Elegant. Perfect. (Well, I suppose you might have said “his alma mater Penn Wharton’s…”) And if this explanation and argument doesn’t make it to the debate stage tonight, it could and should become the foundation of every Harris speech for the next 56 days.
Thank you Stephanie for this succinct post and ‘fighting the good fight’. Too bad the moderators never really got close to questions about budget and deficit. This debacle was pre-ordained to be a prize fight - who’s more ‘presidential’? All circus and no bread. Sheesh.
Government spending comes back (re-venu’s) as taxes so cutting spending to reduce deficits is shooting yourself in the foot. Or both feet, or maybe all three feet - bigly some say, as one of the presidential candidates might spout.
Unless, of course, government policy is to let public money be diverted into private pockets and not come back? Which, of course, it is. And no bad thing - private wealth is not bad, within reason.
But by my reckoning (admittedly amateur) public wealth (the national debt) has been growing twice as fast as GDP as inequality has exploded. And while it is mentioned tangentially here by way of deficits, inequality is not the screaming theme of the election as it should be.
Government should spend as much into public purpose as is democratically decided. Then make sure it gets taxed back and not diverted (stolen?) by the 1%. Which brings us squarely to tax policy.
Can we all agree that paycheque deductions are an absurdity - taking money away from people before it even enters the economy? So what would be a good tax? One that works deep in the economy after money has circulated and done its job. We zoom in on corporate profits. And when we realize that current inflation has unambiguously been caused by corporate price gouging, well, we once again zoom in on corporate profits.
The conclusion is the same - do NOT cut corporate taxes - even though corporations are fully-fledged people entities under the law, have as little sympathy with these people-entities as we have with some other people-entities, for example, well, let’s say, just saying, women.
Good policy - spend on real people and tax it back from corporations.
Bad policy - spend as little as you can on people and let the spending be diverted into the corporate pockets of the wealthy.
A must read for those that want to understand how government deficits and the basic accounting work. Enough with CBO scores and all this 'pay-for' crap. What we need is a balanced economy and you won't get that via deficit reduction.
So good to hear from you and what to expect, policy wise, from the presidential debate. As always your explanations are clear, concise and to the point ( I share with my friends what I learn from you and to help them understand the 'deficit/debt' thing). Would love to hear more from you again now that the debate is over. Always look forward to your newsletters. So much to learn.
You'll often hear the "national debt" hawks warm ominously that every man, woman and child in America will owe over $100,000 when the "bill" inevitably comes due. This fear is preposterous, and here's why.
If you own the U.S. dollars sitting in your savings or retirement account free and clear, it would be downright illegal for the US government to confiscate them. Why? Because unless you're currently burdened by federal student loans (a scandal that requires another comment to address), you didn't "borrow" those dollars, you EARNED them. It is irrelevant that your money was created "out of thin air" via federal deficit spending. When you took your latest job you probably weren't given the option of getting paid in euros or yen. No, you were and continue to be paid in dollars so that your income can be taxed. The portion of your income that the IRS did not require you to pay on April 15 is a tacit admission by the federal government that it belongs to you by virtue of your hard work, entrepreneurship and enterprise.
So stop worrying. The idea that you owe the government upwards of $100,000 is one of those goofy economic myths that refuses to die.
Where is the level of deficits where we create financial problems that undermine our national interests? We saw the bout of inflation brought on by the pandemic, and our subsequent response . How is our standing as a reserve currency , and our ability to fund these deficits.
Deficit spending ultimately regresses to political cronyism. ALL deficits end up with the “one percent” via retained earnings (accounting). As such, it is indisputably valid to conclude that deficit spending is, by definition, THE cause of inequality.
Deficits facilitate accelerated speculation and result in unnecessary strain on the financial sector, which Minsky summarizes as stability breeding instability. Last, deficit advocates overlook Keynes’ concept of effective demand (the limit to growth), thereby exacerbating financial bubbles.
Elegant. Perfect. (Well, I suppose you might have said “his alma mater Penn Wharton’s…”) And if this explanation and argument doesn’t make it to the debate stage tonight, it could and should become the foundation of every Harris speech for the next 56 days.
Your writing and how you explain concepts is soooo very helpful. You are da bomb! Thank you.
Thank you Stephanie for this succinct post and ‘fighting the good fight’. Too bad the moderators never really got close to questions about budget and deficit. This debacle was pre-ordained to be a prize fight - who’s more ‘presidential’? All circus and no bread. Sheesh.
There is a tax policy in here, somewhere.
Government spending comes back (re-venu’s) as taxes so cutting spending to reduce deficits is shooting yourself in the foot. Or both feet, or maybe all three feet - bigly some say, as one of the presidential candidates might spout.
Unless, of course, government policy is to let public money be diverted into private pockets and not come back? Which, of course, it is. And no bad thing - private wealth is not bad, within reason.
But by my reckoning (admittedly amateur) public wealth (the national debt) has been growing twice as fast as GDP as inequality has exploded. And while it is mentioned tangentially here by way of deficits, inequality is not the screaming theme of the election as it should be.
Government should spend as much into public purpose as is democratically decided. Then make sure it gets taxed back and not diverted (stolen?) by the 1%. Which brings us squarely to tax policy.
Can we all agree that paycheque deductions are an absurdity - taking money away from people before it even enters the economy? So what would be a good tax? One that works deep in the economy after money has circulated and done its job. We zoom in on corporate profits. And when we realize that current inflation has unambiguously been caused by corporate price gouging, well, we once again zoom in on corporate profits.
The conclusion is the same - do NOT cut corporate taxes - even though corporations are fully-fledged people entities under the law, have as little sympathy with these people-entities as we have with some other people-entities, for example, well, let’s say, just saying, women.
Good policy - spend on real people and tax it back from corporations.
Bad policy - spend as little as you can on people and let the spending be diverted into the corporate pockets of the wealthy.
A must read for those that want to understand how government deficits and the basic accounting work. Enough with CBO scores and all this 'pay-for' crap. What we need is a balanced economy and you won't get that via deficit reduction.
Superb commentary.
So good to hear from you and what to expect, policy wise, from the presidential debate. As always your explanations are clear, concise and to the point ( I share with my friends what I learn from you and to help them understand the 'deficit/debt' thing). Would love to hear more from you again now that the debate is over. Always look forward to your newsletters. So much to learn.
You'll often hear the "national debt" hawks warm ominously that every man, woman and child in America will owe over $100,000 when the "bill" inevitably comes due. This fear is preposterous, and here's why.
If you own the U.S. dollars sitting in your savings or retirement account free and clear, it would be downright illegal for the US government to confiscate them. Why? Because unless you're currently burdened by federal student loans (a scandal that requires another comment to address), you didn't "borrow" those dollars, you EARNED them. It is irrelevant that your money was created "out of thin air" via federal deficit spending. When you took your latest job you probably weren't given the option of getting paid in euros or yen. No, you were and continue to be paid in dollars so that your income can be taxed. The portion of your income that the IRS did not require you to pay on April 15 is a tacit admission by the federal government that it belongs to you by virtue of your hard work, entrepreneurship and enterprise.
So stop worrying. The idea that you owe the government upwards of $100,000 is one of those goofy economic myths that refuses to die.
Where is the level of deficits where we create financial problems that undermine our national interests? We saw the bout of inflation brought on by the pandemic, and our subsequent response . How is our standing as a reserve currency , and our ability to fund these deficits.
Deficit spending ultimately regresses to political cronyism. ALL deficits end up with the “one percent” via retained earnings (accounting). As such, it is indisputably valid to conclude that deficit spending is, by definition, THE cause of inequality.
Deficits facilitate accelerated speculation and result in unnecessary strain on the financial sector, which Minsky summarizes as stability breeding instability. Last, deficit advocates overlook Keynes’ concept of effective demand (the limit to growth), thereby exacerbating financial bubbles.