Bill Mitchell — Of course governments will be fiscally stretched if they define large surpluses as the norm

Wednesday and a short blog post. I regularly work for unions as an expert analyst/witness in their struggles to achieve wage justice with employers who are intent on paying as little as possible. Often these are private employers but at the moment I am helping a union with their campaign to win a reasonable wage increase against a state government. The logic deployed by the government in relation to their fiscal affairs and their wage setting behaviour is a classic demonstration of how neoliberalism has distorted any sense of reason and created self-fulfilling problems. So today, I will just introduce this issue – given how fascinating it is....

Bill Mitchell – billy blog
Of course governments will be fiscally stretched if they define large surpluses as the norm
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell— Forget the official Rule, apparently, there is a secret Fiscal Credibility Rule

It is Wednesday and only a relatively short blog post. Yes, some more on that Fiscal Rule that seems to be causing people to lose sleep (not me). First, we had the Duck Test debate about the British Labour Party Fiscal Credibility Rule. Those promoting the Rule have been at lengths to deny its neoliberal framing, language and concepts. Not an easy task when the Rule talks about a currency-issuing government wanting to avoid “putting the rent on the credit card month after month”. Sounds like a duck to me. Then there was the ‘all critics (me) are stupid’ approach because they (I) apparently didn’t understand the Rule, simple as it is in construction. That didn’t end well either. Now, rather innovatively, we have the introduction of the Secret British Labour Party Fiscal Credibility Rule – which tells us that the actual British Labour Party Fiscal Credibility Rule, you know, the one published by the “General Secretary of the Labour Party on behalf of the Labour Party” is not the real rule. There is another one that us silly billy types have failed to detect and only those who have close personal contact with the members of the Monetary Policy Committee of the Bank of England could possibly know about. So in our ignorance we have no right to criticise the Rule or to impute nasty motivations from the MPC (not that we did impute anything anyway). And, to put the icing on the cake, we now are told that the Chancellor can abandon this ‘Secret’ Rule whenever he/she likes and does not require the imprimatur of the MPC anyway – so butt out all of you. Of course, only those who are part of our insiders’ club can know anything about this. Summary: Losers getting more lost each time they try to come up with a justification for the duck!

The latest salvo in the Fiscal Credibility Rule descent in stupidity came in the form of a blog post from Rule co-designer Simon Wren-Lewis – Bill Mitchell’s fantasy about Labour’s fiscal rule (June 14, 2019).…

Here comes the SWL smackdown I was waiting for. 😄

Bill Mitchell – billy blog
Forget the official Rule, apparently, there is a secret Fiscal Credibility Rule
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

See also

Lars P. Syll’s Blog
My philosophy of economics
Lars P. Syll | Professor, Malmo University

Bill Mitchell – Seize the Means of Production of Currency – Part 3

The week before last, Thomas Fazi and I had a response to a recent British attack on Modern Monetary Theory (MMT) published in The Tribune magazine (June 5, 2019) – For MMT. In effect, there were two quite separate topics that needed to be discussed: (a) the misrepresentation of MMT; and (b) the issues pertaining to British Labour Party policy proposals. The article we were responding to – Against MMT – written by a former Labour Party advisor, was not really about MMT at all, as you will see. Instead, it appeared to be an attempt to defend a policy approach, that I have previously criticised as giving to much back to the neoliberals. Whenever, progressives use neoliberal frames, language or concepts, it turns out badly for them. Anyway, the published article only allowed 3,000 words, which made it difficult to cover the two topics in any depth. In this three-part series, you can read a longer version of our reply to the ‘Against MMT’ article, and, criticisms from the elements on the Left, generally, who think it is a smart tactic to talk like neoliberals and express fear of global capital markets. In this final Part, we focus explicitly on Labour Party’s Fiscal Credibility Rule – which uses these neoliberal frames – and we show that it would fail in a deep recession, causing grief to a Labour government should it be in office at that time....

Bill Mitchell – billy blog
Seize the Means of Production of Currency – Part 3
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Richard Murphy — The political economy of Labour’s fiscal rule

Good one. Worth reading in full. Richard Murphy gives his summary of the state of the his argument with Jonathan Portes and Simon Wren Lewis.

Tax Research UK
The political economy of Labour’s fiscal rule

Richard Murphy

Chris Dillow — Obstacles to full employment

Is full employment sustainable? For me, this is one question posed by the row between Richard Murphy and Jonathan Portes and Simon Wren-Lewis over Labour’s proposed fiscal rule....

Disappointing for a someone that is sympathetic to Marx, as Chris Dillow identifies himself.

Stumbling and Mumbling
Obstacles to full employment
Chris Dillow | Investors Chronicle

Richard Murphy—A challenge to Simon Wren-Lewis on modern monetary theory and Labour’s fiscal credibility rule

Richard Murphy challenges Simon Wren-Lewis to put up or shut up.

So my question is, I suppose, inevitable. What I would like Simon to do is show how he and Jonathan Portes have written, as he claims, a rule that delivers a real-world political economic solution (because that is what Labour's rule is, because it is not an academic paper) that is the same as modern monetary theory. And I want him to show this even though:

i) The rule he has written works subject to financial constraints, and not the constraints of the physical economy, and

ii) It does so even though it requires a balanced current expenditure budget and modern monetary theory quite specifically does not;

iii) MMT does not set time limits for actions to resolve funding issues and the Portes / Wren-Lewis rule does.

What I would also like to see is Simon's own explanation of why MMT does work, since he accepts it does, and his explanation as to why Jonathan Portes is wrong in that case.

Of course, the explanation can be theoretical, but I should add that this is really about the political economy. This would not matter nearly so much if Labour had not adopted the Portes / Wren-Lewis rule. So the explanation has to work at that political economic level as well: i.e. the power relationships inherent in the two approaches also have to be the same for the challenge to be achieved as that is what political economy is concerned with....

Actual policy is where the rubber hits the road.

Tax Research UK
A challenge to Simon Wren-Lewis on modern monetary theory and Labour’s fiscal credibility rule

Richard Murphy

Brian Romanchuk — Comments On Eric Lonergan's Fiscal Rules Post

Eric Lonergan has recently written a post about the fiscal rules debate that has cropped up around the U.K. Labour Party's adoption of such a rule. As usual, his post covers a lot of territory -- if I were to attempt to cover all the points he raised when following my preferred writing style, it would be a 10 part article. Meanwhile, I am supposed to be working on finishing off my breakeven inflation book, as well as dealing with other projects. As a result, I just want to respond to a couple big picture points....

In order to advance, MMT needs to debate these issues with the mainstream. The issue is that debates keep being framed in a way that assumes that the underlying axioms of mainstream economics are correct. In this case, the whole debate rests upon the assumption that the nominal fiscal deficit is a meaningful economic variable, without any reference to the real economic transactions behind the nominal deficit figure. Once we question those axioms, we see that we are debating the wrong topic. The fact that we keep having to debate axioms is why I am not incredibly optimistic about the state of knowledge actually progressing....

The outcome of arguments is not the "facts" but rather the framing, which involves assuming stylized facts and fixing methodological assumptions. The mainstream is the party to the debate that controls the framing. That's what "mainstream" means. So I am not sanguine about the state of knowledge progressing. So, other means — chiefly, persuasion of the public and policymakers — are required instead of pointless arguments with an opposition that is in control of the framing and is dug in ideologically.

The reality is that the key issues can be resolved under capitalism, when "capitalism" implies favoring capital over other factors because growth and trickle down, capital formation being assumed to control growth. Capitalism cannot be reformed sufficiently in a way that is both effective and permanent, since capitalism results in asymmetric power based on class structure and class power where ownership is the decisive factor. Democracy is actually oligarchy, specifically plutonomy, under capitalism, so that even when reforms are imposed, they are eventually since favoring capital results in asymmetrical power.

Any adequate solution must be approached from the point of view of integrating all factors, especially capital (means of production), land (environment) and labor (people). This basically a world systems approach based on ecology. It necessarily involves examination of foundational assumptions, hidden assumptions, presumptions, and tacit knowledge. It also involves acknowledgement of evolutionary theory, historicity, cultural relativity, and social embeddedness. For starters.

Otherwise, hot air that will not resolve the key issues since the method doesn't identify them either at all or correctly. The ancient Greeks divided such debates into telos, meaning end or purpose — what we now call objectives, and techné, signifying means — that is, strategy and tactics involving the formulation and implementation of plans to achieve objectives, such as those involved in public purpose, using available resources efficiently and effectively.

The bottom line issue is that the social behavior is a function of the level of collective consciousness, which is manifested in the culture and institutional arrangements of a society. Thus, key issues cannot be resolved without raising the level of collective consciousness in a society, and with respect to the world system, that project is global.

Bond Economics
Comments On Eric Lonergan's Fiscal Rules Post
Brian Romanchuk

See also

Although there are more ‘progressive’, Sanders-type Democrats elected to Congress, the Democrat party remains a stalwart supporter of (and funded by) Wall Street and big business. As Democrat House leader Nancy Pelosi has made clear, “I have to say, we’re capitalist ― and that’s just the way it is”. She added that “However, we do think that capitalism is not necessarily meeting the needs with the income inequality that we have in our country.” But she says nothing about how to reverse this income inequality (let alone wealth inequality). Even the ‘left wing’ of the Democrats as led by Senator Elizabeth Warren, stay firmly in the capitalist camp – merely looking for ways to make it “accountable”....

Michael Roberts Blog
America’s halfway houseMichael Roberts

Eric Lonergan — MMT and fiscal rules (part I) – a prologue

Finally, a useful MMT critique.

Philosophy of Money
MMT and fiscal rules (part I) – a prologue
Eric Lonergan

Bill Mitchell — Left-liberals and neoliberals really should not be in the same party

This week’s theme seems to be the about how the so-called progressive side of the economic and political debate keeps kicking ‘own goals’ (given a lot of this is happening in Britain where they play soccer) or finding creative ways to ‘face plant’ (moving to Europe where there is more snow). Over the other side of the Atlantic, as America approaches its mid-term elections, so-called progressive forces who give solace to the New Democrats, aka Neoliberal Democrats are railing against fiscal deficits and demanding that the left-liberals in the Democratic Party be pushed out and that the voters be urged to elect candidates who will impose austerity by cutting welfare and health expenditure and more. And then we have progressive think tanks pumping out stuff about banking that you would only find in a mainstream macroeconomic textbook. This is the state of play on the progressive side of politics. The demise of social democratic political movements is continuing and it is because they have become corrupted from within by neoliberals. And then we had a little demonstration in London yesterday of the way in which the British Labour Fiscal Rule will bring the Party grief. The Tories are just warming up on that one....

The left-liberal voters in the US, have figured that out. Send a message by either not voting or voting third party. The Democratic establishment is poised to lose a portion of its base if it doesn't wake up. The straw that broke the camel's back was sabotaging Bernie Sanders to give Hillary Clinton the nomination.

Bill Mitchell – billy blog
Left-liberals and neoliberals really should not be in the same party
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — The British Labour Fiscal Credibility rule – some further final comments

In this blog post, I want to clarify a few things about the rule that inform my previous assessments....

Important if you are a British voter, but also instructive concerning the MMT point of view on progressive policy.

Bill Mitchell – billy blog
The British Labour Fiscal Credibility rule – some further final comments
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia