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deficit owls

letsgetitdone's picture

Paul Takes Another Swipe at MMT

[Welcome, Naked Capitalism readers! There's a follow-up post here. --lambert]

The Modern Monetary Theory (MMT) approach to economics must be starting to make some waves, because today, Paul Krugman, followed his earlier attack on it and his debate with Jamie Galbraith and others last summer, with another swing at MMT. The debate last summer was an extensive one at Paul's blog site at the New York Times, and, in addition, there were a number of posts at other sites replying to Paul. The debate was a classic in the developing conflict of views between the “deficit doves” (represented by Paul) and the “deficit owls” (represented by Jamie Galbraith and other MMT writers).

Given the earlier debate, you'd expect that Paul's second try at MMT would reflect a bit of learning on his part, and also a characterization of the views of MMT practitioners that is a little more fair than he provided in his first attempt. This post will analyze Paul's new attack and assess how much he's learned. But first, I'll review the earlier debate. Read below the fold...

letsgetitdone's picture

Trouble Is When We Take the Truth Off the Table

Arianna Huffington is calling attention to “the great budget battle of 2011,” between the President and the Republicans. She correctly points out that whichever of the two sides win, we, the people, lose. She's right, of course, and says further:

Just look at this so-called "debate" we're having. The problem ostensibly on the table is the deficit. But, without any context, the raw deficit number is meaningless. If the country's debt were, say, $50 million, that wouldn't be a big deal. If some average American suddenly found himself $50 million in debt, well, that would be a big deal. And that's because the country's GDP is a lot bigger than the average person's income. So what we're talking about is really the debt-to-GDP ratio.

Yet the debate is concentrated almost entirely on the debt side of the equation and barely at all on ways to increase the GDP side. . . .

Read below the fold...
letsgetitdone's picture

Reality Check Plus

After reviewing the terrible state of our economy and the need to reconstruct it so that people can find work and a vibrant middle class can be rebuilt. Bob Borosage suggests that Congress go back to first principles. he briefly reviews the post- WWII history of employment legislation and says: Read below the fold...

letsgetitdone's picture

Deficit Doves Vs. Deficit Owls at ND20: Part Two

Thread: 

The debates between the deficit doves and the deficit owls continued at New Deal 2.0 (ND20) today. Jeff Madrick, a dove, gives us a post entitled: “Stimulate Now: On Inflation and Deficits.” In this post, I'll evaluate Jeff's views paragraph by paragraph.

Jeff says:

”Some have suggested that if a country nears the point that it must consider default, that is, it can’t generate enough tax revenues to pay debt and meet other minimal commitments, then all it need do is create reserves if it has a sovereign (aka ‘fiat’) currency.”

Maybe Jeff is right that “some have suggested . . .” the above, but I've never seen anyone do that. The economists I read who write about the capabilities of Governments sovereign in their own currencies say that such countries can't be forced to default, that they can only do so voluntarily, and that if they do, it's only because their decision makers don't understand that they can't be forced into default by international markets any external authorities. Read below the fold...

letsgetitdone's picture

Deficit Doves Vs. Deficit Owls at ND20

Thread: 

New Deal 2.0 (ND20) is, well, more New Dealish than other web sites, so instead of the usual conflict between deficit hawks and deficit doves, we might see at, say, the New York Times. Here things are shifted to the left, and we see a debate between the deficit doves and the deficit owls. The doves and owls have posted there for awhile without really engaging one another. But recently, the appointment of Jack Lew as OMB Director and the Statement/petition by Sir Harold Evans called “Stimulus Now,” has ended an uneasy truce between these groups. Paul Davidson, Sir Robert Skidelsky, and Jamie Galbraith replied to the Evans petition with a refusal to sign it and an explanation of the deficit owl position. At about the same time, there was an exchange at Paul Krugman's blog between deficit doves sharing Paul's position on the deficit and deficit owls, who don't agree with the deficit dove prescription of short-term deficits until we get a strong recovery and then a “pivot” to deficit reduction eventually resulting in a surplus when times get really good. The deficit owl prescription is to increase Government spending on programs directed toward the public purpose, until all excess productive capacity in the US economy is used, and then cut back on less valuable spending, or raise taxes as necessary to avoid inflation. Deficit owls also believe that there is no need to worry about deficits as long as Government spending hasn't helped to created enough aggregate demand to use excess productive capacity, and that thereafter, aggregate demand needs to be cut either by reducing spending, raising taxes or both, not in order to reach some arbitrary deficit or surplus number, but rather to achieve the specific goal of avoiding inflation. Now, at ND20, blog posts have begun to appear where deficit doves and owls have been exchanging points of view. Read below the fold...

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