Yves here. Although I like this piece, I believe Joe is not cynical enough about MSNBC, which has become a messaging apparatus of the Democratic party. The reason that MSNBC is now talking about inequality is Obama is pushing for a minimum wage increase, so wealth and income disparity are no longer verboten topics. Moreover, the Dems have now opened season on the Kochs and Sheldon Adelson. Both have been highly influential operators for decades. Moreover, the Kochs have been major funders of the extreme right wing campaign to make American values pro-corporate, which was set forth in 1971 in the Powell Memo.
The fact that the Dems are using inequality as a talking point to distract attention from their numerous policy failures, particularly on the economy, may be the big reason we’ve seen such an upsurge in billionaires making badshit crazy remarks about persecution of late. These statements aren’t for the hoi polli, they are for the Beltway operators, as in they had better not go Huey Long on them. As if there was even a possibility that Obama Administration was capable of that.
By Joe Firestone, Ph.D., Managing Director, CEO of the Knowledge Management Consortium International (KMCI), and Director of KMCI’s CKIM Certificate program. He taught political science as the graduate and undergraduate level and blogs regularly at Corrente, Firedoglake and Daily Kos as letsgetitdone. Cross posted from New Economic Perspectives
All of a sudden MSNBC cable commentators are talking about plutocracy and oligarchy. Surprisingly, the first occurrence of this I’m aware of was Chuck Todd, reacting on his Daily Rundown show to the spectacle of Republican candidates traveling to Vegas to seek funding from Sheldon Adelson and his group of hugely wealthy Jewish Republican donors. Todd began to explore the implications of that event. He seemed exercised, and more than the slightest bit upset, about its meaning for Democracy and used the words plutocracy and oligarchy. Andrea Mitchell also discussed it later and she, too, registered apparent dismay, while using the “p” and “o” words.
Chris Hayes has been on leave during this period, so we haven’t heard from him about this. But Chris Matthews, the “oh so very slightly left-of-center insider” has been making very unfriendly noises about Adelson, the Kochs, and the Supremes, culminating today (April 3rd) with nasty references to plutocrats, oligarchs, and candidates, kissing oligarchs somewhere or other, on both his program and Al Sharpton’s.
But the most interesting outbreak of a sudden passion for democracy and hostility toward plutocracy and emerging oligarchy has occurred on The Cycle show, where, in the wake of Abby Huntsman’s oligarch-inspired attack on Social Security and entitlements generally, Krystal Ball has begun talking about inequality, Thomas Piketty’s recently published in English hyped-book on the subject, and the rise of plutocracy and oligarchy in the United States. Here are two videos from the April 1st Cycle show. In the first, Krystal Ball in introduces a discussion among Cycle co-hosts, Touré, Abby Huntsman, and Luke Russert, and Susan Ochs of the Aspen Institute, making a guest appearance.
Amid much praise of Piketty’s book and assertions that it may lead to a re-orientation in the world view of American politics there was a discussion primarily among Susan Ochs, Ball, and Huntsman, about why the rich are sitting on all their money and are not investing it in new businesses that would lower unemployment, create a positive spiral of economic growth that, in turn, would create a healthy and dynamic economy, that, in its turn, would lower inequality.
Huntsman, of course, delivered the right wing gospel, that the increasing concentration of wealth with growing inequality, predicted by Piketty, can be avoided by policies that would restore growth, with the implication being that programs funding new innovations and the proper mix of tax incentives for the rich might shift the psychology of business and persuade investors to stop sitting on their money and start creating the long-awaited full recovery. Huntsman also emphasized the talking point that people aren’t bothered by inequality as long as they themselves are making gains, a contention I critiqued recently.
Ochs, assisted by Ball, with murmurs of agreement from the other two on the panel, quickly talked her down, however, pointing out that businesspeople would be unlikely to respond to anything but increased sales, especially when they could make profits the easy way through financial activities in the international economy. Ochs, in particular, emphasized that the key to restoring a healthy economy and reducing inequality was increased demand; but, following the principle of pundits talking about problems, but rarely real solutions, she stopped short of telling us what could be done to create that demand if business will not do it.
Later in the program, Krystal Ball, in the second video, returned to the subject of inequality, and this time emphasized strongly the danger to democracy it represented. This commentary didn’t make any specific proposals, but it was quite out front in both emphasizing the problem of inequality as a threat to democracy and calling for something “radical” to be done about it.
Meanwhile, Jamie Galbraith has reviewed Piketty’s book. He thinks that while it breaks new ground, its measures of rate of return on capital are flawed because Piketty attributes the rise of return on capital in relation to national income to slower economic growth:
. . . according to a formula he dubs a “fundamental law.” Algebraically, it is expressed as r>g, where r is the return on capital and g is the growth of income. Here again, he seems to be talking about physical volumes of capital, augmented year after year by profit and saving.
But he isn’t measuring physical volumes, and his formula does not explain the patterns in different countries very well. For instance, his capital-income ratio peaks for Japan in 1990—almost a quarter century ago, at the start of the long Japanese growth slump—and for the United States in 2008. Whereas in Canada, which did not have a financial crash, it’s apparently still rising. A simple mind might say that it’s market value rather than physical quantity that is changing, and that market value is driven by financialization and exaggerated by bubbles, rising where they are permitted and falling when they pop.
Jamie Galbraith also disagrees with Piketty on the policies we ought to use to reduce inequality. Piketty recommends a very pronounced focus on a global tax on wealth and also on high marginal income tax rates to go back to post-war policies, while Jamie says:
If the heart of the problem is a rate of return on private assets that is too high, the better solution is to lower that rate of return. How? Raise minimum wages! That lowers the return on capital that relies on low-wage labor. Support unions! Tax corporate profits and personal capital gains, including dividends! Lower the interest rate actually required of businesses! Do this by creating new public and cooperative lenders to replace today’s zombie mega-banks. And if one is concerned about the monopoly rights granted by law and trade agreements to Big Pharma, Big Media, lawyers, doctors, and so forth, there is always the possibility (as Dean Baker reminds us) of introducing more competition.
Finally, there is the estate and gift tax—a jewel of the Progressive era. This Piketty rightly favors, but for the wrong reason. The main point of the estate tax is not to raise revenue, nor even to slow the creation of outsized fortunes per se; the tax does not interfere with creativity or creative destruction. The key point is to block the formation of dynasties. And the great virtue of this tax, as applied in the United States, is the culture of conspicuous philanthropy that it fosters, recycling big wealth to universities, hospitals, churches, theaters, libraries, museums, and small magazines.
I think Jamie has it right, especially since, as he says, a return to high progressive tax rates would be met by various tax avoidance schemes of the kind that caused the previous regime of high progressive taxation to become ineffective over time, and also because a global tax on wealth would be very hard, if not impossible, both to legislate and to administer in today’s world. In addition, however, I think Piketty may not understand how fiat currencies can be used by governments to lower inequality by creating full employment, along with higher minimum wages, and a healthier labor market, in which employers would find it much more difficult to pay less than a living wage.
And this brings me back to the possibility of alleviating inequality by creating a truly healthy economy even better than the one western nations enjoyed in the quarter century after World War II. The Cycle panel and Susan Ochs left us at the point of recognizing that business needed demand before it was likely to use its assets to create a positive growth spiral in which all would share in the rewards of increased productivity reducing inequality in the process.
Well, of course, there is an emphatic Modern Money Theory (MMT) answer to the chicken-egg problem highlighted by The Cycle discussion. And that is that the Government is the only force that is likely to end economic stagnation and rising inequality, because it has the policy space and financial capability to create full employment and price stability.
I’ll end this post with a video clip of a talk, along with a slide presentation given by Stephanie Kelton on the Fiscal Cliff in November of 2012. These lay out very explicitly why Government deficit spending is the most likely way of getting out of the box highlighted by the Cycle discussion, and providing the answer to Abby Huntsman that Susan Ochs wasn’t able to offer, for whatever reason.
A C-SPAN video clip of Stephanie Kelton’s presentation on the Fiscal Cliff with New America Foundation / Economic Growth Program / Economists for Peace and Security. Click here or the image to view the clip at C-SPAN
Here are the slides from the presentation:
There are many takeaways from this presentation. But perhaps the most important is that austerity budgeting harms people and that the “radical” thing we have to do is to budget to benefit most people, including to maintain full employment and price stability without worrying about or targeting the size of the deficit or the debt-to-GDP ratio. If we care about reducing inequality, then we will do the things Jamie Galbraith has mentioned, supplement those things with budgeting for people, and forget about CBO deficit/debt projections and targeting deficit reduction. In short, stop playing the fiscal austerity game, and start worrying about REAL fiscal responsibility.
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If the heart of the problem is a rate of return on private assets that is too high, the better solution is to lower that rate of return. How? Raise minimum wages! That lowers the return on capital that relies on low-wage labor. Support unions! Tax corporate profits and personal capital gains, including dividends! Lower the interest rate actually required of businesses!
I can’t help but feel Galbraith’s attempts to formulate an alternative to higher direct taxation reflect the deep discomfiture mainstream American economists feel toward using public policy to redistribute wealth. They would much rather believe that by tweaking the “rules of the game” the desired policy outcome can be achieved through market mechanisms without anything so crude and sinister as taking from the rich to give to the poor.
To me Galbraith is begging the question. Trying to restrain investment returns through higher wages, stronger unions and lower interest rates makes little sense in an era of financial capitalism in which few of those returns are directly generated through productive economic activity (i.e. making things and providing legitimate services). If the objection to higher direct taxation is that it will simply increase tax evasion, doesn’t the same objection apply to higher taxes on investment income? Indeed hasn’t the corporate class proved itself extremely adapt at bending not only taxation but every other aspect of public policy to its will? If they can evade taxes they can also suppress wages and unions and structure the financial sector to serve their interests – in fact they already have. These ideas are dangerously naive in that they grossly underestimate the extent to which the state has been captured by corporate interests and overestimate the real desire and scope it has to enact policies contrary to those interests.
Piketty’s advocacy of higher direct taxation has the virtue of being a straightforward wealth transfer that doesn’t depend on market mechanisms that have already been shown to be extremely volatile and compromised. It has the additional virtue of making it clear that the purpose of confiscatory taxation is to attenuate the power of the wealthy in our society – in other words, it is a plain acknowledgement of the reality of class interest and class conflict.
Ugh. Taxes do not transfer financial assets, they destroy financial assets. Destroying Bill Gates’ checking account will not increase yours in the slightest.
Sacking the nobility may not make us commoners much richer, but it will make us much freer.
The more money the oligarchs make the more power they have and the louder their “speech.”
+1000%
Is there a problem with some having more than others by hook or crook, by luck or pluck? Most in the U.S. would say no. But how much more? Democracy suffers from a surfeit of the over wealthy who forget how much luck and crook was a part of their having more.
Besides — how much is enough? More — is a counter to track how your contribution helped all of us — not a credit to your account beyond your means to enjoy as a material good.
Redistribution through higher taxes on massive income absolutely will benefit lower income people. It’s absurd to say otherwise. We must have money for schools, roads, police, military, to support art and science and many other necessaries. When hedge fund managers can make a billion dollars in a year gambling with other people’s money and pay almost no tax, we have to resort to extraction of money from wages and salaries of the schmucks who depend on regular paychecks. Ugh is right, your mentality is the problem.
The other feature of lowering the income inequality gap is to avoid the “let them eat cake” syndrome. The greater the disparity between the rich and the rest of us, the more chance there is of the very rich living in a different reality than the rest of us. As money has such a disproportionate effect on US politics, it’s important for the entire electorate to have a shared perception of the world.
Many of us commenting here have a different understanding of the monetary system than you have. We think redistribution is a fiction, since taxation destroys private sector income or wealth, while government deficit spending however funded adds to net financial assets and creates reserves anew. We think this is not a matter of interpretation, but a fact established by academic research into bank, Fed, and Treasury operations. See this primer for further explanation: http://neweconomicperspectives.org/modern-monetary-theory-primer.html
Anyway, the Federal Government (Congress, Treasury and the Fed together) create the money the Government spends so the Government can never involuntarily run out of money, and private sector money isn’t either needed for the purposes you named, or used for those purposes. That said, I’m for taxing the wealthy because I believe that excessive inequality is a threat to democracy that we cannot live with. But I also think that we need to do things in the proper sequence and that sequence is get full employment first and then worry about the leveling once there’s political credit for doing it.
If we tax away Bill Gates checking account, and increase spending by the same amount or more, we can get the deficit size we need while also accomplishing the socially and economically valuable goal of leveling wealth inequalities. One thing both Galbraith and Stiglitz emphasized in their books is that inequality is economically harmful. It also obviously undermines democracy.
Now that the Supreme Court has said we can’t fight the power of the plutocracy by limiting the contributions of the wealthy to the political process, it is necessary to take the direct path: go after the wealth itself.
Is that a joke?
Tell me, were the wealthy less in control during the 2000s when they had lower incomes? No? Hmm, then they must have had less control during the 1990s? Oh, they were totally running running the show then too? The 1980s!! Must have been the 80s when they couldn’t buy influence. God knows lower wealth inequality during the Reagan years meant the Corporate Lords were kept in check. Oops, that wasn’t true either.
Gee willikers, it’s almost as if the folks at the top were somehow able to warp the political process for personal benefit before there was massive inequality. It’s almost like the very high taxes that existed prior to the 1980s completely fucking failed to prevent mal-distribution of power. But let’s ignore history, do the same thing and expect it to take take this time. We’ll ignore that focusing in on taxes as a solution kept the situation stable for less than thirty years and that it ultimately didn’t work.
Not in the 2000s. But they were less in control in the 50’s and 60’s. The surge in inequality began in the 70’s, along with the rest of the neoliberal agenda, following the Powell memo and the organized effort by the business and corporate class to achieve more political power. Believe it or not, there was once something in the US of my youth called, “Big Labor” – the combined political force of organized labor which ran much of the Democratic Party and of which most US politicians lived in fear. The very high marginal tax rates of the postwar era were a major factor in building a broad and politically potent middle class.
The US has had extreme inequality before, in the late nineteenth and early twentieth centuries. Just because we have it now does not mean that it will last forever, or even for very long. Combating inequality may not be easy, but it is not futile, either.
Precisely.
Actually, it was more than 30 years. You know who first introduced high marginal income tax rates? Herbert Hoover, that’s who. That means they worked to make inequality better for 40 years or so, until Jimmy Carter bought into neo-liberalism. Higher marginal tax rates, if implemented without loopholes can help us. The fiscal multiplier of the right kind of deficit spending is higher than the fiscal multiplier of spending offset by tax revenues. But there is more policy space for programs targeted at poor people and the middle class if we have both the proper amount of deficit spending and additional spending offset by taxes on productive projects.
It reduces his ability to charge rent while offering no services in exchange which is the primary problem with too much wealth. In our current system, the rich are simply parasites.
We need to push the rich are parasites and that they are killing the host .
Get over yourself! Characterization of taxes like “destroying Bill Gates’ ‘checking account'” are as juvenile and unhelpful as they are inaccurate and misleading.
Tax “policy” CREATED and SUSTAINS the American oligarchs, and COULD be used to dismantle their unwarranted influence. If anyone was paying attention.
To counter this, they hide behind the skirts of the American “middle class,” for which tax “policy” has an entirely different meaning and effect. They dupe you into thinking that “we are all bozos on this same tax bus,” and you dutifully accept the premise.
IT ISN’T TRUE. YOU ARE NOT THE SAME AS BILL GATES.
They patiently and remorselessly appropriate your resistance to tax “increases,” not because of the deleterious effect it would have on YOUR checking account, but because of the deleterious effect it would have on THEIRS. The surrender of your experience in service of the no new taxes “cause” is accomplished without so much as shot being fired.
And, again and again, you buy-in. To paraphrase a recently popular poker table joke, if you sit down on a bus and you can’t tell who the BOZO is, It’s YOU.
When did calling for tax increases make a dent in wealth inequality since the Reagan Revolution? Dan, no answer? Anyone? But by all means, let us continue beating the drum handed to us by the Democrats, no matter how many times it fails.
So, what in the world is your point? That “calling for” “tax increases” with the express purpose of eradicating gross, unsustainable income inequality does not have the same effect as actually IMPLEMENTING such a policy?
Well, DUH!!!!!
Bring the hammer down, then evaluate.
There has been no organized political effort to dent inequality for at least 50 years. If such a political movement every does catch fire, then obviously tax increases are going to have to be one major part of it.
Are you kidding me? Taxes have been continually reduced for the last 35 years (or more) most notably the farther up the wealth ladder you go. These tax rate reductions have had a huge influence on wealth inequality (They INCREASED it) What planet are you from? And people here are certainly not beating the Democrat drum. Most are highly critical of the Democrats. The fact is that most people here have a pretty good grasp on the macroeconomy, which you seem to lack. Of course “calling for tax increases” makes no dent. That is because taxes rates for the wealthy are NEVER increased, only decreased.
FAIL
@Ben J Ugh. Taxes do not transfer financial assets, they destroy financial assets. Destroying Bill Gates’ checking account will not increase yours in the slightest.
Anyone who believes this need only take a look at Volume II of the Treasury Financial Manual, which concerns itself with transactions between the US Treasury and the Federal Reserve Banks. Tax receipts and other revenues are deposited into Treasury’s account at the Federal Reserve Bank of NY, and are augmented as needed with funds from TT&L accounts, which are Treasury’s accounts at commercial banks.
A walk through the evidence is here:
nakedcapitalism.com/2014/03/is-russia-trying-to-hurt-dollar-to-defend-ruble.html#comment-1918796
Perhaps you’d like to introduce some primary evidence to support your own depiction. To sweat the details rather than merely invoke your fellow deep thinkers who claim it’s so. That’s kinda the difference between a big dog and a lightweight, and any of us can cross that threshold at will.
By “destroy financial assets”, I think Ben just means that it removes financial assets from the private sector.
No problem, though, any financial assets and demand that are removed via taxation can be re-injected via spending.
@Dan Kervick By “destroy financial assets”, I think Ben just means that it removes financial assets from the private sector.
Nonsense. Here’s Stephanie Kelton’s rendition:
The Treasury Financial Manual makes it clear she’s purveying fiction. MMT isn’t operational reality, it’s extraordinary delusion.
How does the Treasury Financial Manual make “. . . it clear she’s purveying fiction.” Quotes please.
It it was possible to impose much steeper taxes on the rich I’d be for it but there are too many ways to avoid taxes including moving to other countries and using tax-havens. I would start with modest taxes on income and similar taxes on wealth and luxury goods. But the real deal would be to gradually increase taxes on all carbon fuels coupled with high investment in alternative/sustainable energy in order to move power away from the energy giants and begin to address (after several decades) climate change–without this, any growth in the economy would just be counter-productive.
Despite the push on MSNBC/Democratic Party I’m not sure this emphasis will work–but its the only issue they have that the Republicans have no answer for in the mid-term elections. Without really emphasizing this issue the DP will lose the Senate.
Collection of taxes isn’t as important as cutting out the middleman. If you can’t spend the cash, it’s as good as taxed as long as the money is fiat. The US is far too large to be isolated or ignored which means there will always be investors. Who cares if the parasites flee? Their property will be seized, and everyone else will move on with less criminals.
Criminalization of such behavior with harsh penalties might work. One theory of law enforcement has it that when apprehension rates are low, increased severity of punishment for the few who get caught can act as an effective deterrent.
Right, the risk is the probability of getting caught X the severity of punishment if you do. The less the probability of the more severe must be the punish to deter people who worry about risk.
I think this comment is overdrawn. First, a lot of profits in the economy don’t come from the FIRE sector. For example, Walton family profits still come their retail businesses. Their profits would be far less if they had a to pay a much higher minimum wage or had to contend with a strong union that could command a greater share of their profits. Second, since investment income is among the shelters people use to avoid paying higher taxes raising taxes on that kind of income may work to some degree. That said, I would like to remove all distinctions among types of income for purposes for purposes of income taxation. I don’t see that these distinctions benefit poor and middle class workers. So, it’s pretty obvious to me that if we want to do something about inequality we shouldn’t privilege certain types of income over other types of income, and that includes income from earnings higher than the SS cap of $117,000. That income should be taxable too.
On the last couple of sentences in your post. Both Piketty’s and Galbraith’s proposals assume that those who favor greater equality can win some political victories, and prevent the rich rolling them back. That may not seem likely to you, but t has happened many times in the past and it can happen once again. In fact, it will happen again sooner or later. But we can’t say how much time and suffering and increasingly hazardous effort that will take. Let us hope that when it does happen, we are wise enough to put very strict controls in place backed by harsh and fairly certain penalties, so that the plutocracy cannot rise again.
Had we been the country we once were (a republic), warts and all I would have agreed with you. But we live in radically different historical moment. We live in a world that is in the midst of transforming itself into a virtual global imperial order. The forces at work in Washington are composed, not only U.S. based oligarchs, but international oligarchs who are deeply tied into globalization, “free-trade”, the U.S. as the military wing of this imperial order, and the ruling elites who administer this new dispensation. Unrest, protest, voting had some effect in blunting the rule of the elites and the elites themselves had some minimal loyalty to the country that nurtured them. Unrest and protest is now violently repressed should it become dangerous to the current order–people can be disappeared, tortured, their property seized, and so on–it was harder back in the day to do such things but now we have statutes that give the Feds almost unlimited power. So why should the oligarchs (who now count foreigners in their cohort and who, even if they are American citizens, don’t care at all what happens to the country) give in even an inch to create a more balanced set of policies?
Look, we still have it easy compared to the folks who made the French, Russian, Mexican, and Chinese Revolutions and even the people who overthrew the Soviet Union fairly recently. Start reading popularresistance.org and keeping in touch with protest events and movements all over the world.
Joe:Their profits would be far less if they had a to pay a much higher minimum wage or had to contend with a strong union that could command a greater share of their profits.
Worse than that, Walmarts profits might not be far less with a moderately higher wage. Maybe even would increase. Capitalists get what they spend. Workers spend what they get. The poor in the USA are so ground down, the minimum wage is so low, depression economics in such control, Fordism so completely vanished that an increase in the minimum wage would probably increase employment and production overall, and the minor increase in cost would be made up by increased sales. I think they backpedaled, but Walmart may have even recognized this.
Of course, higher minimum wages, stronger unions, and lower interest rates are good in and of themselves – much more so than restraining investment returns. The problem is the false assumption: “the heart of the problem is a rate of return on private assets that is too high” is just wrong. The heart of the problem is low and zero wages for the poor and unemployed – more important than everything else put together. Have a real living wage JG – and the plutocracy is dead, forever. Unfortunately, aside from a few academics, the plutocrats are the only ones who understand this.
Lexington: in other words, it is a plain acknowledgement of the reality of class interest and class conflict. Agree with Lexington here. There is one good reason to tax the rich: So that they will have less money. But it is much more important to spend on the poor – to tax the poor in real terms by a Job Guarantee, than it is to tax the rich in monetary terms.
Ben Johannsen: We’ll ignore that focusing in on taxes as a solution kept the situation stable for less than thirty years and that it ultimately didn’t work. 30 to 50 depending on 45-73 or 33-82. But that was NOT what was focused on as a solution back then. The focus was jobs, employment, and that was correct. The Kennedy-Johnson tax cut worked for a while, stimulated for a while. But it set a bad precedent, created an addiction to an ever less effective, ever more destructive remedy and Galbraith & Minsky wisely opposed it, favoring truer Keynesian measures like a JG, like public spending. The Repubs & Dems exchanged places in the 70s/80s – the Repubs becoming the big spenders (on insanity), the Dems becoming apostles of “sound finance” (for the 99%) – and as you say, this has been catastrophic for the 99%.
This statement, “fiat currencies can be used by governments to lower inequality” appears to be the crux of this article and couldn’t be wrong as it has been used to do the opposite.
The problems facing our society is that federal deficit spending has replaced private investment. One must recognize the problem before one is able to see the solution, which is to cut taxes and cut public sector spending.
The MMT crowd envisions a utopian world government, not corporations, control economic activity. I envision one where individuals make their own economic decisions. It is small business which drives economies, not governments or multinationals, but like the earth, the economy has been strip mined for short term profit. Faith in God appears to be the only solution to the pending unmitigated disaster which fiat currency represents.
I lost a comment due to my insane laptop that has a mind of its own so forgive me if I repeat myself.
There are several problems with your statement. The chief of which is to imagine that we have, it appears, that you believe that we have an even economic playing field. We don’t. Markets are regulated and fixed by governments to reflect, mainly, the interests of large corporations who flood politicians with money to do their bidding. Politics determines how markets act and corporations, particularly the financial, energy, military-industrial complex and media conglomerates have control over the economy. Small business plays a big role, obviously, but we (I am one of that lot) take big risks for small payoffs because we like to preserve our human dignity rather than work in the corporate world at least potentially.
When libertarians remove the political power of corporations by forcing them to be accountable to the public, i.e., eliminate “personshood”, force owners and officers to face criminal penalties (personal responsibility) and be, in part, responsible for debts with generous bankruptcy protection, then I’ll have more respect for their positions on the economy. As it is to turn a blind eye to political reality and the fact corporations can run armies of lawyers and lobbyists to force taxpayers to incur their losses makes a mockery of the whole idea of “free market” which, incidentally cannot exist–all markets are political institutions.
I envision a world where individuals make there own economic decisions.
And who exactly is going to keep individuals from forming groups to wield power over other individuals?
It’s so, so f****g obvious, yet these trolls keep coming up with the same naive libertarian ideas that can only end in a Game of Thrones.
I “decide” to be “rich.”
Now what?
“And who exactly is going to keep individuals from forming groups to wield power over other individuals?”
THE FREE MARKET!!! Or the invisible hand. Or maybe Adam Smith’s ghost. Something like that.
Right off we don’t agree. First Federal deficit spending adds to net financial assets in the private and foreign sectors of the economy. This is an accounting identity, effects of flows of deficit spending have nowhere else to go. So since this is true, it’s clear that Federal deficit spending ought to increase. My own view is that given savings and import desires among the public, Government deficit spending ought to be at $1.7 Trillion annually, and must grow each year. If that spending is done on the right things like a Federal Job guarantee at a living wage, infrastructure, education, a stronger social safety net, new and non-polluting energy foundations, Federal – State revenue sharing, it will both lead to economic growth and to greater economic equality.
And no, the debt doesn’t have to increase along with that deficit spending. Just follow the plan in my e-book: http://amzn.to/Z7kG5q
Also, federal spending in the category of “consumption and gross investment” has been declining as a share of GDP for several decades. That’s the part of spending that is referred to by the “G” in the national income and sectoral balance equations.
MMT doesn’t envision a world government; utopian or otherwise. I’ve been working with MMT for 4 years now and I haven’t a single piece of writing or seen a single video or had a single conversation with another MMT writer or scholar that advocated for or talked about world government. So, stop lying about us.
On individuals making their own decisions, I want that too. But guess what? Your freedom to make your decisions has to be constrained by my freedom to make my decisions. When the Koch brothers are given the freedom to use their economic power to magnify the influence of their opinions that affects my ability to make decisions because it leads to legislation that constrain me and affect my ability to do various things. Now when there are many millions of me and only two of them then I think that we have a right to limit the Kochs use of their money, so that we can get new political and economic outcomes that are more favorable to us and less favorable to them. And don’t tell me that “money is speech.” That’s ridiculous and you know it, and so did the Court that promulgated that vicious doctrine which has led us to where we are today! We need to get money out of politics immediately so the liberty of most us to make our own individual decisions is increased once again.
This comment is pretty clearly from a paid troll, given how quickly it hits all the dog whistles.
This statement, “fiat currencies can be used by governments to lower inequality” appears to be the crux of this article and couldn’t be wrong as it has been used to do the opposite.
Joe will be pleased to know you agree with him.
The problems facing our society is that federal deficit spending has replaced private investment.
Where is your evidence of this?
One must recognize the problem before one is able to see the solution, which is to cut taxes and cut public sector spending.
Been there, done that. Where’s the payoff, or shall we continue repeating history like dummies?
The MMT crowd envisions a utopian world government . .
False.
Faith in God appears to be the only solution to the pending unmitigated disaster which fiat currency represents.
God vs. Money. How will that work in a country whose God is money?
On spending, he may mean that government has done some stimulus spending and that the Federal Reserve (not gov’t) has provided free money to Wall Street speculators to play bubble-of the month on the markets. The corporate sector has not been very interested in investing in real economic activities that could benefit the rest of us so other institutions have to take the lead, I guess.
One wonders whether it is ever possible to rectify the drift to oligarchy in a society and economy which accepts, promotes and celebrates two standards of Justice. Is any ‘policy’ or set of ‘policies’ likely to have a more egalitarian effect when implementation is solely within the control of a coterie of elites who have already profited from the looting of their fellow citizens and paid no economic, social or personal consequences for doing so?
This horrendous story confirms your suspicions:
http://www.delawareonline.com/story/news/crime/2014/03/28/sunday-preview-du-pont-heir-stayed-prison/7016769/
An heir to the Dupont fortune is convicted of raping his own 3-year old daughter, but he will never see the inside of a jail because the Judge is concerned he “wouldn’t fare well” there!!
I doubt we’ll ever see such concern from a U.S. judge for the tender sensibilities of an inner-city youth convicted of selling marijuana!
I’m not sure average people celebrate two standards of justice. I do suspect they’d love to be with the “IN” crowd and be able to get away with that traffic violation – if only they could find the “connection” to do so.
We also glorify celebrity. The richest members of western society are those celebrities. Then to make things worse, Americans still glorify the military. In other western nations the military may not be glorified but it is still viewed as the “good guy” and that will never change. This is never going to end well. Yet I can’t help but think it ends exactly how we deserve to have it end.
Well there is no social or political movement calling for equal justice under law–that should tell you something. Americans secretly desire a world of limited choice, royalty, neo-feudalism and strict controls. You can see this with the fetish of swift and draconian justice (shoot first ask questions later) for “bad guys” and this absurd fascination with the British Royals (??!!!??) and, of course, celebrities. I think Americans are, in general, perfectly content to see the nobility have special justice as long as the under-class gets draconian justice and they, the unimaginative, timid and passive middle classes get so slumber standing up 24/7.
Many of the young people I encounter don’t like that set-up–will they have the gumption to change it? Who knows?
Please leave the British Royal ….. I mean German Royal family out of this discussion, they may entertain the Yanks, but don’t necessarily entertain us Brits – just remember, England has had regicide in the past, well before the French actually – and look how that worked out, Cromwell being worse than the Royal fool he replaced, go ask the Levellers and the Irish.
Anyway, just saying, but currently, I think I’d rather sort out our immediate political and economic problems, before bringing the Royal family into the equation. And to say British politics is presently a cesspit would be an understatement, for just like the Yanks, TPTB seem determined to to keep it all a family affair, and that extends to our supposed left-of-centre politicians, most of whom I’d hang if given half a chance.
Right; I didn’t touch that base in this post. I frequently do, however. Bill Black’s frequent posts on seeing to it that one law applies to everybody has made his concerns part of MMT, in my view. I think there is broad agreement among us that until the structure of laws and their enforcement prevents fraud, theft, and extraction of wealth from people, MMT policies will far less effective or perhaps ineffective in reducing inequality, maintaining price stability, and preventing de-stabilizing financial bubbles.
Important to remember that the MSNBC personalities are definite members of the 0.1%, with Ed Shultz’s estimated salary at $4 milllion/year, Matthews at $5 mil and Maddow at the top with $7 million.
Both Matthews and Maddow had “acting” parts (playing themselves) in the ultimately silly (and boring) “The House Of Cards” Netflix series, where their “acting” was indistinguishable from their TV roles.
Thank you for your dose of reality. These on-air personalities owe their status to the carefully nurtured relationships they have with, first, big money men (usually men) and members of the Deep State, usually intel contractors who whisper in their ear sweet nothings. Just as an aside, reporters in the national media have a fascination with “deep” sources from the Deep State whether CIA or otherwise–these characters are very charming and, usually, appear to be politically “liberal.” Just sayin’…..
Rachel Maddow lost me when3-4 years ago she went to Afghanistan and basically recited the GE/ Beltway Insider line on the so called War On Terror. She looked every bit the flack/hack wearing her helmet and combat/reporter fatigues, (Matthews would have looked just as silly in the same get-up—gender neutral).
I find myself wishing that the helmet and flak jacket would have done for Michael Dukakis what it is doing for Rachel Maddow and Martha Raddatz.
http://www.usnews.com/news/articles/2008/01/17/the-photo-op-that-tanked
Ouch!! Gotta LOVE the tie!!!
Authenticity. What a concept.
That photo along with his overly dispassionate response to Bernard Shaw’s stupid debate question about “what if your wife was murdered etc.” figured in his pathetic campaign.
I always thought Dukakis should have responded with “Well, I’d pour gasoline on the guy and light him on fire, and I’d let it soak in a little first so it really burned.” And then while the reporters were sitting there in stunned silence, he’d say “That’s what I would want to do. But that’s why we have courts and judges and juries, so that we get justice instead of revenge.”
It may not be the flak jacket, but I think becoming the Democratic Fox* has led to a large ratings decline with the availability of online news sources. At some point, Christie is fat jokes don’t matter to anyone outside of New Jersey be cause he won’t be president or senator at this point. MSNBC’s audience like CNBC’s audience is there out of loyalty and tribal branding not information. Obama has been President for over five years, and he and MSNBC are known commodities. They can only bleed supporters without making major changes, but they have a credibility gap at this point. Why anyone would trust a network which employed Pat Buchanan is still beyond me?
I’ve long since grown tired of
the Obama Cheerleading ChannelMSNBC. They will spend endless hours on the smallest detail of the Chris Christie saga (not that he’s undeserving) but there will never be a mention that we are now in year 5 of the Obama/Democratic Party depression and jobs crisis or even a harsh word for anything Obama and the Dems do (or fail to do). Obama could boil bunnies on the South Lawn and no one at MSNBC would take notice. Even when their facts are right (which they usually are – credit where credit is due) I find the station and its hosts insufferable because of their obvious partisanship and blindness to the sins of their political compadres and their own network. No MSNBC host dared to get involved in a labor dispute involving their parent network (they know where the bread is buttered). Let’s not forget that this is the network that fired Phil Donahue when he dared speak against the Iraq invasion.Always helpful to re-visit what NBC News President Neal Shapiro did to Ashleigh Banfield for the crime of truth-telling about Iraq War propaganda while giving a lecture on her own time.
—“I was office-less for ten months … No phone, no computer. For ten months I had to report to work every day and ask where I could sit. If somebody was away I could use their desk. Eventually, after ten months of this, I was given an office that was a tape closet. They cleared the tapes out and put a desk and a TV in there, and a computer and phone.
It was pretty blatant. The message was crystal clear.
Yet they wouldn’t let me leave. I begged for seventeen months to be let out of my contract. If they had no use for me, let’s just part ways amicably—no need for payouts, just a clean break. And Neal [Shapiro, the News President of NBC] wouldn’t allow it. I don’t know what his rationale was—perhaps he thought I would take what I felt was a very strong brand, and others felt was a very strong brand, to another network and make a success of it. Maybe that’s why he chose to keep me in a warehouse.
I will never forgive him for his cruelty and the manner in which he decided to dispose of me.”—
http://en.wikipedia.org/wiki/Ashleigh_Banfield
Since I’m part of the long-term unemployed I’ve filled a bunch of time watching the missing plane coverage on CNN. From what I’ve seen I pretty much consider Ashleigh Banfield to be an idiot (not that really distinguishes her among her colleagues) but I do respect her for making that stand.
She’s paid her dues to be an idiot :)
And Olberman man was fired to despite largely building their audience, but he wasn’t a tribal Dem. He is killing it on espn again.
One would think that once the IMF gets it, even MSNBC will not be too far behind.
No need to put the stamps of Oligarchy and Plutocracy on the results, they are inherent to the pudding that is on the table, and only by resort to true economic democracy can we restore our collective well-being.
So sayeth the IMF:
http://www.imf.org/external/np/pp/eng/2014/012314.pdf
I seem to remember that there was a substantial body of research dealing with wealth versus income inequality. This research seemed to support higher taxes on wealth but not income if one wanted a more equitable distribution of wealth in families (Geni Coefficient ). The reason being that there is always far more opportunity to earn wealth than to inherit wealth. Does it make more sense to have high taxes on wealth to encourage disposition and avoid inter-generational transfers and relatively lower taxes on income? Extremely high taxes on income may do more harm than good by preventing turnover in the ranks of the wealthy. In addition, relatively small taxes on wealth produce far greater revenue than very high taxes on income.
Tobin Tax! Tobin Tax! Tobin Tax! Yayyyy!
Yes, but that will tend to move trading to the City of London or elsewhere. Tobin taxes should be part of an international agreement to limit speculation–a tricky issue, to be sure.
Agreed. Tricky indeed, and the Flash Trading genii would no doubt devote their intellectual prowess to discovering unthought of ways to evade it. Alas.
I’ve tried to do something long and ill-considered on this, but it’s poofed into moderation air and such rarely return. I regard Piketty and Galbraith as distractions – old sociology writ as economics.
We can do this redistribution thing. It’s a matter of will. And sadly, hard thinking economists are useless at. I’m not talking about the kind of pre-match and half-time team talks I suffered in ‘will’ (cortisone injections and mouth-wound stapling were more effective). We need a more thorough-going analysis of why people are kept poor in the first place.
Of course we could sequestrate the rich and come up with a decent wage-income spreadsheet. Now work out the way we would police this or even get the votes.
We all know that quote but it is as apt as any other. But it is also useful to try and understand the ways people are kept poor. One of the chief ways, is to demonize poverty and assign people that deal with the poor in bureaucracies to be cruel and unkind–I have personally seen quite a lot of that from administrators, teachers, social workers, cops (duh!) and all officials that feel they can be unkind, short, always provide service with a frown and so on. In other words, the things that keeps people poor consist insult, negative stereotypes and general lack of compassion. When we treat even the poor with dignity, courtesy and consideration we ourselves are elevated.
It would, but the Senators from New York who have long undercut liberal/lefties politics will be significantly less connected to the parasite class. This would be worth it. Without NY and North America behind it, London risks being seen as another Bermuda especially with the growing disconnect between London and the UK. An anti-London platform would sweep anyone into power there.
Good point–hadn’t thought of that.
Quite how a ‘must read’ book like Piketty’s goes scarce when we have Kindle seems little connected with ‘must read’. As a survivor of such must reads as Istvan Meszaros’ ‘Beyond Capital’ (976 pages of agony) I am reluctant on ‘next Bible’ recommendations. ‘Intellectual and political debate about the distribution of wealth has long been based on an abundance of prejudice and a paucity of fact’ Piketty tells us. Well, as we used to say here, ‘I’ll go to the foot of our stairs’. Stuff on Young, Malthus, Richardo, Marx and Kuznets follow, essentially explicated like a PhD student’s literature view. The world wars and stock market disasters are the only things that really brought any proportional redistribution. Well, whoopie. My old man and his mates used to tell me that they had seen how the other half lived and wanted it for all after WW2.
Will the world by 2050 or 2100 be owned by the Bank of China, the Sultan of Oman or maybe the offshore tax havens where the loot is amassed and so on? Various assertions he is using massive data sources ‘never previously available’, and he eventually gets to Bangors oft asserted ‘politics has a lot to do with this’.
It turns out (amazingly) that what various political actors think is fair has a big bearing on inequality. By now I am lining up a box of eggs to suck. Suck, suck.
‘Furthermore, there is no natural, spontaneous process to prevent destabilising, inegalitarian forces from prevailing permanently’. This is at the heart of the book. Suck, suck, suck.
Damn! The dog has snaffled my eggs. I will never be able to finish the book now. It’s just wealth distribution says the grin on Maxwell’s face and anyway my sucking technique is no way to manfully eat eggs. What’s a dog got to do to get me to share wealth and take him on a walk in the country park? The real wealth here is our shared enjoyment in a public park reclaimed from the heart of the industrial revolution by the public purse and volunteer labour.
Will I finish Piketty? Probably not the book unless I get a free copy. It’s easier and cheaper for me to access papers. And I’m probably more cynical than Yves in her words of warning on MSM interest in income inequality. What was on offer in the video was naff. Piketty is a safe choice because he is an economist and has no clue (as an economist) on how to produce an egalitarian society. Sure he waves Sooty’s Magic Wand over a lot of institutional figures, but at my current half-baked stage with his collaborative group I’m sensing a lot of repeat sociology (I tend to prefer Richard Wilkinson and the social epidemiologists).
MSM is now a revolting experience in our house. I tend to the violent thought experiment of a cull of our newsrooms and making such a 60% reserved occupation for disabled people, I’d dump the newsies with a week’s average pay and let them use their skills elsewhere in the economy. We might do a follow-up documentary on how they got on. This said, I think we have what mainstream media is wrong, even in our probably righteous detestation. US MSM is often dismissed in this half of USUK as “Fox”. In fact, your print and other media are generally more diverse and better than ours, Even your academics are more “Bolshie” than ours (with apologies to Ian Parker and David Harvey). I struggle to think of a British Yves Smith,
Someone made a great point yesterday on ‘epiphanies’ and the need to do 5 university courses to understand. Imagine some bwankster turd on MSM telling us (again) that he and his cronies deserve their pay and bonuses (something like this occurs in Joe’s material). I use the term ‘bwankster turd’ to illustrate my frustrations. In MSM this would be disallowed by “manners” (a really complex issue central to censorship roles in MSM – add words like, lying, thieving and we run to the censorship of libel law). I’m just being honest and expressing eristic content. Actually, full honesty would involve BBC-banned expletives that political comedy is now replete with (much like Wambaugh’s early cop books). I would want to tell such a banker that I can produce such data in open conversation ‘down the pub’. But I would also want to counter with 100 versions of this paper – http://www.sheffield.ac.uk/polopoly_fs/1.342913!/file/serps_2014002.pdf – which finds no link between skills and higher pay across finance as compared with other industry sectors. The high pay is just rent extraction.
On MSM I’d be ‘guttersniped’ as a crude irrelevance before I could say I was shorthanding 100s of interviews and papers. Yet the same ‘polite audience’ not allowed to hear ‘down the pub, in the street, backstage’ words – here you find apparently inarticulate, non-five-university-courses people who hate the Queen and banksters as ‘rich and idle abhorrences on democracy’ – are allowed to laugh at stuff like ‘tell him to stick his prick up his arse and piss until he’s full’ (‘Babylon’). Data from the street apart (some ordinary people get the ‘epiphanies’ without formal education?), how do the newsroom pixies not challenge such as ‘we bankers are super-skilled’ stories with even sophisticated argument from easily accessible academic papers?
The MSM Joe spots a bit of conversion in looks like a typical upper-middle-class book discussion club. All surveys on perceptions of equality I’ve seen indicate a massive public misunderstanding of reality – as a public we nearly all assume there is vastly more equality then there is. This is data enough for me to believe we need to re-assess MSM and our own attitudes to our inability to change it. Put taxes up on the rich and wages up. What genius came up with that! We need to be deeper into the political mechanisms. Sorry Joe, this isn’t even a start,
MSM is basically the Church of England – we once referred to them as ‘the Tory Party at prayer’. We might do better to ask ‘Did Jesus own the clothes he wore’, with some reservations Wycliffe was just a front man for John O’Gaunt, With or without God we haven’t got the mechanisms of redistribution right in 700 years. We did, though, dissolve the monasteries and could dissolve the banks, Many of us would lose our pensions and stipends. This doesn’t mean we would starve or be homeless (it might give us a better understanding we live off work done in the present not on fantasies of our previous hard work and its current monetary value). Many of the world’s young and unlucky are allowed to be homeless and starve. How come we egalitarians find it so easy to allow that with our economics? How come the rich don’t like the idea of levelling? What;s that? It’s because of their care and concern for the poor …
It has never been more apparent that giving people more money for their work is an unassailable position, a corrollary to the read my lips no new taxes, cut taxes and oh yeah no no tax! We won’t be taking money already earned from one person to transfer to another. Taking it a step further, since the transmission of money comes in at least 2 channels, wages for work and credit from banks, a law can be passed to allow for the creation of money not as credit with debt, but credit without debt. Everyday, $50 can be deposited into every demand account in every savings bank and credit union not corporately titled. A limit of 2 account per person. That is a little over $18k/yr per account. Of course, entrepreneurs and the thrifty will save up for something, others may lay back and order pizza and beer on a daily basis. The tax system can regulate this better than its regulating corporations and inherited wealth. Since banks create money anyway by fractional bank lending, all of it with attendant debt, it’s about time for money to be spent into existence without debt allowing for increased effective demand to create jobs at the local level due to the small amounts being introduced on a daily basis. Much will no doubt trickle up to Apple and Google but a lot will make its way to local bakeries, beer crafters, diners, food trucks, music venues and hardware stores. It’s time to pay ourselves so we can maintain the capital investment in the already built environment in which we live. And we need to introduce money into circulation without debt, and without one person having to work 3 jobs to get our hands on it.
It has never been more apparent that giving people more money for their work is an unassailable position, a corrollary to the read my lips no new taxes, cut taxes and oh yeah no no tax! We won’t be taking money already earned from one person to transfer to another.
Right.
a law can be passed to allow for the creation of money not as credit with debt, but credit without debt.
The Indiana legislature once came close to passing a law that said pi = 3 . That wouldn’t have made pi be equal to 3. A “credit without debt” law is even more absurd. God could not do either. It is like passing a law that says henceforward, 2 will not be equal to 2. “Credit” and “Debt” are two words meaning the same thing.
You should look up the grants that are passed out. For example, Pell Grants can easily pay for a 2 year degree at a local community college where all expenses are paid for, including books, fees and assorted computer ware. Debit cards are issued with the accounts credited with amounts after the semester tuition bill is paid to the college. What I am saying is that since banks can be the point of origination of money creation, only they are doing it by fractional banking, I am proposing that they can continue in their institutional role of money creation by legally crediting demand accounts with a small amount everyday. Since capitalism does not want to create jobs to pay people wages in order for them to come into possession of the currency we need buy the things we need to live, like food and shelter. We can energize the people and resources that are not being utilized due to the lack of money. We can issue all the money we want, the people and resources are ready and waiting to fulfill the role of the market based economy we now have, except the profit taking business refuse to reintroduce the money back into circulation by reinvestment or taxation. We can then simply reintroduce the money ourselves, by law. Money is not an eternal verity like some intangible idea from mathematics, everyday people use money and understand better than you do, and better than pi will ever be of use.
I do not oppose your proposals, but an extremely destructive, extremely misleading manner of speaking. Sure, the government, whatever should just issue money & use it for public purposes, like full employment, like Pell Grants. That does not make the money the government (or a bank) prints “not debt”, or “credit without debt”. That is a contradiction in terms. Gibberish. And “just issuing money” is how it works right now, has always worked.
Money is and always was and must be debt = credit. It is an entirely trivial but extremely important point. That is what MMT expresses, what I try to convey – the everyday understanding of money and credit/debt. Which is correct, logical and scientific – unlike the nonsense that passes for “economics” usually. But which has unfortunately been inculcated into everyone with unbelievably complete success. The less useful in practice, the more complete the success of such unnatural, unintuitive manners of speaking and habits of thought become.
No, there is no iron law where credit = debt. The government can just pass out coupons to people to purchase commodities and require businesses to take them. The idea is that you will spur human creativity by giving it more room to operate. The current system is, increasingly, limiting expression and conviviality. Not that what passed before was wrong–it was right for that particular period of history–but that we need now is a new dispensation for allocating resources. You can still have debt-money if you want but we have to move towards a world that involves sharing, compassion, and moves away from what Riane Eisler calls “dominator culture.”
In Philadelphia, the city owns and operates the distribution of natural gas throughout the entire city to business and residents alike. It is about to be sold for about $1.8bil. As it exists now, it is a non-monetized asset outside of the capitalist world of trade. By selling it to a privately owned utility for the purpose of making a profit, its monetary value is realized, because it leaves the social order of a non capitalist asset, a non profit producing asset. Your problem is not science vs gibberish, your problem is you are socialized to think as a garden variety bourgeoisie shop keeper. That does not make you a bad person, a stupid person or my intellectual or moral inferior. What it makes you is an uptight plastic red white and blue All American Member of the MIddle Class. It’s who you are, its the air you breath. You have been socialized that way. Breaking free is part of the personal as well as the political struggle of building a new world, right next to and within the existing capitalist world. I see the world as capitalists see it and see myself as capitalist see me. But I also see the world and myself on completely different terms, those not dictated to me but those chosen by me. Turn on, tune in and drop out. Then come back and you will see with 2 sets of eyes feeding 2 sets of brains.
$50 a day deposited in demand accounts because we demand money for the work of sustaining the world without pay, for all of the cooking housework of women, for all of the fistfights to beatup bullies and petty criminals when the police were to busy eating donuts, for all of the subways and buses sitting unmonetized, for all of the little leagues organized, all of the scouting trips endured all of the baby sitting and education of children without pay, for all of the human activity of the informal economy of work without thought of profit. We want money. The asset debt is the entire social order we sustain by making babies, taking care of the elderly and maintaining the entire edifice of the built environment. We want credit for all of the work to build this world and all of the work to maintain it in one piece and pass it on to the next generation. We pay the debt back everyday by taking our place and playing our role however few our lines or if more than one person ever gets to hear them. We want money that can simply be printed up or issued by the stroke of a computer command. We are already committed to the work, we just need the pay to keep it the whole thing running.
Banger: No, there is no iron law where credit = debt. The government can just pass out coupons to people to purchase commodities and require businesses to take them.
The law that credit = debt makes iron look like Silly Putty. Yes, the government can pass out coupons. That is what it does NOW. The coupons are called “dollar bills”. The coupons are a credit to the holder and a debt of the government. That is what money is. Money is not “an accounting entry”. Money is a relation between the money holder and the money issuer. The holder is the creditor, the issuer is the debtor. The relation called money is represented on the accounts of both the issuer and the holder by (opposite) accounting entries.
When used wisely, money/credit/debt is something that enhances sharing and all that groovy stuff. The division of labor is logically impossible without credit. The problem is that people think of credit/debt in the moral sense – which people understand perfectly, practically from birth- “he did something nice for me, therefore I owe him” “I will repay the debt by doing something nice for him.” – as something other than, completely unrelated to the credit, debt of banking and finance and money and governments – when they are exactly the same!
I think you & Paul may think I am saying the government must sell “bonds” =”debt” to issue money, or that bank deposit money has to be created by banks from bank loans, and that the first thing is “money” while the second is “debt”. I am not. Governments can just “pass out coupons”: I am saying that all of these things – all these relations are credit=debt by dictionary definition and common usage.
@Calgacus Money is a relation between the money holder and the money issuer. The holder is the creditor, the issuer is the debtor. The relation called money is represented on the accounts of both the issuer and the holder by (opposite) accounting entries.
Cal, Banger is correct. A USG coin is any party’s asset and no party’s debt. An extended discussion, with financial statements from the Reserve Banks and the US Government as primary evidence, is here:
monetaryrealism.com/negative-money/#comment-99507
Some of us trade in patronizing, reiterative assertions, Cal. And some of us trade in evidence. Please show us what you have as (opposite) accounting entries for coins, and I’ll rejoin tomorrow.
See the Indiana legislature discussion above, EconCCX. This exact point is in Mitchell-Innes – the best explainer / deprogrammer. Abba Lerner, Randall Wray, Geoffrey Gardiner and Geoffrey Ingham are tied for #2. I agree I am repetitive. Because crazy pointless complications of incredibly simple and easy, natural things are everywhere. Do you really think that this MMT / intuitive way of speaking (liability = debt = obligation = promise = credit viewed from opp perspective) is not consistent, not simpler and does not describe the real world?
Why care what a legislature or law says or thinks or purports to do? What matters is what they actually do or can do.The US Congress, the Indiana legislature does not have powers to do the impossible, to do what I said God could not, and issue money / coins which are not credits / debts, to make pi equal 3, by the ordinary , dictionary usage of those words. By the meaning of accounting, a much more (historically) important (to the rise of science), and philosophical discipline that usually thought.
Whether a government (calculates pi), records the accounting theoretically correctly, is also not important, as long as they (draw round circles) honor the notes, coins they issue – thereby paying the debt to the holder they represent. Note I said money is not an accounting entry above; I was being more precise than even academic MMTers usually are. And thereby anticipated an objection I had no idea you would make. Of course if you do your accounting the correct, natural and easy way (e.g. accounting cash, coins etc as forms of credit/debt) you will fully and faithfully represent money, and there is no harm done.
Paul Tioxon:
The problem is that I am using the words “credit” “debt” “money” in the groovy, MMT, traditional, institutionalist, New Deal, Keynesian, dictionary, “Breaking free”, “Turn on, tune in and drop out”, ordinary people meaning.
Unfortunately, the power of the forces of darkness, the Blue Meanies, neoliberal, neoclassical, marginalist, Milton Friedman, dominator culture, capitalist “thought” is so enormous that intelligent people like Paul Tioxon and Banger can repeat neoliberal confusions and honestly believe that people who are using the words consistently, thinking in the true, ancient, universal, hippieish, groovy and ordinary way are being “bourgeois”, and that the neoliberal confusions are groovy ( & MMT?).
The whole world has been through all this already. MMT is nothing but the “New Economics” of the 1940s. With some advance in knowledge, with some retreat in clear exposition. :-) The problem is that enough people went back to using ordinary words in the weird, Satan-worshipping capitalist way and only Abba Lerner understood things well enough, plainly enough, as simply as it really is, to notice and say this (e.g. that James Buchanan was speaking Martian) – and that wasn’t enough. Academic economics and much worse, common understanding went insane.
We want credit for all of the work to build this world and all of the work to maintain it in one piece and pass it on to the next generation. We pay the debt back everyday by taking our place and playing our role however few our lines or if more than one person ever gets to hear them. We want money that can simply be printed up or issued by the stroke of a computer command. We are already committed to the work, we just need the pay to keep it the whole thing running.
Well said! But just printing money up, just keystroking it into existence is the ONLY way it could ever, has ever worked. The only problem is not the sideshow of pretend-different monetary systems – which have always been fundamentally the same – money has always been credit=debt, primarily state credit/debt – but who gets the damn money, who has a right to it.
Obama is not pushing for a minimum wage increase. His proposal is a gimmick, and he only proposed the increase after he and the Dems gave away their only leverage, MIC spending. It’s amazing how the minimum wage chatter only started after that giveaway.
Obama will let the GOP and red-state Dems “twist his arm” and settle for a minimum wage increase to maybe $8.75/hr or so—which is next to nothing, and the barkers at MSNBC will praise Obama for getting crumbs.
The scam: “Now that we have raised the minimum wage and solved our hard working youth’s problem, it’s time to get serious, really really really serious, about saving Social Security and Medicare. by recognizing that old folks shouldn’t be hogging all the resources.”
I don’t think there is a scam as much as they are throwing what they can at the wall. Immigration scams haven’t caught on because Hispanics have non democratic platforms who pay attention, and only racists care about border issues outside of that.
Not a single Democrat ever expected Obama and aca to be unpopular. Mark Warner was just polled at 46%. A do nothing, “radical centrist”, has plummeted in popularity despite always being a pro corporate rat, and the horror stories of ACA haven’t begun. Unlike Harry Reid, Warner isn’t running against a complete lunatic. Gillespie, the likely gop candidate, is capable of not saying what he really thinks. Without the government shutdown or if the ACA website fiasco started sooner, the governor of Virginia would be the tea baggers dream.
I think Team D is vaguely aware they are having problems and are searching for promises which might get them support.
There won’t any change. This is an election tool, nothing else. They want 10.10 for the same reason Herman Cain wanted 999. That increase you propose would help in many low income states where big box stores dominate. In higher income areas, the proposal is meaningless. This is primarily meant for the NPR liberals who think the NYTs is respectable news outlet.
We haven’t seen any proposals for waiters which were ignored in the last increase under dubya.
The other issue is the House take up anything unless they have to, and the Senators won’t acknowledge the filibuster is a sham of the Democratic party because it mm I got give credence to the notion they are corporate whores to low information voters who believe a senator wouldn’t lie about a filibuster.
Joe is overly hopeful on this one, even if wonders truly never cease.
Brindle has it. These are TV manufactured, TV grown personalities who are paid to say what they say and paid to say nothing else. They go where the pay is and their so called political POV and TV persona follow. Those with any background at all, such as Mathews or Sharpton have long ago sold any and all rights to personal integrity. You could turn these people inside out and they still wouldn’t be able to explain what the word honesty stood for to save their lives.
As to the network itself, it is indeed nothing but a mouthpiece for the Democratic party. Yves’s point of “covering up policy failures” for explaining the introduction of inequality and some of the related buzz words on the MSNBC airwaves is more than plausible given their history. That and the probability that they are seeing the beginning of a movement (of awareness) and are trying to get out in front of it before the discrepancy between reality and what they broadcast reveals them as too much of a caricaturization, too much the grotesque laughing stock like Fox. In spite of any such efforts, however, MSNBC remains as absurdly locked onto the track of the establishment talking points as Baghdad Bob or Tokyo Rose ever were, Democratic flavor – of course.
All this little turbulence means is that we are getting closer to some elections and you can pretty much set your watch by it.
Picketty ignores that the taxation (including regulation) he considers politically impossible was also considered politically impossible before the Great Depression, and that we need more (free press, international tax treaties, global warming efforts, to put the representative back into our democracy, short publicly funded campaigns, labor and voting rights). At least Dean Baker says that even if we can’t yet get fiscal policy to reverse shock doctrine yet, fixing the trade deficit can get us started toward full employment raising wages, along with raising minimum wage..
But I agree that MSNBC is effectively doing little more than helping Democrats come up with a platform for 2014 when they talk about inequality.
Are any of the 1%, which includes Democrats in DC or doing MSNBC, proposing more than $10.10 min wage and unemployment extension and actually debating/proposing full employment policies, transaction taxes, finishing Dodd-Frank, the return on infrastructure investment, tax reform (and the proposals of the progressive caucus’s ‘Better Off Budget’)? Are they comparing, contrasting, and evaluating against Republican proposals?
I think Yves is actually not pessimistic enough, to say that inequality hand waving by Democrats is just to distract from their own neo-liberal policies. I would blame the news media equally or more. Until there is some avenue to educate voters on what policies we could be demanding, that would help everyone, it’ll get worse before better, and Firestone is wishful thinking.
Of course, just as the news media decided it had to bring down Obama’s favorables after Nov. 2012, if just to keep a profitable horse race, threats to making America safe for oligarchs will eventually shake things up. Will we feel as hopeless as most Mexicans or are things getting so bad as to be unpredictable?
Inequality is a perfect issue for Democrats as a vote-getter (fire-up the base!) but it is hypocritical if they don’t also push for real campaign finance reform.
Obama (following the Pope’s lead) has already made inequality an issue but his faux ‘solution’ is merely an attempt to head-off real reform. What he offers is essentially the neolib self-licking ice cream cone where the answer to inequality is more inequality. Because exceptionalism! Because Jobs! Because Obama!
Hillary and the Dems are being pulled down by the wake of Obama’s sinking ship. They need to turn populist for the mid-terms and the 2016 elections. Like Obama, they are unlikely to deliver (bait and switch – the dumbass ‘base’ falls for it every time).
The dems aren’t trying to make inequality an issue. It already is. The Dems need activists to get poor people to the polls. Ad buys can only get you so far. In 2012, voting rights groups won the election, but they do nothing in federal cycles. The Democrats desperately need people such as myself to bail them out because the obots only care about Obama and have moved onto their next crush. The Democrats are trying to convince the former activist types that they care because they think we are stupid. Team D’s real prob lemme is they are too stupid to recognize people aren’t impressed and want more than empty promises.
Retiring Retiring congressman Jim Moran is making it his cause to raise congressional salaries because 174,000 isn’t c enough for a dc lifestyle. Team D is at risk of being run out of town, and a respected member of team D wants to raise congressional salaries.
Inequality is a great issue, but the Democrats aren’t smart enough to recognize t hey have a credibility problem or make a message which will get people excited. 42% is the president’s ceiling. He can do nothing to rise above that.
A few months ago Obama gave a speech about income inequality. He went to a poor neighborhood in D.C, I think.
That’s a give away that was not very serious. If Obama was serious about doing something about income inequality he would have gone to Wall St and told the owners of America that things are going to change—of course he would never do that because things are mostly OK by him.
The inequality spiel by the Dems is strictly for motivating the base.
The word ‘inequality’ is not sufficient to describe what we now have. A better term would be:
This term better describes the social and economic atmosphere.
Under capitalism, ‘inequality’ is a given – meant to be an incentive for an individual’s contribution. What we have is advanced crony capitalism and a culture that has been conditioned to support it.
Yeah, I’m aware that I’m not in love with this “(economic) inequality” framing, but I’ve avoided thinking about it too much. Maybe I’ll decide to think about it.
From Yves’ preface: ” they had better not go Huey Long on them”.
This implies that that would be a good thing. I don’t believe I’ve ever seen an objective account of Huey Long – can someone recommend one? It’s unclear whether he was a genuine populist or a budding fascist – and it’s possible he was both.
His assassination raises some questions, too. It’s hardly the only one.
Whether you like Long or not, he was a very effective force on the left. A pretty strong case can be made that he was part of the reason many of the New Deals were passed.
Of course, the blackout is ending. It is 2014 and midterm congressional elections are this year. The blackout is ending because the democrats must pander to their $tup!d base in order to gather support and votes. As usual, that base will rally around and vote for the democrats this year and, then, complain again next year about how they are being sold out by the same democrats they helped elect to office.
After the election and regardless of the results of the election, the blackout will return in 2015 when both democrats and republicans return to their usual work of selling out their constituents to the richest one-half percent who paid for the election campaigns. The blackout is nothing but campaign rhetoric for the media and for voters as the democrats try to differentiate themselves from the republicans (in words but not actions).
At some point, we have to ask when we stop listening to economists like Galbraith and Stiglitz who continue to look to the very system which promotes the looting of us to ameliorate (but apparently not stop) that looting.
MSNBC is unwatchable. Used car salesmen trying to unload a car yard full of obvious broken down klunkers have more credibility than its presenters. They are smug, annoying, hamfistedly hypocritical, and vacuous.
As for tax proposals, here are some:
1. A 50% tax rate for incomes above $300,000 going to 75% at $1 million.
2. A marginal 90% tax rate for income above $1 million. All earnings here and abroad from whatever source to be declared and taxed as income. Any wealth and/or income undeclared to be confiscated and subject to additional financial and criminal penalties.
3. A yearly 10% asset tax on household wealth above $20 million.
4. Current charitable foundations set up by families (think Gates, Buffet, etc.) to also be taxed at this same rate. Ban family foundations in the future.
5. A 50% tax on gross corporate profits. All profits and assets here and abroad to be declared or subject to confiscation with additional financial and criminal penalties for both the corporations and their chief officers.
6. 100% estate tax on all estates over $3.5 million per individual, $7 million for couples. Eliminate most trusts.
7. No renunciation of citizenship accepted until all tax assessments are paid and any assets in excess of $3.5 million returned to the American people.
8. Any bank which hides or abets in hiding assets from taxes shall lose its charter to do business in the US.
The point is to eliminate both severe wealth and income inequality. If implemented, these proposals would do that, but they will never be enacted or implemented under the current political system.
Nor under the current cultural values. Im with you on these proposals, and Id go further to basically outlaw interest all together. But I just had another wake up call yesterday on a computer hardware forum I frequent as to how entrenched competition and meritocratic myths are in our citizenry. Link – http://hardforum.com/showthread.php?t=1813921
We need a revolution in values, because as it stands at least half of us proles still envy the douchebags at the top. That envy needs to become pity, fortified with righteous anger, for any meaningful systemic change.