Just Print The Money
"People may have different ideas about how to pay for it," Jen Psaki said Tuesday, while elaborating on Joe Biden's multi-trillion dollar plan to give the American economy a facelift.
The plan is actually two proposals, which together comprise what may ultimately be a ~$4 trillion makeover aimed at addressing everything from the country's crumbling infrastructure to chronic underinvestment in research to myriad societal inequities to the tax code.
"We’re open to hearing them. So hopefully pe
If we can “find money” to loan to mega corps who offshore the majority of their workforce overseas and then throw all of their earnings in tax shelters outside of the US, we can “find money” to replace lead pipes. If we can “find money” to give so many tax breaks to Donald Trump that he pays effectively less taxes than a below the poverty line two job worker, we can “find money” to fix bridges”. If we can “find money” to tax break Jeff Bezos, the richest man who ever lived, into ZERO TAXES, we can “find money” for anything.
There are things that have needed taking care of for decades. For decades there have been pieces on PBS and various news networks about “crumbling infrastructure” and the “how are we going to pay for it” crowd has pushed those projects off while Billionaires tax break themselves into more riches and less taxes.
ENOUGH IS ENOUGH
Leaked audio from a recent Koch Bros. superPAC meeting:
“This popular legislation, if enacted, will prevent billionaires from buying elections.”
Inside the Koch-Backed Effort to Block the Largest Election-Reform Bill in Half a Century
https://www.newyorker.com/news/news-desk/inside-the-koch-backed-effort-to-block-the-largest-election-reform-bill-in-half-a-century
Until you are talking about stuff like energy or material return on investment you aren’t even tethered to physical reality so economics is most of the time just philosophy with pictures.
The $5 million dollar issue is interesting though because while it is easy to imagine how bad an idea it is… it is also I think easy to see how good an idea it is if you change the time factor of the impulse or reduce the jerk (change in rate of acceleration). So you take that same check, put it into an annuity for everyone that delivers say $2k per month for your lifetime, pays all your medical expenses and education costs. Now you give the economy time to build capacity to support it and it’s no longer an issue. When you die the remaining money evaporates.
So we can narrow down inflation to the effect of attempting to get an economy to output more than it has capacity for faster than it can build it. So it has nothing at all to do with printing money but with failing to plan and act with long term systems thinking.
I think the real problem with implementing MMT would be the discipline to change government spending behavior in the event inflation does appear. Politicians are very good at spending money when given the chance. They are very bad at reducing spending. Inflation is the constrained variable, and in the absence of the political will to respond appropriately, implementing MMT will eventually lead to an inflation spiral–not because the theory is wrong, but because the theory is right.
MMT isn’t something that’s “implemented”
MMT already is
The government spends first, and taxes/borrows later
No spending is “paid for.” It is planned to be paid for. If the government wants to drone somebody in Pakistan, for example, that’s not free. The drone is expensive and so are the missiles. And the people controlling the drone have to be paid. That unfortunate individual (in Pakistan) will be droned irrespective of whether China decides to boycott a 10Y sale and regardless of whether everybody in America decides to stop paying taxes
If China invades the UK next week, the US will not wait around to “find” money to defend Britain. Rather, we would spend a quadrillion “unsourced” dollars (if that’s how much it took) to drive the PLA out of London. There would be no arguing, no budgeting, no nothing. We’d just ramp up the war machine, spend, and go.
There is no such thing as “paid for” spending.
I understand all of that. Replace “implement” with “embrace” and perhaps it will clarify my point. I’ll rephrase my original argument:
If politicians embraced the tenants of Modern Monetary Theory, they would start spending a lot more money. They would get that money by simply updating the spreadsheet that keeps the Treasury Department dollar balance and not wasting any time with the kabuki theater of selling bonds. They–politicians–would be good at this. What they would not be good at is responding appropriately in the event that inflation begins to go up. Their inability to respond appropriately to the constrained variable would lead to spiraling inflation.
Yeah I’m not trying to be abrasive. It’s just that my MMT readers will email me or DM me on Twitter if I don’t clarify that “implement” point at every opportunity. It’s a sore spot for MMT’ers.
Say what you will about the tenets of Modern Monetary Theory, at least it’s an ethos.
I think the need to pay for at least part of the spending can be a useful fiction. I would argue we need higher marginal tax rates and inheritance taxes (as well as enforcement) to rein in the rising inequality in the US. The vast majority of voters will never understand and have no desire to put in the effort to understand something that is so counter intuitive to them. I also worry that while we seem to have competent people in charge today but who knows what the competence of future administrations will be.
I think we’re past where there is anything useful about the fiction. Most of the utility generated is directed at disproving government as a functional enterprise. It’s never used to forgo a war and it’s regularly used to stop healthcare coverage. Time to dispel the mythology once and for all. People who refuse to understand it weren’t going to be onboard either way.
Taxation can certainly be a punitive or preventative measure against inequality and its consequences. I think Bernie is clear evidence that a major portion of the population is fine with punishing billionaires for being criminals or pricks with their power and influence.
Thanks H, again, for the clarity you continue to provide on MMT and accessory issues. Your take has helped shape my take for some years now. MMT is what it is, it’s just the way things work.
Since I’m receiving SSA benefits, I keep track of the trend to the annual COLA. Here’s what I see, so far.
Month CPI-W Index Mo. Percent chg Trend to COLA Adjusted M-O-M
July-20 252.636 0.20%
August-20 253.597 0.38%
September-20 254.004 0.16%
October-20 254.076 0.03% 0.19% 0.20% 1.27%
November-20 253.826 (0.10%) 0.20% 0.20% 1.27%
December-20 254.081 0.10% 0.23% 0.20% 1.45%
January-21 255.296 0.48% 0.39% 0.40% 1.57%
February-21 256.843 0.60% 0.80% 0.80% 1.95%
So far, the trend is 0.80% (rounded). Oh, that’s some scary inflation right there, ain’t it?
Note that every year the trend to COLA (Jan-May) usually increases, and usually Jun-Aug the trend decreases. Sometimes you’ll see a spike when a hurricane, or hurricanes, drive up the price of gasoline or some other commodity.
Inflation doesn’t have a darn thing to do with how much the government borrows or spends.
H told ya’ll it “has always been a fiction, and a periodically pernicious one.
And he told you that “the notion that funding, for example, college tuition, infrastructure and healthcare is “too expensive” is just a useful diversion when politicians need to “explain” why they can’t pursue an agenda they don’t care for or, perhaps more to the point, agendas they believe might upset the existing order or otherwise irritate special interests.”
… when politicians need to “explain” something is, indeed, a “periodically pernicious one”, indeed.
The American Society of Civil Engineers (ASCE)
FAILURE TO ACT – 2021 REPORT: ECONOMIC IMPACTS OF STATUS QUO INVESTMENT ACROSS INFRASTRUCTURE SYSTEMS
This study by ASCE shows how the persistent failure to invest in our aging infrastructure impacts the economy, including GDP, jobs, personal disposable income, and business sales. The electricity and water/wastewater reports (above) were conducted after this full economic study.
The ASCE finds that with an increased investment of $281 billion a year — $5.48 more per household a day — the U.S. can eliminate this drag on the economy, protecting by 2039:
$10 trillion in GDP, nearly half of the annual U.S. GDP in 2019
More than $23 trillion in total output (primarily business sales)
More than 3 million jobs in 2039, two times the number of Walmart employees in the U.S.
More than $3,300 in a family’s annual disposable income each year from 2020 to 2039, which is over half of the average American’s household’s monthly expenditure of $5,102.
This program will create millions of new jobs
Biden has pledged his program will not increase the national debt a penny
The proposed corporate tax increase to 28% still leaves it where it was when Trump recklessly cut it to 21%
Even before the pandemic, McConnell/Trump increased the debt by more than $4 trillion
Infrastructure programs like this are estimated by Wall St. analysts/economists to produce more than twice their size in economic activity
There is a high cost ($3,300/taxpayer PER YEAR) for NOT fixing infrastructure, according to the American Society of Civil Engineers
https://www.asce.org/failuretoact/
Oh, one last bullet point.
Republicans hate it because Joe Biden