Tuesday, November 1, 2016

Jason Furman — The New View of fiscal policy and its application

The landscape of the fiscal policy debate has changed over the past decade, with academics and international organisations moving away from an ‘Old View’ of fiscal policy as ineffective. This column uses examples from the US and Europe to highlight the five principles of a ‘New View’ of fiscal policy, which increasingly appreciates that expansionary fiscal policy is effective in a world of persistently low interest rates, low growth, and strong international linkages.
Better than the "Old View" but out of paradigm with MMT.

The New View of fiscal policy and its application
Jason Furman | Chairman, Council of Economic Advisers


Jose Guilherme said...

Marc Lavoie also touches the subject (in paradigm) in this very good interview:


Ralph Musgrave said...

Strikes me it's quite "in paridigm" with MMT in that MMT says that in a recession, the state should create fiat and spend it (and/or cut taxes).

The Arthurian said...

Scott Sumner:
"The Fed might [say] that fiscal stimulus would not boost demand, but it would allow the current demand to be achieved with less monetary stimulus. But why is that desirable?"

Because monetary stimulus isn't working, maybe?

Tom Hickey said...

Strikes me it's quite "in paridigm" with MMT in that MMT says that in a recession, the state should create fiat and spend it (and/or cut taxes).

The core of MMT is currency sovereignty and the monopoly that this entails for the currency issuer. He doesn't seem to understand that or if he does, he seems to conceal it.

The MMT analysis is much more straightforward. FF is about fiscal space and fiscal stance.

Furman has the right idea in comparison with monetarism that leads with central bank monetary policy, but the execution is deficient from the MMT POV.

He is heading in the right direction though. Now he needs to read some MMT and Post Keynesian monetary economics.

Tom Hickey said...

Ramanan has a post on Furman's article today here .

So there’s nothing new about the “new view”. Just that economists from the mid-70s till now have been orthodox.

Regardless of being in paradigm with MMT, Furman gives the impression that we are just finding out something of importance, even though it was long known and explained. For a profession with a terminal degree in the field not to mention this is an extraordinary blunder. PhD's are not supposed to be ignorant of the parts of their field that are relevant to the present debate and to make such a mistake is is really shameful from the scholarly POV. It's a reputational disaster.

Matt Franko said...

"he seems to conceal it."

No way....

Matt Franko said...

"terminal degree"


Matt Franko said...

Here is Bill on this today:

" There are many like facts that seem to evade the understanding of journalists, politicians and others who desire to push the neo-liberal line. I say ‘seem’ because it is certain that many of these neo-lib banner carriers know full well they lie when they make claims about currency-issuing governments running out of money and the like."

No evidence at all on this... why the conspiracy theory????

Here from the other thread:

"This methodology argues that knowledge is brought about by starting with axioms that are not derived from empirical evidence,"

Bill is doing the exact same thing here... he's starting with an axiom with no empirical evidence...

Matt Franko said...

The WSJ guy is just parroting the Trump statement related to the 'debt', the guy says here:

"The London-based journalist Jon Sindreu wrote that “Among facts that take a stubbornly long time to sink in, here’s one: Countries that borrow in their own currencies never have to default on their debt”

Trump said:

"Trump told CNN's Chris Cuomo on "New Day." "First of all, you never have to default because you print the money, I hate to tell you, OK?"

So the WSJ is right wing and Trump is right wing so he just parrots what the US right candidate recently said about the narrow issue of the "debt"... and its just one guy who picked it up via rote from Trump...

No epiphany here...