Bill Mitchell — The effectiveness and primacy of fiscal policy – Part 1

In this two-part series I will:

1. Consider the question as to whether fiscal policy is sufficiently flexible enough to provide an effective counter-stabilisation against the non-government spending cycle.
If a nation is heading into recession, can governments act quickly enough with discretionary spending changes?

If a nation is ‘overheating’ and inflation is threatening to accelerate, can spending and tax changes be implemented quickly enough to counter these tendencies?

2. Should fiscal policy be outsources to technocrats, who work independently of the political cycle and stop politicians from making political decisions that might not be economically sound?

3. Is MMT a flawed paradigm for policy development given that a progressive application of its principles, relies on politicians understanding the operations of the monetary system and the capacities that the currency-issuing government possesses and to use those capacities to advance the public interest rather than sectional interests or their own venal political survival?  

Can we trust politicians?

These are all issues that have been raised in some of the critiques of MMT over time and warrant attention and response.

In Part 1, I will consider the first of the questions above – the flexibility of fiscal policy….

Bill Mitchell – billy blog
The effectiveness and primacy of fiscal policy – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia