UK Labour’s Fiscal Credibility Rule: Neoliberal Orthodoxy Dies Hard — Joe Emersberger interviews Bill Mitchell

MMT!

The problem is that when you just define these fiscal aggregates within their own financial terms you’re really losing the purpose and meaning of fiscal policy. The purpose of fiscal policy isn’t to achieve any particular fiscal outcome whether it be a balanced fiscal position, or a deficit of whatever percent or even a surplus of whatever percent. The purpose of fiscal policy as a tool is to advance wellbeing in the economy, to engage in government spending programs which are consistent with its electoral remit, and taxation to manage total expenditure in the non-government sector so that there is space – and what I mean by “space” is real resource space – for the government to basically buy those resources and conduct its programs. Taxation creates that space by depriving the non-government sector of the use of resources...

This is the purpose of fiscal policy. In a cyclical sense – in other words in the variation of economic activity – fiscal policy should play a very important role in being able to offset any fluctuations in non-government spending that would either cause unemployment if it were not offset, or would drive inflation if it were not offset. Fiscal policy has to be flexible enough to allow the government to meet that purpose. If you start imposing rules that are independent of purpose then you are likely to end up not meeting that purpose but also failing to meet your rules....

Excellent!

Counterpunch
UK Labour’s Fiscal Credibility Rule: Neoliberal Orthodoxy Dies Hard

Joe Emersberger interviews economics professor Bill Mitchell about the British Labour party’s fiscal credibility rule

See also

More MMT.

Arcade
The Unheard-of Center: Critique after Modern Monetary Theory

Scott Ferguson | Associate Professor and co-director of the Film & New Media Studies Track in the Department of Humanities & Cultural Studies at the University of South Florida. a Research Scholar at the Global Institute for Sustainable Prosperity), co-founder of the Modern Money Network: Humanities Division), and co-host of the Money on the Left podcast

Bill Mitchell — The New Keynesian fiscal rules that mislead British Labour – Part 1, 2 & 3

The British Labour Party is currently leading the Tories in the latest YouGov opinion polls (February 19-20, Tories 40 per cent (and declining), Labour 42 per cent (and rising). They should be further in front, given the disarray of the Conservatives as they try to negotiate within their own party something remotely acceptable about Brexit. When there is this degree of political capital available, in this case for the Labour Party, a party should use it to redefine policy agendas that have gone awry. To build a narrative that will advance their cause for the future decades. British Labour has a chance to break out of its recent Blairite neoliberal past and present a truly progressive manifesto to the British people that will force the Tories to move closer to the centre and squeeze the extreme right-wing elements. In part, under Jeremy Corbyn and John McDonnell, Labour is making progressive noises on a number of fronts. But ultimately, where it really matters – the macroeconomic narrative – they are remaining firmly neoliberal and this will blight their chances of pursuing a truly progressive agenda. One of the glaring mistakes the Labour Party has made is to accept advice from neoliberal economists (so-called New Keynesians) who have instilled in them a need for fiscal rules. This is a three-part analysis of the sort of advice that Jeremy Corbyn and John McDonnell are getting and why they should ignore it....

Bill Mitchell – billy blog
The New Keynesian fiscal rules that mislead British Labour – Part 1

The New Keynesian fiscal rules that mislead British Labour – Part 2

The New Keynesian fiscal rules that mislead British Labour – Part 3Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell —The non-austerity British Labour party and reality – Part 2

In Part 1 of this two-part blog I laid out a general analytical framework for considering fiscal rules that might allow governments to borrow for infrastructure as long as all current expenditure is at least matched by taxation and other current receipts. This is more or less the rule that the British ‘Charter of Budget Responsibility’ imposes and the approach that the new (previously called radical left) British Labour Party leadership aspires to obey. I use previously called ‘radical left’ advisedly because as the days pass the utterances of the economic leadership make it difficult to differentiate between Labour and the Tories. The main difference appears to be the worn out “we will tax the rich and the crafty tax dodgers to balance the budget”. A nonsensical stance for a progressive political force and verges on Game Over syndrome. John McDonnell’s presentation to the National Labour Conference yesterday was a further walk into obscurity. By claiming they are not “deficit deniers” and will close the deficit as a priority they have walked right through the Tory framing door. Not lingered on the doorstep and then sought more salubrious premises. But they are right inside – trapped into the same mantra – yes, they will cut the deficit but it will be a fairer cutting. The rich will pay. And pigs might fly.

Part 1 – British Labour Party is mad to sign up to the ‘Charter of Budget Responsibility’.…

Bill Mitchell – billy blog
The non-austerity British Labour party and reality – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

This Takes The Cake: Europe Needs More Fiat ... But "Fiscal Rules" Get In The Way

(Commentary posted by Roger Erickson)

Europe needs more capital

Bundesbank Deputy President Claudia Buch welcomes plans by the European Commission to build a capital markets union. In a guest article for the German daily Handelsblatt newspaper, she writes that improving enterprises' access to capital should be the main thrust of the planned reforms.

Bundesbank: treatment of fiscal rules is a cause for concern

The Bundesbank believes that the European Commission's most recent actions weaken Europe's fiscal rules. Owing to numerous exceptions, frequent changes and the increasing complexity of the rules, it is now "barely possible" to apply them consistently, the Bundesbank argues in the current edition of its Monthly Report. It sees the weakening of the binding effect of the rules and of the incentives to ensure sound public finances in the euro area as a cause for concern.

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Gosh, where oh where will they get more fiat capital ... and how will they grow if they can't "balance" their fiat. ... Huh?

What happens when the 99% have no more cake for elites to take?

Words fail me. Cue the Mad Hatter. No wonder it's Greek to them.

Simon Wren-Lewis — Some Thoughts on Fiscal Rules

..the surviving UK fiscal rule (or ‘mandate’) ... says the government should achieve structural (cyclically adjusted) balance, excluding investment spending, within five years - where that five year period rolls forward.

mainly macro
Some Thoughts on Fiscal Rules
Simon Wren-Lewis | Professor of Economics, Oxford University

The MMT fiscal rule is that the size of the fiscal deficit is determined by a full employment budget, arrived at by offsetting consolidated non-government sector saving desire in the period. This is accomplished using the principles of functional finance, relying as much as possible on automatic stabilization and variable tax rates in light of the fiscal balance being endogenously determined relative to changing economic conditions.