By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Originally published at New Economic Perspectives
Bob Rubin and Alan Greenspan convinced the New Democrats, over a quarter-century ago, that the key to economic growth was to out-Republican the Republican Party in the fervency of their embrace of austerity. This began the long war of the New Democrats against the working class that culminated in the loss of their candidate, Hillary Clinton, to Donald Trump. Rubin’s and Greenspan’s support for austerity constitutes economic and political malpractice. Austerity is the enemy of the general economy and the people of the world, but it targets for its greatest harm the working class. As I have explained in earlier columns, Hillary was so devoted to austerity that she made it her major new policy theme in the closing weeks of her campaign – even as every poll warned her that she had enraged the white working class, a principal victim of austerity.
The stranglehold that Rubin and Greenspan’s anti-worker dogmas continue to exert over the Democratic Party’s faux centrists’ policies even after Trump’s election is illustrated by a December 5, 2016 New York Times editorial entitled “How to Help Working People” and Larry Summers’ December 4, 2016 op ed entitled “Trump’s tax plans favour the rich and will hamper economic growth: The proposals would threaten to increase federal debt and interest rates.” Summers is Rubin’s protégé.
Any plan by Democrats to “Help Working People” should begin with the word “jobs.” But the creation of “jobs” funded by the federal government in its critical role of employer of last resort is not even an option when policy is in the grips of austerity fever. New Democrats take the bizarre policy position that it is too expensive to pay people who want to work to do useful work, but fine to pay them extended unemployment insurance because there are not enough private sector jobs to employ them full-time.
The NYT editorial is so mixed up that it never mentions either the primary problem – the devotion to self-destructive austerity of New Democrats and Old Republicans – and never mentions the essential policy that would transform our economy and win the devotion of the working class to whatever party puts the policy in place. That policy is a dedication to permanent full employment by making the federal government the employer of last resort for any American who wants to and is able to work. Instead, the editorial focuses on a number of desirable policies to help workers who are already fully employed. Yes, most Americans who wish to work are employed and we should implement policies that help fully employed working class Americans. But tens of millions of Americans are classified as “underutilized” by the Bureau of Labor Statistics. Many were so discouraged by the job markets that they dropped out of the work force. Worse, Americans in general and the working class in particular no longer believe that they have any meaningful job security – that our jobs could disappear without warning within months. The federal employer of last resort would transform the workplace by restoring job security.
The editorial’s sole emphasis is on increasing the income of fully employed workers. That is a worthy goal that should be pursued in parallel with the paramount goal – jobs and providing the security to all Americans of always being able to find a job if they are willing and able to work. More income for the already fully-employed working class is great, but Americans want to work and working class males are the most vulnerable psychologically to being unable to hold a full-time job or the constant fear introduced by the destruction of job security. When working class males are unable to hold down a steady job the results are horrible for family formation and family success.
Austerity’s Choice
Millions of Democrats are salivating at the prospects of being able (again) to chortle at the hypocrisy of Republicans when it comes to austerity. Yes, Republicans always say they love austerity, but when they are in power in modern times they always rise above their pro-austerity dogma and adopt at least some stimulus. Democrats are eager to attack the hypocrisy and Congressional Democrats are gleefully planning to trap Trump in a welter of demands for “revenue neutral” taxes (code for austerity) and “pay fors” (another code for austerity). The New Democrats are so eager to attack Trump’s “mountains of debt” that they are about to launch a new offensive against the working class in the New Democrats’ long war against the working class via economically and politically illiterate austerity.
And how will the Republicans respond? Enough will bend to Trump that they will likely do a major infrastructure program. Then the Republicans will confront the New Democrats with their own odes to austerity and “pay fors” and demand that the New Democrats make an analog to Sophie’s choice. Austerity demands budget cuts in other fields, so the Republicans will tell the New Democrats to choose which social program they are most desperate to preserve – and consign the other programs to death via austerity. In sum, the New Democrats are about to replay the same disastrous economic and political mistakes that have caused so much harm to Americans, particularly the working class, and gifted the presidency to Trump.
Please read Randy Wray’s primer or his newest book. A government with a sovereign currency such as the United States is not “just like” a household or a corporation or the State of Vermont. A budget surplus or deficit for the U.S. federal government is not a moral issue. A budget “surplus” or “deficit” is not an intrinsically good or a bad thing – it depends on the economic conditions of the real economy. For the U.S., with its unique role as the international currency and large trade deficits, federal budget deficits are typically desirable – and typically occur under both Democrats and Republicans. We do not “burden” our “grandchildren” when we run federal budget deficit in typical circumstances or in response to a Great Recession. We greatly aid our children and grandchildren by rejecting austerity in such circumstances. We would help them far more if we provided a federal job guarantee of last resort.
Summers’ Shout Out for Austerity
Summers’ subtitle warns that Trump’s tax proposals “would threaten to increase federal debt and interest rates.” In other words, Summers is banging the war drums to renew the New Democrats’ long austerity war against the working class. There are two parts to Summers argument. First, Trump’s proposed tax cuts are crafted to help the wealthiest Americans. Second, the tax cuts would increase the budget deficit. Summers’ first argument is mostly fine, indeed, it is understated. (He makes the false claim that President Reagan’s tax cuts did not favor the wealthy and represented a “bipartisan” “reform.”) Trump’s plan is to betray the 99% and rig the system to lock in the power and wealth of the one percent (indeed, the top .0001). Trump remains, as he has been for decades, a crony capitalist.
Summers’ second argument is “Austerity Forever.” He leads with another code phrase for austerity, implying that the proper standard for any tax changes is that they be “revenue-neutral reforms.” That means no net tax cuts. Why? What we know, as even Summers agreed, was that President Obama (who told New Democrats that he was a New Democrat) proposed a stimulus program that he knew (because Summers told him) was far too small and then turned his back on stimulus and then in early 2010 in the State of the Union abandoned stimulus and proposed austerity (the code, provided by the Rubinite Jack Lew, was that the federal government should “pull in its belt” in response to the Great Recession because households were doing so).
The 2009 stimulus, though deeply inadequate, materially increased U.S. growth. The self-destructive switch by January 2010 to supporting austerity greatly extended the recovery time from the Great Recession and weakened job market reovery. The U.S. economy could benefit greatly from stimulus even now, so why should Democrats be insisting that they will fight any net tax cut? Summers’ answer, as always, is the need for austerity. He stresses that Trump’s (net) tax cuts would violate austerity.
It would also mean grave damage to federal budget projections. The envisioned Trump tax cut is about the same size relative to the economy as the 1981 Reagan tax cut. It is worth remembering that Reagan, hardly a fan of reversing course or raising taxes, found it necessary to propose significant tax increases in 1982 and 1984 (the equivalent in today’s economy of $3.5tn over a decade) due to concerns about federal debt.
So, we now have the New Democrats’ lead economist, Summers, telling us we should be in panic mode because Reagan had such a dogmatic belief in austerity that he raised taxes (though, net, Reagan actually cut taxes). Summers is seriously proposing that the Democrats should take their policy advice on austerity from Reagan! He claims that Democrats, in response to the revolt of the white working class, should embrace austerity and renew the New Democrats’ long war against the white working class even though he knows that is terrible economics and politics. Reagan knew next to nothing about macroeconomics. Let me be explicit – both the Old Republicans like Reagan and the New Democrats shared this embrace of austerity’s long war against the working class. Reagan’s embrace of austerity was a key contributor to the stagnation of working class wages and the rise of the plutocrats. This is how out of touch the New Democrats are with the American people – Summers’ sees Reagan as the role model that Democrats should emulate.
Summers goes so far as to claim that stimulus would slow growth.
Today’s budget situation is much more worrisome. The baseline involves much higher levels of debt and deficits. Then the economy was suffering from a deep recession; now it approaches full employment. If extreme tax cuts are legislated in the next months, uncertainty about the federal budget and about further tax adjustments is likely to rise. Finally, I can find no basis in either economic history or logic for Mr Mnuchin’s claim that the proposed reforms would increase the economy’s growth rate from its current 2 per cent rate to the historical 3 to 4 per cent norm. Adult population growth has slowed by nearly a percentage point, the gains generated by more women entering the workforce have been exhausted, and it is far from clear why tax reform will hugely spur productivity growth.
Indeed, because the Trump proposal would redistribute after-tax income towards those most likely to save it, push up long-term interest rates because of debt pressures, increase uncertainty and the advantages of overseas production, it is as likely to retard growth as to accelerate it.
Summers’ second paragraph has some important truth. As with the second President Bush’s tax cuts, Trump’s proposed cuts go so heavily to the plutocrats that they will have less stimulus effect because so much of the cuts will be saved rather than spent. The reduces the stimulus of the proposed tax cuts, it does not eliminate it.
The first paragraph is mostly an opportunity for Summers’ to renew his “secular stagnation” claims that suggest that the U.S., and much of the global economy, will suffer from weak growth under austerity for many decades. If Summers is correct, then stimulus is particularly vital now. But Summers’ primary cause is austerity, so he claims that we should accept weak growth and higher unemployment. If Summers were correct about secular stagnation, however, the imperative policy response would be to end the New Democrats and the Old Republicans’ long war of austerity against the working class and ensure that the federal government provided a guarantee that it would serve as the employer of last resort. Summers, of course, claims that our current condition closely approaches “full employment” and we need not worry about the millions of Americans who have dropped out of the labor force or are unemployed or underemployed. At the insipid growth rates he believes will become the norm under austerity, the unemployment rates would grow substantially.
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A balanced budget is a rigid budget. Being rigid, if you are going in the right direction, gives you backbone, but is insufficiently flexible if you are going in the wrong direction. Free use of fiat is a limp budget. Being limp, if you need to change direction, facilitates changes in policy, but if too flexible, your policy will lack backbone, be too easy to change. Knee jerk strategy is no substitute for intelligence. Do what has to be done, however it has to be done, if it is in the common interest.
What?
What? == proud stupidity, which is always tactical stupidity. People bragging about being clueless are being taunting not honest.
A simple but interesting number would be the number of persons without college degrees who are now in need of a job. A related question would be what and how many private sector jobs for this group could be created on the short term to provide a reasonable income. The resulting difference should be revealing and those arguing for austerity in all likelihood have no viable plan for the unemployed. If funds are needed to provide a modicum of support for those with needs, how will those funds be obtained in any austerity budget?
Nice to again see the phrase ’employer of last resort’ after wondering for some years about what had happened to it.
to be fair, they do have a plan, it’s called “go die”…
Exactly, Remember it is cheaper to bring in Educated people from overseas than educate or even train people here. And the single payer plan so far is for people to die earlier because they still cannot afford HealthCare and a HOME….
Of course, there are many college-educated and laid off people in this country who would disagree with that comment, but wish to elaborate, or you could read:
Sold Out, by Michelle Malkin
and
Outsourcing America, by Ron Hira
and
Surplus American, by Charles Derber
It is a good plan simple to the point!
By the time I was 40 I deserved a degree. That the Academic Institutions are now all in on the scam for their own pursuit of greater power, means uncooperative departments of the institutions who may well love independent studies, in theory, but will charge and run one in circles all the same.
The certifications for Aviation Jobs are left. Pass and that is it.
Austerity is code for “If you aren’t actively contributing toward the profit margin of a major corporation then you are a liability and should live in a shack by the railroad tracks”.
The trouble is that those people vote. At least for now.
51% of them neglected to in the recent presidential election – – – add that 51% to the 7% that voted Green, and the win would have been substantial!
7% voted Green? Don’t you mean 1% of the voters or 0.45% of the population?
A dirty little secret of economics is that it has little clue as to what causes growth. Sure, you have to get the basics right — rule of law; stable currency. But what then? It’s hard to forecast GDP even a quarter ahead, much less years ahead.
Macroeconomic history suggests that secular stagnation is a product of: (1) value-subtraction expenditures, such as the cost of empire; leading to (2) inadequate domestic investment; and (3) excessive debt.
Now we have slowing population growth, which a system adapted to perpetual growth does not handle well. Anti-austerity “debt doesn’t matter” theories are an artifact of this bygone time, when endless expansion and inflation would whittle down the debts of previous generations to negligible proportions.
John Mauldin has forecast, plausibly enough, that the federal deficit soars to $1.0 to 1.5 trillion in the next recession, in 2018 or so. This in turn will push US debt-to-GDP to a growth-retarding level of over 100%.
Faced with crushing postwar debt in 1945, Britain let its empire go. One would think the US would do the same. But 70 years of permanent war footing have warped our culture, such that the US empire is regarded not only as normal but nonforfeitable.
Thus the US is more likely to follow the Soviet route of driving living standards down down down, along with the external value of the US dollar. Mainstream economists will be along for the ride, as confronting the military-intelligence complex on its egregious value subtraction not only would get them fired, but also (far worse) banned from social media — our equivalent of Siberia.
“…has little clue as to what causes growth.”
I disagree. It has been true through out history and is just as true today – Small Businesses Create 80% of all Jobs. This is a fact and everyone knows it.
Problem is we are headed in the opposite direction. Government at all levels will bend over backwards to encourage, subsidize, whatever it takes to get a small business killing big box store into the area.
Now that that Amazon has killed off local retail through monopolies without the pressure of having to make money they are now aiming at grocery stores.
It’s true that small businesses create most jobs. But this fact isn’t helpful in forecasting whether the collective rate of growth will accelerate or decelerate.
Even policy measures intended to “help small business” don’t necessarily have the intended effects.
In our fog of unknowing, a one-eyed economist has no advantage over a blind one.
What???
If small businesses create most jobs and small businesses are being attacked from all sides, going bankrupt, closing, not starting up that is a 100% indicator of no future growth. Unless you believe that the jobless recovery makes logical sense.
It is the parasitic sectors of the economy that have grown and are being propped up through intervention. It is economist and their magical thinking that we can grow the economy through Financialization thats the problem.
No small, local businesses no growth!
Jim Haygood explained:
http://delong.typepad.com/kalecki43.pdf
Thanks for the reminder Camelotkidd!
JSN
On the subject of Kaleki which has been inoperative for decades:
https://www.youtube.com/watch?v=4JPm2nPfz7M
Great link! Thanks!
So the Lucas critique is as applicable now about the NAIRU regime now as it was to labor wage gaming in 1974. I don’t quite follow how Kaleki is inoperative.
JSN
You are welcome.
As for my comment on Kaleki I’ll let Blyth explain.
You can skip to the 6:50 mark to hear his views on the subject ,which I also believe to be the case.
https://www.youtube.com/watch?v=o8LAUQwv77Q
JSN
I just realized that “inoperative” was very inarticulate way of putting it. What I was trying to say was that, because Kaleki accurately predicted the the trajectory of Keynesian economics and the political response that has held sway for three plus decades ,to the point of unquestioned orthodoxy, it is little more than an interesting footnote , fait accompli.
Want to second jsn. Great link. I hadn’t heard of Blyth till now, but I think I’d better catch up on what he’s been saying.
“The Hamptons is not a defensible position” is my favorite quote!
I think Mr. Haygood may misunderstand economics entirely: the purpose (to paraphrase Max Lerner) is to explain why a very small percentage own everything, while the majority own next-to-nothing!
I like that summary of what the purpose of economics should be!
Macroeconomic history suggests where work is both taxed and made insecure, and un-earned financial rents are subsidized, financiers learn to suppress wages and loan them back to workers perpetuating a cycle of increasing debt and wealth concentration. As a policy, it always works!
Similarly wherever economic power is regulated to ensure the reward for labor is equal to that for capital, middle classes are created and become robust and healthy. It worked here, it worked in Europe under Marshall, hell it even worked in Asia under MacArthur. The last New Deal president, tricky dicky, even created the EPA to try to price in the externalities, an effort that could have saved us from our current climate predicament except that money concentrations were deployed to subvert first it and then the rest of the equitable economy that was the aim of the New Deal.
Growth is a different issue from distribution. At present our monetarily obsessed system is near the worst of all possible worlds: growth is required because the powerful/rich are consuming everything that’s not tied down or defended with guns. For everyone else to survive, “growth” is necessary: so long as money is allowed to concentrate in dormant pools, this will continue to be the case.
I agree with so much of what you said. I found it most interesting that Germany integrated East Germany so seamlessly and it would have been the equivalent of the US integrating Mexico. You have to remember that Germany has Corporate Representation by EMPLOYEES and more regulation than we have, but MORE entrepreneurship BECAUSE THE REGULATIONS were not written by the OLIGARCHS….. and they have unions….
I believe that at least 50% of the socalled growth in the last 40 years is due to gutting the employee compensation and the other 50% is due to SUBSIDIES per David Kay Johnsons trilogy on tax fraud and abuse… All the time the employees pay more for healthcare, have lost sick time and healthcare benefits due to deductibles, copays, coinsurance and worse information about network providers…. and 401ks have replaced pensions for the little guys….
And Germany has the largest middle class by percentage, while the US rates at #27 or worse (old number) – – – and that the class of working poor is much larger than America’s middle class today!
in 2013, 24,4% of the German workforce earned less than 9.30 € per hour.
http://www.lohn-info.de/niedriglohn.html
Fundamentally economic growth rides on cheap energy: When “net energy” is high, large investments are possible. When it’s not so high, then the economy grows slowly, stagnates, or even contracts. So the current global economic stagnation, despite technological advances, is no mystery to me. And, of course, if the net energy is not spent wisely the resulting “growth” will have little long term benefit, e.g., it could be wasted on imperialistic wars or on luxuries for the rich.
Yes, the current model burns carbon to keep people unemployed. It’s suicidally insane. Plenty of useful things need doing and we have the technology and manpower to do them, we just lack the political will to overcome the oligarchical indoctrination into “markets” as a fundamental organizing mechanism for human activity.
Markets are great for a great many things, there are other and more important things that they’re terrible for. At present they’re burning up the biosphere while starving and desiccating a growing slice of the living world. We claim to be the rational animal but apparently can’t overcome our collective impulse to consume any better than bacteria in a petri dish.
So long as money is accepted as the desired outcome of human activity, we’ll keep trashing the place so that those who want and control the winnings can enjoy their perch on the topmast of the sinking ship.
Jim Haygood,
You lead your short list of basics with “rule of law.”
It is my opinion through observation, research, and anecdote, that we no longer enjoy the rule of law.
Our criminal courts are so dysfunctional that not only does Lady Justice rarely make an appearance, she usually isn’t even invited. Plea agreements predominate to such a large degree that I think most involved on the prosecution side no longer know what the rules are, or what actually composes due process.
Our civil courts are … as bad, or worse. Civil litigation is often used as a weapon, and victory is practically assured to the party with more resources. The bias/prejudice of the presiding judge has more influence than should be permitted. Two cases with identical facts, presented to two judges in the same jurisdiction (operating under the same rules), can result in radically different outcome.
I’ve long thought that without judicial equality no equality is possible.
We have known for a while. Kalecki’s Profit Equation (wikipedia has a good walk through) shows us that profits are proportional to past investments. Which is why stock buybacks are toxic. Also, Reagan dropping the top tax rate from 70% to 30%, which incentivises firms to inflate top wages now that it wasn’t going straight to uncle sam and balance the books by paying the bottom less and reinvest less, may have been the stupidest thing the US government has ever done.
Stupid is as stupid does. After the next tax cut for the rich, it won’t be that long until we get our first trillionaires. Getting rid of estate tax should help too.
One may wonder what one would do with a trillion dollars, but you may want to purchase, say, the Supreme Court, IRS or the even the Pentagon, if you could get together a group of peers to put together an offer that Uncle Sam can’t refuse. Lobbyists and political contributions are cheaper, but you get total control if you buy the whole thing outright!
. . . it won’t be that long until we get our first trillionaires.
The Waltons only need a ten bagger, and then we have a trillionaire family. Could happen next week with the right stawks.
217 Nimitz class aircraft carriers = $1,000,000,000,000
Spending doesn’t have to force the government to go into debt, unless I am wrong in how the system works. The Treasury could create money debt free and wouldn’t even need to tax anyone in order to spend. The taxing could be used to lessen inflation, not to get money to pay off debt or for government spending, and it seems that what we are facing is deflation. People are citing Kalecki for good reason. Look at how much money the central banks have thrown into the global economy and there isn’t much inflation here. The problem with government spending now when a recession hits (did the last one ever end?) is that it all goes through the debt based financial system. We bail out the banks, and keep the debt on the books, and we allow them to transfer their financial junk onto tax payers. We could just create money debt free through the Treasury, have a citizens dividend & public works projects, and push for things like public banking. Having everything go through parasitic financial capital is a dead weight collective loss.
The US will go down once the dollar stops becoming the world’s reserve currency. When that happens, what we export will determine what we can import, and we’ve hollowed out industry. Then there’s ecological collapse…
Living standards, scmizistandards. What matters is community,comaraderie, good food and a common goal (like a peace time army). With global warming and insect movement pointing the way to the new Growing Zones in the US and the Kudzu strangling trees everywhere, I say we reforest, orchard, farm the suburbs and the highway strips and bring in goat eatting, sickle welders (Oh, Propornot will have a field day!) to cut away the Kudzu. With protests and education by internet (coursera?) scheduled in.
Love it when you talk straight JH. This info makes sense, and so does Summers in his usual superficial way. But there is no reason to stop at austerity and go no further because you just said it: nobody knows what causes growth. Yes small Bz gets on the bandwagon and boosts growth but what is the thing that stops it or gets it all going? We oughta just do this: Retool the voracious military machine to repair and maintain the environment and plan a coordinated economy top down like a good soviet-capitalist state – making sure small businesses participate in the reconfiguring of human enterprise to make life sustainable. We can use lotsa people in this effort and money should be no object – that money gets in the way of progress like this is laughable considering how in the wind our shit already is. Already our military (navy) has been at work mitigating some of the worst Fukushima pollution but we don’t get told about it. Think of all the other constructive stuff the military could do instead of its “subtractive” crap.
See–Political Aspects of Full Employment,
by Michal Kalecki, for the best explanation of why both parties pursue austerity.
To put it bluntly, why isn’t Summers in jail alongside the bankers after the 2008 Financial Crisis?
It seems like only the “poor little people” ever have to deal with the laws and the rest of us just have to watch them get away with whatever they want.
This makes it a travesty. I wish that theses “economists” and “plutocrats” could experience first hand what their economic policies are doing to people.
This is really where it is at. Most other comments seem to have a startling disconnect with the real world of real people, which I am happy to say Mr. Black retains. He is an Old Democrat, the kind that Franklin Roosevelt bequeathed us, with concern for the lower classes and an “e pluribus unum” mentality. We all have our needs, the basic ones, met, or none of us do.
It was sad to me that Obama embraced Reagan coming into office when he had the huge opportunity to eulogize FDR, a member of his own party. Obama already had the people with him; doing that would have given him a legacy the party could build on for generations to come. I can’t believe he couldn’t see that. I hope that Trump will.
It is waiting for him if he seizes it, but it will have to be with both hands; no half measures will do.
It’s my understanding that FDR had far more Hillary/Obama in him than most realize. It was Huey Long who pushed the progressive agenda and threatened FDR from the left.
But someone better informed can feel free to correct this.
Obama was worthless, except to Republicans. At least he’s in the past tense now as president.
Obama is a New Democrat. He is not of the same party as FDR. He’s a member of the very different ideological faction that took the assets of the party and used them for opposite purposes and policies. He didn’t embrace Reagan “coming into office”; he had already embraced Reagan; he just hid that from the voters he needed to elect him before he could exploit them.
While I think it is possible Trump will be less actively destructive to those in the lower 90% (in part because there’s much less there to steal now), I’m not holding my breath.
AAB,
Honestly, I don’t even think it’s that malevolent and contrived. I think the Democrats are simply that stupid. They’re the grand enablers of the Republican party.
Interesting analysis from Bill McBride. Private sector job growth in Obama’s second term was strong but public sector jobs were lost at an extraordinary rate–the worst showing of any of the last six presidential administrations. Clearly this was a function of gridlock. Lots of great data and food for thought in this post.
http://www.calculatedriskblog.com/2016/12/public-and-private-sector-payroll-jobs.html
Mark Blyth on Austerity: Not common sense but rather a nonsense.
https://www.youtube.com/watch?v=go2bVGi0ReE
Mark Blyth: “Austerity – The History of a Dangerous Idea” |
https://www.youtube.com/watch?v=JQuHSQXxsjM
Oh, myers, thank you for sharing these Mark Blyth links. He is one of the smartest guys is the room. Just discovered him recently. I encourage everyone to watch/listen; the man is brilliant.
I think the biggest enemy of MMT is simply people wanting to maintain the value of their income and assets over the long term.
We cant go bankrupt with MMT, and I don’t think that is the majority’s fear so MMT educators need to stop using that straw argument.
For it”s own success MMT needs to argue consistently and concisely that:
1. The growth of higher spending outweighs the higher tax burden of a higher debt load.
2. The government can spend efficiently enough for #1 to be possible.
Personally I believe #1, but I’m not convinced on #2, if not for general incompetence than for corruption/bias of public officials to the Kleptocracy that may also prove incompetent in the long term.
there is no fear that “we” might go bankrupt (who’s this “we”?). No one cares if Uncle Sam goes bankrupt or not. They care if _their_ assets and savings are not being robbed.
MMT is a tremendous waste of brainpower.
To understand real economics you need to see through the financial trickery. It is due to fiat money that the 0.1% have been able to print unlimited money and give it to themselves. Austerity is a code word to prevent that purchasing power from reaching the others.
This problem can be easily avoided if by law all new money must be sent to taxpayers. This will avoid
– endless power to benefit chosen ones by the Fed.
– provide purchasing power to the taxpayers fairly
– reduce the incentive to QE as money creation is not tied to cushioning assets.
– regulatry corruption
Well, most money isn’t printed or created by central banks/governments, and that’s been the case for centuries. Also, since you were critiquing fiat money, do you keep that in place but give the fiat money to the people, or send everyone a little bit of gold, silver, or whatever else backs the currency? Do we institute a 100% reserve ratio, and completely socialize money creation? The Green Party is for that, as is Herman Daly. I’m not against a citizens dividend, just wondering.
The oligarchs/large corporations do not want full employment. Full employment means that workers can demand higher pay, a bigger slice of the pie, and that would mean paying workers what is now being put strait into the pockets of the 1%. If they truly do ‘own’ our government, how do we get the government to support and work towards full employment or anything else that actually benefits workers?
This might all be perfectly true, but for one inconvenient truth: the Democrats do not want working class votes, or rather, they are unwilling to alienate their donor base by adopting measures that would appeal to the working class. They recognize that they can’t appeal to both constituencies at the same time, and in a political system dominated by money working class votes can’t compete.
But they have a plan. They think they can still hang on to the lion’s share of working class votes by appealing to identity rather than to class. Blacks, Latinos and women will, to their way of thinking, stay loyal to the party because of their racial, ethnic or gender identities rather than because of their class one. The only segment that gets left out in the cold are white working class men -and the irredeemable white working class women who stay loyal to them- and the Democrats have made it plenty clear that they regard that segment as expendable.
I can already see how 2020 is going to play out. The Democrats will tell themselves that (a) we just barely lost last time!, and (b) after four years of President Trump potential party supporters who sat out in 2016 will have realized the error of their ways and will flock to support whatever corporatist shill they decide to run.
Nothing learned, nothing forgotten.
The scariest part though is that this strategy might be perfectly viable.
The political classes will continue to serve whomever pays their bills. It becomes a competition between con men to see who can sell the biggest line of BS to the most voters. Whatever the line they are selling they still serve the donor class. This time around it was the biggest con man of them all, Trump, the flim flam man. He realized, that if you’re going to lie, don’t be afraid to really really lie. The Democrats and old line Republicans were too afraid to offend the donor class, they toned down their BS to appeal to the donor class. Trump had no such compunctions and ran on a basically progressive platform laced with bigotry and authoritarianism which apparently Americans of Euro origin can’t get enough of. Until there is real electoral reform, and I don’t mean getting rid of the electoral college which actually has some merit, but getting rid of the donor class, whether by public financing or public guillotines, there will not be a rational economy that serves everyone and not just the Chosen. I am reminded of Kennedy’s aphorism, “”Those who make peaceful revolution impossible will make violent revolution inevitable.”
The ruling class has become so adept at bamboozling the public, that they have made peaceful revolution, i.e. Senator Sanders, impossible. How many billions of rounds of hollow point bullets did the Department of Homeland Security recently buy? Apparently they believe that they can make both peaceful and violent revolution impossible. Let the first tumbrel be filled with the likes of Larry Summers and Bob Rubin, human filth.
A new jobs program: economic homesteading in an age of global climate change. How should we do this?
A basic jawb guarantee, and the the jawb is to do nothing. If you get caught cheating, your punishment is a jawb where you have to do something.
Raise the top marginal tax rate significantly and collect on corporate taxation. It’s easy.
I am just going to throw this out their as I still see no one talking about it. The 1960s and 70s were heavly regulated. But there was a pholosphy behind those regulations. It was based around the idea that a certain degree of ballance needed to be maintained between small “mom & pop” firms and large corperations. One role of government regulations was to protect small firms from the abuses o large croperations.
For example. If you wanted to open up a new busness, you first had to show regulators that there was sufichent market to open into. There were also regulations which set prices, preventing large firms from undercuting prices in order to run smaller firms out of busness to take over their market share.
Perhaps an argument could be made that they were over-regulated.
But in the wake of deregulation, small operations were systemticly crushed, resulting with what we could call the Walmart busness stratigy.
Any thoughts?
Hi Code Name D,
My big picture view is still that the following factors caused the destruction of our middle class:
1) The top marginal income tax rate plummeted from 90% to 28% and now resides at 39.6%.
2) Labor unions have been completely destroyed.
3) Executives can now make 500-1,000 times the average salary, something unheard of in human history pre-1960 or so. Gains don’t reach labor at all.
4) Corporations have completely eliminated human responsibility from business behavior.
5) Our government is now entirely owned by Wall Street. The SEC is non-existent.
I personally think that any and all crying about debt, fiat, and “economics” is BS beyond these factors. I agree with your point that “less government” has been really bad in critical areas. Still, I see that as a symptom of causes above. Corporate power and lobbying has led to deregulation, not the other way around. Just my view.
I would add: it wasn’t necessary to have a high school or college degree to get a decent job that paid well enough to buy a house, a car, feed ones family and enjoy a small vacation.
Good point, SD.
And the issue there, in my opinion, is at least partially due to ‘occupational licensing’. It’s gone too far. I don’t even think that issue has a lot to do with the rich, just human stupidity and HR departments feeling the need to show value.
Still, I also think it’s a symptom of all company gains going to the top, number 3 on my list.
A lot of people think Sanders would have beaten Trump but I noticed a lot of skepticism when talking to people about Sanders.
They liked a lot of his programs but easily dismissed them as being too expensive and that we couldn’t pay for them.
Sanders himself, although having Kelton as his economic advisor, wasn’t able to go full MMT and still looked to taxes to fund his projects.
I think Trump likes to spend money, and not being pro-war he may be interested in diverting large sums of cash to projects that turn out to be worthwhile and create jobs.
I like his forming alliances with people like Putin, Tulsi Gabbard and Al Gore and think this could assist in useful projects.
I think the main problem is going to be trying to keep crony capitalism at bay.
I don’t know if the ‘fiscal deficits put money into the economy and into people’s hands’ has clicked in Trump’s head or not. For some politicians it seems not to have clicked and for others it has clicked but they use it to enrich the 1%.
If it clicks with Trump and it turns out that he wants to be a true populist that could be a very good thing.
New Democrat is actually code for Republican. New Democrats are what used to be called moderate Republicans. The Republican party purged them from the party so they became “Democrats” to survive. Bill Clinton is a good example. This moved the political sphere for both parties to the right. Until Democrats move left and become what democrats used to be they will be a party struggling to survive. Appointing Schumer as leader of the senate just confirms that it will be the same old losing strategy for the Democrat party. Democrats need to do what republicans did. Get rid of the dead wood through the primary system and nominate progressive democrats. Some of this is happening but on a too small scale.
This claim is 100% provably wrong. You cannot be so stupid to imagine the Republican Party is moving right.
Huge deficits for social spending increases were created under Republican presidents Reagan Bush and W, and Congress. Liberals like to lie and say they raise military spending, but if you look at government spending records you’ll see the proportion of spending increases was much higher for social spending than for military.
Once one party can buy votes with increased social spending, both parties are compelled to engage in Vote-buying handouts and tax cuts.
Polybius first documented the end game for democracies to bribe the voters into abject stupidity and self destruction 2300 years ago
when Bill Black talks about banking regulations, I am with him. When he starts talking about general economy, he starts talking nonsense. Government as an employer of last resort thing has been tried. It is called state socialism. It always leads to the same outcome, the latest one playing itself out in Venezuela. Come on Bill ,you are not dumb, you ought to know better.
Right on.
The incessant claim that austerity is “bad” is not supported by any results. Stimulus has zero success stories, austerity has all the success stories. People who advocate “stimulus” never intend to pay back the loans, I found out by conducting over 5000 debates with liberals. Zero of them would discuss the issue of paying back any money borrowed by the government. Clearly gov’t borrowing was a different fiscal morality, a morality that the gov’t can borrow incessantly with no conscience of ability to repay. A fraud borrower’s mentality – a con man.
Keynesian Beauty Contest – I’ve been posting this for 10 years, zero winners so far.
$50 gift certificate for the winning example:
Keynesian stimulus was used in the
country _____ in the years ______,
during a __ recession/__ depression,
then the economy turned around within 2
years, and then produced ___ years
of lasting growth WITHOUT A WAR after this.
The increased tax revenue was enough to
pay off all the deficit the stimulus
had created within ______ years.
Keynesian stimulus has been used nigh on 27 years here in the US, and the deficits keep rising. Same for all 20 top western democracies: All have massively increased deficits so they are larger per capita than the US over the last 2 decades. None are paying back the increasing debts. The US has printed $2.9 trillion dollars to prop up the failure, Europe has printed $4 trillion.
Austerity is not a conservative “idea”, it’s a forced march, a sane response to failure. Capitalism. Default bad loans. Restore bond rating honesty. Market driven interest rates. Stimulus is a con game – the promoters know it was zero success stories. Offer them money to find them – they can’t, if private loan “success criteria” is the standard for success. Liberals call the “success” of stimulus the lack of collapse in the economy when the borrowed money is spent. Private lenders don’t call a loan a success until the money is repaid. Liberals moral system is inverted from private lenders.
jdl
I think you are not even wrong.
Keynesian stimulus was used in the USA during a depression in 1933 and turned the economy around in 1 or 2 years, and provided for 4 years of growth without wars.
Austerity was applied in almost any post-war country and has only succeeded in increasing deficits, decreased well-being, and more people dying off faster (Greece being the most recent shining example).
There is theory and practice for stimulus, and neither for austerity.
You have restated a lie – you can look at .gov spreadsheets, there was no recovery. That’s why the called it the great depression it never sustainably ended until the war started.
Fill in the form above, and the link to the proof, if you believe you are correct. I am certain you know you are lying about this, and will provide no proof of any recovery which meets the beauty contest criteria above. You’ll leave the $50 reward.
FDR even tried to raise taxes back to normal levels in 1936, and the economy entered a second depression because a sustainable economy had not been created.
Austerity is cutting spending, so you’re lying about that too – you can’t even find a country which cut spending as austerity would demand – slowing down increases in spending is NOT austerity.
The US cut spending in 1921, that was austerity, and the 18 month recovery from a depression is the shortest depression on record. and it lasted for 6 more years.
I’ve made this point to thousands of liberals, and they go on jabbering about it working in complete disregard to .gov spending records.
Liberals love to lie about stimulus working and austerity not working.