Saturday, August 11, 2012
Romney-Ryan 2012 — Open Thread
What say you? Or does anymore need to be said?
I see this election as a referendum on the basic direction of the country. But this direction will not be presented completely clearly to voter for two reasons. First, the parties themselves are not united around a clear vision and path, and secondly, politicians don't like showing their hand when doing so revealing an agenda that is unpopular with voters.
The GOP is clear where it wants to take the country. There is a basic division in the party between the Laffer crowd of supply siders and the fiscal conservatives who regard the Laffer position (deficits don't matter) as "voodoo economics." Romney and the GOP Establishment belongs to the former and Paul Ryan the conservatives to the other.
The Democrats not so much. There is still a tug of war between the Third Way New Democrats and the Progressives, and the Third Way New Democrats are in power.
So look for a lot of sophistry, obfuscation, and distraction rather than substance and argument.
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112 comments:
This is another GOP hail mary pass, and I couldn't be anymore thrilled with Paul Ryan as potential VP. This is the discussion I want to have.
America thinks we need to balance the budget. Fine, I get that. But it's beyond irresponsible to "balance" the budget off the backs of seniors and the poor. You don't get to ignore half the equation (and military expenditures) when having this discussion.
We need to establish what our priorities are as a nation. Let the debates begin!
Dis to the Evangelicals seems like... the Mormon picks the Catholic... that may flare up.
Fiscal:
Perhaps Romney thought he needed "fiscal responsibility" cred TO COUNTER THE DEMS ON THIS ISSUE..and thus chose Ryan for this reason... the Dems after all have the Simpson-Bowles commission and Peterson backing on the deficit issue..
The Dems might have hit Romney over the head with the deficit issue if he didnt pick Ryan.
So I of course blame Democrats for this debacle ... it's all the Democrats fault! ;)
rsp
Given Ryan's political baggage and the country's changing demographics, this does not make a lot of sense in terms of popular politics. However, if it is true, as I think it is, that politics today is a parlor game for the super rich rather than an exercise in popular self-government, it does make sense.
The modern Republican Party is made up of two factions: a) the corporate elite, who created Ryan, and b) evangelicals, who are somewhat suspicious of both the Mormon Romney and the Rand-loving Catholic Ryan, but who will vote for anyone who is not a wily Kenyan. Four years ago, John McCain allowed the evangelical wing to strong-arm him into picking Palin. If memory serves, he wanted Lieberman, but Jim Dobson and others told him they'd turn on him if he chose Lieberman, so they "compromised" with Palin. Disaster ensued. This time, Romney appears determined not to repeat McCain's error, so he let the corporate elite strong-arm him. We'll see how it works out.
I can't help but wonder if there isn't something poetic about David Barton's ludicrous Jefferson book being pulled on the same day we learn about Romney's choice. Barton overreached and is getting push-back even from people who share his politics. Ryan will overreach, as well. Ideologues always do. The problem is, if a second Obama administration administers our next dose of austerity, it will be politically diluted by the Democratic Party's reputation as the pro-social service party in much the same way Nixon's trip to China was diluted by his reputation as a Cold Warrior. But the economic damage will be the same. If Romney-Ryan administers the dose, then they get the blame.
I'm happy with the Ryan pick because I think it's important that D candidates especially be forced to state a very clear position on whether or not they will support entitlement cuts under any circumstances. Before the Ryan pick it might have been possible for the Rs to run a campaign focused only on jobs, and the various side issues which arise. But now, with Ryan nominated, a discussion on entitlements both SS and Medicare can hardly be avoided.
The Ds will try to run by attacking Romney/Ryan as the would-be destroyer of Medicare, and presenting themselves as the saviors of entitlements as Medicare as we know it. But this opens every D candidate to a question about what they will do when a "grand bargain" is proposed that includes some tax increases and much heavier spending cuts including cuts to entitlements.
At this point we must seek commitments from D candidates that they will never vote for entitlement cuts whatever Obama wants, including changes to the COLA formula which slows the rise in their benefits from year-to-year. We must get them on the line on this with a clear understanding that if they go back on their promises, they will lose in the next election. We must also make clear to them that if they don't make an iron clad commitment for this election, then they will be gone by the end of the year. I've written ore about what should be done here: http://www.correntewire.com/defending_entitlements_against_the_debt_terrorists
I realize Obama isn't a progressive but hopefully this will end all the talk about him being essentially the same as the Republicans.
On the one hand, Ryan stands as a very stark difference for where the american conservative movement is pushing to take the country. This should broaden the debate. On the other hand, because Ryan is so far to the Right, does that mean Obama can stay center to center-right in order to sound Left-enough for the liberals? Is the Ryan pick a win the battle (the election), but lose the war (the causes)?
Either way, this pick should make for interesting political debate.
edit:
Is the Ryan pick a win the battle (the election), but lose the war (the causes) FOR PROGRESSIVES?
After the strategy of defining Romney before he defined himself, which likely would end with the Republican convention, I think the next stage would to paint Republicans as wanting to cut taxes for the "rich" at the direct expense of middle-class programs like Medicare, Social Security etc. That strategy would take dollars for many many ads to explain the connection between Romney and Paul Ryan's budget, and equally important time. With Paul Ryan as VP, it will now cost much less money and time because the press will likely hit on Paul Ryan's budget a lot and the Obama campaign does not have to waste time nor money explaining any connection between Romney and Paul Ryan's budget now (Romney directly did that for them of course) - they can instead just quote excerpts from the budget.
Paul Ryan used to work for Jack Kemp, so you mean he's the supply side candidate, right? You said "former", but meant "latter", right?
Krugman has Ryan's number, he's a flimflam man. His balanced budget plan doesn't actually balance until the 2040s, the spending cuts are used to offset tax cuts for the wealthy.
Romney (like his father) strikes me as a Lord Milner-style gas and water socialist (to make a British political reference from the Great War). A rich man who understands there's more money to be made and wars to be won if there is social peace (via govt programs) at home.
Its the difference between cutting taxes while increasing Medicare benefits (as George W. Bush did) and cutting taxes while cutting Medicare benefits (as Paul Ryan proposed).
That Romney picked Ryan is a sign of weakness, he let conservatives stampede him. You move to the center during a general election, not further right.
beowulf wrote "That Romney picked Ryan is a sign of weakness, he let conservatives stampede him. You move to the center during a general election, not further right."
I guess he used a Chinese made Etch A Sketch.
Stop the whining. Everyone knows there won't actually be any cuts in social security or Medicare no matter who is elected. And since when did the V.P. actually do anything besides photo ops. Geez...
Everyone knows there won't actually be any cuts in social security or Medicare no matter who is elected.
Wrong. I have good reason to believe the ONLY person who can slash social safety nets is Obama. Ryan on the ticket forces Obama to make clear distinctions, hopefully tying his hands if re-elected.
And since when did the V.P. actually do anything besides photo ops. Geez...
Tell that to Palin, who in all likelihood forced independents into the Obama camp in 2008. And someone who has become a "rising star" among Mea Party activists since. No one would have ever heard of her otherwise.
Paul Ryan potentially suffers the same fate. Sans the photo ops.
It may be a "referendum" but both candidates support the same policies. They are identical on the major issues -- gutting the New Deal, destroying the middle class, handing out billions to bankers, expanding the surveillance state, supporting endless war, ignoring climate change. These are all self-destructive, cannibalistic policies that are destroying American democracy.
There are insignificant (to the 1%) differences on social issues that only affect subordinate minorities.
If you vote for either one of them you are a fool and a tool and should hold yourself personally responsible for the decline of America.
Ryan shifts the debate to the right. Instead of debating "how do we grow the economy and put everyone to work" we'll be debating "my austerity deficit reduction plan is better than yours."
I'm disgusted with both legacy parties.
As many have said (including David Korn in particular), this is a great VP pick from the Obama perspective. So much for Rmoney being a closet Keynesian -- he's clueless all the way through.
There is a big difference between Obama and Romney. Romney is clearly all out for economic policies which are 180 degrees the opposite of what we need. More tax cuts for the rich and austerity for the rest is clearly Romney's closet motto.
Obama is a mainstream, status quo guy, and that is the best we can do from this election. A vote for Obama is a vote against Orwellian distopia...
Obama's pretty status quo except he certainly intends the weaken the safety in the name of fiscal sustainability. The question is whether we can make his party unwilling to go along with him on this and bring him around to another way to get long-term deficit reduction.
Supply-siders advocate government spending cuts as well as tax cuts, with the aim of reducing government debt over time and maintaining what they call "sound money". So I don't they believe that "deficits don't matter".
JK, this is now a battle to capture the center where elections are decided. Ryan will be no help with the center and the Democrats will remind the country of how far to the right he is. Romney will have to respond by emphasizing his more liberal credentials.
beowulf: Paul Ryan used to work for Jack Kemp, so you mean he's the supply side candidate, right? You said "former", but meant "latter", right?
That may be, but the public's memory is short and now Ryan is associated, rightly or wrongly, with the conservative and Libertarian position.
I agree that Ryan, like Romney, is a more pragmatic and flexible than the base thinks or they would admit. But they may be forced to during the rest of the campaign to capture the center. Notice how fast Ryan back away from Ayn Rand when it became an issue. But right now, he is being positioned as the Koch candidate and not an Establishment candidate.
Anonymous: "Stop the whining. Everyone knows there won't actually be any cuts in social security or Medicare no matter who is elected. And since when did the V.P. actually do anything besides photo ops. Geez..."
I am looking at it here in terms of the choice being presented to the voters. Ryan was chosen, as Palin was for McCain, to energize the conservative and Libertarian base. So this election is definitely about how far right the direction of the country should be.
As beowulf noted, Romney moved to the right with the Ryan choice rather than the center, which would be the move that would be expected politically if the base were shored up, as it usually is at this time before the election. Romney is already having trouble holding the Big Tent together, when the far right is willing to downsize the tent.
At first blush picking Ryan looks like a huge gift to the D.'s. It removes the ambiguity about the direction Romney wants to take on the economy, which is what he's running on. Ryan would have probably been more effective promoting his plans from where he was. This raises the level of scrutiny and exposure that the supposedly charismatic Ryan will be subjected to. When Newt Gingrich was the right wing rising star, the more the country was exposed to his outlandish ego and callous policies the less it liked him.
I think the deeper game being played as Dan Lynch mentioned, is moving the Overton window to the right, turning the election into a referendum on "how" we're going to balance the budget, and not anything we the people might be legitimately concerned with.
It may be a "referendum" but both candidates support the same policies. They are identical on the major issues -- gutting the New Deal, destroying the middle class, handing out billions to bankers, expanding the surveillance state, supporting endless war, ignoring climate change. These are all self-destructive, cannibalistic policies that are destroying American democracy.
Yes, that is the hidden agenda. No politician is going to admit to that publicly. Elections are about "the agenda for America," not the hidden agenda, which is the real agenda.
Odds are right now that Obama will retain the presidency and the GOP will take Congress. They Obama will be "forced" to compromise by agreeing to large cuts to social spending in exchange for some crumbs that may never even stick anyway.
Only Nixon could go to China, only Obama can cut social programs significantly.
A reporter for a small local paper in my home town wants a quote on why the Ryan plan would be bad for the economy. It needs to be 2 to 3 sentences max. Any thoughts on how to be concise with such a criticism?
JK, A reporter for a small local paper in my home town wants a quote on why the Ryan plan would be bad for the economy. It needs to be 2 to 3 sentences max. Any thoughts on how to be concise with such a criticism?
You are capable of doing it. Here's the logic.
The Ryan budget aims at balancing the budget. Every time in the past that the US has done this, it has been followed by a recession or depression. The reason is that the national debt is actually non-govt saving of net financial assets, so in reality cutting the "national debt" amounts to reducing financial wealth.
Thanks for the vote of confidence. 2-3 sentences is tough. Feels like everything I try to say needs to be qualified with more perspective.
I'll come back and comment with what I decided on.
y said... Supply-siders advocate government spending cuts as well as tax cuts, with the aim of reducing government debt over time and maintaining what they call "sound money". So I don't they believe that "deficits don't matter".
The Laffer agenda is to cut social spending and replace it with military spending and crony capitalism, e.g., subsidies, deregulation, etc., while drastically cutting taxes. The deficit would either remain the same or grow.
According to Warren, Laffer, the originator of supply side, understands MMT very well and would use the principles to further the agenda of the right.
Although he does not claim to have invented the Laffer curve concept (Laffer, 2004), it was popularized with policy-makers following an afternoon meeting with Nixon/Ford Administration officials Dick Cheney andDonald Rumsfeld in 1974 in which he reportedly sketched the curve on a napkin to illustrate his argument.[10] The term "Laffer curve" was coined by Jude Wanniski, who was also present. The basic concept was not new; Laffer himself says he learned it from Ibn Khaldun [1332-14O6] and John Maynard Keynes.[11]
I wonder if conservatives know that the Laffer curve is Islamic and Keynesian? :o
A simplified view of the theory is that tax revenues would be zero if tax rates were either 0% or 100%, and somewhere in between 0% and 100% is a tax rate which maximizes total revenue. Laffer's postulate was that the tax rate that maximizes revenue was at a much lower level than previously believed: so low that current tax rates were above the level where revenue is maximized. Wikipedia
Sound like something we've all heard Warren repeat — "Taxes are too high for the size of govt." MMT holds that the tax rate is so high that as the economy recovers it gets choked in the crib.
MSNBC villagers w/Chris Matthews saying it will be a simple election to make a choice because the differences will be so clear cut. They never mention that the choice is hard because both sides routinely lie. So, just because the Ds say that they will save entitlements, doesn't mean they won't cut more deeply than the Rs who say they want trim them.
Tom -
No, that's not Warren's argument. Warren thinks that "revenues" are irrelevant for a currency issuer. He thinks that taxes are too high to allow the economy to run at its full potential.
I suppose tou could look at in terms that , if the government were trying to maximize the real resources it had to make use of (call it the "shear the sheep" theory), it would set taxes low enough to allow for maximal growth. But that has nothing to do,with "revenue"...
Ok, so the question I was asked for a quote for the local paper was: "What's your reaction to Romney's decision to choose Paul Ryan as his vice presidential running mate?"
My soundbyte response was this:
~ Romney's selection of Paul Ryan indicates tacit support for an economic plan that seeks to balance the U.S. Government's budget. This would exacerbate unemployment. Ask any business owner what would cause them to hire more employees, and you'll likely hear: an increase in sales. The economy is starving for dollars to be spent on goods and services, and balancing the budget would remove spendable dollars from the economy. I cannot vote for that. ~
Any thoughts?
Kotlikoff/Ryan moronfest: "Paul Ryan Pick Shows Romney Is Serious About Protecting Our Children"
http://www.forbes.com/sites/kotlikoff/2012/08/11/paul-ryan-pick-shows-romney-is-serious-about-protecting-our-children/
Yes! do it for the children you f-ing morons!
let us re-iterate to you guys our perspective on mitt romney, from first-hand experience working closely with the bain cap. guys.
mitt romney is a sado-corporatist. he doesn't care whether the pie is constant, shrinking or growing - all he wants is to grab other people's share of the pie for himself. he derives pleasure from this as well as having the authority to dispense the crumbs from the pie to those he chooses.
the reason for his disconnect with the public is due mainly to the fact that he detests diversity (he became bill bain's protege due to the fact that they think alike on this issue - everyone has to look and act the same as them or there is something wrong with them); and he doesn't care about social issues, only about personal gratification (re. 1st paragraph about pie capture)
so, ryan as wingman was a natural choice for him. ryan looks exactly like what bill bain and mitt would approve of - fit, athletic, well groomed,clean cropped/gelled hair, black/blue suits with white/light blue shirts and conservative colored ties. overlay that with his pie capturing policies and you can see it was a no-brainer.
what does this mean? well, it would mean a whole slate of romneyhood policies, sharply accelerating the already high-gear wealth transfer.
p.s. if any one in the 99% votes for this ticket, don't blame them for shafting you for what you have left - it is clear as the light of day what they intend to do - and if you are stupid enough to vote against your own interests, well then the world is better off w/o you anyway.
Tom,
Agree with Jim's comment above... the "Laffer curve" is complete garbage from go because it's basis is a desire to show how govt can acquire exogenous money thru tax revenues...
this should be called the "Moron Curve"...
It is based on gold standard thinking and hence garbage for revealing anything about our current system. It is of NO VALUE and NO EFFICACY.
rsp,
Jim Baird No, that's not Warren's argument. Warren thinks that "revenues" are irrelevant for a currency issuer. He thinks that taxes are too high to allow the economy to run at its full potential. I suppose tou could look at in terms that , if the government were trying to maximize the real resources it had to make use of (call it the "shear the sheep" theory), it would set taxes low enough to allow for maximal growth. But that has nothing to do,with "revenue"...
True that WM doesn't mention "revenue" since it is not directly relevant the way MMT looks at it. However, it is highly relevant indirectly in that taxes are booked as "revenue."
It's like "public debt." The words mask what is actually happening operationally, but that is the way the numbers are booked and the numbers are highly relevant in aggregate.
It is true that under the currency monetary system, govt doesn't need revenue to spend, but to get reserves for spending under the current system in the US, either rb from taxes have to be credited to the Tsy account or the Tys must "borrow" i.e. issue tys that are auctioned by the Fed before the Fed can credit the Tsy account with rb.
While we know from operational description that, strictly speaking, govt funds itself without revenue or borrowing, taxation and Tsy issuance are required by law.
And Laffer knows that as well as Warrren. Both Laffer and Warren realize that tax rates are too high, withdrawing too much from the economy, and they know why. They just use different words to talk about it.
Beg to disagree, Matt. I think that Laffer and Warren both recognize that there is an optimal tax rate for the size of govt that the electorate desires and they know how to achieve it operationally. The difference is just in the specifics involving political choices. Warren is center-left and Laffer is center-right. The left and right don't have a clue about what the actual issues are, let alone how to approach them operationally.
Interesting, SR.
This is why Romney is trying to declare discussion of Bain off limits in the campaign. Good luck with that. People are catching on to who Mitt really is, and they don't like it.
When Tom says Obama will be "forced" to cut social spending, it is right on and the same can be said about enforcing laws with regard to financial crimes. No worries for GS or JPM.
You can judge the strength of a president in part by the number of vetoes (also by enforcement of laws, etc.):
https://en.wikipedia.org/wiki/List_of_United_States_presidential_vetoes
Compare FDR/Truman/Eisenhower to Obama. And the republicans recognize weakness when they see it.
This is why the GOP fears him and tries to marginalize him a "socialist." They see him poaching the moderate GOP vote to capture the center while they are moving more rightward than the country wishes to go.
tom,
for more info on bain and it's practices, please read "dangerous company: consulting powerhouses and the companies they save and ruin". in the chapter on bain, it details one episode in which bill bain came back to the office to find a fat receptionist at the front desk - he threw a fit & immediately ordered her to be removed as she didn't fit the "image" of the firm. it also details how bill bain never disclosed the company's profits even to the partners & doled out bonuses as he saw fit (which implies how much he liked you).
can tell you from 1st hand experience about how one of mitt's ex-inner circle guys in bain cap.(he is still there running a region) thinks and you can use this as a proxy to gauge how mitt thinks. one day, 3 of us walked past a guy on the street holding up a placard looking for a hand out. the 3rd guy in our group who happened to be a financial controller plunked down a few coins and the bain guy engaged me in a discussion about whether to give to anyone asking for money. he said he would never give money to such a person because you don't know whether he committed serious errors that lead to him having nothing or whether he squandered his past wealth on "entertainment" etc.
so basically, he thinks 1) if you are poor, it's your fault 2)any sort of social contract such as social security or medicare or medicaid or taxes is taking money out of his pocket to give to others.
therefore, have no hesitation in saying he will erase as many such programs as he can if he is elected.
"to get reserves for spending either rb from taxes have to be credited to the Tsy account or the Tys must "borrow" i.e. issue tys"
A positive balance in the Treasury account is always matched by an equivalent liability in the Fed's account, meaning the government has net $0. How can the government spend $0?
y,
The appropriations law allows the Treasury to perform an accounting transaction that assigns the USD balance asset to the non-govt sector. (ie TGA marked down, Senior citizen SS recipient's bank account marked up)
After this transaction, the Fed still has the liability, but now the asset is in the non-govt sector...
(In double entry accounting, all transactions "net to zero")
rsp,
Matt,
I've made a simple diagram which I think shows how taxes destroy money.
http://www.flickr.com/photos/84792170@N03/7765255644/in/photostream
Can you tell me whether you think it's correct?
y,
looks good, some things I would point out:
In your "2", even though the consolidated govt position "nets to zero" (AS ALL BALANCE SHEETS DO), the Treasury account is still +1
Then also a point on semantics: bringing in the terminology "destroy money" introduces the real into a situation that is abstract.
iow you are starting to mix the real and the abstract and this is never a good idea. Mathematically weak minds can then start to become confused and can no longer separate the real from the abstract.
Its like using "units" in the sciences and engineering: for example, in a closed pressurized system, we use the units "pounds per square inch" or psi as units in order to do the engineering, but THERE ARE NO "REAL" POUNDS INVOLVED, they are abstract units.
So if you have a tank that is pressurized and you tell someone: "hey, there is 250 pounds per square inch in this tank" .... if the person responds: "ok, let's open that tank up then and have a look at those pounds", then you are talking to a moron.
Or if you open up the tank and the pressure equalizes with the ambient, you wouldn't say "hey, we really destroyed those pounds in there didnt we!"
iow what you are contemplating is "destroying the pounds" when you say "destroying money". The whole premise of "destroy money" is VERY, VERY poor semantics.
It starts to lean back on "metallic coin thinking" which when all we had was real physical coins to use (no modern Information Technology) i guess those physical coins could be "destroyed" but today we work in the abstract because we have invented real time information systems to keep track of all of these balances.
So "destroy" is not a term I would use in trying to explain how our current system of state currency operates today...
Rsp,
y,
It's like the people today who still use the phrase "printing money" as in "ok, yes we can always let the Fed print money".
Use of this phrase is a tip-off that you are talking to a WEAK MINDED MORON with little to no capability for abstract thought.
A mental midget.
Certainly someone who has no business operating in or around macro economics either as a policy maker or journalist and certainly NOT an academic.
Rsp,
Both Laffer and Warren realize that tax rates are too high, withdrawing too much from the economy, and they know why.
This description is problematic for me and leaves the important distinction between who is taxed and why unsaid.
Taxes on SPENDERS (ie workers) are too high, taxes on ACCUMULATERS (the rich) are too low.
Just saying taxes are too high buys into the framing that taxes are BAD.
Taxes are NECESSARY for the proper functioning of a system that has a natural tendency towards decay (due to the various modes of SAVING).
paul, Warren says that taxes are too high for the size of govt chosen. The implication is that there is an optimal way to withdraw funds from non-govt for the size of govt chosen that optimizes investment, production, and productivity. It's getting "the most bang for the buck" even though the buck is not actually funding anything.
Economists talk about accounting entries in terms of "borrow" and "save," "tax" and "spend," etc., which is misleading terminology, but the accounting entries remain the same however they are expressed in language about them, and there is an optimal way to arrange the accounting entries wrt the real economy to obtain optimal output, employment and price level. That's the point of MMT. and Laffer also understands that.
This ordinarily involves running a govt deficit. Here the question is the balance of taxes v. "spending" and the details of distribution. Economics can also cast light on this, but ultimately that is a political decision. Presumably a well-informed electorate and representatives that actually represented their constituents and the country would arrive at a reason solution through compromise. But when the political process is skewed so that the wealth and power have the predominant influence that doesn't happen.
@y
From the MMT POV
"print money" = increase non-govt NFA
"destroy money" = decrease non-govt NFA
I agree that both "print" and "destroy" are confusing so it is best to avoid them.
As I recall, Warren introduced the terms to counter "printing money" as the Fed increasing monetary base, i.e., amount of rb, through QE. The Fed's buying tsys is an asset swap that increases the level of rb but doesn't affect non-govt NFA, and its selling tsys thereby reducing the level of rb doesn't affect non-govt NFA either, so no money printing or destruction is involves in monetary ops like QE. Fiscal is the opposite. It affects non-govt NFA.
Out of the context of an explanation about NFA v. the monetary base and the difference between fiscal and monetary, using "print" and "destroy" invites confusion.
SR, I had heard the story of the fat secretary and Bill Bain's obsession with fitness and "dressing for success," as well as the extreme "Protestant ethic." But your personal story puts flesh and bones on it.
One of the fundamental teachings about management is that the leader(s) set the culture that everyone below them will emulate. Pretty much like parenting. Certainly Bill Bain knows this and chose the cultural paradigm he desired Bain & Co to operate out of.
Romney is a chip off the old block. Did you see this?
Mitt Romney Started Bain Capital With Money From Families Tied To Death Squads
Tom,
paul, Warren says that taxes are too high for the size of govt chosen
Of course I agree with this. The problem is in repeating this without qualification to the public-at-large.
We understand the nuance but most won't.
In our current political climate, taxes are being framed as "bad" as is the deficit.
We shouldn't be making arguments that fall into this trap.
Taxes are a necessity for a healthy economic system and society at large.
We need to be more specific about which taxes are helpful to the 99% and which ones aren't.
In the current climate progressive taxation is framed as a "bad" thing, contrary to the needs of society.
Good link Tom, I found this interesting:
"Lloyd Blankfein, Chairman and CEO of Goldman Sachs, who is a registered democrat, referred to himself as a "Rockefeller Republican" in a recent CNBC interview in April 2012."
Registered Democrat = Blue Dog Democrat = Rockefeller Republican
And you also have the Progressive Democrats, which means the Democratic Party has Dissociative Identity Disorder. The republicans have gone Tea Cult Crazy with Wealthy Malefactor backing.
Bottom line - Both parties need psychiatric help. Just like that chinese saying "may you live in interesting times."
I found this interesting,
sounds similar to the Wealthy Malefactor Plan for America (replace education with superstition):
"What I have just read, though, is the account of the influence of positivism on the rise of anarchism (the term was not in general use at the time of the Commune) in Russia. The Tsarist court were so alarmed by the claims of the positivists that science could build a new society freed from superstition that they attempted to ban it (as well as workers’ education)."
https://cartesianproduct.wordpress.com/2012/07/07/russian-science-in-the-nineteenth-century/
Matt,
In my diagram the +1 in the Treasury's account is NOT money!
It's just a number - a record of tax 'collected'
I used the simplest possible example of a $1 note to make this point in particular.
When the non-govt holds the $1 note, the note is money (it is a liability of the govt and an asset of the non-govt).
When the Treasury holds the $1 note, the note is NOT money!
It's just a piece of paper!
That piece of paper only becomes money again when the government issues it to the non-government (i.e. when it spends)!
The Treasury may refer to a positive balance in its account as an 'asset', but in actual fact this is just a word they use to denote the quantity of money that has been destroyed by taxation.
The Treasury's so-called 'asset' is a government liability!
The government does not need "funds" in the Treasury's account before it can spend.
Instead, it has a self-imposed rule that it can only spend as much money as has been already destroyed by taxes or bond issuance.
"We need to be more specific about which taxes are helpful to the 99% and which ones aren't"
I think this is what differentiates Mosler, UMKC and MNE.
As far as I can remember Mosler never refers to taxes as a means of redistributing spending power. Instead for him they are just a way of 'regulating aggregate demand'.
Instead for him they are just a way of 'regulating aggregate demand
Sure, but does taxing the 0.1% and above have any traction in regulating demand, other than through the redistribution channel?
re my previous comment, what I am getting at is in that case higher taxation can increase demand, because it is redistributed to those that would be most likely to spend.
paul: Of course I agree with this. The problem is in repeating this without qualification to the public-at-large. We understand the nuance but most won't.
Agree.
Matt,
"the consolidated govt position "nets to zero" (AS ALL BALANCE SHEETS DO)"
Do they?
For the non-govt to have a positive balance in government assets (currency, bonds etc), the govt has to have a negative balance. (I'm no accountant)
"does taxing the 0.1% and above have any traction in regulating demand"
probably not that much, if you're looking at the CPI for signs of inflation.
Who and how to tax in different macroeconomic conditions hasn't been clearly laid out by MMTers I think..
y: In my diagram the +1 in the Treasury's account is NOT money! It's just a number - a record of tax 'collected'
The accounting entries record the rb credited to a Tsy account for banks' reserve accounts at the Fed, with banks' debiting taxpayers' account at the bank. So taxpayers' deposit account are marked down, and banks' reserve accounts marked up, then banks' reserve accounts are marked down and a Tsy account is marked up.
what I am getting at is in that case higher taxation can increase demand, because it is redistributed to those that would be most likely to spend.
I shy away from the word "redistribution" because to me it implies a taxes-fund-spending connection that kind of clouds the issue.
Could any of you say whether you agree or disagree with the point I made that reserves/notes etc held by the Treasury are not in fact money (i.e. they're just numbers/bits of paper, that only serve as a record of tax 'collected' - i.e. money destroyed).
I want to know whether you think this is incorrect or not.
"higher taxation can increase demand"
I think so.
MMTers often say that 'savings desires' reduce demand. Taxation basically reduces those 'savings desires' by taking away those savings.
that's something that's a bit odd about MMT - the idea that government deficits should always accomodate 'savings desires'.
You could also just redistribute the savings through tax. No need to accomodate *everyone's* 'saving's desires'
y, when taxes are collected they extinguish that amount of non-govt NFA.
It's difficult to say exactly what is money and not money. Rb in the TSy TGA is apparently not "money" in that it is not figured in any of the measures of
money." At the top of the hierarchy of money is HPM ( high-powered money). This excludes rb in the TGA, but it includes rb in the Tsy's TTL accounts in commercial banks.
In economics, the monetary base (also base money, money base, high-powered money, reserve money, or, in the UK, narrow money) is a term relating to (but not being equivalent to) the money supply (or money stock), the amount of money in the economy. The monetary base is highly liquid money that consists of coins, paper money (both as bank vault cash and as currency circulating in the public), and commercial banks' reserves with the central bank. Wikipedia
"higher taxation can increase demand"
Higher taxation can result in notional demand unable to be met by effective demand, i.e., consumers and firms might want to buy stuff they cannot afford with the higher tax rate.
MMTers often say that 'savings desires' reduce demand. Taxation basically reduces those 'savings desires' by taking away those savings.
Saving desire when met by actual saving reduces nominal aggregate demand, i.e., income not spent def= income saved. If the tax rate is too high wrt saving desire, then the desire to save cannot be met. After all income is consumed or invested, then increased borrowing, drawing down savings from previous unspent income, or sale of assets is required to convert notional demand to effective demand.
According to MMT a "full employment budget" makes room for changing saving desire without provide so much effective demand that nominal aggregate demand becomes greater than the capacity of the economy to expand to met it.
I'd say its logical not to count rb within the tsy's account as 'money' as they are simply govt liabilities held by the govt.
i.e. Nothing.
I don't think you can say that there are rb's in the tsy's TTL accounts. TTL accounts are basically bank deposits (bank credit).
Deposits and reserves are seperate categories that do no share the same "physical or conceptual space". Banks move their reserves around independently of their deposits. Reserves are assets and deposits are liabilities, that's all.
"higher taxation can increase demand"
What I meant is that higher taxation with an equivalent level of spending. I didn't make that clear.
i.e. you can increase effective demand by taxing and spending, if you are redistributing spending power from "savers" to "spenders".
I shy away from the word "redistribution"
I can understand that and you are welcome to suggest a better term.
From a system perspective that is what is occuring…it's equivalent to moving sand from the bottom of an hourglass to the top.
In the absence of that, new money must be created and spent into the economy or the system will wind down as savings in all it's forms increase.
I don't see any more options for a dynamic economy. The presence of money alone isn't enough, it has to be spent.
When your heart stops you stop, even though you have plenty of blood.
y,
consider the term "money" is a wide category of things.
Like "fruit" is a broad category and within it you have apples, oranges, peaches, etc...
In biology they have 'kingdom, phylum, class, order, family, genus, species' ie biologists know how to assign and use correct terminology that becomes more specific as you continue thru the nomenclature system.
If you look at the Aristotle quote from my post downthread, you can see how the ancient Greeks used the unique term nomisma when they were writing/talking about the specific kind of what they broadly called a "medium of exchange" that they were using. Aristotle explains what they were SPECIFICALLY doing and it has a UNIQUE terminology.
You would want to avoid discussion where it is claimed "this" is "money" or "that" is "money". That is like someone claiming "apples are fruit" and then someone countering "no, oranges are fruit!"... etc... they both are included in the broad category of "fruit".
Resp,
Y,
you said: "In my diagram the +1 in the Treasury's account is NOT money!
It's just a number - a record of tax 'collected"
Then you get a "+1" from me y ! ;) rsp
I don't think you can say that there are rb's in the tsy's TTL accounts. TTL accounts are basically bank deposits (bank credit).
The TTL accounts are accounts at commercial banks and the amount deposited in the TTL account shows up on the Fed's spreadsheet as rb in commercial banks (not yet transferred to the TGA).
Matt,
Should we use the term "USD balances" when discussing what we generally mean by "money"?
Paul,
I would hope that academic economists would get together on this a nail it down for the rest of us, that is part of their job imo... thats what biologists do and I believe there is a process biologists can go thru when they think they have found a new species...
But short of that, I usually use "USD balances" when I write referring to balances in the US banking system.
Warren calls the broader category of what the systems like are used in the US, Japan, UK, etc... "Free Floating, Non-convertible" currencies, Aristotle and the Greeks/Romans used "nomisma" and Aristotle explains why in a post downthread.
But I am certainly not an economist and it has been pointed out by others that Warren is not an economist either. If economists in the academe dont nail this down then they cant complain when "regular people" take matters into their own hands...
Resp,
"USD balances" it is then for me until someone important decides we should use a different term.
"as savings in all it's forms increase."
a debt obligations increase at the same time of course.
Matt,
"It's just a number"
Yes but money isn't 'just a number' in the sense that I meant - i.e. an accounting record of "money destroyed by tax".
Money is a relationship - a liability of the issuer and an asset of the holder.
When the two are the same "person" - i.e. the government, you have no money!
I gather that "USD balances" means the amount of dollars deposited on account in banks. Seem to include at the Fed, eg., govt holdings of USD balances at the Fed, since govts can have reserve accounts at the Fed in addition to commercial banks. Foreign banks hold dollar balances resulting from their currency exchange operations.
But I have not able to verify this def by searching.
Tom,
"the amount deposited in the TTL account shows up on the Fed's spreadsheet as rb in commercial banks"
Are you sure?
I would have thought the TTL accounts were bank deposits, i.e. promises by banks to pay the Treasury reserves as required, however, they don't 'become reserves' until that payment is actually made.
So TTL accounts are records of taxes owed, but not yet actually paid, or finalised.
"When the two are the same "person" - i.e. the government, you have no money!"
The major stumbling block for critics, it seems, is the belief that Treasury and central bank are purely separate entities with nothing to join them.
But if the Treasury has an asset, whose asset is it?
The government's.
If the Treasury has a liability, whose liability is it?
The government's.
If the central bank has a liability, whose liability is it?
The government's.
If the central bank has an asset, whose asset is it?
The government's
Work it out, MR.
When the two are the same "person" - i.e. the government, you have no money!
As Warren says, the government does not have or not have money. It creates money by issuing credits to non-govt and and destroys it by accepting its credits in payment of taxes, fees, and fine. Money is created in not-govt by govt crediting bank accounts, which increases non-got financial assets. Money is destroyed when deposit accounts are drawn down to extinguish liabilities to govt with a non-govt asset. The asset and liability cancel "destroying money," i.e., reducing non-got NFA.
At the vertical level, money is created when rb are transferred from the Tsy to a non-govt account, that is, a bank's reserve account at the Fed, and money is extinguished when rb are transferred from a bank's reserve account at the Fed to the Tsy account at the Fed.
There seems to be a curious state due to the TTL accounts where there is a lag between the canceling of taxpayer's liability and the transfer of the rb out of the commercial banking system to the TGA for reserve management in addition to OMO when the Fed is not paying IOR and the interest rate is set above zero.
y, reserves = rb + vault cash in commercial banks. Other than commercial banks' vault cash, everything on the Fed's spreadsheet is rb in some account. That's what the entries signify. There is no other significance of the entries as far as I know.
I gather that "USD balances" means the amount of dollars deposited on account in banks.
We may have to revisit this because when I talk of "USD balances" I'm referring to NFA's including government debt held by the public.
Dollars deposited in bank accounts may be offset by liabilies held by others.
I'm mostly concerned with net USD balances.
The overall level of USD balances is a function of leverage and/or individuals ability to service debt.
Credit expansion is not a sustainable vehicle for a steady-state economy, because it is limited by leverage, which is limited by…
…the reality that the people that accumulate the USD balances are not the same people that get caught holding the liabilities, and If they can't somehow interact (it's contrary to human behavior, ie voluntarily giving up those balances) the financial system is doomed to collapse.
Gee, that's waht's happening now.
Paul,
That all may be termed 'USD NFAs' (ie if you include par value of USTs as well as balances in the US banking system).
Y, You may be going down a rabbit hole if you start to think in terms of "money is liabilities" or "money is debt" or whatever.... that may be some other form of "money", but it is not what we are doing in the US today imo... perhaps someone can come up for a terminology for that type of thing...
resp,
"As Warren says, the government does not have or not have money"
agreed*, but critics over there think that because the treasury maintains a positive balance that somehow refutes Mosler's statement (read JKH's stuff). I think someone should refute all that stuff. I re-read his "contingent institutional approach" paper and as far as I'm concerned it is riddled with errors.
*we have to qualify this though. The govt obviously does "have" money denominated in other currencies (foreign exchange reserves).
As I read it, the rb in the TGA is not counted as HPM (apex of the hierarchy of money) and it doesn't fit into any other category of money, .e.g, M1, M2, M3, so it is apparently not "money" as far as I can see. The Fed as cb has no operational limit on the amount of reserves it can create. Does it therefore possess infinite money?
Y: The govt obviously does "have" money denominated in other currencies (foreign exchange reserves)
Let's clarify this further...
... The government doesn't have money because the government doesn't need money - whatever money the government has on it's books is either an abstract accounting entry or a balance held by someone in the non-government.
The government is us.
Under a non-convertible flexible rate regime, i.e., a "fiat currency," there is not limit on how much "money" the government can create (issue). The financial constraint is effective demand. If government creates too much effective demand for the real economy to absorb by expanding production to meet it, then the price level will rise, If the govt creates too little, then economic contraction will ensue. The price level, interest rate, and economic conditions also affect fx rate.
This all depends on the availability of real resources and the use to which they are put. Govt does not directly affect this, although economic policy does indirectly.
Matt:
Let's look at this another way ...
There is currently ...
$54 Trillion in outstanding credit
$11 Trillion in government bonds
$5 Trillion (???) in cash
So ...we have (by the seat of my pant's arithmetic) ...
$59 Trillion in balances deposited in banks, funds, money markets, etc.
$11 Trillion in bonds probably in safety-deposit boxes and safes.
$54 Trillion in liabilities held by various saps in the non-government.
There's only about a $Trillion or so in actual currency (including coins).
Paul, the govt does have reserves of foreign currency though, doesn't it.
Y: Could any of you say whether you agree or disagree with the point I made that reserves/notes etc held by the Treasury are not in fact money (i.e. they're just numbers/bits of paper, that only serve as a record of tax 'collected' - i.e. money destroyed).
I want to know whether you think this is incorrect or not.
Quite right. Wray says as much in several places in his book, e.g. when he says that FR Notes in trucks going to banks is not yet money until the bank gets it.
Other points: Of course the government, the central bank can have money denominated in other currencies. It is only having its own liabilities that are problematic.
You can believe the Treasury & the Fed are purely separate entities with nothing to join them. You can also believe that personality A & personality B of someone with a multiple personality disorder are purely separate and think of their debts to eachother. About as useful for (macro)economic purposes.
A metaphor I like: you can think about a laundromat as the washers, driers, soap-packet-dispensers & the change machine. People who think that fiscal policy is important are the ones who think that the first three are the important part of a laundromat. Central Bank cultists are ones who think the real profit center is the change machine.
Thinking of money as a relationship, as liabilities or debt - (asset/credit viewed from the other direction) - always & everywhere - is how MMT thinks of it. Wray & the rest of UMKC are the clearest on this, following Mitchell-Innes, Lerner, etc. Geoffrey Ingham's book The Nature of Money is the most extensive treatment, & of course many papers by Wray et al.
thanks, Matt
Paul
"the government doesn't need money"
It may need foreign currency, depending on the circumstances.
I suppose the statement "the government never has nor doesn't have money" can only refer to its own currency
For example, if the govt has a deposit in a commercial bank, that is a form of private money which it "has".?
"the real profit center is the change machine"
Lol.
I'll have to read that Ingham book.
y:
Paul, the govt does have reserves of foreign currency though, doesn't it.
I suppose it does and you would know a lot more about that than I would. I don't concern myself with accounting chains because every step away from simple system arithmetic complicates the discussion and doesn't add much that I can see.
My comment was meant to convey my view that the governments finances is mainly an accounting abstraction, as you said earlier it is the opposite side of the non-government ledger.
The "government's money" is our money.
Does the government "need" foreign currency? Dealing in it would just be a convenience. We have plenty of our own financial resources.
Paul,
did that data come from the flow of funds report?
http://www.federalreserve.gov/releases/z1/current/z1.pdf
I would look at this Fed report as authoritative and accurate...
Rsp,
y For example, if the govt has a deposit in a commercial bank, that is a form of private money which it "has".?
Seems so based on the def of HPM. That's why I am questioning whether the rb in the Tsy's TTL accounts are money until transferred to the TGA, even though the tax liability has already been extinguished.
All cb's hold gold and balances at foreign cb's, and they may hold other assets depending on institutional arrangements differing among countries. These assets are not "money," in that they are neither HPM nor any other money category.
Matt,
The $54 Trillion in outstanding credit comes from the FoF.
I extrapolated the other from the National Debt balance.
That should represent all of the US dollar balances in existence, where else would it come from?
I further assume that the dollar balances have to be deposited mainly in bank accounts, some in mattresses.
Tom,
as a followup, if you're interesested… I was quoted in the article: http://cumberlink.com/news/local/govt-and-politics/vp-ryan-pushes-locals-to-obama/article_dcb96752-e429-11e1-880b-0019bb2963f4.html
I was hoping there would be comments so I could respond and introduce modern money ideas to new people. But it's just a small local paper. Not many people probably even read it.
"the tax liability has already been extinguished"
If the tax payment is sitting in a TTL account then perhaps the liability hasn't actually been extinguished - it's simply been shifted from the original taxpayer to the bank with the TTL account. The bank now owes the tax to the government.
JK, very good. A lot more people read their town newspaper than you might think.
I read the letters to the editor to keep a finger on the local pulse.
Y, I think that the bank would say that its part of the bargain is finished in that it has acted as intermediary in transferring the rb to an account owned by the Tsy. The fact is tho that the rb in Tsy TTl accts are still counted as HPM as far as I can see.
Tom,
Is the term HPM universally accepted across all economists, in the same way as all biologists accept the term Canis lupus for the species of the gray wolf?
Iow if you asked Lawrence Kotlikoff what HPM was do you think he would know what it was?
RSP,
I think that the def is standard, Matt.
NBER, High Powered Money
NBER, The Money Stock and Its Three Determinants, p. 9
Tom,
That pub, c. 1965
Excerpt: "High-powered money
erefore comprises bank reserves plus currency held by the public.
'Governments have authority to define, issue, and regulate the quantity of high-powered money, but they typically delegate part of their control over the amount issued to central banks and to the suppliers of
ommodities used as the monetary unit, now usually gold. (The
suppliers are the domestic producers of gold and the foreign-exchange dealers who import or export gold bullion, when profitable.)
(My emphasis ;)
So with gold now out of the picture thanks to Nixon, it would seem that HPM would be left to just bank reserves plus currency held by the public....
rsp,
So with gold now out of the picture thanks to Nixon, it would seem that HPM would be left to just bank reserves plus currency held by the public....
Right. Gold now just a cb asset, no longer a component of reserves under the present system.
The points that this use of HPM goes back to the Civil War era, with gold as a reserve or not.
Tom,
"the bank would say that its part of the bargain is finished in that it has acted as intermediary in transferring the rb to an account owned by the Tsy. The fact is tho that the rb in Tsy TTl accts are still counted as HPM as far as I can see."
I thought TTL accounts were just deposit accounts within commercial banks, not reserve accounts.
So, for example, a bank will debit its customer accounts and credit the TTL account when the customers pay taxes. This doesn't involve placing reserves in the TTL account. The bank simply credits the TTL account like any other cusomer deposit account.
Reserves come into the picture when the bank later settles with the Treasury and reserves are transferred to the Treasury's account at the Fed from the commercial bank.
That's why it seems to me that tax deposits in TTL accounts actually represent taxes that haven't been paid yet, or finalised yet (the commercial bank holds the tax liability instead of one of its customers)..
Mike, am I going to see more of you on TV? Now that the Ryan Budget has been elevated to the forefront, your presence is now needed more than ever
y I thought TTL accounts were just deposit accounts within commercial banks, not reserve accounts.
That is the way I understand it, too. When the taxpayer pays taxes to the TSY by check and the check is cleared, rb are transferred by the taxpayer's bank to where the TSY designates. If to the TGA, then the rb are no longer in non-govt and don't count toward any category of money. However, if the Tsy wants them in a TTL account in a commercial bank instead of the TGA, then the rb that settled the tax bill are still in non-govt and count as HPM, it would seem. Remember that it's not the check from a customer deposit account that settles the tax bill. It is the clearing of the check in rb. The accounting entries will show whether the rb are in a govt account at the Fed (TGA) or on the Fed's spreadsheet as an entry in a commercial bank's reserve account (TTL). Ultimately, the rb corresponding to the deposits in TTL accounts get transferred to the TGA account as the Tsy directs in coordination with the Fed in rb management to hit the target rate.
Who actually issues the US currency?
Wikipedia:
“The Treasury prints and mints all paper currency and coins in circulation through the Bureau of Engraving and Printing and the United States Mint."
Wikipedia
http://en.wikipedia.org/wiki/United_States_Department_of_the_Treasury
"The mission of the Bureau of Engraving and Printing is to serve as the Federal Government's most secure and efficient source of vital government securities. The BEP manufactures the financial and other securities of the United States. Accordingly, the BEP designs, prints, and furnishes a large variety of security products, including Federal Reserve Notes, Treasury securities, identification cards, naturalization certificates, and other special security documents."
- Federal Reserve Notes and Treasury Securites are both US government securities.
(Bureau of Engraving and Printing - U.S. Department of the Treasury)
http://moneyfactory.gov/faqlibrary.html
"Federal reserve notes… shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues."
- Federal Reserve Notes are US government obligations, i.e. US government liabilities.
(United States Code)
http://www.law.cornell.edu/uscode/text/12/411
"In order to furnish suitable notes for circulation as Federal reserve notes, the Secretary of the Treasury shall cause plates and dies to be engraved in the best manner to guard against counterfeits and fraudulent alterations, and shall have printed therefrom and numbered such quantities of such notes… as may be required to supply the Federal Reserve banks."
"When such notes have been prepared, the notes shall be delivered to the Board of Governors of the Federal Reserve System subject to the order of the Secretary of the Treasury for the delivery of such notes in accordance with this chapter."
United States Code
http://www.law.cornell.edu/uscode/text/12/419
- So Federal Reserve Notes are US government securities/obligations/liabilities that are created by the Treasury and then supplied to the Federal Reserve banks, subject to the order of the Secretary of the Treasury.
- The basic reason why Federal Reserve Notes have any value at all, is that the Treasury demands/accepts them in payment of taxes, fines and fees owed to the US government.
Smoke and mirrors.....
Y,
Consider that the tax part while an important 'feedback' loop in the USD system, its 'value' , may not be imparted by this process.
Aristotle seemed to think it was human LAW itself what they called 'nomos' that gave 'value and efficacy' to their medium of exchange. So much so that they put their word for 'law' iE 'nomos' RIGHT IN THE NAME for their 'money' ie 'nomisma'....
I think we may be conceding something to the metal lovers when we start to think that tax coercion is the thing that imparts value. The law Ie 'nomos' logically has to precede any taxes.
Rsp
Very good point.
Right, Matt, it's not the tax itself that requires non-govt to obtain the govt's money, but the ability to enFORCE the tax laws. So it's not just the law either. The power to enforce must also be present. This presupposes a coordinated political system, which is what Aristotle considered the polis (city-state) to be.
For Aristotle, the polis as a social system based on reason (behavior iaw law) is the functioning political unit, which is made up of subsidiary components, the clans, families and citizens.
Aristotle was a state collectivist rather than an individualist. He regarded man literally as a "political animal," which is more properly translated into contemporary English as "social animal." Human beings do not have meaningful existence outside of society, and the most serious punishment among ancient people short of capital punishment was banishment from the realm.
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