Going around telling everyone the deficit is too small is a non starter. If the goal is to offer up policy suggestions that will broadly improve economic conditions, that's admirable, but telling everyone that the deficit is too small is a really bad way to do it.
First of all, no matter how much you try to explain it, most people will cringe at the idea of needing bigger deficits. They're either ideologically or philosophically against such a thing, right or wrong. That's just the way it is. Good luck in trying to turn everybody around on this. I hope you live a very long life.
Secondly, there's no way you can target "THE DEFICIT." How do you do that? Even if you get people to understand this, the very next thing they're going to say is, "Okay, how do we do it?" At which point you will have to say, you raise spending or cut taxes, or both.
So it's really about raising spending and/or cutting taxes. Why, then, even bring up the deficit? The deficit is whatever it is.
Of the two proposals--raising spending or cutting taxes--the government usually only manipulates tax rates, up or down. Therefore, even if you cut rates, you still don't know how big the deficit will end up being. Nor do you know whether or not people will spend those tax savings or just hold onto them. So, we can't accurately predict demand from that and that's what it's all about, demand. Finally, the government's gotta spend first before most people even know what will be the amount of tax they owe. So spending's gotta come first.
We're really talking about spending. The good news is, it's a concept that most people understand. Even if they're inclined to be ideologically opposed to spending you can still sell them on it if you talk to them about necessary things like infrastructure, health care, education, basic science and research, altnerative energy, transportation, etc. They get it. They can envision those things. You're not just saying, "we need bigger deficits," a totally nebulous and largely negative concept for most people.
This is one of the most important rules of selling: create a picture in the person's mind of the benefits; of this beautiful thing they're going to have.
Now go paint a picture of the benefit of a bigger deficit. Good luck with that.
This is why MMT goes nowhere. It's got terrible messaging and communication.
23 comments:
The issue in the US is the size of government. Most people are convinced that "big government" is "bad" for all the reasons they have been programmed. But Americans in general have been suspicious of big government from the outset of the nation.
People actually like spending. So the opposition to the welfare state has to argue against spending. That is a disadvantage.
So they have to frame it differently. "Tax and spend." "Borrow from future generations." "We've run out of money." Etc.
The real issue is why spending on desirable outcomes is not the danger it is made out to be. Nor is it the moral degeneracy it is pictured as either.
Not only is it "affordable" as long a real resources are available, but also it is moral degeneracy not to spend on a welfare state and let people sacrifice and suffer for it unnecessarily.
Who is not for spending on desirable programs? It's just that people have been scared away from it based not only on bogus reasoning and appeal to strong emotions like fear.
Underlying resistance to the welfare state in the US is racism. Recall the Reagan era attack on the welfare state based not only on "waste, fraud, and abuse" by "big government liberals," but also (non-white) "welfare queens" living in city ghettoes and voting Democratic to keep the checks coming.
Yes, 95% of the population need a "picture". 95% of the population are persuaded by emotion, not logic.
MMT is for the 5% who are interested in REALITY. MMT is for the 5% who are persuaded by logic.
The 95% will never understand MMT.
Mike,
You have no idea how right you are.
I've tried doing it. Result? People just think you're a total wacko. If they're polite, their eyes glaze over. After a while, they make their excuses and just walk away. If they're less polite, they'll tell you to your face that a village is missing its idiot.
No argument can be used to win people over in large numbers. A few may come over after considerable persuasion, but nowhere near the numbers needed.
Whoever came up with "leaving debts to your children" is an evil genius. It's the best austerity line ever - so much better than "living within your means" and it hits all the right emotional buttons. In fact, I don't think it can be bettered.
Sometimes ignorance really is bliss. I was so much happier when I was like everybody else.
Damn you, Mike! It's all your fault!!! I wish I never found your videos. Uncle Peter and his hard money spiel was so much more comforting! Who needs the truth, when you can be happy?
Ralph,
In the end we're all persuaded by emotion. Mr. Spock is dead.
I disagree, Ralph is more right than you may think. Only about 10% of the population are logical and analytical. And from those a lot would disagree because other reasons.
Ignacio,
There is a copy out there of the flyer that the girl who threw the rice at Dragi was passing out its like all emotion... rsp
When it comes to how one should build a society and live therein is there such a thing as absolute logical truth? When the onion gets peeled back on life and living it's all more or less subjective in the end. That is why emotion becomes the prime catalyst of action in daily life. It's the default condition we function under.
People are and have always been emotion driven beings, even the so called logic cranks among us. Like the non theistic determinists among us intone, life, living, society are all relative-morally relative- in all things said and done.
There is no one right way to build a culture/society/family and so on. There are dominant emotions such as self preservation that augers for a degree of cooperation as a means to action, but even this isn't universal in outcome or application. From a logical standpoint self preservation (more precisely how one aims to self preserve) is not an objective truth outside oneself either.
Theism (fideism in all cases) attempts to square the unsquarable circle, but from a logical perspective doesn't quite do the trick so we find it laden with emotion writ large too.
This is simply a long winded way of saying Mike is right:-)
George Layoff has gone through this in terms of the psych and cognitive science behind it. Randy wrote on how MMT had to adapt to this to get traction in policy setting.
Well maybe emotion can come in to play when we are figuring out what public purpose should be... but then we we have to stop the emotion and turn policy over to qualified and competent people to implement it....
The girl protesting Dragi today is as incompetent and unqualified as Dragi . .. she has zero insight just like Dragi...
One problem is the sheer mind-crushing contemporary dominance of the macroeconomic approach to reality - whether its the monetarist version, the NK version, the MMT version, the MM version, the new secular stagnation theories, etc.
There is no royal road to fixing our lives that focuses solely on a couple of macroeconomic parameters: whether the long-term rate of interest, the inflation rate, the level of MB or or M2, the NGDP growth rate, or the size of the deficit.
A national economy is a big, ugly, complicated machine, made up out of a lot of tools, machines, transportation channels and millions of human beings formed into millions of interacting groups and institutions. Economic transformation requires getting into the many parts and guts of that machine, getting our hands dirty and redesigning it. All of the crude, surface level kvetching about large aggregates and averages - "If only the interest rate were lower!" If only the inflation rate were higher!" "If only the deficit were smaller!", "If only the deficit were bigger!" - is a substitute for concrete, feet-on-the-ground thinking and real, effective action.
Ok Malmo, you are right, "homo rationalis" does not exist, but when approachign problem solving there is a subset of the population which is MAINLY analytical, has some sort of system's approach to problem solving.
Over different categorization systems from research not more than 10% of the population form this subset of the population.
@ Dan Kervick
I agree, of course. Econ is a waste of time. Econ won't be useful until it integrates itself with other relevant disciplines instead of either mimicking natural science, or presenting itself as being applied math, or considering itself as a stand-alone discipline that doesn't need anything else to inform it.
There have been exceptions but they haven't fallen into a school. John Kenneth Galbraith, Gunnar Myrdal, Amartya Sen, Adolf Lowe, Kenneth Boulding are some examples.
Karl Marx was chiefly a philosopher, as were Hume, Bentham, and Mill, although all made contributions to the formation of economics.
Hayek was largely a philosopher, too, as was Mises, since they realized that social and political thought, of which economics is a subset, depends on a theory of man that is grounded in ontology epistemology and ethics. Murray Rothbard wrote in this vein, too. So they are worth paying attention to, even if one disagrees with their assumptions. They are at least looking at the big picture and realize that the overarching issue is social order. The only other school that rivals this in breadth and depth is Marxism-Marxianism.
However, the attempt to systematize is itself a weakness.
The issues were already drawn by the ancients in posing the enduring question, what are the criteria of a good life in a good society and how is this achieved. These are enduring questions because biological systems are complex adaptive systems that are characterized by reflexivity and emergence. Therefore the horizon is always receding no matter how much progress takes place in any particular period.
While there is no final answer in the sense of "the end of history," a systematic approach in nevertheless needed in order to for thinking about the issues to be comprehensive and take everything relevant into account.
Ignacio:
"homo rationalis" does not exist, but when approachign problem solving there is a subset of the population which is MAINLY analytical, has some sort of system's approach to problem solving."
I agree. I'm all for a rationale approach to what I call "the in-betweens" of everyday life, particularly technical elements therein. I don't get bogged down with theoretical problems surrounding absolute truths, however. I get it that the idea of a standard maker--God-- works for religious folks, and depending on the belief system bothers me little. Religious ideas have produced much that makes me happy, so I, an atheist, am not complaining one bit about what rocks their world.
My particular meaning in life isn't centered on some so called supreme being, but rather on simply what makes me content and happy in the here and now. I can't be content where there's a world of misery and injustice, thus I desire "progress". It's emotional to the core, but to get there (contentedness) requires technical expertise (objective truth of a sorts relative to the "in-betweens"). I suppose it's a paradoxical mindset, but I desire and promote all the little "truths", especially through science, while at the same time rejecting the notion of absolute truth.
If one peruses the shelves of book sellers and looks at ratings on Amazon, for example, one finds that almost all the normative/emotional writing wrt to econ, public policy, culture and values is on the right. In fact, it’s a genre that is almost guaranteed to make for a profitable book if the writer knows the right heart strings to pull and what the code words are.
On the left, it's mostly analysis that very few are interested in and fewer motivated by.
Those identifying with the left in the US is minuscule and those identifying as liberals amount only to about 20%.
Lakoff observes that many people are much more liberal than they think. Most people are bi-coneptual, holding values of both left and right. These are the people that self-ID as centrists and moderates.
The big concept that people struggle to get their heads around is that money comes out of nothing and just pops into existence when required.
Then disappears again when the job it was created to enable completes.
The idea that something so ephemeral has value and people chase it down to the point of killing each other for it is a difficult mental leap to make.
There is a religious belief that things of value are solid.
I avoid talking about deficits other than to say that it is 'inconsequential'.
My focus is on ensuring everybody has a job and the benefits of a competitive alternative job offer on the table to everybody - so that they can always say 'no deal' to the private sector.
And how that forces the private sector entities to either automate, better their processes or go bust and get out of the way - reversing the so called 'stagnation' of the current setup.
The key to balance in the economy is a fully effective auto-stabiliser system. That doesn't require a cabal of the elite to pontificate once a month. It just adds and subtracts spending from the economy counter-cyclically.
You can add other spending to the economy by simply narrowing the banks. Ban them from doing most of the rubbish they currently do and you free up space without having to touch taxation.
There are many avenues that are politically viable and the 'where does the money come from' argument is dealt with simply by saying 'from spending the money'.
Malmo that's a good summary. I would frame my belief system in a similar way (also an atheist, also don't bothering much religious people, also don't believe in absolute truth, but we can try to seek truth and analytically solve problems to improve our lives based on science, etc.).
IMO the biggest problem stopping any sort of progress is the word "debt". Is very problematic, and has a long baggage in human social structures. Until we can re-frame the wording and disappear the word "debt" related to sovereign money progress will be tough.
If you talk to people about how public debt is only debt by name and it's a liability of the government to itself, an accounting trick (like central banks 'negative equity', doesn't matter, is irrelevant); their mind is blown and they won't listen/care.
Solving this would open a big part of the population to be more receptive to MMT. Others simply won't accept "monetary financing" (ie. euro architects and troika-types) because other reasons (most of them false, but still).
76% of UK public polled want the deficit reduced every year and a balanced budget as soon as possible.
We're screwed.
Give the public what they want, Neil. Quickest way to open their eyes.
My initial instinct is to do as Bob says, "give the people what they want" and they will soon wise up. However, the response to the disaster of a balanced budget will rely on the framing that carries the day. People won't see the "cure" of balancing the budget causing the ensuing recession/depression. It will be blamed on the "profligate spending" of the past, and most people will buy into this reasoning. It will be a long, painful slog.
On a side note, if I'm ever accused of being half as smart as Tom Hickey or Neil Wilson, I'll consider it a massive complement. Thanks for contributing your endless insights to this blog.
76% of UK public polled want the deficit reduced every year and a balanced budget as soon as possible.
We're screwed.
Not necessarily. Polling can be misleading. Good polling has to ask comparison questions. Usually what emerges is that people are for something cet. par. But if things are not cet. par. then preferences turn out to be much more nuanced.
For example, ask the elderly if they are for deficit reduction and being conservatively inclined they are likely to say they favor it. But ask them if the think that deficit reduction is of such a priority that their benefits need to be curtailed and they will likely say no.
Similarly with military spending. Most people in the US will say that they agree military spending needs to be increased to meet increasing threats. But ask them whether they think that military spending is of a high enough priority to merit increasing either taxes or cutting their benefits and they are likely to say no.
well for those that need a picture, there's the picture of the sectoral balances.. Most people don't understand that for one person to earn more than they spend another entity has to spend more than it "earns".
So maybe once people truly understand that the govt's deficit is the non-govt surplus, then they'll quit worrying about the deficit.
Thanks, Six
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