AEI libertarians sober up long enough to connect a few dots here.
Obnoxious lede is dismissive for sure; if you read it though, perhaps some progress has been made into libertarian occupied territory... hard to tell.
Progressives have a new economic theory that lets them spend, spend, spend. @JimPethokoukis https://t.co/dqUcuaLeXh pic.twitter.com/ftWKZUC7mT
— AEIdeas Blog (@AEIdeas) October 20, 2015
Pethokoukis is such a tool. He used to be on Fox Business back in '07 when it first launched and I was still there at the time. He knew about MMT 'cause I would argue with him about it.
ReplyDeleteHe looks like a pyscho... Probably is.
ReplyDeleteIf Sanders goes too close to this stuff it will destroy him as a viable force. Unfortunately, the MMTers have created a bit of a monster. There is a core group of more or less serious economists who understand the limits on monetarized spending. I recall Stephanie saying a dozen times, "We have always asserted the the real limit is inflation."
ReplyDeleteUnfortunately, MMT spun itself off into a global amateur fan club - a kind of MM Tea Party - that doesn't get that stuff at all. It has convinced itself that MMT is a path to the end of all taxes and that whenever anybody says that a major permanent government spending program calls for a new revenue source, that shows that they are idiots who don't get the new "paradigm." Frankly, it's mostly a bunch of crackpots who have very little understanding of underlying constraints. But they are high on the catnip of free lunch economics.
And they are out there completely undercutting Sanders's progressive agenda. Sanders wants to build a more equal society by - among other things - taxing the wealthy. Every time he calls for those taxes, a bunch of crazy MMTers pop into the mix yelling, "Why is he saying that?! Taxes are obsolete!! Hasn't he discovered the awesome MMT ATM machine filled with endless free resources in a world without taxes???!"
Interesting comment Dan as Bernie has self-identified as a fiscal conservative...
ReplyDeleteThis AEI guy is 100% projecting this onto Sanders via a connection he has made thru Kelton who I dont think even works for Sanders campaign... she is at Senate Budget where Sanders has some sort of minority standing...
btw the AEI guy ridicules your favorite subject of redistribution of "wealth" as part of this as a non-starter politically and has polling data included you might want to take a look at that.. .... tries to project how Democrats (btw partisan word here from an alledged 'think tank') will propose to pay for their infrastructure portion in addition to taxing "wealth" for strictly redistribution... posits that Dems will go "MMT" for the infrastructure portion.... UK Labour is proposing using the "wealth tax" for the infrastructure....
Sanders is a balanced budget guy though in his own words and is keeping his distance per your recommendation ... so this AEI guy (imo a partisan in truth lets face it) may be trying to actually smear Sanders here with MMT... we'll keep and eye on it...
Matt, that's an useful insight. We are in uncharted waters now. 2016 would be interesting times.
ReplyDeletebacker the GOP has moved on this from last month:
ReplyDeletehttp://www.washingtonpost.com/news/wonkblog/wp/2015/09/22/deficits-and-debt-are-no-longer-at-the-top-of-the-gop-agenda/
So partisan Pethokoukis has to go easy here imo... brings in the old GOP 'deficits dont matter' line from Dick Cheney in the wrap... spends more time on the REAL loser which is the redistribution issue for tar .... even has data to back it up...
Nothing out of Trump so far that is outside of mainstream on this issue.... Trump may not need to even talk about it... he has other fish to fry...
Dan-
ReplyDeleteThat you would write a sentence like this:
" There is a core group of more or less serious economists who understand the limits on monetarized spending. "
Only goes to show that you dont understand the spending operations. "monetarized spending" is a completely vacuous and meaningless term. Anyone who thinks along these terms is simply ignorant.
And raising taxes an equal amount to some spending plan is stupid, the two things have nothing to do with each other. Raise taxes on top earners in order to force more national income to go to labor, then by all means go ahead; as I personally advocate for a maximum income to go along with a minimum wage, 90% taxes on all incomes of all types over $20 million a year.
But to hurt the political chances of a good spending program like universal post high-school education by tying it to unpopular tax increases is simply moronic.
Matt, why do you put "wealth" in scare quotes?
ReplyDeleteDan what is Trumps "wealth"?
ReplyDeleteHe says 10b, Steve Forbes says it's really 4.9b, now Mike Bloomberg chiming in its 2.9b.... ????
What does Picketty say it is? How can this be considered a "source of funds" for federal spending?
The federal govt can't plan to spend what it needs to unless it gets the " wealth" valuation right?
'The Appretice' crashes in the ratings so we can't pay TANF? VA benefits?
C'mon when do we grow up already? This is childish....
Sorry Auburn, but you are just wrong. As I said, Stephanie used to say all the time that MMT understood that inflation was the real limit on spending. If you just monetize an expansion of spending indefinitely by either issuing endless bonds or endless dollars, eventually you get inflation. This is an obvious point that the army of MMT web zombies does their best to ignore, or not talk about in any cogent way.
ReplyDeleteBut to hurt the political chances of a good spending program like universal post high-school education by tying it to unpopular tax increases is simply moronic.
You've got it completely backwards Auburn. If Sanders went into the US Congress and said, "We should introduce universal post-high school education without raising one additional dime of taxes, 90% of the country would laugh heartily at him and his effective presidency would be over. The only folks on his side would be the MM Tea Party crackpots. And if somebody then asked those folks, "OK, show us your numbers," what would the answer be? "Oh we're sorry; we're MMT! We don't do math. We just do model-free polemical rambling."
MMTers can't even explain their vaunted "sectoral balances" equation. Set five MMTers loose on that equation and you'll get five mutually inconsistent stories about what it says.
Until such time as MMT goes back into Mr. Wizard's laboratory and turns its fuzzy, hand-waving intuitions into something that can stand up to the challenge of rigorous critical counter-argument, they don't deserve a seat at the big boy table. They are worse than amateurs.
Matt, if someone owns 10,000 acres of land, they have a lot of wealth. If the government takes it and divides it into 1000 10-acre pieces and give those pieces to 1000 individuals, it has re-distributed that wealth.
ReplyDeleteIf Joe Blow owns 100,000 shares of stock in Megacorp, and the market currently values those shares at $100 each, then Joe Blow has 10 million dollars wort of wealth at current market prices. If the government hits him and every one else with a similar assessed net worth with a 50% wealth tax, he and all those other folks are probably going to have to sell a lot of those shares to lower net worth part of the population in order to pay their tax. That will redistribute shares in Megacorp and other companies.
If the government takes control of a number of private corporations, and creates a sovereign wealth fund backed by those assets in which all adult citizens are invested equally, then that is another way to redistribute wealth.
If Donald Trump doesn't know how much wealth he has, then lets said up a global wealth inventory to count it up for him, based on accounting principles that apply a uniform measure across the board. Once we have a measure of how much wealth everyone has, it becomes clearer how to redistribute it.
Measuring wealth is no different in principle from measuring income. There are practical challenges to each job. But we measure people's income every year and then tax them on the basis of the measurement. The same can be done for wealth.
ReplyDeleteYou can't finance the govt through confiscation of stocks permanently thought. Let's talk about the net incomes and how to tax them in practice (not in theory), specially the wealthy and large corps.
ReplyDelete"If you just monetize an expansion of spending indefinitely by either issuing endless bonds or endless dollars, eventually you get inflation."
ReplyDeleteNobody is saying that. Nobody.
Everybody is saying functional finance. You're just not listening.
And functional finance realises that there are more limiting tools in the box than the Holy Power of Taxation - limiting bank lending and using planning authorities for starters - even before you get onto 'banning things', aka regulation.
Simply setting fixed prices on contracts and not chasing the wage defeats any inflation. What you get there is simple delay in things happening.
The problem is, Dan, that when your only tool is the taxation hammer everything looks like a nail.
Redistribution is just one of the things that need looking at. But you're seeing it as *the only thing* and that simply won't sell at the ballot box.
You get a lot more bang/buck by targeting the banks and the finance industry. Reducing the size and power of that should be the target - simply by banning most of it.
"If you just monetize an expansion of spending indefinitely by either issuing endless bonds or endless dollars, eventually you get inflation."
ReplyDeleteNobody is saying that. Nobody.
Everybody is saying functional finance. You're just not listening.
And functional finance realises that there are more limiting tools in the box than the Holy Power of Taxation - limiting bank lending and using planning authorities for starters - even before you get onto 'banning things', aka regulation.
Simply setting fixed prices on contracts and not chasing the wage defeats any inflation. What you get there is simple delay in things happening.
The problem is, Dan, that when your only tool is the taxation hammer everything looks like a nail.
Redistribution is just one of the things that need looking at. But you're seeing it as *the only thing* and that simply won't sell at the ballot box.
You get a lot more bang/buck by targeting the banks and the finance industry. Reducing the size and power of that should be the target - simply by banning most of it.
Dan from the AEI piece:
ReplyDelete" A 2014 survey from GlobalStrategyGroup found voters said they prefer a presidential candidate focused on “more economic growth” versus “less income inequality” by 80% to 16%. "
Redistribution is a LOSER.
You, Picketty, and the purple haired PTSD kids from Occupy Wall St. will vote for it.... that is all.
I dont see how you think it is a good strategy to press for a manifest 80% loser redistribution program over a candidate that will just simply reply that the deficit MAY increase a bit if the recipients of the additional spending for community college subsidy decide to save some of their new income and leave it at that.... or with the infrastructure program...
No one is saying Bernie should bring a white board out and start drawing equations on the campaign trail... just that he should proceed confident in the knowledge that the portfolio of UST securities issued is simply savings for private citizens and private concerns and has lately actually been coming down with the tepid recovery as people save less and then get right back back on message about the actual programs...
I vote straight GOP so go ahead and have him press for 50% asset liquidations to pay tax... have him propose your land redistribution scheme for a Zimbabwe redux as Detroit manufacturing outsourcing victims dont know how to farm and dont have the equipment... starve us all out while you're at it as Ag output collapses and hyperinflation sets in... good job!
Trump will malaprop his way to a 'big league' win and then impose balanced trade and "balance the budget" with our seniors currently dis-saving out of ERISA accounts.... we already ran a domestic balanced budget last year as the fiscal deficit = trade deficit... cut off the foreigners and you get a balanced budget under current demographic conditions.... people will think he's a genius...
You can't finance the govt through confiscation of stocks permanently.
ReplyDeleteCorrect Ignacio. Redistribution only gets you to where you want to be for the long term. Once you get there, and put in mechanisms to stabilize income and wealth distribution at the desired place, the tax burden becomes much more equal. You then run a small deficit each year, so the debt service grows in line with the economic growth rate, and that's it.
Everybody is saying functional finance. You're just not listening.
ReplyDeleteNeil, if everyone were simply saying functional finance, they would all recognize the need for a price stabilizing mix of taxes and new issue to accomplish any new spending. Then, if the topic of discussion was a gigantic new permanent US spending initiative like single payer health care, they would be open to the fact that such a program could not possibly be established in a way compatible with stable prices without at least some new taxes.
Now, I don't know about you, but I am hooked up with all sorts of MMT Facebook groups, and get their stuff in my inbox every day. I think you are as well. And I can tell you that every single time somebody proposes new tax revenues in conjunction with a major spending program, they are attacked and lampooned by a large proportion of these clowns as fools who don't understand the MMT Gospel (as they construe it) of a world in which taxes are no longer necessary.
A guy just wrote an article in which he argued that Bernie Sanders could pay for his entire agenda without any new taxes. That article was linked to here, and I seem to be the only one who criticized it.
You think I am distorting the true MMT message. Fine. But if you guys had done, and would do now, half the necessary work you needed to do to weed out the yahoos and ignorant dreamers you wouldn't have the problem of a growing global group of people, all calling themselves "MMT" and reading the same leading lights you read, who think MMT has discovered the keys to a permanent tax holiday and all discussions of new revenues have now been rendered obsolete.
When all that dumb stuff comes rolling out, do we see Scott, or Stephanie, or Randy, or Mosler jumping in to establish some intellectual discipline and say, "What the heck are you guys talking about?" No.
Maybe MMT should have spent a bit more time developing a solid body of grown-up economics, and a little less time in the "framing" of idiotic and half-baked slogans for mass consumption by a Tea Party-style fan club of amateur enthusiasts.
Matt, Sanders's proposals poll very well. But clearly you have much more conservative values than I do, so there is not much to debate. I wouldn't vote for a cretin like Donald Trump if he was the last barbarian in the village.
ReplyDeleteDan actually certain programs would REDUCE prices and inflation. The government sets the prices in almost any sector of the economy directly or indirectly, the current arrangements which are set up to benefit certain corporations through price bidding and fixing rise costs beyond what is rational. In a functioning system you don't get a medicament worth 200 USD that through stupid intellectual property laws and indirect government help costs 70,000USD a day later. This sort of scams don't exist in 'socialists' countries with socialist non-corrupt health care systems.
ReplyDeleteI believe this goes well with Neil comment: the mighty power of taxation is not the single tool in the toolbox, is just one more. Neither functional finance or strong progressive taxation are going to fix our deeply rotted and dysfunctional system.
P.S: I don't get how can you vote for the Paul Ryan libertarian infested GOP either Matt. Or you mean just for the presidential campaign? Now, historically the GOP is true that has increased spending and reduced taxation in general compared to more 'balanced budgets' approach of the Democrats, but the crazy takeover of the traditional conservative by the libertardians looks like the only thing it will achieve is more military spending and cutting all sort of social benefits, and reducing taxes on the rich. Unless you believe in disproved trickle down...
The GOP is a disgrace that is pushing the public towards a Dictatorship with the Tea-Morons in charge, it currently holds most of the power except the presidency. Off course the Democrats are not much better as they are just 'stupid identity politics' + neoliberalism + neocolonialism.
I don't have much hope for democracy, IMO is a finished system which won't resist the intense internal contradictions that are cracking the system.
If prudential regulators simply increased the risk weights of mortgages and home equity loans/HELOCs you could see a significant shrinkage of credit/spending power. This is an easy way to reduce any potential inflation without increasing taxes. And you could have GSEs freeze or reduce their conforming loan limits, FHA raise the minimum down payment etc. All easy ways to slow down housing which can be an inflation engine.
ReplyDeleteWe have these tools available to us now. Government officials during the last periods of inflation (40s, 50s, 70s), did not have these tools available, at least not to the extent we do now. They pretty much only had fiscal policy and had to let the banking system run on its own, often into overdrive (inflation).
Problem is though I've never experienced a case where prudential regulators realize that they can have this huge role in determining inflation. They focus only on the safety/soundness of the banking system. In fact, they may think that rapid expansion of bank assets is a good thing because it increases their capitalization...while ignoring the macro effects.
ReplyDeleteIts Quantity Theory of 'Money' Justin...
ReplyDeleteSomehow they think that an increase in the cumulative amount of govt spending over some time period has some sort of functional relationship with unit prices... or they are looking at 'money' supply measures, etc and think those accountings are again functionally related to unit prices...
The units dont even line up...
In business, with increased order size, you typically expect to pay less per unit (scale economies)... so this doesnt square up for them either... no competent person would agree with any of these theories...
"a cretin like Donald Trump"
ReplyDeleteHey thats not a very respectable way to refer to your source of funds!
Without Trump and all of his pump and dump friends, we're "out of money!"....
ReplyDeleteIf Schwarzenegger lays an egg on 'The Apprentice', we'll have to shut down the community colleges....