Proponents of MMT are well versed in the concept of sectoral balances, which states that the sum of government financial balances plus non-governmental financial balances (domestic and foreign) must equal zero.
Sectoral balances explain why, when the government runs a deficit, the non-government runs a surplus equal to the size of the government's deficit to the penny.
This is tautology, not theory.
Now here comes Paul Ryan, the new GOP hatchet man, who proclaims that he is going to put America back on a "Path to Prosperity," by cutting $6 trillion out of the Federal Budget over the next 10 years.
Anyone with even a casual understanding of sectoral balances (like, if you read the first paragraph of this post), would instantly be able to understand, when armed with a little 1st grade arithmetic, that the people of this country (and many foreigners) are about to be relieved of $6 trillion in wealth and savings.
How that adds up to a path to prosperity in any way other than some warped idea of prosperity in Ryan's mind, is a mystery to me.
Outside of Ryan's mind, it is a path to poverty and dystopia.
Mike - I thought you mentioned you had a meeting with Paul Ryan in your offices not too long ago? Yes? If so, care to share what his thinking (or lack of) is? Maybe you posted about this and I missed it...
ReplyDeleteMike,
ReplyDeleteI wish there were more people like you making these points in such a high profile way. There's Krugman, Reich, Romer, Baker, and Galbraith, as I can think of now. But, you have a higher profile than most of these.
Sure, most of them aren't MMT people, but the current policy prescriptions are the same.
AP:
ReplyDeleteMet with Eric Cantor. Same ideology. Didn't get very far.
That's because they are doing God's work. You just tried to confuse them with your sorcerer's ways!
ReplyDeleteLet's call it like it is. It is a reallocation of resources to the elite and to the military-industrial complex by reducing progressive taxation and slashing social expenditure. This is in the name of "fiscal responsibility" by balancing the budget, but it will result in an eventual depression as shown by projecting sectoral balances.
ReplyDeleteTax cuts will mostly be saved, since that is what being "rich" means, and the middle will have to save more to prepare for medical expenses and retirement. With a balanced budget that means economic contraction due to insufficient demand to purchase output. Of course, the rich know this and expect the demand leakage to be offset by net exports, so that US workers are laboring for the ROW instead of themselves.
This means a significant drop in the US standard of living, if it works, which it won't. All countries cannot be net exporters, and it is highly unlikely that the US can net export to the required degree.
This is class warfare lead by the elite against the rest of the country.
Right Tom,
ReplyDeleteAnd 90% + of the people are blind to this currently.
I was feeling in a pretty good mood when I got up this morning but then as I was getting ready I had CNBC on at 7:00 and it became the "Paul Ryan Show" and there went my good mood, gone by 7:00 AM as I continued to listen to this depraved moron...... ugh!
Joe Kernan at CNBS thinks he should run for President!
Anymore at CNBS if it isn't Ryan then they have moron David Walker with the Peterson people on or some other deficit reduction fetishist. Where is the balance? Alternative viewpoints?
Resp,
I have been saying for some time that we are in the end of Reaganism/Neoliberalism. The present crisis would have done it already had it not been for massive government intervention, beyond the scope of imagination, really.
ReplyDeleteThe crisis is not over yet though, and this could still be the Big One. If not, the next crisis will hit in 5 to 7 years and it will be the Big One, because the US and world will still be dealing with the residual of the present crisis.
What is unsustainable cannot go on forever, but "markets can remain irrational longer than you can stay solvent." So the timing is unclear, especially when government has been captured and is throwing its wight behind the unsustainable. But that just means a bigger fall when it comes.
Reading the news lately, it appears to me that the US is going mad. Recall the ancient Greek proverb, "Whom the gods would destroy, they first drive mad."
Ayn Rand: "If I had to choose between faith and reason, I wouldn't consider the choice even conceivable. As a human being, one chooses reason."
ReplyDeleteRyan: "The reason I got involved in public service, by and large, if I had to credit one thinker, one person, it would be Ayn Rand "
Paul of Tarsus: "Now profane and old womanish myths refuse, yet exercise yourself in devoutness,"
(1 Tim 4:7)
My Forbes blog should be up soon (they had a bit of a mix up with the contract, but it's fixed now). I already have my first post ready, on Social Security. However, I'm already working on a second, doing a very basic sectoral balances look at Mr. Ryan's (and Mr. Obama's) budget-cutting initiatives. Good Lord, what utter insanity.
ReplyDeleteGreat. Please post a link when it is up.
ReplyDeleteOkay, got one done. I think I'll still do the Social Security one first, but then I'll strike with another anti-austerity one thereafter. I guess we really need to spread it out, anyway, to keep some sort of pressure on.
ReplyDelete