Is the glass half full or half empty. It depends on the perspective from which one is looking. Krugman reflects the popular perception that workers, that is, most of the economic participants, are being left out, while Sachs cherrypicks the numbers and finds that all is getting better under austerity.
However, Sachs agrees that "better" is not good enough.
The GuardianHowever, Sachs agrees that "better" is not good enough.
To be clear, I believe that we do need more government spending as a share of GDP for education, infrastructure, low-carbon energy, research and development and benefits for low-income families. But we should pay for this through higher taxes on high incomes and high net worth, a carbon tax, and future tolls collected on new infrastructure. We need the liberal conscience, but without the chronic budget deficits.
There is nothing progressive about large budget deficits and a rising debt-to-GDP ratio. After all, large deficits have no reliable effect on reducing unemployment, and deficit reduction can be consistent with falling unemployment.
Paul Krugman has got it wrong on austerity
Jeffrey Sachs
Why Yes, I Do Believe Jeffrey Sachs Has Lost His Mind. Why Do You Ask?
Brad Delong
It seems to me that the fundamental question is whether it is progressive to accommodate saving desire in an economic environment based chiefly on rent-seeking and rent-extraction.
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It seems to me that the fundamental question is whether it is progressive to accommodate saving desire
Plus demand leakage due to a large trade deficit.
Can anyone explain to me why debt-to-gdp has any relevance at all? The fed controls the interest rate, so that's not an issue... So non-govt savings can be too large wrt gdp?
The functional finance view is that debt-to-gdp has no meaning for a government that issues its own currency and borrows in its own currency.
It's different for governments that don't issue their own currency -- i.e. the individual US states, or the EU nations.
The deb to GDP ratio is conventionally considered significant for two reasons.
First, there is the familiar concern about having to raise revenue down the line to "pay for" previous borrowing on the government as household or firm analogy.
Secondly, there is the fiscal discipline argument that affects attitude toward the value of the currency. The debt to GDP ratio is supposed to indicate the level of fiscal responsibility of a government, to affect growth, and to influence both the fx rate and price level.
Basic to both is assumptions about a fixed rate system applying and also an inter-termporal budget constraint that will blow out government interest payments unless taxes are raised to pay down the mounting debt.
While this may be bogus from the MMT vantage, it's how conventional economists and finance people see it, and the media picks it up from the "experts." Then the reporting makes it seem intuitive to the public that the government is profligate since they cannot themselves act that way being currency users.
Most people, even very smart people, either can't get the concept of monetary ops under different systems or they are repelled by the notion that a state, represented by its government, can create money from nothing. Of course, they don't realize that banks can too, since they think that banks act as intermediaries between borrowers and savers.
"Plus demand leakage due to a large trade deficit."
That's just saving desires as well.
Largely forced savings.
I like this phrase from Sachs’s Guardian article: “deficit reduction can be consistent with falling unemployment.”
Yes, and cutting off your right forefinger “can be consistent with” subsequently living a normal healthy life. In fact I’d go further: given the efficiency with which modern medicine deals with potential infections stemming from injuries, there’s a 99.9% chance of leading a normal healthy life after cutting off your forefinger.
All of which proves, according to dummie Sachs logic, that cutting off your forefinger is a good idea.
Could people talk about the quality of 'recoveries'? Everyone is worse but stable does not eman 'it works'.
40 years of scamming the population on recoveries and progress, how longer can it work!?
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