Pete Buttigieg and the Myth of Deficit Responsibility — Luke Darby

Stony Brook University economist Stephanie Kelton is a proponent of something called modern monetary theory (MMT), a new school of economics that argues that as long as a country is in charge of issuing its own sovereign currency, it can't "run out of money." According to MMT, if Greece were still using its own currency, the drachma, instead of the euro, then it could have printed more money to pay off its debts, especially if inflation was low to begin with. Instead, as part of the European Union, it had to turn to the European Central Bank which dictated the terms of Greece's bailout.

Kelton argues in the New York Times that the way we think and talk about deficit is entirely wrong. When governments run up deficits, it's because they're pumping money into their economy or spending it on social welfare programs. Kelton writes, "The problem is that policy makers are looking at this picture with one eye shut. They see the budget deficit, but they’re missing the matching surplus on the other side. And since many Americans are missing it, too, they end up applauding efforts to balance the budget, even though it would mean erasing the surplus in the private sector."...

GQ
Pete Buttigieg and the Myth of Deficit Responsibility

Luke Darby

Pete Buttigieg's Vow to Cut the Deficit Is Fiscally Irresponsible — Eric Levitz

“Fiscally responsible” is one of the more Orwellian phrases in American politics. Lawmakers earn that coveted title by affirming the three tenets of the Beltway’s official budgetary orthodoxy: (1) Deficits are inherently undesirable, (2) all new spending (on things that cannot be used to kill foreigners) should be fully offset by new taxes, and (3) reducing America’s existing national debt should be a top-tier policy priority.

But these premises are rooted less in economic science than popular superstition. And, over the past decade, our political class’s indulgence of the public’s mythical intuitions about the national debt has imposed gargantuan costs on our collective prosperity. In the present context, validating the electorate’s economically illiterate fears of public debt is roughly as “responsible” as affirming the anti-vaccine movement’s conspiracy theories about the CDC.

Cites MMT.

Pass along to Pete's supporters.

Intelligencer
Pete Buttigieg's Vow to Cut the Deficit Is Fiscally Irresponsible

Eric Levitz

The Debt Delusion by John Weeks — Mathew D. Rose

Book review. Many MMT points.

Brave New Europe
The Debt Delusion by John Weeks
Mathew D. Rose

Lars P. Syl — Vickrey on deficits and obfuscatory financial rectitude

Keeper quote by William Vickrey.

Lars P. Syll’s Blog
Vickrey on deficits and obfuscatory financial rectitude
Lars P. Syll | Professor, Malmo University

Brad DeLong — Debt Derangement Syndrome

"We knew it all along."

Project Syndicate
Debt Derangement Syndrome

Brad DeLong | Professor of Economics, UCAL Berkeley

Heiner Flassbeck — The debtor is always guilty

In German debt and guilt are the same word: Schuld. So, in Germany, debt has a morally negative connotation. Further, the state budget is referred to as “Haushalt”, which is the word for household. Germans equate state finances with those of personal finances, a concept that is reinforced by German political parties across the whole of the political spectrum.

Flassbeck Economics
The debtor is always guilty

Heiner Flassbeck

Bob Bryan — Trump is suddenly obsessed with the ballooning federal deficit after his signature legislative victories caused it to explode

Apparently the president doesn't get the connection between deficit spending and stimulus.

Business Insider
Trump is suddenly obsessed with the ballooning federal deficit after his signature legislative victories caused it to explode

Bob Bryan

Brian Romanchuk — The U.S. Debt Limit (Preliminary Primer)

The debt limit in the United States is currently not an object of worry, but it represents one possible avenue to default. From the perspective of a non-American, it is rather difficult to understand how such a strange custom could arise. This article outlines very briefly the history of the debt limit, and then moves to discuss the risks associated with it. This issue underlines the argument that default risk in floating currency sovereigns is political risk, not financial....

Bond Economics
The U.S. Debt Limit (Preliminary Primer)
Brian Romanchuk

John Lounsbury — Documentary Of The Week: But How Will We Pay For It?

On Stephanie Kelton and MMT.

econintersect.com
Documentary Of The Week: But How Will We Pay For It?
John Lounsbury

See also at econintersect

Even The Statisticians Are Highly Dubious Of Applying Their Methods In Economics!
Philip Pilkington

Stephanie Kelton and Noah Smith — Just When Should We Start Worrying About Deficits?

Stephanie and Noah debate.

Bloomberg Opinion
Just When Should We Start Worrying About Deficits?

Stephanie Kelton and Noah Smith

Bill Black — How Democratic Party Mendacity about Deficits and Banksters Lifted Trump

Stephanie Kelton and I have been trying hard to keep Democrats from, again, rushing into the trap of denouncing Republicans for running federal deficits. Yes, Republicans are hypocrites about debt and deficits. That does not mean that Democrats should repeat Clinton and Obama’s embrace of the Republican’s economically illiterate, harmful, and fake hysteria about debt and deficits....

In general, good government is good politics. The Democrats should focus on adopting and supporting superior policies that are humane and supported by good science....

New Economic Perspectives
How Democratic Party Mendacity about Deficits and Banksters Lifted TrumpWilliam K. Black | Associate Professor of Economics and Law, UMKC

John Buell — Government debt and spending

Nice précis of MMT.

Mount Desert Islander — Letters to the Editor
Government debt and spending

John Buell

Max Mastellone — MMT economists look at debt, deficit differently

OMG! Is MMT going viral?

Las Cruces Sun-News
MMT economists look at debt, deficit differently
Max Mastellone

Bill Mitchell — The bond vigilantes saddle up their Shetland ponies – apparently

One of Bill's best titles. Maybe "unicorns" would be better than ponies though. It's fantasy all the way with them.

Last week (February 8, 2018), we witnessed the US Senate spectacle with Rand Paul embarrassing himself with his lack of economic knowledge but also embarrassing both major parties – the Republicans for their gross hypocrisy and the Democrats for their gross idiocy. The – Congressional Record – of Paul’s speech (starting S817) is a classic. Also, last week, the stables were stirring apparently, as the ‘bond vigilantes’ were strapping on their saddles and getting ready to make the US government suffer for its so-called fiscal ‘ill discipline’. These characters apparently emerge out of the darkness of fiscal profligacy to defend our interests and force the government to run surpluses. Fantasy stuff all round. In fact, Rand Paul should resign and get a job he is more suited for (which would be?) and the bond vigilantes should make sure their Shetland ponies are not to wild for them. These bond traders play this elaborate game of bluff and pretend they have the power over the government. In fact, they are mendicants queuing up for their daily dollop of corporate welfare and the government could play them out of the game anytime it chose to. The problem is that the bluff works because governments are captive to the neoliberal nonsense that my professsion preaches.

Amazing that anyone still believes the "bond vigilante" nonsense after "Bond king" Bill Gross was ignominiously humbled.

Bill Mitchell – billy blog
The bond vigilantes saddle up their Shetland ponies – apparently
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

DownWithTyranny! — The Smartest Economist In America Explains What Deficits Really Mean

Who is the smartest economist in America? None other than — Stephanie Kelton.

DownWithTyranny!
The Smartest Economist In America Explains What Deficits Really Mean

Reuters — Deficit worries roil Senate debate on tax bill, leaders scramble for votes

Deficit hysteria rises just prior to the hitting of the debt ceiling due on Dec. 8th, which will ratchet up debt phobia, too. What else is new in Moronville?

Behind closed doors on Capitol Hill, concerns were mounting, however, about Republican Senator Bob Corker’s push for a snap-back “trigger” amendment to the bill that would raise taxes automatically, possibly on corporations, if economic growth targets are not hit in the future, to offset a higher deficit.

Conservative Republican Senator Ted Cruz said at mid-afternoon that there were problems with the ”trigger“ proposal, and ”a significant number of members would have a serious problem“ if it only triggered tax hikes and not spending cuts.”...

Reuters

Deficit worries roil Senate debate on tax bill, leaders scramble for votes
Susan Cornwell and Amanda Becker

See also

Sausage-making.

Zero Hedge
Senate Bill Nearly Killed By Deficit Hawks: Will Include $350 Billion In New Tax Hikes
Tyler Durden

Brad DeLong — Should-Read: Alan Simpson and Erskine Bowles: Unfortunately, the tax plan currently

The deficit hawks and debt phobes are back at it again. At least they are consistent across administrations and parties.

WCEG — The Equitablog
Should-Read: Alan Simpson and Erskine Bowles: Unfortunately, the tax plan currently
Brad DeLong

John T. Harvey — Dear President Trump: Your Tax Plan Needs Bigger Deficits!

What I want to highlight here is this: the private sector needs government deficit spending if it is going to recover properly from both the heart attack of the Financial Crisis and the decades of disease brought on by income redistribution and rising debt levels. This is so because government deficits are private-sector surpluses.

The logic is really very simple. What number do you get when you add up every trade surplus and trade deficit on the planet? Zero, of course, because one nation’s trade surplus is another’s trade deficit. This is a specific application of the general rule that in any closed system, the sum of all deficits and surpluses must be zero. If you and I are the only two people in the economy and I spend more than I earn, then you earn than you spend (and by the exact same amount, of course). There aren’t many inescapable truths in life, but this is one.

Now think about the U.S. government budget deficit. If Washington is spending more than it earns, then non-Washington must be earning more than it spends. In 2016, for example, the US federal government spent $585 billion more than it collected in taxes.

That money did not disappear in a puff of smoke. It became the excess of income over spending earned by non-Washington. Non-Washington had a $585 billion surplus or, which is the same thing, $585 billion of savings.

This is an inescapable accounting truth and it implies that any tax plan that hopes to stimulate the private sector must create a budget deficit. Federal government budget surpluses drain non-Washington income. That’s hardly what we need. Pundits and policy makers need to stop worrying about Washington’s deficit and start focusing on non-Washington’s surplus.

“Wait,” you may ask, “true or not, doesn’t this just lay the foundation for bigger problems in the future?” Almost certainly not. Let me address a few of the most common worries:

Forbes — Pragmatic Economics
Dear President Trump: Your Tax Plan Needs Bigger Deficits!
John T. Harvey | Professor of Economics, Texas Christian University

Bill Mitchell – The lame progressive obsession with meaningless aggregates

Maybe the British Labour Party could get Nancy Pelosi to do some stupid tweets for them as well. She is an expert at it – see my blog – When neoliberals masquerade as progressives. She thinks it is smart progressive politics to post tweets criticising her political opponents for a policy that “explodes the deficit … dumping … debt on every man, woman & child in America”. A fallacious argument. But moreover, a very stupid strategic argument because it fails to educate the public on what deficits and public debt are and what the capacities of a currency-issuing government and locks the progressive side of politics into no-win dilemmas. When it is their turn to govern they quickly find that they have no room to move on government spending because their own taunts when in opposition are thrown back at them. Same the world over. The progressive side of politics seems to have a lame obsession with meaningless aggregates – like the size of the fiscal deficit or public debt to GDP ratio. Pathetic is not the word.

I don't believe that Nancy Pelosi would be regarded as a "progressive" in the US. She is a limousine liberal (rich) and a latté liberal (upper class Californian) that has been a Clinton New Democrat as long as I can remember. She dd not switch to supporting Bernie Sanders in the general, which is a pretty good criterion of being progressive in US politics at the moment. I think most American who are paying attention would recognize that Pelosi and the other New Democrats are neoliberals whose political strategy has been representing the Democratic Party as GOP Lite.

Nancy Pelosi et al are increasing being recognized as old school people that should just step out of the way and make room for new blood take over. The real problem in US politics is that the "new blood" is pretty much the same as the old blood on the issue of fiscal deficits and public debt. TINA (there is no alternative) means that no one is presenting any other alternative than a variant of neoliberalism in economic policy.

The real problem is that most actual progressives in US politics that are actively challenging the Clinton New Democrats for party control are under the same neoliberal illusion or at least have very strong neoliberal tendencies they have absorbed from the ongoing propaganda in US corporate media.

This problem is now endemic in the US and there is no voice of reason present in the establishment, including the corporate media. Polls indicate that it is political folly to espouse views that contract the public perception of deficit hysteria and debt phobia that have been created by organizations such as the Peterson Institute. It may take a deep depression to turn this around.

The bright spot is that Stephanie Kelton got a lot of cred and publicity as Bernie's economic adviser and now she is being featured more in the corporate media. Pavlina Tchernova also got some good exposure regarding the job guarantee that made a wave, too. So some good things are happening, but slowly.

Bill Mitchell – billy blog
The lame progressive obsession with meaningless aggregates
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

David Morgan — Deficit worries complicate path for Republican tax cuts

The Committee for a Responsible Federal Budget, a nonpartisan budget watchdog in Washington, on Friday called a Senate Republican tax plan a “fatally flawed budget buster,” likening it to Republican legislation in the House of Representatives that the House tax committee has approved....

The Tax Foundation, another nonpartisan group, said the Senate plan would add $1.78 trillion to the deficit over a decade. It estimated that over the same time frame lower taxes would expand the U.S. economy by 3.7 percent, add 925,000 full-time jobs, raise wages by 2.9 percent and generate enough new tax revenue to erase all but $516 billion of the deficit effect.…

Reuters

Deficit worries complicate path for Republican tax cuts

David Morgan