Professor Karl Whelan backs up Joe Weisenthal and MMT on the sectoral balance approach, but questions Weisenthal's analysis. However, Professor Whelan does not actually work out the sectoral balances in terms of non-government saving desire and deficit offset. He concludes without deep analysis that the Bush Administration was also involved, but without a deeper analysis, he does not see that that the Bush deficit was not a large enough offset.
Moreover, saving/spending desire is also a changing viable, and the private sector appetite for debt was increasing as the housing bubble expanded, along with the trade deficit. The Bush administrations' fiscal liberality was not enough to offset the accumulating stock of private, however, and private debt growth is unsustainable. Stephanie Kelton qualifies Joe Wisenthal's argument:
Here’s a presentation I gave years ago on the housing crisis/deregulation, greed, etc. http://www.slideshare.net/MitchGreen/did-greenspan-blow-itScott Fullwiler tweets, Broader point is recognition of sectoral balances approach rather than household budget/deficit analogy to govt's fiscal position.
I never said (and never would say) that the Clinton surplus *caused* the housing bubble. The surplus emerged as the private sector took on more and more debt to finance a consumption binge that was, in part, fueled by rising home prices.
Forbes | Business
Did Bill Clinton's Budgets Really Destroy the American Economy?
Karl Whelan | Professor of Economics at University College, Dublin, PhD in economics from MIT, with Federal Reserve Board from 1996 to 2002, regularly briefing Alan Greenspan and working on the FOMC's macroeconomic forecast and from 2002 to 2007, with the Central Bank Ireland and attended many meetings at the European Central Bank.
(h/t Scott Fullwiler via Twitter)
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