Stephanie Kelton asks, "[D]o we need deficit myths and old-time budgetary religion to protect us in a world of uncertainty?"
Who are "we" and "us" in that question? No doubt you're using them rhetorically, but I fear that could boomerang on you (and, in non-rhetorical sense, us). The Washington Democrats (ranging from Schumer to Pelosi to Manchin) still need those myths to one degree or another. The Washington Republicans need them when they're not in power. As Tonto said to the Lone Ranger, ....
I think the people already in on the secret. As Dick Cheney said, deficits don't matter (i.e., not a political issue). The issue is what people want bigger government to do--start wars and cut taxes, or fight climate change, provide healthcare, etc.? The dangerous piece of the secret might be admitting that we really didn't need taxes to pay for any of it. So, the agonizing tax-filing chore is simply to mop up and destroy some of your excess $.
We (all of us who aren’t bent on social and political domination) have nothing to fear from the masses; rather, what about the right that would prefer to do any number of large projects aimed at heightened social surveillance, Space Force silliness or massive engineering projects designed to blunt the more extreme effects of climate change while charging full steam ahead on fossil fuel use. it’s the right I’d worry about.
The leadership on the right has known about it for decades. All you need to do is look at the FRED charts since Reagan. As Dick Cheney said, "deficits don't matter". Democrats get upset by the hypocrisy and "irresponsibility", but Republicans have been running a con game all along.
After Wallace, New Deal liberals' subsidization of white-flight suburban sprawl, auto bases, red-lined destruction of "minority" business districts, tearing out electric traction (streetcars, interurbans and cargo short lines) ubiquity of segregated schools and Dixiecrats' gatekeeping tag-team kleptocracy: federal, state and municipal (enforced by the courts). We're reminded how Keynesian largess, simply lined pockets of dopplegangster criminals; subjugated Blacks, LatinX, certainly MOST female citizens... as developers undoubtedly accelerated climate change, poisoned air, water, food (especially amongst poor, indentured, media-denigrated or ignored citizens) to maintain a petit-bourgoise managerial, credentialed white voters, while gentrifying Creative Class™ kids into decaying cities; by flipping minority housing.
I'm thinking back to Henry Wallace (before, party socialists got stomped out). If we'd look at folks like Ken Galbraith as Party functionaries, trying to deal with war-time/ peace-time economic transition; collusion, as the MIC aggregated, "energy" and FIRE Sector morphed into US autocratic duopoly and Roosevelt's younger idealists got swept away by 1947's kleptocratic neoConfederate Dixiecrat tsunami (media, unions, lobbyist PR firms, academia, Madison Ave & racist clerics jumping onto cold war McCarthyism and Jim Crow segregation & urban renewal. Sir William Wallace came before & George came after, but I see your point?
The vehemence and stubbornness towards MMT seems analogous to the same reluctance to move off the gold standard. Fundamentally, this requires a generational transition in the same manner of the Niels Bohr's remark that physics advances one funeral at a time.
I'd appreciate someone with knowledge of MMT explaining how resource limits will be measured and modeled so that forward planning can occur in pursuit of Govt agendas. How will tradeoffs be measured and modeled so that we can understand the relative benefits of different budgetary allocations?
In the same way corporations measure resource limits, needs, and constraints for their future operations. It's curious how "planning" becomes a dirty word (for neoclassicals, libertarians and the like) when government does it but all the finest business schools teach it as "management" or, you know, "business."
I remember a reading an article once about crop estimators who work for the US Dept of Agriculture and how so much rides on their accuracy (commodities markets).
We know how to measure. We know how to plan. And it's not about "Govt agendas." It's about OUR agenda. What do we the people need? Another aircraft carrier? Not so much. A mission to Mars? Let's talk about it. More trained daycare worker/teachers. Damned right we need them. Fewer gas-powered cars and more electric? Now we're talking.
How many electric vehicles do we need? Here's a beginning measurement, just a start: We need to replace 30% of the gas- or diesel-powered vehicles in each category (passenger cars, delivery trucks, etc.) with electric vehicles by 2035.
How many batteries will we need? No idea. Let's get some engineers to figure it out.
How much steel? No idea. Can we maybe get some engineers to figure out if we can use some of the steel from the gas-powered cars we won't need anymore?
How much rubber?
See where I'm going?
It's not the planning and measuring that is the problem. It's the lack of will to do it that is the problem.
How do we model this? Well, right now there are big financial incentives for anyone who knows some math to go into parasitical finance. How about we incentivize going into industrial and commercial planning for a transition away from fossil fuel?
You get what you incentivize and right now our tax system incentivizes parasitical finance.
"If MMT (and Keynes and Tooze) are correct that anything we can actually do, we can afford, then how do we operate in a world where that truth is revealed to the broader public? Are MMT economists too cavalier about the risks of inviting everyone in on the secret? Is honesty really the best policy, or do we need deficit myths and old-time budgetary religion to protect us in a world of uncertainty? Can we trust the MMT framework to guard against excesses?"
I like this framing. It cuts through the noise. Ultimately, if we simplify these questions further, we are asking the following: What kind of a society do we want to live in?
For my part, if we want to live in a just and democratic society, then we have to reveal the truth. To do otherwise is to seek advantage. To do so is to stand in opposition to the egalitarian ethos democracy requires.
I would request that the subject of US dollar as reserve currency be addressed.
While I am in agreement in general with the concept that a sovereign government has no short term limit on its ability to generate revenue in the absence of large foreign currency denominated debts, the existence of trillions of US dollars in the hands of foreigners - both sovereign and private - is real.
Just how many trillions? And just how strong or delicate is the motivation which underlies why these foreigners hold US dollars?
The one scenario I have not seen talked about is some level of loss of faith in the US dollar by these holders and what impact the repatriation of these dollars has on the US economy.
After all, if these holders are non-voting victims of dollar printing - which is to say, inflation export - then a significant reduction of foreign held dollars would constitute a re-import of said inflation.
It is also safe to say that the existence of these foreign-held dollars underwrites some significant degree of US sovereign spending without consequence. Again, if a foreign dollar holder is the non-voting, non-beneficiary recipient of exported inflation/USD devaluation, the trillions of USD held be said foreigners enables far greater US sovereign spending than would otherwise be possible without inflation consequences. And in turn, the management of said foreigners' perceptions of the US dollar and its stability does matter.
Foreigners cannot and do not "hold" dollars. They keep them in US administered bank accounts that can be zeroed out at any time if truly needed. There is no such thing as a bank account with dollars in it that is not administered finally by a US institution.
I would bet commenter c1ue thinks in terms of foreigners "holding" dollars because they still think in terms of "printing" dollars.
c1ue, things will become clearer as soon as you stop thinking in terms of printing presses and paper dollars. You must think instead of the ledgers that keep track of assets and liabilities.
Foreigners have dollar-denominated assets. Sometimes those assets are deposits at US banks (or US branches of foreign banks). In that case they are what you habitually call "dollars". Cash.
Sometimes those assets are land or buildings. In which case they are not denominated in anything until a valuation is made by someone (because of some impending sale, for example).
Sometimes those assets are stocks in American companies. Again, those assets are mere marks on a balance sheet until given a dollar valuation.
In all cases those assets are HERE. In the United States. Those "foreign-held dollars" underwrite nothing at all except to the degree to which those foreign-owned assets are used as collateral for borrowing (in dollars).
But in that case, the foreigners putting up their dollar-denominated assets will in turn receive dollar denominated deposits (the loan funds) which can only be spent here (technically they can be spent anywhere US dollars are accepted as payment, but most of it is here).
Your concern about inflation comes from still thinking about this in terms of the flows and stocks related to a gold standard. We have been off the gold standard for, coincidentally, exactly fifty years (last month).
"Are MMT economists too cavalier about the risks of inviting everyone in on the secret?" No. The Rs figured it out with the Bush and McConnell-Trump tax cut for the rich.
McConnell threatens to trigger a default on obligations of the U.S. Treasury by withholding Republican Senator's support for a further postponement of the applicable debt limit. Can't the FED forgive repayment of enough of the Treasury bills it holds to reduce that debt to below the existing limit, and/or purchase enough of such bills, and then forgive their repayment to stay within the limit? If the FED would announce its intention to pursue that policy indefinitely, there would be no need for Congressional action on the debt limit -- ever. If not, why not?
The difficulty becomes how do you explain taxes. If tax revenue supposedly pays for government expenses, that's one thing. (Dubious in practice.) But if the purpose of taxes is to try to bend inequality thru redistribution, then you've got to have a principled theory how that is supposed to work.
I've wondered about this too but I think it's a tractable communications problem. In my experience, people are very clear on why excessive wealth should be taxed once they understand two things:
1. How a lot of excessive wealth was unfairly, crookedly, or criminally earned. Bezos got rich because WE subsidized much of Amazon's growth by not requiring sales taxes early on. I remember those days.
2. How excessive wealth corrupts our political system and incentivizes climate-changing and venal behavior, and dehumanizes people.
If whoever is advocating for this tax or that tax, or increasing some tax, just does what Roosevelt did ("the malefactors of great wealth") or Sanders did ("the 1%") and names the culprits, then the message is easy to convey, I'm convinced.
Lastly, taxes is not about RE-distribution. I like Randally Wray's word: PRE-distribution. Make the tax laws such that we stop excessive and undue wealth accumulation before it begins.
We should tell the masses. They won't believe it though, at least not until government admits it.
MMT is factually true, and factual truth should never be withheld or perverted by mismanaged government policy. Even so, It's rejected by the masses on the long and tired tradition of their lies.
Such lying is the primary motivator for corrupting influences staked within the policies of democratically elected representatives, which continually drag the people of this country down into an ocean of societal muck.
If the country ever changes for the better, the people must come to know the factual reality of truth, rather than the Representative corrupt claims of their distorted reality of facts.
Stephanie Kelton offers factual reality, relative to the countries monetary policies, and the mismanagement, and corrections, of same.
The people of the country must come to understand and accept the basis of Its reality. Once accomplished, they can effectively remove the corruption by which they were fooled.
Some years ago I read something where the writer explained why she always preferred Star Trek over Star Wars. The gist of the argument was Star Wars, despite its inconsistent silliness, merely perpetuates an immature belief in an unelected elite who know better and will take care of society (the Jedi). And Star Trek, for all its hokey idealism, at least argues for humans freely creating their future society. It is at least republican, if not democratic.
I liked her argument.
Samuelson thought he and other economists, together with presumably sober-minded politicians, should be our stern parents, our Jedi. What is the point of a republic if the public in our res publica cannot even discuss things freely?
Stephanie Kelton asks, "[D]o we need deficit myths and old-time budgetary religion to protect us in a world of uncertainty?"
Who are "we" and "us" in that question? No doubt you're using them rhetorically, but I fear that could boomerang on you (and, in non-rhetorical sense, us). The Washington Democrats (ranging from Schumer to Pelosi to Manchin) still need those myths to one degree or another. The Washington Republicans need them when they're not in power. As Tonto said to the Lone Ranger, ....
I think the people already in on the secret. As Dick Cheney said, deficits don't matter (i.e., not a political issue). The issue is what people want bigger government to do--start wars and cut taxes, or fight climate change, provide healthcare, etc.? The dangerous piece of the secret might be admitting that we really didn't need taxes to pay for any of it. So, the agonizing tax-filing chore is simply to mop up and destroy some of your excess $.
We (all of us who aren’t bent on social and political domination) have nothing to fear from the masses; rather, what about the right that would prefer to do any number of large projects aimed at heightened social surveillance, Space Force silliness or massive engineering projects designed to blunt the more extreme effects of climate change while charging full steam ahead on fossil fuel use. it’s the right I’d worry about.
The leadership on the right has known about it for decades. All you need to do is look at the FRED charts since Reagan. As Dick Cheney said, "deficits don't matter". Democrats get upset by the hypocrisy and "irresponsibility", but Republicans have been running a con game all along.
After Wallace, New Deal liberals' subsidization of white-flight suburban sprawl, auto bases, red-lined destruction of "minority" business districts, tearing out electric traction (streetcars, interurbans and cargo short lines) ubiquity of segregated schools and Dixiecrats' gatekeeping tag-team kleptocracy: federal, state and municipal (enforced by the courts). We're reminded how Keynesian largess, simply lined pockets of dopplegangster criminals; subjugated Blacks, LatinX, certainly MOST female citizens... as developers undoubtedly accelerated climate change, poisoned air, water, food (especially amongst poor, indentured, media-denigrated or ignored citizens) to maintain a petit-bourgoise managerial, credentialed white voters, while gentrifying Creative Class™ kids into decaying cities; by flipping minority housing.
Which Wallace are you referring to, if you don't mind my asking?
I'm thinking back to Henry Wallace (before, party socialists got stomped out). If we'd look at folks like Ken Galbraith as Party functionaries, trying to deal with war-time/ peace-time economic transition; collusion, as the MIC aggregated, "energy" and FIRE Sector morphed into US autocratic duopoly and Roosevelt's younger idealists got swept away by 1947's kleptocratic neoConfederate Dixiecrat tsunami (media, unions, lobbyist PR firms, academia, Madison Ave & racist clerics jumping onto cold war McCarthyism and Jim Crow segregation & urban renewal. Sir William Wallace came before & George came after, but I see your point?
https://mronline.org/2021/09/18/the-western-lefts-collaboration-with-the-western-bourgeoisie/
Keynesian largess?
If you wish to give credit, suggest you apply it correctly. In this case republicans and neoliberals. Keynes policies had nothing to do with it.
OK. But what's your point? Let's assume your condensed history is accurate. So what. Or are you just practicing an elevator-ride lecture?
Reply was in context to the comment at BeliTsari. That was my point, absent assumption.
The vehemence and stubbornness towards MMT seems analogous to the same reluctance to move off the gold standard. Fundamentally, this requires a generational transition in the same manner of the Niels Bohr's remark that physics advances one funeral at a time.
I'd appreciate someone with knowledge of MMT explaining how resource limits will be measured and modeled so that forward planning can occur in pursuit of Govt agendas. How will tradeoffs be measured and modeled so that we can understand the relative benefits of different budgetary allocations?
In the same way corporations measure resource limits, needs, and constraints for their future operations. It's curious how "planning" becomes a dirty word (for neoclassicals, libertarians and the like) when government does it but all the finest business schools teach it as "management" or, you know, "business."
I remember a reading an article once about crop estimators who work for the US Dept of Agriculture and how so much rides on their accuracy (commodities markets).
We know how to measure. We know how to plan. And it's not about "Govt agendas." It's about OUR agenda. What do we the people need? Another aircraft carrier? Not so much. A mission to Mars? Let's talk about it. More trained daycare worker/teachers. Damned right we need them. Fewer gas-powered cars and more electric? Now we're talking.
How many electric vehicles do we need? Here's a beginning measurement, just a start: We need to replace 30% of the gas- or diesel-powered vehicles in each category (passenger cars, delivery trucks, etc.) with electric vehicles by 2035.
How many batteries will we need? No idea. Let's get some engineers to figure it out.
How much steel? No idea. Can we maybe get some engineers to figure out if we can use some of the steel from the gas-powered cars we won't need anymore?
How much rubber?
See where I'm going?
It's not the planning and measuring that is the problem. It's the lack of will to do it that is the problem.
How do we model this? Well, right now there are big financial incentives for anyone who knows some math to go into parasitical finance. How about we incentivize going into industrial and commercial planning for a transition away from fossil fuel?
You get what you incentivize and right now our tax system incentivizes parasitical finance.
"If MMT (and Keynes and Tooze) are correct that anything we can actually do, we can afford, then how do we operate in a world where that truth is revealed to the broader public? Are MMT economists too cavalier about the risks of inviting everyone in on the secret? Is honesty really the best policy, or do we need deficit myths and old-time budgetary religion to protect us in a world of uncertainty? Can we trust the MMT framework to guard against excesses?"
I like this framing. It cuts through the noise. Ultimately, if we simplify these questions further, we are asking the following: What kind of a society do we want to live in?
For my part, if we want to live in a just and democratic society, then we have to reveal the truth. To do otherwise is to seek advantage. To do so is to stand in opposition to the egalitarian ethos democracy requires.
I would request that the subject of US dollar as reserve currency be addressed.
While I am in agreement in general with the concept that a sovereign government has no short term limit on its ability to generate revenue in the absence of large foreign currency denominated debts, the existence of trillions of US dollars in the hands of foreigners - both sovereign and private - is real.
Just how many trillions? And just how strong or delicate is the motivation which underlies why these foreigners hold US dollars?
The one scenario I have not seen talked about is some level of loss of faith in the US dollar by these holders and what impact the repatriation of these dollars has on the US economy.
After all, if these holders are non-voting victims of dollar printing - which is to say, inflation export - then a significant reduction of foreign held dollars would constitute a re-import of said inflation.
It is also safe to say that the existence of these foreign-held dollars underwrites some significant degree of US sovereign spending without consequence. Again, if a foreign dollar holder is the non-voting, non-beneficiary recipient of exported inflation/USD devaluation, the trillions of USD held be said foreigners enables far greater US sovereign spending than would otherwise be possible without inflation consequences. And in turn, the management of said foreigners' perceptions of the US dollar and its stability does matter.
Foreigners cannot and do not "hold" dollars. They keep them in US administered bank accounts that can be zeroed out at any time if truly needed. There is no such thing as a bank account with dollars in it that is not administered finally by a US institution.
Hear! Hear! David b.
I would bet commenter c1ue thinks in terms of foreigners "holding" dollars because they still think in terms of "printing" dollars.
c1ue, things will become clearer as soon as you stop thinking in terms of printing presses and paper dollars. You must think instead of the ledgers that keep track of assets and liabilities.
Foreigners have dollar-denominated assets. Sometimes those assets are deposits at US banks (or US branches of foreign banks). In that case they are what you habitually call "dollars". Cash.
Sometimes those assets are land or buildings. In which case they are not denominated in anything until a valuation is made by someone (because of some impending sale, for example).
Sometimes those assets are stocks in American companies. Again, those assets are mere marks on a balance sheet until given a dollar valuation.
In all cases those assets are HERE. In the United States. Those "foreign-held dollars" underwrite nothing at all except to the degree to which those foreign-owned assets are used as collateral for borrowing (in dollars).
But in that case, the foreigners putting up their dollar-denominated assets will in turn receive dollar denominated deposits (the loan funds) which can only be spent here (technically they can be spent anywhere US dollars are accepted as payment, but most of it is here).
Your concern about inflation comes from still thinking about this in terms of the flows and stocks related to a gold standard. We have been off the gold standard for, coincidentally, exactly fifty years (last month).
Joining the parade of Daves
It is common and natural to think of money as “stuff”. As a tangible thing.
But that is a category error which leads to poor intuition. Money is primarily simply a measurement of debt.
It is common and natural to think of money as “stuff”. Some tangible thing.
But that is a category error; money is primarily measurement of debts
"Are MMT economists too cavalier about the risks of inviting everyone in on the secret?" No. The Rs figured it out with the Bush and McConnell-Trump tax cut for the rich.
Thank you for this interesting article. It should be a discussion for every educated student across the globe
McConnell threatens to trigger a default on obligations of the U.S. Treasury by withholding Republican Senator's support for a further postponement of the applicable debt limit. Can't the FED forgive repayment of enough of the Treasury bills it holds to reduce that debt to below the existing limit, and/or purchase enough of such bills, and then forgive their repayment to stay within the limit? If the FED would announce its intention to pursue that policy indefinitely, there would be no need for Congressional action on the debt limit -- ever. If not, why not?
The difficulty becomes how do you explain taxes. If tax revenue supposedly pays for government expenses, that's one thing. (Dubious in practice.) But if the purpose of taxes is to try to bend inequality thru redistribution, then you've got to have a principled theory how that is supposed to work.
I've wondered about this too but I think it's a tractable communications problem. In my experience, people are very clear on why excessive wealth should be taxed once they understand two things:
1. How a lot of excessive wealth was unfairly, crookedly, or criminally earned. Bezos got rich because WE subsidized much of Amazon's growth by not requiring sales taxes early on. I remember those days.
2. How excessive wealth corrupts our political system and incentivizes climate-changing and venal behavior, and dehumanizes people.
If whoever is advocating for this tax or that tax, or increasing some tax, just does what Roosevelt did ("the malefactors of great wealth") or Sanders did ("the 1%") and names the culprits, then the message is easy to convey, I'm convinced.
Lastly, taxes is not about RE-distribution. I like Randally Wray's word: PRE-distribution. Make the tax laws such that we stop excessive and undue wealth accumulation before it begins.
Last line; great point.
We should tell the masses. They won't believe it though, at least not until government admits it.
MMT is factually true, and factual truth should never be withheld or perverted by mismanaged government policy. Even so, It's rejected by the masses on the long and tired tradition of their lies.
Such lying is the primary motivator for corrupting influences staked within the policies of democratically elected representatives, which continually drag the people of this country down into an ocean of societal muck.
If the country ever changes for the better, the people must come to know the factual reality of truth, rather than the Representative corrupt claims of their distorted reality of facts.
Stephanie Kelton offers factual reality, relative to the countries monetary policies, and the mismanagement, and corrections, of same.
The people of the country must come to understand and accept the basis of Its reality. Once accomplished, they can effectively remove the corruption by which they were fooled.
Some years ago I read something where the writer explained why she always preferred Star Trek over Star Wars. The gist of the argument was Star Wars, despite its inconsistent silliness, merely perpetuates an immature belief in an unelected elite who know better and will take care of society (the Jedi). And Star Trek, for all its hokey idealism, at least argues for humans freely creating their future society. It is at least republican, if not democratic.
I liked her argument.
Samuelson thought he and other economists, together with presumably sober-minded politicians, should be our stern parents, our Jedi. What is the point of a republic if the public in our res publica cannot even discuss things freely?