I submitted the following Letter to the Editor in response to Annie Lowrey’s July 4 article on Warren Mosler and MMT. The Times chose not to run it. So I will.
Thank you for alerting your readers to the growing impact of the anti-austerity branch of economics known as MMT. More than a decade ago, Warren Mosler challenged the economics profession, insisting that the U.S. would be a far more prosperous nation if we stopped basing our fiscal and monetary policies on macroeconomic theories that were designed for a country whose currency was still tied to gold. I was among the first wave of academic economists to reach agreement on this point. Now hundreds of articles, book chapters and conference presentations later, the ideas have spread well beyond the ivory towers. Tens of thousands of professionals in finance, business, government, etc., many of them formerly self-proclaimed deficit hawks, now champion Warren’s insight that our fears about debt and deficits are based on a failure to understand how modern money works–and that it’s holding all of us back.New Economic Perspective
My Unpublished Letter to the Editor of the NYT
Stephanie Kelton | Associate Professor of Economics, UMKC
7 comments:
Have you noticed what's happened with the deficit doves? They spent a good deal of time - a few years in fact - arguing with the deficit hawks about whether we could afford additional "stimulus". Much of the hawks' case depended on Rogoff & Reinhart. When R&R then suffered the ignominious meltdown, the doves declared victory.
And then what? Did they follow up with concerted and vociferous advocacy for fiscal expansion? Nope. They're invisible. They ran away and turned their attentions back to QE infinity and all of the other blogospheric and policy time-wasters.
I suspect a lot of the deficit dove silence can be put down to partisan politics.
In Australia, the labor party ran a very successfull fiscal stimulus at the onset of the financial crash. Now they are pushing for a balanced budget and slowly draining demand.
There are a good few voices calling for more fiscal action again. The debt to GDP ratio here is so low, the R&R arguments are laughably bogus.
The media and the general public are obsessed with running a budget surplus as the epitome of good economic management. It was the major selling point of the previous conservative government.
Kevin Rudd the current PM alluded to more fiscal stimulus as he took office, but quickly changed his tune. I believe in response to focus group and polling feedback.
In short. A lot more people are believing in fiscal stimulus now. The partisan pragmatists are keeping quiet because it is a hard sell to the general public.
I suspect a lot of the deficit dove silence can be put down to partisan politics.
Agreed. I think the message came down from the White House to the Democratic faithful that no matter what the underlying economics, Obama wants his legacy to be that of a "fiscally responsible" budget cutter.
"Obama wants his legacy to be that of a "fiscally responsible" budget cutter."
Just like Clinton. Obama is an Establishment Third Way Democrat, which is to say a moderate Eisenhower-Rockefeller Republican. Actually, Obama has more often cast himself in the Reagan mold than FDR.
"Actually, Obama has more often cast himself in the Reagan mold than FDR."
Reagan got much more bang from the buck with his relatively smaller fiscal expansion as a percent of GDP than Obama has.
Obama inherited the mother-of-all post-war total economic crashes. Reagan inherited a weak economy which then got much weaker during his first term as Volcker pushed interest rates up in the mother-of-all short term monetary maneuvers. Once Volcker lightened up, things improved automatically.
Obama is not a risk taker, and I wouldn't expect him or other incumbents to push fiscal expansion at this time. Unfortunately, it's going to take another downturn in the stock market to get government action. The conventional wisdom is that the recovery is well underway. Bold fiscal proposals now would then be blamed for any economic weakness. "Obama torpedoed the recovery" would be the message.
This is somewhat analogous to the "War on Terror". There's a lot of political risk in challenging the "deep state" (NSA, Homeland Security, etc) which is keeping us safe.
As long as the Republicans are completely crazy, the Democrats have little incentive to actually do something to fix the nation's problems...
Andrew,
Are you an Australian interested in MMT and preferably an advocate, did you know there is a Google Group just for you http://groups.google.com/group/mmt-australia
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