Friday, October 26, 2012

Stephanie Kelton — Pete Peterson Has Won

As Stephanie intimates, this is the politics of fear, pure and simple. It's the same hyper-emotional politics that is depriving Americans of their constitutional liberties in the name of fighting drugs, and terror, and undermining their future in the name of preventing US bankruptcy.

It's carefully crafted, well-financed, and ruthless. And Stephanie is right, they are winning, with leaders of both parties in the tank and the leadership of the left clueless and resistant to learning there might be a better way. Lookin' bad not only on the economic front but also on the social and political front as well. This is not going to end well for America.

New Economic Perspectives
Pete Peterson Has Won
Stephanie Kelton | Associate Professor of Economics at the University of Missouri-Kansas City and Director of Graduate Student Research at the Center for Full Employment and Price Stability


Malmo's Ghost said...

The wealthy will continue to get their state money, just watch. The average Joe is the one who is going to get screwed. This whole deficit hysteria meme is the primary reason Obama would lose, if he does lose. I'm not sure, however, who will have the tougher time passing this austerity package, Obama or Romney? My guess is that it will be significantly tougher for Romney, so perhaps an Obama loss won't nearly sting as much. We'll see soon enough.

Matt Franko said...


" All of this is utter nonsense, as readers of this blog know, and it leave progressives in the weak position of pointing at the 1% and yelling, “Get ‘em! They’ve got all the money!” Want to care for seniors? Tax the 1%. Want safe roads, good schools, investment in alternative energy? Tax the 1%. "

She makes a good point here. This is textbook "from each according to ability, to each according to need" garbage.

The left needs to shitcan this garbage if they are ever going to get anywhere in this...


Dan Lynch said...

A small note: I believe Stephanie's official title these days is chair of the economics department at UMKC. I'm not sure if that is "instead of," or "in addition to" being associate professor ?

It makes no difference to me what her title is but it's probably important in the academic world.

paul meli said...

I read a week or so ago someone on Joe Biden's staff suggested Stephanie should run for president.

paul meli said...

I'm assuming he meant in the next election. :-)

Dan Lynch said...

I believe that was Biden's economic adviser, Jared Bernstein, who joked about Stephanie running for president.

Stephanie is very good at framing the issues and crafting sound bites. We're lucky to have her on our side.

Tom Hickey said...

Dan Lynch A small note: I believe Stephanie's official title these days is chair of the economics department at UMKC. I'm not sure if that is "instead of," or "in addition to" being associate professor ?

There are three ranks of professor in the US, assistant professor, associate professor, and (full) professor. The departmental chair is admin postion. In some universities it goes to one of the top dogs and carries political weight, whereas in other places it just rotates through the faculty as an additional duty that different profs assume for a year or two.

Roger Erickson said...

if true, then 80 years after the New Deal, the same Upper Looting Class finally has the UnDeal

Dan Kervick said...

I think a policy of taxing the 1% much more heavily, pursued along with a variety of other measures for leveling income disparities, will be an essential component of any revived left-progressive movement. It makes sense popularly, politically, socially and economically. This has nothing to do with the operational mechanics of public finance.

Trixie said...
This comment has been removed by the author.
Dan Lynch said...

I interpret Stephanie's point as that Occupy has been fixated on taxing the rich while ignoring other ways to lift up the poor and reduce inequality -- like ending FICA, a JG, raising the minimum age, etc..

IMHO, the inequality issue has come out of the closet and there's no way to stuff it back in the closet. It *will* eventually be addressed, one way or another. Refer to France in the 1790's.

I do fault MMT for not including a policy recommendation to address the rentier problem (Michael Hudson excepted). In fact, some of MMT's policies, like free trade and ending corporate taxes, favor rentiers.

Mind you, I identify as an MMT'er, just saying there's room to improve.

Dan Kervick said...

I'm with you Trixie. There is also an increasing amount of research coming out showing the economic harms caused by inequality - apart from the moral, social and political harms.

What I would like to see the MMT-influenced progressives arguing is that increased tax revenues coming from taxing the wealthy more heavily not be used to shrink the deficit, but instead be used to create policy space to expand spending even further without creating price instability pressures.

But basically, I think progressives should stand for democracy and equality, and that the policy specifics and operational details flow from those principles.

Tom Hickey said...

I do fault MMT for not including a policy recommendation to address the rentier problem (Michael Hudson excepted). In fact, some of MMT's policies, like free trade and ending corporate taxes, favor rentiers.

MMT as an operational description and macro theory doesn't address this issue directly. It is policy neutral other than wrt policy directly relevant to its macro theory.

Michael Hudson is not considered to be a MMT economist, although he is an MMT ally like Jamie Galbraith and some others. Dean Baker might be considered a peripheral associate.

My take is that MMT economists don't want to wander too far off their own turf. The issues are huge and a lot of factors are in play. It really requires a total Minskian-Post Keynesian approach, and the MMT economists cannot be expected to provide this without a grand alliance, so to speak. This is developing at UKMC with Michael Hudson and Bill Black posting at New Economics Perspective along with MMT leaders.

It looked like Bernie Sanders economic advisory committee might play such a policy and grand strategy role, but so far no indication that is happening.

Trixie said...
This comment has been removed by the author.
Stephanie Kelton said...

I'm not defending inequality. I'm not rolling over for anyone. And I DON'T think the Occupy narrative is "working." I also dont' see the reelection of Obama as a referendum on anything. The man is Mr. Grand Bargain. Mr. "Go Big." Mr. I'll see your $2.5 in spending cuts and raise you $1 in revenue increases. Yeah, by all means, let's go to the mat for that. This guy cannot wait to tackle the nation's "entitlement problem." He is desperate to go down in history as the Democrat who was brave enough to touch the third rail without getting electrocuted.

Inequality is a HUGE issue. No question about it. But I refuse to roll back 20 years of effort and pretend that it is in some way tied to our government's ability to fund itself.

And, not that it matters, but there was stiff competition for the Chair's position. I (clearly) lost.

Bob Roddis said...

This is great news. Of course, no normal or intelligent person believes that funny money creation and/or government spending and debt causes prosperity.

Obama: Look, I get the Keynesian thing. But it's not where the electorate is… p. 338.


Malmo's Ghost said...

I despise Romeny, but more than ever my gut tells me the deficit hawks will do worse with him at the helm than with Obama. In fact, Obama, and the grand bargain mentality could lead us to the abyss far faster than the Mormon Moron.

Trixie said...
This comment has been removed by the author.
Stephanie Kelton said...

We bought it hook, line and sinker, and they told us this would put the program on solid footing. Moynihan etc. struck a bi-partisan deal that called for some shared sacrifice, but guess what? Both parties went right on claiming the system was broken and demanding further concessions from the majority of working Americans.

So that's where I'm coming from. Buy the myth, own the myth. It's herpes, not influenza. You don't get over it.

Stephanie Kelton said...

Well, that was HALF the comment I tried to post. Grrrr.... Wonder why I don't comment much? That's why! No idea or saved record what was supposed to precede that.

Dan Lynch said...

I understand the desire to focus on the "monetary" part of MMT, Tom, yet free trade has a chapter in Warren's book even though it is not directly related to MMT (in my mind.)

I don't want to hijack the thread any more than I already have so I'll leave it at that. ;-)

I agree with Stephanie AND I agree with Trixie. Taxing the rich should not be our primary focus, but letting the Bush tax cuts expire could give the left leverage to negotiate a better deal.

Otherwise, there's no way the House is going to pass any tax increases on the rich, so why beat that horse to death ? The left would have better odds challenging the deficit myth, minting the platinum coin, and proposing a FICA suspension, which might actually have a chance in the House (R's won't like it, but they would be hard pressed to vote against a tax cut !)

Trixie said...
This comment has been removed by the author.
Matt Franko said...

Trix (and those on the left),

" I'd still tax the snot out of the .1% for obvious reasons outside of "funding"."

But look, once you say you have to raise tax your argument crumbles... this implies taxes are needed to fund expenditures.

You guys on the left have to get away from this "tax increase" completely, it undermines the argument that govt is not a household. (and btw, as SK points out here: IT'S NOT WORKING!!!! HELLO!!!)

These 1%ers always end up losing all of their money anyways in bad business decisions due to their greed or get thrown in jail, buy overpriced things and have to pay local taxes on them anyways, etc... To "hell" with these people, let them have their hoards and choke on them for all I care.

The message has to be to establish the fiscal flows from the bottom up.... let God deal with the 1% morons.


Dan Kervick said...

These 1%ers always end up losing all of their money anyways in bad business decisions due to their greed or get thrown in jail.

Matt, where have you been? You have read Bill Black and Yves Smith. They don't at all mostly end up losing their money and they are certainly not in jail: they are running Wall Street and running our world. Why do you think Pete Peterson and the Kochs have such an outsized voice in our politics in the first place? Because they are brilliant political philosophers? No, because they are very, very rich. Money talks and we live in a plutocracy. If we don't take on the plutocracy, there will be no social progress and the super rich will continue to use their political power to destroy what's left of progressive and democratic government.

And there is no way of ring-fencing the wealthy and their money out of the political arena. Those with money will always have a louder voice and more power than those without it. The only way to have a democratic society of political equals is to take steps toward economic equality as well.

Dan Kervick said...

Government doesn't need tax revenues to fund spending since government is a source of dollars and doesn't need to get the dollars first. However, when I read some of the comments that pop up on MMT blogs, I sometimes think some people believe MMT points the way toward a future without taxes. It clearly doesn't.

Total Federal spending is currently around 23% of GDP. Even if we assume healthier annual GDP growth rates of 3% and 4% in the future, there is no way that the entire volume of Federal spending, amounting to about a quarter of the annual spending in the entire economy could be injected into the economy each year without corresponding taxes draining out almost the entire amount. If we spent this amount without the taxes we would have crazy inflation. We don't have to tax the full amount we spend, since economic expansion can absorb the difference between expenditures and tax revenues without price destabilization. And when the economy is running far below capacity, as it is now, the deficit should be even larger. We should always run a deficit.

But there is always going to have to be some sizable amount of taxes. As long as that is true, we can and should debate the allocation of the total tax bill, and that wider debate includes debates about other social and political goals we want to achieve via taxation.

Matt Franko said...

Dan this is the way those people look at things:

1. "It's my money"

2. "Govt needs my money to be able to spend"

3. "therefore, govt is going to come and try to take my money away from me"

4. "I think it would be a good idea then to spend $1 of mine on political advocacy/influence that will save me $10 on taxes that the govt needs from me now and in the future."

It's all false Dan. Their whole view of things is false. Their lives are dedicated to a complete falsehood. They are disgraced.

I submit that we could could just keep telling the truth, unapologetically advocate for higher fiscal deficits thru bottom up tax cuts and expanded EITC and health and education vouchers, etc.....

and let these 1% or whatever you want to call these MFers eat shit and die for all I care ...

You give them too much credit in your thinking that these people really know what is going on...

I think (to some extent) both Yves Smith and Bill Black are discounting the negligence on the part of govt to maintain adequate fiscal flows leading to the GFC... then they get carried away with their view that "frauds" were largely to blame, etc...

Warren Mosler basically predicted the GFC on Mike's show long before it happened just based on his observance of the level of the fiscal balance and the household obligations ratio... not rampant frauds or political corruption.


Dan Kervick said...

I submit that we could could just keep telling the truth, unapologetically advocate for higher fiscal deficits thru bottom up tax cuts and expanded EITC and health and education vouchers, etc

Non of that is going to happen Matt, because those other guys run the world and own the politicians.

Tom Hickey said...

Dan, I think it would be a mistake to connect the MMT "brand" with a particular political policy approach since such approaches are necessarily ideological. There is not only the left-right divide, but also division among those on the left and the right. And this there is the so-called center that everyone wants to occupy. There are lot of ways to formulate a policy approach that is MMT-consistent, especially when at least some of the MMT leaders have said that the MMT JG is not a sine qua non.

Ideally, the entire political debate would be taking place in terms of the MMT operational description at least. There are a whole range of policy options within that framework, left, right and "center."

I would say that a left-leaning position based on MMT would accept the view that the aim of macro is to resolve the trifecta of growth, employment and price stability effectively and efficiently by doing the right things and doing them right.

Policy, strategy and tactics are about management and management is the effective achievement of policy goals as efficiently as possible. Policy goals are a matter of political choice. There's always going to be disagreement about goals and then also about strategy and tactics for achieving them.

Let the debate begin on solid ground by accepting the MMT operational description as a starting point. But as we see even here, there is disagreement over the correct operational description. So the debate actually starts before the MMT operational description. That is to say, at this point, lacking common agreement, it is an assumption by one side in the debate.

So far this debate is only at the initial stages. Not even all PKE economists are in agreement. Lots of work yet to be done to come up with agreement over a unified approach economically, let alone politically.

I think it is fine for individuals or advocacy groups to come up with MMT-based or MMT-consistent proposals, which is to say, reality-based proposals instead of myth-based ones. But these proposals should not be represented as "MMT" either, or confusion will result.

Dan Kervick said...

Tom all that is fine, but we're not just talking about the MMT brand.

Matt Franko said...

Agree Tom,

I look at Trixies statement here and I assume Dan's here represents a shall we say 'severe dislike' for these "1% people" or whatever they are... and dont get me wrong I dont like them either...

(I believe apostle Paul termed them "the contemptible" ie imo 'they are able to be the object of our contempt')

but overall we should guard against proposing policy to "screw them" as a foundational part of what we are doing here... let's get the basic truth out there first and let our republic 'go to work' with that in mind...


Dan Kervick said...

By the way, I agree that the Occupy movement has yet to deliver a compelling program for real change. There is still too much millennial daydreaming about some future paradise in which there are no contracts, no debts, no laws and no obligations.

Tom Hickey said...

Dan Tom all that is fine, but we're not just talking about the MMT brand.

Just saying that everyone is welcome to come up with their own policy proposals and join with others in advocacy groups. OK, too, to advertise that the proposal is "MMT-consistent." But don't expect all MMT proponents to get on board just because it is MMT-consistent, and some MMT proponents may even be in opposition.

But this is just a general observation. Right now, in the various countries there are crises in progress and different people will be coming up with various proposals. I do think that a balance has to be struck between the theoretical and ideal, and the practical and achievable. MMT is not my first choice.

I would rather see a totally different social, political a,d economic system in place and I realize that this is unreasonable at this level of collective consciousness. So I compromise with a solution I think is practically achievable, that is, something MMT-based, while I do my best in other ways to raise the level of collective consciousness so that humanity can display more of its inherent potential.

Tom Hickey said...

Bottom-line in winning the political debate comes down to who has the most compelling narrative, and as cognitive scientists point out, this boils down to who has the most appealing analogies.

The prevailing fiscal analogy is the government-as-big-household analogy a variant of which is the government's checkbook-is-like-yours.

It is not sufficient to show that this thinking is wrong due to the distinction between issuer and users. The analogy needs to be replaced with an accurate one, such as Stephanie's see-saw that illustrates the inverse relationship, whereas the household and check book analogy is a direct one.

The task is hammering home inverse analogies to the point they replace incorrect and misleading direct ones.

That's something we can all do, regardless of differences in policy, strategy and tactics.