a downturn, it is not inflationary; but if they are generating money when the rest of the economy is fine, then it is inflationary.

    For example, bailing out the banks did not lead to a ton of inflation. Maybe Boudica is concerned about doing things like bailing out the banks again while people continued to lose their housing?

    My concern with this discussion is that we are not going to do anything about either healthcare or climate change because we cannot afford to do that; and within a few decades, we are done because we did not do anything about climate change.

    The Democrats, in their wisdom, have decided not to have a debate on climate change; and I think this was a bad move on their part.

  63. 63
    Cacti says:

    Is there an example of this theory actually working in a national economy in the real world?

  64. 64
    m.j. says:

    It’s the only way I’m going to be a billionaire.

  65. 65
    Ken says:

    @Cacti: Are there examples of any economic theory working in the real world? Most of them are pure ideology of the it-can-only-be-failed school. The ones that use math start from the premise Fair Economist noted above, which is that we’re all little profit-maximizing robots with perfect information.

  66. 66
    Dave says:

    The other comments are fine in terms of explanations for MMT. Empirically we know that any sovereign government can print money and do so without inflation up to the point of maximum output on the GDP. We know this because every Republican administration has done so for their pet projects since 1980 using federal reserve debt/money creation instead of just having treasury print the cash. Taxes are the anti inflation damper . My background is MBA.. Bernie is a candidate with huge blind spots but this isnt totally bonkers

  67. 67
    Another Scott says:

    @Baud: Think of the economy like a factory that can make 100 widgets a year at full capacity. If it is only making 50 widgets a year, then there’s a lot of spare capacity. If the factory suddenly gets an order for 50 more widgets a year – great! It can make those widgets without any increased costs. If however, it is making 80 widgets a year and gets an order for 50 more widgets a year, then it has problems. It has to find the workers to make those 30 more widgets beyond capacity, it has to find the raw materials (and its suppliers may not be able to supply them), etc. Costs will almost certainly go up (if all else is equal).

    That’s why it matters whether the economy is near full capacity/full employment or not. It’s not the amount of spending that matters; it’s whether the increased spending is in excess of what the economy can absorb.

    All the signs are that the US economy is not at full capacity – industrial output, numbers of people working part time who want full-time work, quits, wage increases, all the inflation measures, etc., etc. There’s still a lot of slack in the economy, so the government could take up some of that slack (buying stuff, employing people, increasing transfer payments) without any increase in inflation. Even if that spending is $Big-Scary-Number.

    HTH.

    Cheers,
    Scott.

  68. 68
    zzyzx says:

    @Starfish:

    What is the problem that a climate change debate solves? It’ll be something that will mainly be watched by people who already care about the issue, will get covered the next morning by the papers and then forgotten, and will be politicians being vague about their potential solutions and the differences between the candidates all fall well beyond what could even get past the Senate or can be done via executive order.

    I mean sure, it wouldn’t be bad if we had one, but the anger of the lack of one seems misplaced.

  69. 69
    Starfish says:

    @zzyzx: Not having one says we are not taking this problem seriously and have no interest in solving it any time soon.

  70. 70
    Xavier Onassis says:

    @mario: Some of the comments seem to be more about “Wilmer” than they are about MMT.

  71. 71
    Peale says:

    IDK. There’s some dishonestly in saying Bernie wants to spend 16T in free college, like that’s what we spend each year. And like it would just go “poof” once it were spent.

  72. 72
    Matt McIrvin says:

    @Fair Economist: My impression of MMT is that most of it is just a different way of stating standard economic mechanics, which is what leads people like Krugman to ask exactly where the special sauce is and why this should lead to any revolutionary conclusions. As a corrective to the folk belief of thinking the government really has a fixed supply of money that can run out, it’s salutary. And we could probably stand a slightly more inflationary regime than we’ve had for the past few decades. But the MMT folk keep insisting they know something extraordinary that classical economists don’t, and it gets weird and cultish.

  73. 73
    zzyzx says:

    @Starfish: or it says that all of the candidates more or less agree on the outline of a solution and an hour hashing out minor differences in opinion when they’re not going to be dictator and none of this will matter anyway is a waste of time.

  74. 74
    Peter says:

    MMT on its own makes sense as a theoretical framework. MMT as deployed by various political actors on the left is basically inverted Lafferism. Here is a brief (and simplified) explanation:

    The classical view of government economics goes like this: The government wants to spend X dollars on a program. It needs to raise those X dollars through taxing or borrowing. For whatever amount of money it borrows, it now needs to manage those interest rate payments, typically through controlled inflation by printing money and introducing it to the economy.

    The MMT view of government economics goes like this: The government wants to spend X dollars. So it prints that money and spends it. Having printed all that money and introducing it to the economy causes inflation, though, so the government decreases the money supply to compensate, by (among other things) removing money from the economy through taxes.

    The important thing to note here is that these two ways of looking at the process of government spending are not actually describing different things. MMT just flips the script, framing taxation as a counter-inflationary measure rather than as a revenue source to pay for government programs. It’s like if you were asked to solve 10 – 5, and you chose to rewrite it as 10 + (-5). Different ways of looking at the same problem, but with fundamentally the same output.

    That’s what’s crucial to bear in mind: MMT is a theoretical framework, a way of thinking about phenomena. It doesn’t actually do anything on its own.

    Now, thinking about government spending in this way does suggest some relatively wonky ideas about how government should be run, and does lead to the conclusion that deficit spending is fine to do and that all the pearl-clutching deficit scolds are full of shit. But, crucially, all of those conclusions can also be reached with the classical economic views as well. That doesn’t mean that it has no value. What it does mean is that the pop economics version of it floating around leftist spaces is, uh, incomplete.

    Understandably exasperated with the neverending bad faith ‘but how will you pay for it’ nonsense the right throws out whenever a new government program is proposed, some leftists have taken to whipping out MMT as a magic wand. ‘We don’t have to pay for it, the government just prints money to pay for whatever it wants, MMT will handle it’, they say. This is basically appropriating the front half of MMT (government prints money to pay for services) but leaving off, whether through ignorance or malice, the back half (you still have to levy taxes, it’s just decreasing inflation instead of actually paying for the service). It’s a rhetorical flourish against deficit scolds, not an answer to to good-faith ‘okay but what’s your funding model’ version of the payment question.

  75. 75
    Jim, Foolish Literalist says:

    @zzyzx: I mean sure, it wouldn’t be bad if we had one, but the anger of the lack of one seems misplaced.

    I don’t see how a “debate”– too many damn people trying to get their canned sound bites while Bernie Sanders bellows at his starry-eyed cultists that anyone who doesn’t endorse his proposals to the letter is a corrupt corporatist sell-out– elevates the issue with people who don’t already get it. This folderol is an outgrowth of two tenets of the Bernie Cult: 1) Bernie would have won the 2016 primary if there had been more DNC-sanctioned debates, but the evil Debbie Wasserman Schultz (cue the dramatic chipmunk) plotted against Our Hero and 2) the real enemy to progress is something called the Democratic Establishment, which childish fantasy got us first George W Bush (and Roberts and Alito, to stick with just the domestic horrors) back when Bernieism was called Naderism, and then trump (and Kavanagh and Gorsuch).

  76. 76
    zzyzx says:

    @Jim, Foolish Literalist: Yep and meanwhile all of the research shows that debates usually move public opinion for a couple of days before resetting unless there’s a huge disaster.

    Especially considering how Sanders was a not particularly good debater who just answers every question with his talking points, I will never understand that. I guess it’s just a belief that others will agree with me if I can just find the right way of phrasing my opinion. I’ve been known to fall for that

  77. 77
    Matt McIrvin says:

    @Peter: OK, that was a much better statement of what I was trying to say.

  78. 78
    Xavier Onassis says:

    @Baud: You’re asking the wrong question. Any budget, MMT or not, is a political thing not an economic one (Joe Biden: “Don’t tell me what your values are, show me your budget and I’ll know what your values are.”) And MMT is not about values; it’s simply a description of what money is and how it functions in the economy, and what constraints that does and does not put on economic policy.

    MMT says that the only constraint on what is possible for a government that issues its own money is the availability of real resources; labor, materials, infrastructure, technical knowhow. What it chooses to do with those real resources may be constrained by political will but is never constrained by lack of money.

  79. 79
    Formerly disgruntled in Oregon says:

    This post kinda sux, but the comments from the regular jackals are straightening it right out.

    Let’s be intellectually honest about Bernie & Co.’s intellectual dishonesty, please!

  80. 80
    StringOnAStick says:

    @Starfish: I suspect that if we had a climate debate on the D side that the reality of the situation (all must consume less, living standards must decline) will doom both whoever is most realistic in what they state at the debate and provide the D dark money PAC’s with all the sound bites they’ll need to sink every D candidate at any level who praised, even lightly, the GND. Not an optimal outcome.

    I’d rather we paint ourselves as the party that recognizes the seriousness of the situation but keeps it leaning to the aspirational side until we sweep the contests enough to actually do something with a mandate. Any specific plans are going to get fear mongered to death and electoral defeat by telling everyone we’ll have to confiscate their F-350 and cut their standard of living. I’m willing to accept any and all changes to our wasteful system, but I’m a DFH. Every winger relative I’ve got uses AGW and the GND as a punchline that always gets a laugh and eyeroll.

  81. 81
    Jim, Foolish Literalist says:

    @StringOnAStick: Any specific plans are going to get fear mongered to death and electoral defeat by telling everyone we’ll have to confiscate their F-350 and cut their standard of living

    Yup. And even with the sort of suburbanites who recycle and think of themselves as ‘green’, the solution they want is the one where everything is fixed, but they’re not inconvenienced. In fact they don’t even want to notice the change. Oh, and not a nickel more in taxes*. But I will buy another canvas tote bag.

    * see also: health care reform

  82. 82
    Baud says:

    @Peter:

    Thank you.

    @Xavier Onassis:

    That’s fine. But then it doesn’t “pay” for anything and it’s misleading to suggest that it does, no?

  83. 83
    TerryC says:

    @Spanky: We slept out in our tent last night on our private disc golf course, it was a glorious night. No gun shots, but also no coyotes singing as we had hoped for.

  84. 84
    Baud says:

    @StringOnAStick:

    I suspect that if we had a climate debate on the D side

    We’d have to have a debate on every issue of importance to any constituency we want to have vote for us.

  85. 85
    Miss Bianca says:

    @Raven: Awww!

    @TerryC: Oh, *we* had plenty of coyote singing to wake *us* up during intervals last night. Little fuckers seem to have moved into the neighborhood again. Roxy the Wolf Girl was definitely disgruntled that we wouldn’t let her out to investigate. Still a bit groggy starting my second cup o’ joe this morning.

  86. 86
    Miss Bianca says:

    @Peter: Wow, I think I actually understood that! Which is cool, because until this morning I’d never even *heard* the term MMT before.

  87. 87
    StringOnAStick says:

    @Baud: That too.

    I don’t think there is a top tier D in the presidential race who doesn’t agree that AGW is a serious issue that must be addressed NOW. The core of D voters agree, so there’s no need for a TV debate that at this point is a contest for who has the better sound bite writers. I’d rather hear more about SS, and blowing the whistle on what the R’s intend to do to it.

    We went camping last weekend with our mid-40’s friends, who like our 50 yo friends have completely internalized Pete Peterson ‘s ” SS will be bankrupt by the time YOU retire so plan on never retiring and blame the Boomers for ruining the system” crap and nothing you say can sway them from this attitude. I explain that it’s R’s who want to cut SS and make younger people be cynical enough to accept it without a fight to preserve everyone’s benefits; I get bovine looks and a whatever that tells me Peterson succeeded beyond his wildest dreams.

  88. 88
    Frankensteinbeck says:

    @Starfish:
    Elected Democrats talk about climate change all the time. They address it in every budget. They argue about the best way to deal with it. Whether it has been the topic of a presidential primary debate so far is irrelevant. That fact’s effect on public opinion is ephemeral. You seem to be implying it means Democrats don’t care about and don’t intend to address climate change. I hope I’m misreading that, because it would be an absurd and obvious lie.

  89. 89
    smintheus says:

    The twitter comments are dishonest. The figure given for wealth is not “America’s total wealth” as claimed, but seemingly refers to the wealth (assets minus debts) of households alone. In 2018 the total wealth of US households was 113T. The wealth of the top 1% by itself is 25T. If wealth were spread even among the US population (including children), everyone’s personal wealth would be over $340,000.

    None of that includes the wealth of corporations, banks, hedge funds, and the many other institutions that have large assets.

    If you’re going to mock a candidate for being innumerate, it would be advisable not to demonstrate that you yourself are innumerate…or dishonest.

  90. 90
    smintheus says:

    @oldster: I agree, the tweeter is full of crap.

  91. 91
    Bnad says:

    Paul Krugman‘s take on MMT is that conventional Keynesian economics gets to nearly the same policy positions as MMT does, with the benefit of having a solid, empirically supported theoretical framework, which MMT resoundingly lacks. Keynesian economics has a rational view on what happens if you print too much money AND it still leads to policy recommendations that are very expansionist. So why not go with Keynesian economics?

  92. 92
    HinTN says:

    @mrmoshpotato:

    Nothing more needs to be said.

    Actually, what needs to be said is that this sort of economic irresponsibility is NOT Democratic party policy.

    Wilmer is not a Dem and that needs to be made clear. He’s got a record in Vermont. Publicise it.

  93. 93
    catclub says:

    @Starfish

    I am unimpressed by all the people who were willing to accept the Laffer curve as sound economic policy saying that MMT is absolutely ridiculous. These are people who have been unharmed by existing policies.

    Exactly. All the ‘QE will cause hyperinflation’ bozos have been proved wrong. MMT has definitely NOT

  94. 94
    Matt says:

    To put this in perspective. The total tax revenue for the government is 3T per year. America’s total wealth is 100T.

    Bernie Sanders is proposing 50T in taxes.

    TFW you’re shitting your pants so hard that a socialist might win that you confuse yearly amounts with decade-long amounts. I’d call it “intellectual dishonesty”, but I suspect it’s just outright stupidity.

    If these people had spent 10% of the energy they put into hippie-punching into actually fighting Republicans we wouldn’t be here. They need to sit down and STFU.

  95. 95
    Xavier Onassis says:

    @Matt McIrvin: Here’s a possible answer to your question of why MMT is different. In Paul Samuelson’s 1948 textbook, which was the introductory text for several generations of economists, including many if not most people teaching economics today, he characterizes money as a veil. He says money is a veil that obscures the real workings of the economy, which is production and consumption of real goods and services. He further says that if you look behind the veil, you’ll find that even the most modern economies are sophisticated systems of barter.

    MMT says instead that money is a promise; or more formally, money is a promissory note denominated in units of currency. And a monetary economy, where goods and services are exchanged for promises, is a fundamentally different beast than a barter economy, where goods and services are exchanged for other goods and services.

  96. 96
    Repatriated says:

    @Starfish:

    For example, bailing out the banks did not lead to a ton of inflation. 

    This was largely because that tidal wave of cash replaced the vast amount of money that evaporated in the crash.

    There was deflation in the directly-affected sectors – a dollar became worth more if you were buying real estate or securities, for example. (Not that you would want to, of course, because of continued deflationary expectations there…)

    This defllation didn’t carry over into the rest of the economy because we collectively chose to pretend (from a macroeconomic perspective) that the vanished market value still existed but was temporarily unavailable.

  97. 97
    Jim, Foolish Literalist says:

    @Matt: If these people had spent 10% of the energy they put into hippie-punching into actually fighting Republicans we wouldn’t be here.

    What if Bernie had put 10% of the energy fighting Republicans that he spent bellowing about “Wall Street Speeches!” and Superdelegates and a rigged system (and he was talking about the primary he lost, just to forestall your inevitable, “Oh, so you don’t think The Man has his foot on the neck of The People!”). What if Bernie had a firmer grasp of law, government and politics than his “look out the window Mitch” demonstrates? What if Bernie (and his followers) had a fucking clue what the electorate looked like outside of his rallies (and their twitter feeds)?

  98. 98
    Xavier Onassis says:

    @Baud: I hope I understand your question, here’s an attempt at an answer. You “pay” for any good thing by giving up some other good thing. Opportunity costs are real.

  99. 99
    Renie says:

    I don’t really understand any of this economic stuff but wonder how do new people know what is being discussed here so they can post their messages. Is there some type of software that tells them so they all run here and post? Or is there someone already reading the blog who sends out a message to ‘the group’ to come and post?

  100. 100

    MMT isn’t just a dangerous fringe ideology, it’s also hilariously self-contradictory, because it’s actually a cult of personality around a single economist who, like everybody else, is self-contradictory. And the cultists in this thread are equally hilarious.

    It’s even dumber than the Laffer stuff because that’s at least grounded in actual human experience. And more dangerous because instead of wasteful, somewhat-stimulative tax cuts, you get currency-destroying insanity.

  101. 101
    Another Scott says:

    @Renie: There’s software out there that can notify you if a web page changes. E.g. https://visualping.io/ (first thing that showed up for me in a search.) Presumably it can be setup to notify you if a certain term is used as well.

    HTH.

    Cheers,
    Scott.

  102. 102
    Marcopolo says:

    @oldster: Second this about a 1000%. The initial tweets trying to compare yearly to decade figures is dishonest & misleading. Oh, and by the way healthcare spending in the US was about $3.5T in 2017. A huge amount of that is what Americans are paying for private healthcare. Most of that spending goes away under Medicare for All (which is the largest portion of spending Sanders is proposing (~$30T over 10 years). I am not a Sanders supporter, but to me those numbers look like they might be workable and I am not prepared to rule out the entire idea with a quick snarky retort in a blog thread.

    I am totally behind the idea that if money is cheap–and it is really cheap right now, just look at Germany issuing notes where the holder of the note is paying Germany for the “safety” of holding their money–that it makes total sense to borrow money now, pretty much in whatever amount is needed, to improve infrastructure, combat climate change, basically go after whatever big project is out there that needs investment to be solved to make our lives better & more productive & to protect the planet. In my limited economic knowledge this kind of thinking seems to straddle the boundary of Keynesian economics and MMT.

    Finally, I have mostly stopped watching cable news because imho the vast majority of content they present now is meant to push the viewer’s buttons & get an emotional response (and thus garner more eyeballs) instead of providing information with context that will help folks understand issues better. Let’s try to avoid doing that on this blog.

  103. 103

    @Marcopolo:

    I am totally behind the idea that if money is cheap–and it is really cheap right now, just look at Germany issuing notes where the holder of the note is paying Germany for the “safety” of holding their money–that it makes total sense to borrow money now

    MMT money is not borrowed, it is printed.

  104. 104
    Macopolo says:

    @Renie: I just do this thing called opening up my web browser on my laptop & coming to this website several times a day to see what has been posted, though there are ways to set up notifications for new posts, or I suppose one could just follow j cole’s twitter feed–I think he has it set up to automatically note when new posts go up.

  105. 105
    Repatriated says:

    @Major Major Major Major: Laffer was technically right (it’s a trite obsevation on taxation), but it’s invariably abused — effective rates are never anywhere near the point of diminishing returns.

    MMT as a restatement of Keynesian theory is fine. It’s problematic when used as the funhouse mirror version of Laffer Curve nonsense.

  106. 106

    @Repatriated:

    MMT as a restatement of Keynesian theory is fine

    But this is not what MMT is.

  107. 107
    Marcopolo says:

    @Major Major Major Major: Yes. But typically when money is borrowed it is with the expectation that it can be paid back, right? By the person borrowing the money. Or the company borrowing the money. And with a bond that has typically meant payed back with interest. Now we have countries issuing bonds with negative interest rates. And is there really anyone in their right mind who actually believes that all of the money the US has borrowed will be paid back? NO! We can’t unless we print new money. Yet we continue to borrow. Then there is Quantitative Easing which, if I understand it correctly, is once again similar to the government printing money.

    Unfortunately, in the US we have a much more marked tendency to borrow in order to spend on our military or to give tax cuts to folks & companies who don’t so much need them as opposed to spending the money to fix problems that would make everyone’s life better.

    Anyway, that is where I am coming from where I say there seem to me to be a grey border area between Keynesian economics and MMT.

  108. 108

    @Marcopolo: MMT is an ideology with fixed beliefs that has fundamental assumptions completely at odds with Keynesianism.

    And is there really anyone in their right mind who actually believes that all of the money the US has borrowed will be paid back? NO!

    Yes. This is how treasury bonds work. People wouldn’t buy them if they hadn’t always been fulfilled. It’s why bonds from unstable governments have high interest rates.

    It is entirely possible—likely even—that we don’t quite grok how sovereign debt works. But MMT is a fantastical departure.

  109. 109
    joel hanes says:

    @SenyorDave:

    The logical extension of MMT is no taxes, jut print up $4 trillion every year to cover the federal budget.

    No it isn’t. I am agnostic about MMT, not being an economist, but misrepresenting the ideas you want to combat is dishonest.

  110. 110
    mrmoshpotato says:

    @HinTN:

    Actually, what needs to be said is that this sort of economic irresponsibility is NOT Democratic party policy.

    I was reacting more to the ridiculous-on-its-face idea, but, yes, it does have to be said loud and clear that this sort of economic irresponsibility is NOT Democratic party policy but the idea of an “Independent” crackpot.

  111. 111
    Brachiator says:

    @Major Major Major Major:

    MMT isn’t just a dangerous fringe ideology, it’s also hilariously self-contradictory, because it’s actually a cult of personality around a single economist who, like everybody else, is self-contradictory. And the cultists in this thread are equally hilarious.

    I think I listened to a discussion about MMT not too long ago on some NPR program. Didn’t realize it was about to be introduced into the presidential contest. No mention of cults or the idea that this was the brainchild of a single economist. Maybe the host and staff didn’t do background research.

    Anyway, some of the discussion sounded interesting, but it didn’t rock my world.

    We will see how this plays out.

    One thing though. Trump’s advisors have been tremendously dishonest, and even conservative economists who should know better have kept silent about Trump policy that violate supposedly sacred “free market” principles. Many reporters and pundits who weigh in on economic topics are hilariously unqualified. So it’s going to be tough to separate solid insight from typical political and media bullshit.

  112. 112
    Marcopolo says:

    @Major Major Major Major: Well, unfortunately we seem to have figured out a way to have an unstable government. I guess only time will tell how that affects the US’s position as the world’s premiere economic power and our ability benefit from that. If/when China assumes that mantle it will be a rude awakening for a lot of folks.

  113. 113
    J R in WV says:

    Here’s an interesting couple of questions…

    Who was Lyndon Baines Johnson’s vice president? Why can’t one remember who LBJ’s VP was ???

    The answer is odd…

    .
    .
    .

    there was no vice president during LBJ’s first term in office, as there existed no method to replace a VP elevated to the office of president until the 25th amendment was enacted into the constitution. How ’bout that!

    I couldn’t remember who was VP, turns out I was right again!!!

  114. 114
    germy says:

    Say what you will about Bernie…

    But if he wins the nomination, I’ll stand in line to vote for him to defeat drumpf.

  115. 115

    @J R in WV: wow that’s really interesting!

  116. 116
    Another Scott says:

    @Marcopolo: Dean Baker says that using purchasing-power-parity, China passed us in 2015. (They’re still way behind in per-capita GDP, of course.)

    Cheers,
    Scott.

  117. 117
    Peter says:

    @Major Major Major Major: the differences between MMT and Keynesian economics are interesting in an academic sense, but you reach 95% of the same practical policy conclusions by properly applying either.

  118. 118
    Brachiator says:

    Ah, found it. “Why is this happening” podcast episode about MMT.

    Chris Hayes talks with economist Stephanie Kelton about politicians’ bad faith use of the deficit.

    (From the Introduction:)

    When you look at the behavior of people in politics, they don’t really care about the national debt as much as they like to talk about it. So what does their bad faith use of the deficit tell us about how important that number actually is?

    Stephanie Kelton is here to break it all down — the national deficit, the nature of money itself, federal spending, and why it’s time to stop comparing it to a household budget.

    Podcast and transcript here.

    https://www.nbcnews.com/think/opinion/debunking-deficit-hysteria-stephanie-kelton-podcast-transcript-ncna1003301

  119. 119

    @Peter: not really. The 10,000-foot “taxes are for paying for spending vs. taxes are for curbing inflation due to money-printing spending, and at any rate stimulus is good” argument is indeed academic and brings you to the same practical place. But another fundamental tenet of MMT is that American sovereign debt doesn’t matter, which is insane special pleading and leads to very different places. (Some will argue that all sovereign debt is a fake idea due to fiat currency, which is both less and more insane.)

  120. 120

    @Brachiator: left-liberal economist Noah Smith has a good and fair (IMO too fair) summary & critique of MMT that goes into good depth here: http://noahpinionblog.blogspot.....l.html?m=1

  121. 121
    Fair Economist says:

    @Matt McIrvin:

    My impression of MMT is that most of it is just a different way of stating standard economic mechanics, which is what leads people like Krugman to ask exactly where the special sauce is and why this should lead to any revolutionary conclusions

    Basically, yes, because in traditional Keynesian economics money is treated as something the government can create without limit, although not without consequences, which is exactly what MMT is claiming (although less than some of the folks calling themselves MMTers). So, to a first approximation, MMT is just saying “Keynes was right and the monetarists are wrong”.

    I’m not sure if “money is a perfect substitute for government debt” falls out of the standard Keynesian assumptions. I have to look at that.

  122. 122
    Brachiator says:

    @Major Major Major Major:

    left-liberal economist Noah Smith has a good and fair (IMO too fair) summary & critique of MMT that goes into good depth here:

    Thanks. I listened to the Chris Hayes podcast on my commute, paying half attention. I had no idea that it would be popping up big-time (relatively speaking) as part of Wilmer’s economic platform. I give Hayes some credit for being prescient.

  123. 123
    Richard Guhl says:

    I hate to be a defender of Bernie, but in today’s context — an important caveat — it isn’t as nuts as it seems.

    The reason I say so is our chronic trade deficit. Since 1981, we’ve imported trillions of dollars more in goods and services than we’ve exported. According to classical economic theory that’s unpossible. No nation should be able to run the sort of chronic trade deficits we have. By all accounts, we should be experiencing Greece level pain of austerity and sky-rocketing interest rates. But here we are.

    And the rest of the world seems quite content to let us get away with it. In fact, they eagerly suck up all those excess dollars sloshing around.

    Back in the 60s and 70s, when we were on the gold standard, the trade deficit was cause for alarm, and our nation endured chronic credit crises. Now, with the dollar itself functioning as the world’s gold standard, our problems stem, not from credit crunches, but from a huge credit glut.

    The evidence for this is seen in the ridiculously low interest rates in most of the developed world and the real fear of deflation in Japan and the EU. These low interest rates reflect a dearth of economic activity and investment opportunities.

    The rest of the world would welcome us going on an inflationary spending spree which produces real goods and services, as opposed to the present deficit caused by shoveling a ton of money into the laps of those who already have a ton of money.

    Having said this, there’s good reason to look at the claims of 20 million jobs and other wishes and beggars aspects of Bernie’s program with a healthy dose of skepticism.

    Given the amount of disruption transforming the economy will incur, we’d be far better off with a Churchillian blood, toil, tears, and sweat promise.

  124. 124
    Another Scott says:

    @Major Major Major Major: tl;dr. ;-)

    Jared Bernstein’s take (from 2012):

    I know some visitors here will be happy to see this piece on “modern monetary theory” in today’s WaPo today, as was I. It’s particularly gratifying to see my friend Jamie Galbraith featured, a rare economist whose ability to see outside the box has enabled him to be consistently right about a lot of things that others have missed.

    For me, I’m down with MMTs up to a point. I very much agree that deficit reduction has been deeply miscast as pure virtue, with little regard for its economic impact. As I’ve written many times here, the first question re fiscal policy, at least until we’re reliably headed toward full employment is not “how quickly does your deficit come down?” It’s: “is your deficit large enough to replace lost private sector demand?”

    This emphasis on using the tools of government, including the ability to print money and run large budget deficits in times of market failure, is MMT’s most important contribution to the current debate. On specifics, I thought the piece intimated that MMT’ers’ fiscal policy operates largely through tax cuts and increases. I don’t think that’s correct—I know for a fact that Jamie G, for example, favors investment in public infrastructure.

    That’s important, because while tax cuts are a breeze politically, they’re less effective relative to most other types of stimulus, and they’re awfully hard to unwind (this is a political flaw to MMT, btw…they seem to believe they can reverse the potential inflationary impacts of printing money by raising taxes on a dime).

    Also, a fundamental MMT pillar—countries with their own fiat currencies can’t default—is correct, though the piece cited some economists suggesting that default would be preferable to the hyperinflation they fear that MMT could generate.

    […]

    Read the whole thing (it’s not long).

    Sounds sensible to me.

    (Bernstein was Biden’s chief economics guy in the Obama administration.)

    Cheers,
    Scott.

  125. 125
    Patrick Armshaw says:

    @🐾BillinGlendaleCA: unless by doing so you unlock further demand for goods/services. If you were right, we would have had inflation every time the Fed cut interest rates during a recession. I’m not arguing MMT is true, but I’m not at all convinced that inflation is our big worry given that a lack of demand has been the main problem since the Great Recession. The government is more efficient at providing medical insurance, so MFA should unlock a lot of money for demand that is currently going to unproductive insurance bureaucracy and padding corporate profits. It’s complex as hell, but the idea of printing more money and taking on more debt is not necessarily bad, economically.

  126. 126
    Ruckus says:

    @Fair Economist:

    In a Green New Deal context maybe they could have a suite of proposed projects and put them up for bid each month in an appropriate amount.

    Bid each month for a long term project? You expect this to ever be completed?
    I work on projects that take weeks, if we had to rebid on them as we went along….. no one would deal with that level of uncertainty.
    I used to work on projects that could take 3-6 months to complete. If we had to rebid every month just to complete the project nothing would ever get done. Life just doesn’t work like that. It’s not moving numbers around in a computer, it’s moving physical things around. Your way would mean, in my context, 3 to 6 different projects, each one would have to be completed in one month because the project might be pulled for another contractor or there might be a delay in getting started in the next phase, so people are standing around with their thumbs up their asses waiting. And given it’s humans involved there would be waiting. And my employees would be getting paid, while I wouldn’t, so my next bid would be higher enough to at least cover my costs, meaning someone else would have bid lower and now I’ve got nothing to pay my bills.

    What you have described is what’s known in business as a cluster fuck.
    And businesses create enough of those on their own without adding automatic ones into the mix.
    This concept of just printing money. Some are saying that it’s over time and therefore OK. And it may be, if for no other reason that the concepts have to be done to have a country/world to live in. Except people still have to be paid and have some expectation that they are getting some value for their work. Other wise you have the old soviet system, “They pretend to pay us and we pretend to work.”
    Yes we print money. Yes we sometimes print more than just replacement money. But we also have business, which sometimes create value over and above what we had at the start of a business cycle. Say housing, more people, more houses, problem probably somewhat solved, with a value increase. Some times that money is spent on long term positive things, like solar energy or a new hydroelectric dam. The benefits can be/are some time out but they are there and make a positive direction in value. Printing money to pay for these is inflationary, any time the printing is larger than the value added to the economy. That inflation may be necessary but it may also destroy an economy. Just making a statement that we can just print money shows how little the concept relates to the reality of a vibrant economy and how much it is just wishful thinking on solving big, expensive problems that we face.

  127. 127
    Xavier Onassis says:

    @Peter: I think the difference between MMT and Keynes is that Keynes was living in a gold standard world and accepted the constraints inherent in a gold standard. MMT isn’t and doesn’t. But yes, the focus on demand shortfalls and the ability of governments to cover those shortfalls is something MMT got from Keynes — or at least Keynes got there before MMT.

  128. 128
    Ruckus says:

    @Richard Guhl:
    One of the issues is that we also deal far more today is making money from money. In other words we move money around and get paid for it. Or we store money for a bit, in the form of stock and then sell it to make money. The value only accrues to a small number of people – really to anyone who can use the increased valuation of some stock for making money. The value of the physical asset may not have actually increased at all – Coca Cola still is making and selling X thousands of gallons of soda a day. The valuation of their company is based not only on the product but on the length of time they have been making it and the expectation that they will continue for the foreseeable future. There may be no actual value added, only the expectation that they will continue to be profitable. And someone is making money off that, which has little benefit to the company or the workers, other than continuation. Can they increase market share or come up with another soda that makes more money, or say build another plant if they are running at full capacity? That’s physical value.
    Let’s take what I’ve just been doing for the last two weeks, building tooling for a company that uses it to build hydraulics for airplanes that we fly in. Your $500 buys you a ticket on a $25-30+ million airplane which will cover millions of miles in it’s life time, hopefully 100% safely. You want the lowest price because it’s your money, but you want to get there on time, and in one piece. Four people worked on one precision project for about 160 hrs. What is that project worth to you? There are tens of thousands of projects like this for any airliner. And that’s value added, not just money moved around.
    Money moved around gives value only to those who can move money around. If you don’t have enough to play with, you get no value from it. An airliner gives anyone physical value because you get to move a long distance in a relatively short time. A train is cheaper but takes a lot longer to travel the same distance. Which is more value to you, time or money? It depends on which you have the most of.

  129. 129
    Richard Guhl says:

    @Ruckus:
    Kevin Phillips — yes, that Kevin Phillips — has observed that you know when a great power has hit a wall when it shifts from making things to a rentier/financier economy.
    The thing is that the whole world is hitting a wall caused by the very things that produced so much wealth — fossil fuels. It’s not just the CO2 induced warming. It’s also the CO2 induced ocean acidification which, coupled with the loss of forests, will destroy the world’s ability to produce oxygen. You know, breathing.
    What makes this predicament even harder to manage are all the sunk costs of having created a world around fossil fuels. I mean, what do we do with the 168,000 gas stations, just to give one small example?

  130. 130
    Xavier Onassis says:

    @Major Major Major Major: “MMT money is not borrowed, it is printed.”

    Precisely. When the Government creates money out of thin air, some of it is created in the form of Treasury bonds, which are actually just “future money.” And that “future money” is eagerly accepted for three reasons. It can be used to pay future taxes, spent in the future, or it can easily be swapped for current money at a small discount.

    One of the keys to understanding MMT is that bond sales are not “borrowing” in the sense we normally understand the term. The Government creates money in three forms: paper notes and coins (walking around money), reserves (that is, deposits at the Federal Reserve Bank, or checking account money) and bonds (future money/savings account money.) When the Government sells a bond, it is merely swapping “future money” created out of thin air by the Treasury for current money created out of thin air by the Fed.

    Since Treasury bonds are liabilities of the Treasury and cash/reserves are liabilities of the Fed, bond sales are just a swap of one Government liability for another Government liability. No new liability is created by the sale. As any accountant could tell you, the hallmark of borrowing is creation of a new liability. No new liability means no borrowing took place.

    The point of all this being to enable the Government to buy goods and services created out of thin air by the private sector.

  131. 131
    Xavier Onassis says:

    @Major Major Major Major: Marcopolo is right, the debt will never be repaid. It will be rolled over indefinitely. Individual bondholders will be repaid in full in a timely manner, but they will just be replaced by other bondholders.

  132. 132
    grubert says:

    @Fair Economist:

    Thank you.. I’ve been skeptical of most of macro economics ever since taking it in college and seeing the professor wave away Information Asymmetry and The Agent Problem, both of which undermine pricing theory, as something to get over because can’t “make real progress in economics” if we let those problems get in our way.

    Turns out the reason why so many don’t seem to pay attention to what Adam Smith actually wrote is that neo-libs altered economic language to prevent wrong-think.

    https://michael-hudson.com/2018/12/guns-butter-the-vocabulary-of-economic-deception/

  133. 133
    grubert says:

    @oldster:

    So I think the OP takes some cheap shots that are ill-informed. Yes, Bernie is bad. Really bad. Yes, some of his advisors like MMT. That does not mean that MMT is bad.

    Also thank you.. quite right.

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