I ask the followers of MMT, and like-minded thinkers, to switch their primary argument from deficits, debt, taxes, money creation, banking laws and other inanimate concepts, and instead humanize our economic problems by focusing on the gap – that historical source of human misery and domination.
The populace cannot and will not understand why deficits should be larger and “debt” should not exist at all. This is not what they know about deficits and debt.
The populace cannot and will not understand why taxes don’t pay for federal spending, nor why the government does or does not create dollars by spending dollars. This is not what they have been told about taxes and spending.
All the discussions of federal banking laws, Monetary Sovereignty and seigniorage will not penetrate.
What the populace does understand and believe is the gap – the fact that the rich are getting richer and the poor, by comparison, are getting poorer.
Using the gap as a starting point, we can segue into additional facts:Monetary Sovereignty
–MMT: To make your case, begin with what people already believe
Rodger Malcolm Mitchell
We essentially agree on policy, now we need to work on strategy.
The problem is that MMTers continue to use the language of the enemy. The term "deficit", from the latin "it is wanting" is exactly the wrong word to use. It is too value-laden a term: when people hear it they automatically think "bad", that government is lacking something.
ReplyDeleteI've ceased using surplus and deficit at all in discussion, preferring "positive" and "negative" balance as they are value neutral and can be explained in terms of a battery; there's a positive terminal and negative terminal, neither is better than the other and they simply tell us which way the juice is flowing.
I forget exactly who it is, but someone at NEP has suggested using "net contribution" instead of deficit, since it is the government's net contribution to the economy.
ReplyDeleteSounds good to me, John. Net contribution v. net withdrawal
ReplyDeleteSpread the word! :)
ReplyDeleteGood idea too Ben..... rdp
ReplyDeleteYou better hurry up before Germany takes all their gold back!
ReplyDeleteOh if your interested in understanding why I have lost complete faith in the elected officials and the DOJ check out PBS FRONTLINE "the untouchables"
Bob -- Yeah, heard about that. Check Naked Capitalism for Yves Smith's expose of the OCC review of mortgage problems focusing on Bank of America. Posted in the past 2 days.
ReplyDeleteI don't understand why Rodger thinks there is a problem with the goal of reducing Medicare costs. It seems to me that reducing the cost of any good is always a plus.
ReplyDeleteHere's the thing I think MMTers need to focus on: offering clear policy guidance with definite, specific recommendations, rather than dancing around the issues with a vague menu of possibilities. I don't think the issue is framing. It's leadership.
ReplyDeleteJeffrey Sachs has a new op-ed today in which he argues that the US needs to increase the size of the discretionary non-defense budget. He's right. He then goes on to call for higher revenues and a reduced deficit.
Now as we all know, MMT claims that "taxes don't fund spending", and also tends to argue for sustained large deficits. But it is usually pretty hard to make that case plausibly for people since, given the current rules under which the US government constrains itself to operate, rules that are written into laws, the government has a budget. Spending is constrained by the balances in Treasury's accounts, and the law does not permit overdrafts. Those account balances are built up from a combination of tax revenues and borrowings.
So if one argues for increases in overall spending, one is thereby committed to this disjunction:
Either
1. The government should increase its tax collections; OR
2. The government should issue more debt; OR
3. The government should change the rules under which it constrains itself to operate so that it can increase the size of its deficit without issuing more debt.
Since MMTers would presumably argue against shrinking the deficit, they would then be committed to choosing between 2 and 3.
So what one is it? I think the usual impression one receives is that MMT tends to favor 2. And there is a lot of theorizing about the role debt issuance plays in interest-rate management.
But I think a growing number of people are increasingly ill-disposed toward issuing more bonds to the richest financial institutions in America, simply so that the government can carry out its spending. Why should the government have to swap a bunch of interest-bearing bonds with Goldman Sachs and the like in order to credit itself with the dollars it needs to buy a new school building or bridge?
It's not an either-or thing. Some bond issuance might serve a useful public purpose in providing inflation-protected savings vehicles in insecure times. But c'mon. At least we ought to provide for ourselves the operational option of just spending the money we need into existence in the act of spending it.
If the concern is price-stability management, then institute flexible tax rates that allow the fiscal authorities to tax folks like Goldman Sachs to drain NFAs when that is necessary.
And as for controlling the interbank interest rate, if that is the goal then why not just set the darn rate by fiat, and forget about all this business of draining and injecting reserves, and setting a floor based on the continuous provision of free money to banks via IOR.
Coming from a different perspective, I think Dan Kervick's recommendations 1 & 2 face strong head winds with the electorate, while #3 is a long term educational effort.
ReplyDeleteSometimes I think MMT is trying to push through a door marked "PULL". Why not try using a jiu jitsu approach? Offhand I see two areas where MMT could politically hone its message in a way to be more aligned with the popular zeitgeist.
1. A smaller trade deficit suggests that it does not take as large a budget deficit to get the same bang for the buck in economic stimulus. So, why not go with that instead of trying to convince unemployed workers that they are better off from seeing their jobs exported overseas in order to get better terms of trade for the "cheap imports" they can buy. Seems to me that the deficit may be providing as much economic stimulation to China as it is to the US. Sounds too much like trying to get something for nothing.
2. MMT should be pounding the drum much louder to end the war now! Bring troops home not only from Afghanistan, but South Korea, Japan and Germany. Who are we protecting Germany from? Poland? Redeploy military assets patrolling the border or some other useful purpose where they can spend their pay domestically. I know Ron Paul has no fan club here because of his stance on deficits and gold, but he garnered a lot of support from the anti-war left who were disaffected with President Obama.
MMT is a monetary description and a macro explanation based on demand-side principles and commitment to full employment. It's basic prescription is to use available policy space to harmonize the trifecta of growth, employment and price stability. As a monetary description and macro theory it has policy implications but there are a variety of applications.
ReplyDeleteThose who understand MMT are welcome to formulate and advocate for a policy option of their choice.
As far as I know, the MMT "principals" have not chosen to issue a joint statement about policy, although they are in general agreement about the direction and various proposals are on the table, the most comprehensive of which are Warren's proposals for the US, which, I think, is mostly what we are talking about here.
So if there is an MMT policy formulation, that is it. Then the question becomes one of strategy and tactics for advocacy. That again is up to the MMT "principals" and those who have joined them.
Everyone else is welcome to use understandings developed by MMT economists to formulate and advocate for alternative policy and adopt different strategy and tactics.
I would advise loosing the MMT label as a strategy and tactic. It adds nothing substantial as far as I can see, and I think just gets in the way by introducing its own controversy.
Just put some proposals out there if they are different from Warren's. Otherwise get behind the "Mosler plan" and advocate for it. Or convince Warren to change his plan to what you would like to see.
My two cents.
I have a policy essay I'm posting tonight at NEP called "From Central Bank Independence to High-Powered Public Finance"
ReplyDeleteWhy does everyone on the internet spell lose wrong? Even Tom did it. hehe
ReplyDelete"What the populace does understand and believe is the gap – the fact that the rich are getting richer and the poor, by comparison, are getting poorer.
ReplyDeleteUsing the gap as a starting point, we can segue into additional facts:"
And you just lost every republican voter.
And you just lost every republican voter.
ReplyDeleteThey are over at MR :)
"And you just lost every republican voter."
ReplyDeleteActually I'd bet you'd lose only about 90% of REGISTERED republicans, but you probably could grab 70% of independents plus democrats leaving you a pretty solid majority.