A commenter Brendan M left a very interesting comment over at Bill's:
...However it does seem common for you to discuss fiscal balances (deficits), structural balances, pro-cyclical spending and other quantities that my reading of MMT to suggest were dependent variables given the constraints applied to the economy.
Consider a piston moving in a gas filled cylinder. As the piston advances into the cylinder, the temperature of the gas will rise and as the piston retreats, the temperature of the gas will drop according to Boyle’s law.
Although heat is a relevant quantity here, you will never come to an understanding of this system simply by looking at heat budgets. You can divide your heat flows according to any sophisticated criteria you care to devise. However, the temperature changes are caused by the pistol moving, thinking about heat flows just confuses the issue.
In the case of the fiscal balance, the ‘piston’ is the savings propensity of the private sector.
Sophisticated classifications of government fiscal flows are only confusing the situation. Your government can be as pro-cyclical or counter-cyclical as it wants. It can have a structural deficit or surplus. It can raise spending or drop it. It can raise tax rates, cut tax rates, target the rich or the poor.
As long as the private sector has the option to net save, then the private propensity to save will be the determining factor in the sign of the fiscal balance.
This is why Neo-liberal economists are continually surprised by fiscal balance results, they are looking at the wrong variables.
Still, you also seem to lend some credence to the practice of looking at these government fiscal settings variables when considering the fiscal balance.
Am I misunderstanding something?
Uh... no... I would say Brendan is not misunderstanding anything...
Saving is very important to accommodate; AND so is the return on said savings that the savers have been trained to expect.