Tuesday, July 27, 2010

The brilliance of JFK!

Here's why JFK was a true statesman. Read his brilliant comments on debt, deficits and gov't spending from his commencement speech at Yale University in 1962. And they called Reagan the "Great Communicator?"

For the great enemy of truth is very often not the lie--deliberate, contrived and dishonest--but the myth--persistent, persuasive, and unrealistic. Too often we hold fast to the cliches of our forebears. We subject all facts to a prefabricated set of interpretations. We enjoy the comfort of opinion without the discomfort of thought.

Mythology distracts us everywhere--in government as in business, in politics as in economics, in foreign affairs as in domestic affairs. But today I want to particularly consider the myth and reality in our national economy. In recent months many have come to feel, as I do, that the dialog between the parties--between business and government, between the government and the public--is clogged by illusion and platitude and fails to reflect the true realities of contemporary American society.

I speak of these matters here at Yale because of the self-evident truth that a great university is always enlisted against the spread of illusion and on the side of reality. No one has said it more clearly than your President Griswold: "Liberal learning is both a safeguard against false ideas of freedom and a source of true ones." Your role as university men, whatever your calling, will be to increase each new generation's grasp of its duties.

There are three great areas of our domestic affairs in which, today, there is a danger that illusion may prevent effective action. They are, first, the question of the size and the shape of the government's responsibilities; second, the question of public fiscal policy; and third, the matter of confidence, business confidence or public confidence, or simply confidence in America. I want to talk about all three, and I want to talk about them carefully and dispassionately--and I emphasize that I am concerned here not with political debate but with finding ways to separate false problems from real ones.

If a contest in angry argument were forced upon it, no administration could shrink from response, and history does not suggest that American Presidents are totally without resources in an engagement forced upon them because of hostility in one sector of society. But in the wider national interest, we need not partisan wrangling but common concentration on common problems. I come here to this distinguished university to ask you to join in this great task.

Let us take first the question of the size and shape of government. The myth here is that government is big, and bad--and steadily getting bigger and worse. Obviously this myth has some excuse for existence. It is true that in recent history each new administration has spent much more money than its predecessor. Thus President Roosevelt outspent President Hoover, and with allowances for the special case of the Second World War, President Truman outspent President Roosevelt. Just to prove that this was not a partisan matter, President Eisenhower then outspent President Truman by the handsome figure of $182 billion. It is even possible, some think, that this trend will continue.

But does it follow from this that big government is growing relatively bigger? It does not--for the fact is for the last 15 years, the Federal Government--and also the Federal debt--and also the Federal bureaucracy--have grown less rapidly than the economy as a whole. If we leave defense and space expenditures aside, the Federal Government since the Second World War has expanded less than any other major sector of our national life--less than industry, less than commerce, less than agriculture, less than higher education, and very much less than the noise about big government.

The truth about big government is the truth about any other great activity--it is complex. Certainly it is true that size brings dangers- -but it is also true that size can bring benefits. Here at Yale which has contributed so much to our national progress in science and medicine, it may be proper for me to note one great and little noticed expansion of government which has brought strength to our whole society-- the new role of our Federal Government as the major patron of research in science and in medicine. Few people realize that in 1961, in support of all university research in science and medicine, three dollars out of every four came from the Federal Government. I need hardly point out that this has taken place without undue enlargement of Government control--that American scientists remain second to none in their independence and in their individualism.

I am not suggesting that Federal expenditures cannot bring some measure of control. The whole thrust of Federal expenditures in agriculture have been related by purpose and design to control, as a means of dealing with the problems created by our farmers and our growing productivity. Each sector, my point is, of activity must be approached on its own merits and on terms of specific national needs. Generalities in regard to Federal expenditures, therefore, can be misleading--each case, science, urban renewal, education, agriculture, natural resources, each case must be determined on its merits if we are to profit from our unrivaled ability to combine the strength of public and private purpose.

Next, let us turn to the problem of our fiscal policy. Here the myths are legion and the truth hard to find. But let me take as a prime example the problem of the Federal budget. We persist in measuring our Federal fiscal integrity today by the conventional or administrative budget--with results which would be considered absurd in any business firm--in any country of Europe--or in any careful assessment of the reality of our national finances. The administrative budget has sound administrative uses. But for wider purposes it is less helpful. It omits our special trust funds and the effect they have on our economy; it neglects changes in assets and inventories. It cannot tell a loan from a straight expenditure--and worst of all it cannot distinguish between operating expenditures and long term investments.

This budget, in relation to the great problems of Federal fiscal policy which are basic to our economy in 1962, is not simply irrelevant; it can be actively misleading. And yet there is a mythology that measures all of our national soundness or unsoundness on the single simple basis of this same annual administrative budget. If our Federal budget is to serve not the debate but the country, we must and will find ways of clarifying this area of discourse.

Still in the area of fiscal policy, let me say a word about deficits. The myth persists that Federal deficits create inflation and budget surpluses prevent it. Yet sizeable budget surpluses after the war did not prevent inflation, and persistent deficits for the last several years have not upset our basic price stability. Obviously deficits are sometimes dangerous--and so are surpluses. But honest assessment plainly requires a more sophisticated view than the old and automatic cliche that deficits automatically bring inflation.

There are myths also about our public debt. It is widely supposed that this debt is growing at a dangerously rapid rate. In fact, both the debt per person and the debt as a proportion of our national product have declined sharply since the Second World War. In absolute terms the national debt since the end of World War II has increased only 8 percent, while private debt was increasing 305 percent, and the debts of state and local governments--on whom people frequently suggest we should place additional burdens--the debts of state and local governments have increased 378 percent. Moreover, debts public and private, are neither good nor bad, in and of themselves. Borrowing can lead to over-extension and collapse--but it can also lead to expansion and strength. There is no single, simple slogan in this field that we can trust.

Obama needs to read this and memorize it!

Read entire speech here.


Tom Hickey said...

Nice find, MIke. The sad thing is that I am willing to bet that President Obama has read this speech and similar ones by other great presidents, especially FDR in light of the present situation. I don't think that it is because he is unaware. For some reason, he has chosen to take another course, and it is sinking his presidency and the country with it.

Not that I blame him primarily. The GOP is acting very badly in blocking needed reform based on bogus reasons. But the president is also getting bad advice from his chief advisors, whom he chose.

Unfortunately, the president and his party seem tied up by both the opposition and also their own governing philosophy, seemingly a continuation of triangulation, along with alienate your own base. As a result, they are only proposing weak compromises and passing half-measures instead of blasting back with effective policy and fighting tooth and nail for it.

Matt Franko said...

It saddens me to see what is going on over at ND2.0 right now. Bo Cutter, who I think would be a key ally in bringing MMT into the OMB (he has contacts there) is now on the defensive about how the Jacob Lew appointment was criticized by Marshall and then Joe F and Prof Wray jumped in. And now you have this Jeff Madrick publishing a piece supportive of the Krugman view. (i saw your comments) Its all over the place there and they are all supposed to be Progressives (ie on the same team).

This apparent disharmony is personally discouraging. Do you think these are "birth pangs"? and perhaps to be expected in this kind of a paradigm shift?

They need to take it down a few notches, calm down and get together on this.

I was going to send Joe Firestone an email suggesting he set up another Teach-In only this time make sure to get more of the key Progressives there (even if they are required to be kidnapped). Even try to get some OMB staffers there to introduce them to MMT if possible.

What do you think?

Tom Hickey said...

Matt, I think that a lot of progressives resistance is to be expected because MMT is still out of paradigm in the mainstream, and it is very difficult to argue with others out of their paradigm. One big problem problem is that MMT addresses problems based on operational realities that most economists do not understand since they are trained in theory and modeling. Of course, they don't care to admit this, or even be drawn into debate where it will become obvious.

Moreover, the MMT approach just does not fit into their modus operandi, which is assumption-based and they have trouble debating assumptions because many of these assumptions are not empirical at all. They function as ideological norms; hence, they are privileged from questioning.

Most significantly, MMT requires a suspension of the old way of looking and adoption of a new way of seeing. People that are heavily invested in the old way of looking aren't really open to taking off their ideological glasses. It's difficult convincing people that their ideas are wrong when their livelihood and reputation depends on maintaining such views.

So it is a long, slow slog and requires persistence. Bill Mitchell has courageously invested an entire career in it, and the goal still seems out of reach. But it is getting closer. People aren't getting way with erroneous claim anymore and MMT'ers proliferate and begin to confront them.

MMT needs to become higher profile and this requires well-publicized and well-attended events. The opposition knows this and they have done very well exploiting it and getting media coverage. MMT needs to take every opportunity possible to get the word out. The Financial Sustainability Teach-In was a great start with an impressive panel of experts. We need more this on a regular basis. That will require raising contributions, and as more people get involved, that will happen.

We also need more "celebrities" on board. MMT has hit the front page, so to speak, through Jamie Galbraith. If we get a couple more well-known and oft quoted folks like that on board, much of the publicity will be free.

Matt, I first became an activist when I was on duty in the military during Vietnam and learned what was really going on. When I got out, I joined the anti-war movement, like John Kerry and others. During the Nixon years, things looked impossibly bleak, but the rest is history. You can never tell what is going to happen.


Tom Hickey said...

Matt, I know how disappointing and shocking it can be to find even progressives supposedly for reform spouting the orthodox view. It's a long slog to change ingrained ways of thinking. We just have to keep at it persistently. I have seen thing improve greatly since I got involved only about a year ago. It is happening, albeit gradually.

Moreover, there is no such thing as bad publicity. Having people talking about MMT is a plus, regardless of what they say. If they have it wrong, then they need to be confronted. Recent experience is encouraging in this regard. While I recognized quite a few of the names in the comments, there are also many that I haven't seen before. I think that momentum is building. So people like Krugman and Madrick criticizing MMT is actually good news. Many more folks heard about MMT through Krugman's posts than through the Financial Stability Conference, even though the presenters were far more knowledgeable about viable solutions than Krugman, who is still stuck in monetarism.

I think that more events like the initial Financial Stability Teach-In are indispensable. Blogging and academic works aren't going to do it alone. It requires media attention and that necessitates events and celebs. Things have really perked up since Jamie Galbraith got active recently. It's happening. Events with celebrities is even better. Something to work on.

Matt Franko said...



Even Mike's post here from JFK from 50 years ago and under gold standard presents alot of MMT compatible views on debt/deficits. So these views have been out there. 'gotta keep advocating...

You know I took one of Mike's courses on Macro and Mike used WEBEX and it was pretty slick. Perhaps one/two of the MMT elite thought leaders could do a WEBEX if they cant get everyone together physically for another Teach-In.

Promote it on the blogs and charge a small subscription fee to cover the WEBEX costs, etc.. really coerce some other key people who are out of paradigm to watch/participate in the WEBEX conference...

Tom Hickey said...

Great idea, Matt. Technology is the way to go. I do think that there is a place for high-profile events that get media attention, but they are expensive. However, if the media pick it up, then the expense is relatively small relative to the monetary value of the free publicity. So let a hundred flowers bloom. Let's give it all we got.

mike norman said...

Great discussion guys. Tom, I have been saying for a long time that our cause needs to get more aggressive at fund raising. Getting the message out in any sustainable and mass-market way is going to require money and lots of it. Warren has personally contributed and my hat's off to him. However, the effort needs more focus. After all, we are up against Peterson and his billions. A great project would be an "Asset Clock" that would go right up there next to the dreaded "Debt Clock" in Times Square!

googleheim said...

Here is a slogan :

while Raygun printed for bombs, we need to print for people.

"don't print for bombs, print for people"

again, I have to point out the SuperConductorSuperCollider that was killed off in 1994 by the Republican congress and created a mini recession in Texas.

We could have a 42 Terra Electron Volt super particle collider, and instead we got Newt Gringrich who stole X-mas with his Austrian two step Austerity shut-down the government and Barney ( purple dinosaur ) ...

Then the German Austrian Austeritists turn around and get Switzerland and it's ability to print with its Swiss cheese to cough up the Large Hadron Collider with a mere 14 Terra Electron Volts but it is still the biggest machine.

Therefore, just as Norman says we are ceding our economic leadership to China, we are also ceding our fundemental scientific leadership to Europe in the name of THEIR Austrian Austerity.

So instead of an $14 billion dollar machine at 42 TeV in OUR backyard, there is a measly 7 to 10 Tev at the cost of $6 to $8 billion during the inflated Bush years in THEIR backyard.

Who paid for their toy ?
Where did they "print" the money?
Why are there so many tunnel projects in Switzerland ...do I hear infrastructure deficit spending?

googleheim said...

I'd like to point out what I pointed out before - that there is a form of "printing" in the Real Economy as opposed to that within the "Imaginary" economy of Fed & Treasury -

WHEN these banks especially goldman stanley etc created CDO's and other instruments what they were doing is piggy backing debt on debt, paper on paper. They increased the size of the economy but it was hot air.

This is a form of printing and when the music stopped, things imploded much more than what ever could happen with stimulus spending.

We know that stimulus spending is what creates the I = S relationship. Any credits formed within the Fed/Tsy are instantly mutliplied into investments and savings as a function of said spending.

The problem are these banks

Matt Franko said...

You got it Goog!

All the banks really do is loan against Property and Autos. All other lending they do is very minor to their overall business.

They have created a business that is very fee and/or commission oriented. They only originate debt and often intend to offload that debt or otherwise get it guaranteed by the Govt if they hold on to it. In sthis past sub-prime debacle, they even got Henry Paulson to go to DC and bail them out of investments that didnt even have the govt guaranty. Hows that for size? If you dont have a govt guaranty, get your guy to DC as Treasury Sec. and he'll roll Congress for $350B to get you out of it anyway!

But now they are stuck. May's housing starts #'s of 267K times $200k per house only represents 53B annual of new credit creation, and auto sales are waay down also. Several years ago, bank credit was expanding at over 500B annual. They are dead in the water at these rates of housing starts and auto sales.

You know all of these idiots in the media who go on about debt and deficits, bankruptcy, etc..are mostly representing banks and financial cos., they are also actually screwing themselves over....I wonder if the moron banks will ever figure this out? If they ever did they should demand that Rick "stop spending" Santelli be taken off CNBC, and Glen "stop spending" Beck be cnacelled on Fox.

The banks are so stupid. If they ever want to make serious dinero again, they would get their morons who rage about deficits off the airwaves and instead focus on govt policies that promote full employment and incomes so people could once again go out and buy houses and cars and we ALL would make a lot more money...


Anonymous said...

Learn wisdom by the follies of others.............................................................