Bill Mitchell — When progressives become neo-liberals and create a Trump

When you have a madman sounding, well “presidential” (according to the obsequious US press) what would you expect a Democrat politician to say in response? Yes I am talking about the Democratic response to the speech given by the US President on February 28, 2017 to the joint session of the United States Congress. The last thing I would want is for the response to being with a report card on how the responder was fiscally responsible because he had achieved fiscal surpluses during the GFC. But then this is the Democratic Party circa 2016 we are talking about. The Party that lost an unlosable election to a showman who is sparing of the truth. This is the Democratic Party that having just lost an election because its candidate was seen as part of the neo-liberal establishment that has brought grief on millions of Americans, decides to replace its administrative head with another neo-liberal corporatist. But this problem is not uniquely American, although Americans do like to think they are unique. All around the world, political parties who should be defending workers and the poor have morphed into right-wing look-a-likes preaching fiscal rectitude (they would do it fairer) and cuts to public services and all the rest of it. They have so let down their natural constituents that real right-wingers preaching hate against immigrants and refugees and the like have seized the political initiative and taking votes from them. Trump is a sort of hybrid of that. Until the Left abandons its notions that fiscal responsibility does not mean running fiscal surpluses as a matter of course, it will continue to lose ground. And, we will all be worse off as a consequence....

Bill Mitchell – billy blog
When progressives become neo-liberals and create a Trump
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Zero Hedge — The Narrative Changes: Republicans "Pour Cold Water" On Trump's Massive Stimulus, Will Block Tax Cuts

Republican lawmakers warned "that there could be a major obstacle to enacting President-elect Donald Trump’s agenda: the national debt."

“I was disappointed that it wasn’t brought up in the campaign — anybody’s campaign really — it really wasn’t mentioned,” Sen. Jeff Flake (R-Ariz.) said of deficits and debt. “So I’m very concerned about it. It’s going to be tough to address if there’s no push from outside of the Congress,” he added. “I’m very concerned about it. It’s the biggest problem we face, by far.”

“We did not hear anything about entitlement reform from either of the candidates, and that’s a serious issue,” said Michael Sargent, a research associate at The Heritage Foundation. “You cannot address the growth in spending without addressing entitlement issues.”...

As Bloomberg explains, Trump’s race to enact the biggest tax cuts since the 1980s went under a caution flag Monday when during a news conference, "Senate Majority Leader Mitch McConnell warned he considers current levels of U.S. debt “dangerous” and said he wants any tax overhaul to avoid adding to the deficit."…

“What I hope we will clearly avoid, and I’m confident we will, is a trillion-dollar stimulus,” he said. “Take you back to 2009. We borrowed $1 trillion and nobody could find that it did much of anything. So we need to do this carefully and correctly and the issue of how to pay for it needs to be dealt with responsibly.”

Then there is the debt limit, which will need to rise next year to avoid defaulting on government obligations; McConnell said he wasn’t sure if that would be paired with any deficit-reduction measures next year as it was in 2011, when Republicans held the debt limit hostage and extracted more than $2 trillion in deficit cuts over a decade from President Barack Obama.

House Speaker Paul Ryan has also said he wants tax changes to be deficit-neutral, indicating that Republicans will assume positive macroeconomic benefits from tax cuts to ease the projected budgetary hit - a process known as dynamic scoring that is popular on the right.…

Finally, even if all the changes are implemented immediately, and the GOP rolls over, virtually none of Trump's stimulus package will generate any impact on the economy until some time in 2018 as Goldman calculated last week.…

Trumponimics DOA?

Zero Hedge
The Narrative Changes: Republicans "Pour Cold Water" On Trump's Massive Stimulus, Will Block Tax Cuts
Tyler Durden

Brian Romanchuk — Economic Stability And The Size Of Government

In "Fiscal stimulus does not necessarily mean large government", Bill Mitchell dissected a debate whether "if you support austerity it is because you really just want smaller government and vice versa." Professor Mitchell argues that this is incorrect, although I would note one small qualification - the government cannot be too small for fiscal policy to stabilise the economy....

Bond Economics
Economic Stability And The Size Of Government
Brian Romanchuk

Joe Firestone — The Real Fiscal Responsibility Talk Show Pilot Project

This pilot project and the radio/video shows it will produce and place on the web is for everyone tired of hearing economic commentary from those who got everything wrong. For decades, the doctrine of “Fiscal Responsibility” interpreted as long-term deficit reduction and Government austerity has had a secure place in American politics. This doctrine is the economic equivalent of the medieval notion that patients must be bled to cure them of disease. And this truth is reflected in the economic history of the United States at least since 1976, when we first began to practice ideology-based austerity in its modern form by planning for deficit reduction and balanced budgets in order to decrease the debt-to-GDP ratio.…

New Economic Perspectives
The Real Fiscal Responsibility Talk Show Pilot Project
Joe Firestone

Peter Martin — The economics of a budget surplus: Something to think about before making rash promises

Left of centre political parties are nearly always faced with the charge, levelled by their right of centre opponents, of fiscal profligacy. Accusations are made that the more socially minded parties cannot be trusted with a nation’s finances. They will tend to spend too much ‘taxpayers’ money’ on what they consider to be worthy causes. This supposed tendency is often disingenuously linked to the size of the government budget deficit, which in turn is equally disingenuously linked to the size of government itself. Left unanswered this charge will cost votes. So how should they best respond to the very predictable attacks along these lines which will be only too familiar to Labour Party strategists?

MMT solution follows. Why "fiscal responsibility" is irresponsible.

Labor List
The economics of a budget surplus: Something to think about before making rash promises
Peter Martin

Alan Grayson — How to Destroy an Entire Country

...What is the cause, then? The World Health Organization has the answer: austerity. "Austerity" is a bloodless term for gross economic mismanagement, animated by heartlessness. That robotic cut-cut-cut mentality that deprives us of jobs, of public services, of safety, of health, of infrastructure, of help for the needy, and -- ultimately -- of our economic equilibrium and the ability to survive. The mentality that ushers in, and welcomes, a vicious war of all against all. Austerity is destroying an entire country, right before our eyes…..

In America, we have a rich and powerful lobby that has the same prescription for every economic malady: austerity. Cut-cut-cut. Cut Social Security and Medicare. Cut teacher and police and firefighter jobs. Cut health care. Cut pay and cut pensions. It all boils down to that one ugly word: austerity. And austerity always brings disarray, disaster, decay and death.

People often ask me my position on various issues. Well, I'm for certain things, and I'm against others. But on one issue, I'm very consistent. I'm against pain and suffering. Especially avoidable pain and suffering. And therefore, I'm against austerity. It begins with seemingly innocuous budget cuts. It then leads inexorably to the destruction of countless lives.

Why am I telling you about Greece? In 1935, Sinclair Lewis wrote a book called It Can't Happen Here. But it can. And it's up to us to prevent it.

The Huffington Post

How to Destroy an Entire Country
Alan Grayson | U.S. Congressman for Florida's 9th District

John Carney — Which 'Fiscal Cliff' Do We Want?

John cites Stephanie Kelton.

CNBC NetNet
Which 'Fiscal Cliff' Do We Want?
John Carney | Senior Editor

Cutting spending is not fiscal responsibility. It's fiscal irresponsibility!

A government can be said to be fiscally responsible when it taxes and spends at a level that sustains full output and employment. Doesn't matter what the arbitrary level of taxation, spending or deficits are; what matters is the outcome. Simply cutting spending for the sake of cutting spending is not fiscally responsible behavior of government, especially a currency issuer.

Someone finally gets it!!!!!!!!!!!

Many of you may have already seen this on Warren Mosler's blog, but I just came across it and was floored at what the St. Louis Fed wrote in its report, Why Health Care Matters and the Current Debt Does Not.

As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills.6 In this sense, the government is not dependent on credit markets to remain operational. Moreover, there will always be a market for U.S. government debt at home because the U.S. government has the only means of creating risk-free dollar-denominated assets (by virtue of never facing insolvency and paying interest rates over the inflation rate, e.g., TIPS—Treasury Inflation-Protected Securities). Together with the unusually high, but manageable, level of the current debt, these facts imply that the current U.S. government can wait out any short-term economic developments until long-run growth is restored.7 Further, without an immediate need to drastically reduce the debt, the mechanism between high debt and slow growth loses most of its credibility.

It’s what we in the MMT community have been arguing for years! Looks like the word is finally starting to get out through “respected” mainstream channels. This is great news!!!

John T. Harvey — The Horror Movie That Is Fiscal Responsibility

You know that incredibly frustrating feeling you get in horror movies when you see someone exploring the dark, dusty mansion alone, walking from room to room armed only with a flashlight, and you say to yourself, “Noooo! Don’t do it! Get the hell out of there or you’ll be killed!!!” Many economists have that feeling right now. It could not be more obvious that we desperately need an increase in the demand for goods and services, yet both Democrats and Republicans (though not to the same extent) are calling for “fiscal responsibility” in the form of reduced government spending. Idiots. You might as well give Freddy Krueger a key to your house and turn off all the lights.

Read it at Forbes | Leadership
The Horror Movie That Is Fiscal Responsibility

by John T. Harvey | Professor of Economics at Texas Christian University

He says "idiots," we say "morons."

Felix Salmon — How Pete Peterson is driving the fiscal consensus

The obsession about fiscal prudence is a new phenomenon, and can be dated, pretty much, to 2008, when Blackstone went public and Pete Peterson took his billion dollars in proceeds and decided to use it to found the Peter G Peterson Foundation. Wherever fiscal prudence is preached, Peterson’s money can nearly always be found.

That's only in the US. The EZ has its own champions of fiscal responsibility and austerity — the bankers.

Read it at Reuters | Opinion
How Pete Peterson is driving the fiscal consensus
by Felix Salmon

Favorite line: I’m decidedly dubious about the wisdom of teaching sovereign fiscal responsibility to high schoolers. For one thing, it’s inevitable that many teachers will resort to the personal-finance metaphor, and thereby teach something which is downright wrong.

Salmon gets it that the government is like a big household analogy is false, but it doesn't see that it is because the government is the currency issuer, hence unconstrained operationally, while households and firms are currency users, hence revenue constrained.

Mike Bloomberg jumps on the fiscal austerity bandwagon with one horribly misguided speech

Mike Bloomberg's speech to the Center for American Progress (a liberal think tank, no less), touting his remedy of hard fiscal conservatism. Bloomberg really doesn't seem to understand much when it comes to the economy.

It's a long speech. I make comments until about halfway through. The full speech can be read here.

Bloomberg's remarks are in italics. Mine are in regular type.

Thank you, Elaine and Neera, and good morning. This happens to be Election Day, although there aren’t too many big contests today – unless you count Dancing with the Stars. I want to thank both the Center for American Progress and the American Action Forum for hosting us – who said there’s no bi-partisanship in Washington? But it’s always nice to come to DC – for a few hours anyway.

I’ve come here as a concerned citizen, like all of you, and as an entrepreneur who dedicated 20 years to building a company and as the Mayor of 8.4 million people, many of whom are deeply worried about their futures.

Nearly 40 percent of my constituents are immigrants. They came to America – and to New York – for the opportunity to work and to build better lives for themselves and their families. That’s the promise of America: a nation of dreamers and strivers; we keep our eyes on the stars and our nose to the grindstone. We understand that success requires hard work – there’s no free lunch.

That "hard work" line is becoming a worn out jingo. People have been working hard and even with two family incomes and the social dislocations associated with that, the average American's standard of living has been falling for thirty years. Wages in real terms are lower now than they were in 1968. Maybe we have more billionaires who play games of financial speculation, but those workers he's talking about have not seen real progress and many are currently out of work.

That’s true in New York City, and it’s true in towns across America, except one: Washington.

For too long, Washington has operated on the ‘something for nothing’ principle. Both parties have promised their constituents the world – and given them debt and a sluggish economy and anemic job growth. They’ve adopted ambitious programs – without any serious way of paying for them. They’ve promised to produce and protect jobs – and for the most part, the elected officials have their jobs, but right now, there are 14 million everyday Americans who can’t find work, and more who have stopped looking.

Should read: "both parties have promised their benefactors" (i.e. corporations, the rich) and they've delivered. The plight of the worker has not been the interest of Washington, nor is it the interest of Bloomberg. NYC has become a corporatist paradise.

Both parties preach fiscal responsibility, and yet the national debt stands at $10.3 trillion. That’s about $34,000 for every man, woman, and child in the country and it’s growing by $4 billion – every day. If our current tax and spending policies hold, in 10 years the national debt will be $21.5 trillion, or about $72,000 per person.

That's $34,000 in additional income and savings (in the aggregate) for every man, woman and child. Those dollars spent went to someone, right? They would have been that much poorer if the gov'ts hadn't spent that much in excess of what they took in taxes. And in 10 years it will be $72,000 to every man, woman and child.

Thanks to the ‘prudence’ of the two parties, the Federal government is running annual budget deficits of $1.3 trillion, which means it’s borrowing one of every three dollars it spends.

That's $1.3 trillion of additional income and savings to the private sector. The deficit recycles savings into higher consumption and income.

To put that in perspective: if you made $40,000 a year – would you spend $60,000? Not for long you wouldn’t – because no bank would continue lending to you.

The bank would certainly lend to you if your never missed your debt service and always had the ability to pay. It's called revolving credit. Anyway, he's comparing apples to oranges. Individuals are not currency issuers, the US Gov't is. It has no problem, ever, paying in US dollars.

But Washington doesn’t have that problem. It effectively prints money, while the rest of us have to earn it. And so even during the good times, when responsible management of the budget would’ve meant saving money, Washington was gorging itself on debt.

Saving is inapplicable to the gov't for the very reason he mentions: the gov't can "print" all of its own money it wants. And much of what we (the private sector) "earns" comes from government payments for goods and services, interest and transfer payments (SS, Medicare, Medicaid, etc.). If the gov't weren't paying for these things (yes, Mike, by printing the money), what would replace that income?

In 2000, the federal government took in $2 trillion in revenue and spent $1.9 trillion. In 2010, the federal government took in $2.3 trillion in revenue and spent $3.6 trillion. That means, over 10 years, our revenues increased by 15 percent while our expenses increased by 80 percent.

The surplus of $100 bln that he alludes to removed $100 bln of income from the public. That's his remedy??? The $1.3 trillion deficit he talks about added that much to the public's income and savings. He deems that bad???

Spending money we don’t have seems to be about the only thing the two parties can agree on, but it is threatening the very future of our country. Why? That’s what I’d like to discuss today: Why the era of ‘Something for nothing’ has to end – and end now – and what it will take to do it.

A few sentences ago he said the government doesn't have the problem of money because it can print all it wants. Now it says we're spending money we "don't have."

For the past few years, government has attempted to stimulate the economy largely by deficit spending and tax cuts – and I think it’s fair to say the results have been, at best, mixed. Even though we’re in better shape than Europe, far too many Americans are still out of work. Far too many families are still having trouble keeping up with their bills. Far too many small businesses are still struggling to keep their doors open – and they are responsible for about half of all jobs in America.

Yes, we're in better shape than Europe because Europe is imposing austerity. We haven't done that yet, but we will because of people who think like Mayor Bloomberg. And if our stimulus had been larger, the upswing in the economy from the depths experienced in 2009 would have been that much larger, too.

By now, it should be clear that more government spending and tax cuts cannot stimulate the job growth we need to regain economic stability. We’ve already crossed that bridge – and borrowed too much.

Clear? By what evidence? If you look at the rebound in the economy since the stimulus was enacted, what's clear is that we saw major turnarounds in GDP, household wealth, stock prices, even employment started to grow. There is nothing that clearly shows the stimulus was not effective. It just needed to be bigger.

Likewise, consumer spending cannot stimulate the growth we need to regain economic stability – because consumer debt remains high. Both government and consumers have balance sheets that are heavily in the red. Neither has the money to lead an economic recovery – but luckily, one group does: business.

Consumer debt has fallen considerably. It's down to where it was in 1991, way below where it was in 2007. It's probably still going down. That's precisely why gov't debt has to rise.

Unlike in the run-up to the 2008 crash, where businesses took too much risk, today they are not willing to take risks we need them to – and the result is that a lot of capital is sitting on the sidelines. Why this is happening is not something that government leaders seem to fully grasp – and as someone who has been in both business and government, I’ve seen how the two sides often talk past each other.

Yes, there is deleveraging going on. The private sector is shedding risky assets for safe assets (cash, Treasuries). The faster the gov't supplies this, the quicker we'll be out of the recession. He certainly doesn't grasp this.

Last week, at Senator Michael Bennet’s request, I convened a dinner with a bipartisan group of Senators and New York business leaders. We had a very frank discussion about the economy and how Washington is handling it. Some of the business leaders expressed the concern that they are not being heard in Washington – and they are half-right.

That's been the rally cry, however, it's a slogan and not based on any visible evidence. Business investment under the current Administration is higher than any president in the past 30 years, with the exception of Clinton. And corporate profits are at a record even as millions go unemployed and hungry. How are businesses not being heard? They're the ONLY ones being heard it seems.

They are being heard – but they are not being understood. Hopefully, this morning I can do a little translating.

More of his "translating" that we don't need.

Generally speaking, major American companies are not short on cash. But one of the big reasons they are not investing is that they are short on confidence in the Federal government’s ability to manage macro-economic policy.

Again, that's just a line of B.S. Business investment under Obama dwarfs anything seen in since 1980. Bigger than Reagan, Bush I, Bush II. Only Clinton was bigger and he had Internet and Y2K as drivers. Obama is just three years in. if he goes two terms he could even be bigger than Clinton.

Companies do not make major investments when the future of tax and regulatory policies are so up in the air. Every CEO and business leader that I speak with says virtually the same thing: They are not going to make major investment decisions until they know how Washington intends to grapple with our huge deficits. And right now, they have no idea how or if that’s going to be accomplished.

That's just a bunch of crap. Companies look at their order books to determine whether they invest or not and/or how much. Did Bloomberg look at the deficit (which was big at the time) when he started his company? It was 1981, a very scary time.

That uncertainty is a major drag on job creation – because the price of uncertainty for business is paralysis. Decision-makers abhor a lack of clarity. You can price tax increases and labor costs into your business plan and still invest and grow.

Business conditions are always uncertain. This idea of "certainty" is an illusion. It's all about making a guess about the future.

But if you don’t know what’s on the other side of the ledge – you don’t jump off it. You sit and wait – and that’s what companies are doing. Companies are expressing a vote of no confidence in Washington because of the lack of certainty they face, and we see the effects in the lack of job growth and investment.

There's no evidence that they are sitting and waiting. Investment is up. Hiring is not up because they don't need to hire. Their profits are rising without adding new employees.

When business leaders talk about uncertainty, they are often talking about how healthcare reform or financial regulatory reform will end up being implemented – and those questions are real impediments to growth.

Many more talk about something much more important: weak orders and sales.

But as important, and the subject for today, is the broader uncertainty that exists about the country’s long-term fiscal stability. There is widespread recognition in the business community that we have to make big changes – now – or risk having big changes thrust upon us in the form of further credit downgrades, high inflation, or unacceptably severe austerity that would harm the most vulnerable Americans. So – what does the business community hope to see out of Washington?

We had a credit downgrade and, so? Rates are at all-time lows. High inflation? Where? In commodities, perhaps, but that's because we let speculation run wild. Austerity? It would be self-imposed. No one but ourselves (billionaires like Bloomberg) imposing austerity on the most vulnerable. Like he said before, we have all the money we need.

Nearly every CEO I talk with says the same thing: If the Federal government passed a real deficit reduction plan – and we’ll talk about what ‘real’ means in a minute – business leaders would respond just as they did in the 1990s, when President Clinton and Congress adopted a long-term deficit reduction plan that gave businesses more certainty about the market. That sense of greater certainty – that confidence in the future of the country and the stability of markets – is worth its weight in gold.

Well then the CEOs he talks to are completely misguided. Massive deficit reduction would destroy the economy. Just look at Europe. Are they blind?

But so long as the Federal government continues running huge deficits, and engaging in kabuki dances every few months about how to fix them, business leaders will be less likely to make major long-term investments that would produce jobs.

That's another line of garbage. Moreover, all the major long-term investments of this country, like infrastructure, education, basic science, were ALL undertaken by government.

One of the reasons this message is not penetrating the Beltway is that too many elected officials have not spent enough time in the private sector to know that investment decisions are about more than dollars and cents. They are about expectations – expectations of where the market is moving, and in which ways the government will push it.

That’s a panacea that you have to work in the private sector to have an understanding of what to do. Most people in Congress are millionaires. Gov't and the private sector have different functions. Government is not a profit seeking enterprise and should not be run that way.

That’s why today, I believe the best economic stimulus is fiscally responsible, long-term deficit reduction that sends a clear signal to the private sector about Washington’s commitment to economic stability.

Fiscal responsibility and economic stability should mean running the government in a way that always sustains full employment and output.

Real deficit reduction means more jobs today and tomorrow. But real deficit reduction requires real political courage – and that, unfortunately, is the biggest deficit we face.

They are reducing deficits in Europe with austerity and it is not creating jobs. It is killing the economy for reasons mentioned earlier.

As we all know, the Super Committee on deficit reduction has until November 23rd to come up with recommendations for achieving $1.2 trillion in savings over the next ten years. To put that in perspective: that would shrink our deficit by about 13 percent. That’s it. A drop in the bucket. And the Federal debt will continue to grow.

A 13% shrinkage of the deficit means a 13% decrease in net private savings and income. Huge. That would shrink GDP by the same amount: $1.3 trillion in lower output. He wants it bigger? That's a depression.

I can't take it anymore. If you want to read his entire speech it's here.