The American Rescue Plan as Economic Theory — JW Mason

Some people are frustrated about the surrender on the minimum wage, the scaled-back unemployment insurance, the child tax credit that should have been a universal child allowance, the fact that most of the good things phase out over the nest year or two.

On the other side are those who see it as a decisive break with neoliberalism. Both the Clinton and Obama administrations entered office with ambitious spending plans, only to abandon or sharply curtail them (respectively), and instead embrace a politics of austerity and deficit reduction. From this point of view, the fact that the Biden administration not only managed to push through an increase in public spending of close to 10 percent of GDP, but did so without any promises of longer-term deficit reduction, suggests a fundamental shift.

Personally, I share this second perspective. I am less surprised by the ways in which the bill was trimmed back, than by the extent that it breaks with the Clinton-Obama model. The fact that people like Lawrence Summers have been ignored in favor of progressives like Heather Boushey and Jared Bernstein, and deficit hawks like the Committee for a Responsible Federal Budget have been left screeching irrelevantly from the sidelines, isn’t just gratifying as spectacle. It suggests a big move in the center of gravity of economic policy debates.…

While this is a overdue change in direction — owing more to the pandemic and progressive activism than a change of heart — it is not an about-face, which JW Mason mentions.

However, an about-face is sorely needed to get the country back on track economically in the pursuit of "shared prosperity" (ht Xi Jingping). Quoting the Chinese leader is meant to underline that if the US want's to "compete" (Joe Biden) with China, then it has to put people first instead of capital accumulation, especially now that "capital" means chiefly financial capital rather than productive capital.

This is a good post. Longish, but tight and not rambling. While not specifically about MMT, it gives a clear summary of the economic background needed to set MMT in place politically as a challenger to neoliberal "policy science." For example, in emphasizing full employment as economic policy rather than the assumed outcome of economic general equilibrium.

Regarding the change of heart, I suspect that the Democratic Party, and not only the progressive wing, has at least begun to realize how economically devastating the decisions taken during the Obama administration were, and therefore politically devastating as well.

While the post doesn't mention this, the "loyal opposition" is adamantly opposed to to this and their contention is to overhaul conventional economics in the direction of Austrian economics. You knew that already, or course. It necessary to mention, however, in that the country is deeply divided politically, which means ideologically. This influences how quickly the Overton window can move to the left and how far.

J. W. Mason's Blog
The American Rescue Plan as Economic Theory
JW Mason | Assistant Professor of Economics, John Jay College, City University of New York