Thursday, October 1, 2020

Bill Mitchell – Tax cuts are unlikely to work at present and are less effective than government spending increases

As governments grapple with the dissonance that the pandemic is causing them – realising that their old mainstream economics narratives are not going to cut it any more but still reluctant to admit that and pass onto a new phase of creative policy making – we are observing these contradictions in both statements about fiscal policy and monetary policy. The Australian government, for example, is convinced tax cuts are required but have observed that recent tax cuts, before the pandemic hardly stimulated any spending. Further research from the US is demonstrating that payments to households under the – Coronavirus Aid and Economic Security (CARES) Act – may not have resulting in the spending boost that was modelled as part of the policy design. And then on the monetary policy front, central bankers like Madame Lagarde are strutting around making grand statements about becoming flexible with their definition of price stability (that is, saying they will allow for higher inflation before they increase rates) despite not being able to remotely meet their current stability levels with deflation looming. I covered a statement along similar lines from the US Federal Reserve Bank boss recently – US Federal Reserve statement signals a new phase in the paradigm shift in macroeconomics (August 31, 2020). It all adds up to what happens when a paradigm is shifting and the old school are caught out – no longer able to really offer anything of use but hanging on to their status nonetheless. Pragmatism usually passes them by as it will in this case.…
The question is how long before they are passed by. "The old school" can do a whole lot of damage in the meantime.

Bill Mitchell – billy blog
Tax cuts are unlikely to work at present and are less effective than government spending increases
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

12 comments:

Unknown said...

Police pigs flying what appears to be satillites outside my house:
https://youtu.be/xY9XyPcZkhU
They can monitor my thoughts.

Unknown said...

Please promote my YouTube video Tom on satillites harassment they think I'm a terrorist.

Peter Pan said...

Well, what did you expect? They can't see your Blogger profile.

Matt Franko said...

Unk, that’s probably some neoliberal monitoring system spying on MMT people... it’s all part of the vast neoliberal conspiracy....

S400 said...

It’s probably Matt spying on you thinking you have an art degree. It’s all part of the vast art degree conspiracy...

Peter Pan said...

May also be a symptom of schizophrenia... have we covered all bases?

Peter Pan said...

Yep, "old school" doing lots of damage as paradigm shifts uncomfortably in its seat.

Matt Franko said...

S, incompetence and conspiracy are two different things..

Matt Franko said...

“ realising that their old mainstream economics narratives are not going to cut it any more but still reluctant to admit that”

Powell has some Economics training but he is primarily a trained jurist... he has nothing to do with the economics discipline...

He cites the feds lawful mandate of “maximum employment with stable prices” repeatedly ... he has pointed out that we had 3.8 unemployment with “inflation!” below the 2% recently

since we are nowhere near maximum employment and 3.8 UE caused no “inflation!” a few mo this ago he’s just going to continue to be max accommodative at 0.1% policy rate and keep adding moderately more reserves “to lend out!” until UE gets back to 4% or below line it just was pre covid...

He’s just following the law as he is trained to do... has nothing to do with the Economics discipline...

If Powell leaves and they put another Art degree economist back in then it’ll be right back to the previous policy with NAIRU and the whole thing...

S400 said...

“S, incompetence and conspiracy are two different things”
Yes and as you noticed I wrote conspiracy.

S400 said...

Or do you mean you’re incompetent? Either is good with me.

Peter Pan said...

conspiracy = conservative piracy ?