With more to come.
Caveat: the honesty of CBO reporting fluctuates based on appointments, etc. The current regime has already proven itself to be not very good. That is to say, overly partisan. So presuming no GDP growth this year is, well, I don’t have the words for such complete willful BS.
The problem, in turn, is exacerbated by establishment media that don’t care about proper framing or honesty. So we get a day or two of hysteria over the $31t number which does us absolutely no good. To the contrary: it benefits the pro-austerity crowd for whom austerity is the answer to everything.
The CBO is a joke in my opinion but I guess there are some people that are still slaves to whatever they say about the economy in their report. However, Warren Mosler was right about rate hikes in which so many economists have it backwards. It's funny that they don't realize that those rate hikes for which the federal government is paying interest income into the hands of those who are better off financially.
Let me preface my remarks by saying I think Stephanie is one of the brightest lights in the economics firmament. Having said that, I don't understand why she appears on Bloomberg and essentially spouts bromides.
Example: In asking her opinion about the accuracy of survey data, Stephanie replied (I'm paraphrasing a bit) "I don't know, you know, on a scale of 1 to 10, where I put myself on the worry scale." What?! What?! If you think the surveys are bullshit, then say so. If not, then express your confidence in them.
And on the debt ceiling crisis. Stephanie (in my view) correctly assessed that refusing to pay our bills would be catastrophic, and she made the interesting dichotomy between a WILLINGNESS to pay and an ABILITY to pay our bills. But then her interviewer seemed to imply that it wasn't a crisis at all, but just another wrestling match between Democrats and Republicans, the White House and Congress. At which point I was hoping Stephanie would reply: "No! It's a FUCKING NIGHTMARE if the debt ceiling isn't increased! Don't you understand that these MAGA Republicans want to bring down our democracy, and defaulting on our national debt is their last best chance of doing so?"
Now I understand that I don't have an academic career to worry about preserving, but I think Stephanie has been given a chance by the confluence of recent events to be a true American hero. I wish she would aggressively embrace that opportunity.
I think we could go a long way towards solving the problems created by the "debt ceiling" by referring to it as the "savings ceiling," and asking the Republicans to explain their hatred of people and corporations wanting to park their hard-earned money in the safest, most secure place on the planet -- Treasuries.
What becomes here apparent is the mythology gap.
Either public DEBT in fact IS an obligation of our government to repay any amount borrowed by a date certain - in ($US) money that can only be 'gained' by government through taxation of our citizens 'incomes', OR it is not that kind of legal obligation. And what kind is it?
Banker Mosler, with Dr. Kelton's concurrence, claims that the fact the Fed's record-keeping to track these borrowings ends up as 'just another FED accounting norm' means that the amounts OWED by the government are not really "DEBTS". The folly of perpetuating this Moslerian mythology should become apparent.
Any read of USC Title 31's various definitions of Government borrowing, via either Bills, Notes or Bonds, actually proves the fallacy of this mythology. The borrowing requires the issuance of Certificates of InDEBTedness. Although today most of that government borrowing happens 'electronically', by keystrokes, the record established and kept by the Fed shows EXACTLY to whom our government owes its Debt-Service Payments. So, why again, ain't that a DEBT?
What's the deal?
Lastly, WHY does MMT insist on separating the American citizens from our funding of government spending and borrowing, and, when the hammer falls, of re-paying, as lawfully required, the principal amount of the loans?
The Money Apprentice
I took a quick look at the CBO's Projections. Quick. The consistent increase in interest shown in the projection seems questionable - as there is an expectation interest rates will come back down in future years. Are their interest projections questionable ??
What do you think the effects will be of Lael Brainard's move from the Fed to lead the White House economic team? With more and more jobs hitting the street in the coming years from the Infrastucture Bill, the Chips Act and the Inflation Reduction Act how does anyone think the labor market is going to shrink? How is inflation going to accelerate with insulin cost capped at $35/mo for seniors and out-of-pocket expenses capped at $2000/yr? Do any of these 'experts' do math any more?
Nikki Haley proposed a cognition test for people over 75. Being 82, I'm a bit insulted by that but I do believe some testing is called for. I propose an economic competency test developed by Stephanie for all politicians. They have to pass the test before being allowed to vote on any economic issues.
Nice read, but troubling! It's like the policy officials have it all backwards. Way out of supply-shock led recession is to take the inflation hit, go to ZIRP (which is deflationary biased), and employ people, not unemploy them. How does unemployment solve a supply problem? It can't, makes it worse.
Also Stephanie, please mention the Federal Government *nominal* deficit has to be inflation adjusted, so currently it is (probably, year-to-date) a *real* surplus, which is contractionary. That might be what the FOMC wants, perversely, but the nominal deficit also fuels the neoclassical inflation hysterics, absurdly, because a real government surplus is deflationary.
On this column I agree because CBO projections are static. They assume linearity and never take into account incentives that change behaviors.
CBO estimated that Trumps tax rate cuts would increase the deficit due to lower tax revenue collections. The deficit is indeed higher but not because tax revenues have declined. Federal tax revenues continue to set new record highs. The deficit is growing not because of declining tax revenues but due to endlessly growing federal spending.
But it's okay. MMT tells us deficits don't matter. And if they don't matter, I'll ask again - why do any of us need to pay federal taxes?
Inflation still hot, consumer spending still strong on the gusher of printed money they've been given by Santa's elves at Treasury. 'Transient' is becoming as legendary as 'if you like your plan you can keep your plan'. MMT isn't solving anything, it's exacerbating problems.