i'd argue the myth never left, certainly not in the UK - it's stronger than ever and is being used to justify not doing anything about anything. Both parties are in total paralysis, with the PM making explicit contradictions in his own pledges to the country - "We will make sure our national debt is falling so that we can secure the future of public services".
That's the level we're at now!
I think believing the myth had been slowly unravelling has just been naiive and comforting in our leftie MMT circles. Social media has been really powerful in reinforcing the myth, it's that 'common sense' narrative of household budget, which has spread like a virus. It is unstoppable.
Both sides can spin this all they want, this deal was an utter disaster for America and as Stephanie mentioned, this will come up again in 2025 and possibly under a GOP president and that guy sprouted deficit myths of his own in Ron DeSantis. Yep, we are truly backsliding into dangerous austerity that is no good for working class people. There were alternatives (minting the coin) that could've alleviated this nonsense but hey this is what happens when you have a two party system that doesn't understand how deficits work.
You are probably correct about the “deficit”...the real severe damage is government spending.. period...would you buy your home, car, food, medical care From a horribly wasteful government monopoly??
I expect demagogues like Kevin McCarthy and every other Republican in Congress to keep whipping up debt/deficit hysteria. But I find it even more disturbing that not a single Congressional Democrat, and certainly no one in the Biden administration, nor Biden himself, have come forward to even timidly address the absurdities of the deficit myth.
This could have been a teachable moment, one in which people who should know better step up to speak truth to idiocy. That no one who could do so has done so is just infuriating.
MMT an important economic paradigm, but do think it needs to directly address the following: what is a sustainable interest cost of debt as a percentage of US federal inflows? As GDP grows you can grow debt and the corresponding interest cost, but if interest cost grows due to higher interest rate and debt growing much more quickly than GDP, where is the sustainable ratio - this is a math question and not a political question -
Kevin McCarthy: "...the debt limit is like letting your child go crazy with the family credit card." Perhaps the strategy for MMT'ers should be NOT to ridicule this analogy, BUT TO EMBRACE IT. What if the family credit card had an interest rate of--not 25%--but 2%? Running up credit card debit would then be the responsible thing to do for any family trying to get ahead or just improve their standard of living.
Just think, a family with a combined income of $100,000 could BORROW $100,000 at a cost of a mere $2,000/year. Want to really go rogue? Borrow $200,000 with interest of only $4,000/year. You'd have to be an idiot not to do this. The credit card company NEVER wants you to pay it back. Charging interest is how it makes money.
Now what's the problem with this example? Credit card companies can't charge a 2% interest rate and stay in business. BUT THE FEDERAL GOVERNMENT CAN. This simple example reveals the idiocy of the fiscal hawk argument.
One more downside to this deficit myth capitulation by the Dems-how do you get out of a recession without fiscal stimulus? The Rs already have the answer-tax cuts for the rich. What happens when you lose your job in a recession? Go to the junk food bank line because there won’t be any food stamps for you. Does inflation go away? No, all domestic programs get cut by at least the rate of inflation because their costs go up by the rate of inflation and the money they receive from the budget remains the same.
So come an economic downturn Biden and the Dems in Congress that vote for budget austerity with the deficit myth as the excuse lose the 2024 election. And then the Rs go after Medicare and Social Security.
Can the Dems be that dumb or has Washington corruption reached the point where they don’t care?
Can anyone guess why the Fed didn’t retire some of their $5 Trillion they hold in treasuries to give more space in the debt ceiling? Or, I wonder why Biden didn’t ignore republicans, not negotiate, and just veto the budget bill to allow the lawful walk-arounds to be employed. One, the Fed’s board of governors has a mandate to pay all debt in spite of failures of Congress and the White House. Why didn’t Biden allow?
Almost everyone, including educated liberals, think that deficits and the national debt are at least a "long-term" problem. See, e.g., Peter Coy's column today in the NYT about how the R's are going too far but the deficit certainly needs to be addressed. He is such a nice man and has been writing thoughtfully about economics for years. People just cannot shake the belief that the government is more or less like a family and, at least in the long-run, cannot spend [a lot] more than it takes in. A growing national debt will result in higher and higher interest payments, they say, consuming more and more of our federal budget. None of this is true, but the truth is so counter-intuitive that it's almost impossible to convince people. This has been going on since Keynes (not that he understood the whole story). But we must keep trying.
‘There are lies, damned lies, statistics and the deficit myth.’ Depressing! Please keep trying, Stephanie.
i'd argue the myth never left, certainly not in the UK - it's stronger than ever and is being used to justify not doing anything about anything. Both parties are in total paralysis, with the PM making explicit contradictions in his own pledges to the country - "We will make sure our national debt is falling so that we can secure the future of public services".
That's the level we're at now!
I think believing the myth had been slowly unravelling has just been naiive and comforting in our leftie MMT circles. Social media has been really powerful in reinforcing the myth, it's that 'common sense' narrative of household budget, which has spread like a virus. It is unstoppable.
Stephanie,
What happens when the debt gets so large it consumes the entire Federal budget?
Both sides can spin this all they want, this deal was an utter disaster for America and as Stephanie mentioned, this will come up again in 2025 and possibly under a GOP president and that guy sprouted deficit myths of his own in Ron DeSantis. Yep, we are truly backsliding into dangerous austerity that is no good for working class people. There were alternatives (minting the coin) that could've alleviated this nonsense but hey this is what happens when you have a two party system that doesn't understand how deficits work.
You are probably correct about the “deficit”...the real severe damage is government spending.. period...would you buy your home, car, food, medical care From a horribly wasteful government monopoly??
I expect demagogues like Kevin McCarthy and every other Republican in Congress to keep whipping up debt/deficit hysteria. But I find it even more disturbing that not a single Congressional Democrat, and certainly no one in the Biden administration, nor Biden himself, have come forward to even timidly address the absurdities of the deficit myth.
This could have been a teachable moment, one in which people who should know better step up to speak truth to idiocy. That no one who could do so has done so is just infuriating.
No link to the video...?
It's maddening.
MMT an important economic paradigm, but do think it needs to directly address the following: what is a sustainable interest cost of debt as a percentage of US federal inflows? As GDP grows you can grow debt and the corresponding interest cost, but if interest cost grows due to higher interest rate and debt growing much more quickly than GDP, where is the sustainable ratio - this is a math question and not a political question -
Kevin McCarthy: "...the debt limit is like letting your child go crazy with the family credit card." Perhaps the strategy for MMT'ers should be NOT to ridicule this analogy, BUT TO EMBRACE IT. What if the family credit card had an interest rate of--not 25%--but 2%? Running up credit card debit would then be the responsible thing to do for any family trying to get ahead or just improve their standard of living.
Just think, a family with a combined income of $100,000 could BORROW $100,000 at a cost of a mere $2,000/year. Want to really go rogue? Borrow $200,000 with interest of only $4,000/year. You'd have to be an idiot not to do this. The credit card company NEVER wants you to pay it back. Charging interest is how it makes money.
Now what's the problem with this example? Credit card companies can't charge a 2% interest rate and stay in business. BUT THE FEDERAL GOVERNMENT CAN. This simple example reveals the idiocy of the fiscal hawk argument.
I've been trying to find a way to beat/replace this metaphor for some time. Still working on your "buckets!"
If we can't replace it, can we use it? Or would that ultimately be self destructive?
Is there a metaphor to explain the need to A. Increase revenue, such as "get a raise" or to B. make worthwhile investments like "buying a house"?
As Paul Simon has observed: "One man's ceiling is another man's floor." Maybe our debt ceiling floor is TOO LOW.
One more downside to this deficit myth capitulation by the Dems-how do you get out of a recession without fiscal stimulus? The Rs already have the answer-tax cuts for the rich. What happens when you lose your job in a recession? Go to the junk food bank line because there won’t be any food stamps for you. Does inflation go away? No, all domestic programs get cut by at least the rate of inflation because their costs go up by the rate of inflation and the money they receive from the budget remains the same.
So come an economic downturn Biden and the Dems in Congress that vote for budget austerity with the deficit myth as the excuse lose the 2024 election. And then the Rs go after Medicare and Social Security.
Can the Dems be that dumb or has Washington corruption reached the point where they don’t care?
TL:DR: maintenance and expansion of empire takes priority over everything else, including its own subjects.
Everything else is theater.
Can anyone guess why the Fed didn’t retire some of their $5 Trillion they hold in treasuries to give more space in the debt ceiling? Or, I wonder why Biden didn’t ignore republicans, not negotiate, and just veto the budget bill to allow the lawful walk-arounds to be employed. One, the Fed’s board of governors has a mandate to pay all debt in spite of failures of Congress and the White House. Why didn’t Biden allow?
Almost everyone, including educated liberals, think that deficits and the national debt are at least a "long-term" problem. See, e.g., Peter Coy's column today in the NYT about how the R's are going too far but the deficit certainly needs to be addressed. He is such a nice man and has been writing thoughtfully about economics for years. People just cannot shake the belief that the government is more or less like a family and, at least in the long-run, cannot spend [a lot] more than it takes in. A growing national debt will result in higher and higher interest payments, they say, consuming more and more of our federal budget. None of this is true, but the truth is so counter-intuitive that it's almost impossible to convince people. This has been going on since Keynes (not that he understood the whole story). But we must keep trying.