Thursday, September 16, 2021

J. W. Mason' — The Politics of Pay-Fors: A Simple Framework

These debates are in part about economic questions — both what the constraints on issuing new public-sector liabilities (“borrowing”) are in principle, and of how close we are to those constraints in practice. But a second and arguably more important dimension of the debate is political: In a public or legislative debate, what are the advantages and disadvantages of linking proposals for public spending with proposals for increased taxes?

I think it’s useful to think of this second question in terms of the grid of possibilities below....
JW Mason says he is dealing with the political implications rather than the economic ones, but he fails to mention the key political dynamics involved, which have to do with class struggle within capitalism, political agendas of parties and factions, media propaganda, social conditions, public opinion, ignorance, and copious bullshit.

OK, I get that he is doing something else but why beat around the bush. The par-for nonsense is just that. It's contrived for political advantage.

According to MMT there is no actual basis for linking spending and taxation since taxation is unnecessary as a pay-for and these operations are separate considerations. The link rather is economic and social conditions that both may affect but that has nothing to do with pay-fors. 

MMT prefers dealing with fiscal matters as far as possible with automatic stabilizers rather than directly through budgeting anyway. Budgeting should be based on priorities, with targeted spending according to priority and taxation aimed at inflation control and addressing externality, including economic rent.  Budgeting can be and should be be used for targeting, using both, which monetary policy cannot do since it is a shotgun approach.

It's an interesting toy model though and worth a look.

J. W. Mason's Blog
The Politics of Pay-Fors: A Simple Framework
JW Mason | Assistant Professor of Economics, John Jay College, City University of New York


Peter Pan said...

Academic versus practical. Academics are paid to dwell on the former.

Matt Franko said...

Where was all the outrage when Trump was in there and Dems shut him down ?

AXEC / E.K-H said...


The 3-sector #ProfitLaw Q≡(G−T)+(I−S)+Yd implies PublicDeficit = PrivateProfit. If tax T goes to minimum and spending G goes to maximum, macroeconomic profit Q goes to maximum. This is why MMTers need nobody to pay for anything.

MMT works just fine (for the Oligarchy)

Egmont Kakarot-Handtke

Peter Pan said...

Forward that message to Mitch McConnell.

Ryan Harris said...

Taxes shrink private sector wealth and resource consumption. Only purpose. Fiscal spending grows private sector wealth and public sector resource consumption. Only purpose. When a broad swath of real resources are constrained by climate policy/ship shortages, China "supply chain" demographics, energy/climate policy, water/climate policy, I think it makes sense to link tax and spending policy since the increase in public resource consumption comes at the expense of private sector in the form of inflation (hurts working class) or taxes which affect the wealthy and their investment consumption.