If wealth inequality is to be prevented from becoming worse than the horrendous level it has already attained, then the only way this can be done is by larger government spending that is financed by a tax on the rich, either a profit tax or a wealth tax....
We have been talking about the “private sector”, but since workers more or less consume what they earn, it is the capitalists whose savings increase because of the fiscal deficit and who hold claims upon the government. And here, the real point to note is the following. The claims that capitalists hold against the government because of the fiscal deficit have been put into their hands by the fiscal deficit itself. It is a booty handed to them by the government which they have done nothing to earn. The resources which the government obtains for spending through a fiscal deficit come out of the larger output generated by the stimulus it provides, and the profit part of this output simply lands on the capitalists’ lap, a fraction of which they hold as savings, in the form of claims on the government.The purpose of the tax Prabhat Patnaik recommends would be to claw back rent extraction, economic rent being the source of asymmetries that arise owing to asymmetrical markets instead of earning deserved on the basis of contribution through competition in "free market," "free" meaning free of asymmetries that bias outcomes. This was at one time the case with a very progressive incomce tax (90% at the top level), and a steep inheritance tax. Those levies have been way chipped down.
This also tells us why a fiscal deficit is not a good way of financing government spending. It is not because of the spurious arguments put forward by the representatives of finance, but because a fiscal deficit increases wealth inequality. If, for instance, the government taxed away this booty through a profit tax or a wealth tax, then the capitalists’ wealth will remain the same as it was before the increase in government spending; but if it does not, then this wealth increases by exactly the amount of the fiscal deficit. This increases wealth inequality in the country.
Since a fiscal deficit puts wealth into the hands of the capitalists without their doing anything to earn it, it gratuitously increases wealth inequality in the economy; and that is what is wrong with it, compared for instance to tax-financed government spending....
People's Dispatch
What could be wrong with a fiscal deficit?
Prabhat Patnaik | Indian Marxist economist and political commentator, Professor (retired) at the Centre for Economic Studies and Planning in the School of Social Sciences at Jawaharlal Nehru University in New Delhi (1974-2010) and formerly vice-chairman of Kerala State Planning Board (2006-2011)
Misses the point. The super-rich aspire to control governments so they can put the message over the Little People will get badly hit by high taxes too!
ReplyDeleteGetting money out of politics should be the priority. Campaign finance reform, electoral reform, voter access reform, redistricting reform, should be added to the list.
ReplyDelete"it is the capitalists whose savings increase because of the fiscal deficit and who hold claims upon the government. "
ReplyDeleteThat's the mistake of Marxists right there. There are no claims on government. What you have instead is the solution to the capital accumulation problem and they hate it.
Capitalists get to hold green paper as the score of how well they have done. Whether those things represent any sort of claim on anything depends entirely on whether government will allow them to use those pieces of paper for anything other than decoration.
Which they will find out when they try to spend the money, and find government responds by taxing away spending capacity to stop the economy overheating.
"Wealth inequality" doesn't exist if the government is on the side of the people. Government has infinite paper wealth.
That’s wrong with a fiscal deficit
ReplyDeleteComment on Prabhat Patnaik on ‘What could be wrong with a fiscal deficit? ’
Prabhat Patnaik resumes “And here, the real point to note is the following. The claims that capitalists hold against the government because of the fiscal deficit have been put into their hands by the fiscal deficit itself.”
Yes, that’s exactly what the macroeconomic Profit Law implies, i.e. Public Deficit = Private Profit.#1-#3 And by consequence, the financial wealth of the Oligarchy ≈ Public Debt of WeThePeople. The sign ≈ indicates that some other factors play a role that can be left out of the picture here.
This, however, is only the first move in the distribution game. The Oligarchy gets interest on the public debt which is taxed from WeThePeople as long the debt is rolled over. The taxman makes sure for 200+ years now that interests are paid on time.
The policy of deficit spending/money creation is the mechanism for the perpetual and progressive self-alimentation of the Oligarchy. Financial wealth grows in lockstep with public debt. Mr. Trump’s current policy will blow up macroeconomic profit to hitherto unimaginable proportions no matter whether unemployment falls or rises. This, after all, is why the Oligarchy put him into office in the first place.
MMTers sell the biggest Ponzi scheme of all time as a good deed for the benefit of WeThePeople. Academic economists are already for a long time part of the scam.#4
That’s wrong with a fiscal deficit: it is a political and scientific fraud. Economists will go to the scientific equivalent of hell for this. Except for Prabhat Patnaik, of course.#5
Egmont Kakarot-Handtke
#1 Profit
https://axecorg.blogspot.com/2020/06/profit-axiomatic-economics.html
#2 Cross-references Profit
https://axecorg.blogspot.com/2015/03/profit-cross-references.html
#3 The Profit Law, Wikimedia AXEC143d
https://commons.wikimedia.org/wiki/File:AXEC143d.png
#4 Keynes, Lerner, MMT, Trump and exploding profit
https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
#5 Your economics is refuted on all counts: here is the real thing
https://axecorg.blogspot.com/2020/06/your-economics-is-refuted-on-all-counts.html
Capitalists get to hold green paper as the score of how well they have done. NeilW
ReplyDeleteNevertheless, fiat is a public utility and large users/hoarders of it should pay for those privileges, e.g. negative interest.
Whether those things represent any sort of claim on anything depends entirely on whether government will allow them to use those pieces of paper for anything other than decoration. ibid
That's largely unenforceable unless anonymous physical fiat, aka "currency", is abolished. Otherwise, for example, cocaine would not be both highly illegal and yet readily available to bankers and the rich.
Which they will find out when they try to spend the money, and find government responds by taxing away spending capacity to stop the economy overheating. ibid
The dirty little secret of MMT tax policy is that taxes to curb price inflation MUST fall on the non-rich since the rich don't consume enough to matter.
Much better are actual physical limits, ala the Bible, on how much land and other necessities of life (e.g. water rights) one may own.