With the end of the Summer break, now comes the return of the debt limit dance. From Treasury Secretary Jacob Lew's letter to John Boehner:
“Congress should act as soon as possible to protect America’s good credit by extending normal borrowing authority well before any risk of default becomes imminent.
“Based on our latest estimates extraordinary measures are projected to be exhausted in the middle of October. At that point, the United States will have reached the limit of its borrowing authority, and Treasury would be left to fund the government with only the cash we have on hand on any given day, The cash balance at that time is currently forecasted to be approximately $50 billion.
“. . . A cash balance of approximately $50 Billion would be insufficient to cover net expenditures for an extended period of time. And, on certain days, net expenditures could exceed such a cash balance.
“. . . Protecting the full faith and credit of the United States is the responsibility of Congress because only Congress can extend the nation’s borrowing authority . . .“
OK. So, only Congress can extend the nation's borrowing authority. But it doesn't follow from that fact that protecting the full faith and credit of the United States is the sole responsibility of Congress. Read more about Jack Lew: Avoiding Default Is Your Responsibility Too
The Five Worst Reasons Why the National Debt Should Matter To You: Part Four, The Three Real Reasons
This is the concluding post in a four part series on the “Top” reasons why the national debt should matter. In Part One, I considered “Fix the Debt's” claim that high levels of debt cause high unemployment and argued that this is a false claim. In Part Two, I followed with a review of the historical record from 1930 to the present and showed that it refutes this claim throughout this period, and that there is not even one Administration where the evidence doesn't contradict “Fix the Debt's” theory. In Part Three I showed that the other four reasons advanced by “Fix the Debt” also had very little going for them. In this part, I'll give reasons why the national debt does matter, and why we should fix it without breaking America, or causing people to suffer. Read more about The Five Worst Reasons Why the National Debt Should Matter To You: Part Four, The Three Real Reasons
The Five Worst Reasons Why the National Debt Should Matter To You: Part Three, The Other Four Worst Reasons
In Part One of this series, I considered “Fix the Debt's” claim that high levels of debt cause high unemployment and gave a few reasons why this is a false claim. Read more about The Five Worst Reasons Why the National Debt Should Matter To You: Part Three, The Other Four Worst Reasons
In Part One, of a critique of the most important of "Fix the Debt's" reasons for "Why the National Debt Should Matter To You," I asserted that high debt levels haven't caused high unemployment in the United States, and that, if anything causation was in the other direction. I didn't want to disturb the flow of the argument there with a relatively lengthy survey of some of the numbers in the historical record since the 1930s. But let's test the idea that High debt causes fewer jobs and lower wages in the United States by looking at that record now. Read more about The Five Worst Reasons Why the National Debt Should Matter To You: Part Two, the Record Since 1930
The Five Worst Reasons Why the National Debt Should Matter To You: Part One, High Debt Levels and Jobs
I came across a post from the “Fix the Debt” campaign last month called “The Top Five Reasons Why the National Debt Should Matter to You.” It's a post full of debt/deficit lies that cry out for correction. That's what I'll provide in this series. Read more about The Five Worst Reasons Why the National Debt Should Matter To You: Part One, High Debt Levels and Jobs
Thank you for being here, for exposing all of the Obamacare clusterfucks, the need for Medicare for All, and for bringing the anger and populism to MMT while fighting the deficit terrorists in the Obama administration. I have also tried to bring the anger and populism to MMT along with advocating for MMT policies and accepting nothing less. We need to get angrier and out of our little academic corner to combat Obama’s neoliberalism and his sycophants. They vomit his deficit terrorist police state apologist BS up onto the veal pen pseudo “progressive” blogosphere daily, and then we are all stuck with the smell. Read more about A Thank You to Lambert and Corrente
The first two Parts in this series began answering the question “what would u have him do?” It arose in the context of a Post at Naked Capitalism by Michael Hudson with some additions by Yves Smith. A commenter, objecting to the criticism of the President's Knox College speech, issued the challenge in connection with the President's promised effort to restore prosperity to the middle class and the poor.
In Part I, “Necessary First Moves,” I offered and described two of these: ending the filibuster, and using High Value Platinum Coin Seigniorage (HVPCS) to fill the Treasury General Account (TGA) with $60 Trillion in reserves. In Part II, I offered a number of proposals aimed at getting to full employment.
These included: a full payroll tax holiday; a guarantee of annual entitlement spending without regard to “trust fund” balances; State revenue sharing grants of roughly $1600 per person; and a Federal Job Guarantee program establishing jobs in local communities at a living wage with full fringe benefits. This third and last part will offer proposals for doing some economic and social justice to begin to right the wrongs the neoliberal globalizing political/economic/ideological system has inflicted on the American middle class and those living in poverty. Here are the proposals. Read more about What Would You Have the President Do? Part III, Doing Some Economic and Social Justice
Responding to a Post at Naked Capitalism by Michael Hudson with some additions by Yves Smith, a commenter, objecting to the criticism of the President's Knox College speech, issued the challenge ”What would u have him do?” in connection with his promised effort to restore prosperity to the middle class and the poor. In this series I'm giving my answer to that question. In Part I, “Necessary First Moves,” I offered and described two of these. Ending the filibuster, and using High Value Platinum Coin Seigniorage (HVPCS) to fill the Treasury General Account (TGA) with $60 Trillion in reserves.
The purpose of the first was to prepare the way for substantive policies by removing the Republican minority's power to tie up legislation. The purpose of the second, was to neutralize austerian fiscal responsibility justifications for subjecting every policy proposal to a deficit neutrality test, and for opposing deficit spending on grounds that it adds to the national debt and imposes heavy risks that the bond markets will demand very high interest rates on US debt. Of course, HVPCS gets rid of both the debt and bond market concerns for good.
Neither of these two policies, however, addresses substantive needs such as creating and maintaining full employment. This post is about the policies for getting to full employment I want the President to propose and try to implement. All of these policies have been previously proposed by MMT economists including Warren Mosler, Randy Wray, Bill Mitchell, Stephanie Kelton, and others. Read more about What Would You Have the President Do? Part II, Getting to Full Employment
There were varying reactions to the President's recent speech at Knox College this week. My reaction was that the speech was deeply dishonest in light of the President's previous policies, actions, and results, and I intended to do a critique, but Michael Hudson and Yves Smith beat me to it. Read more about What Would You Have the President Do? Part I, Necessary First Moves
One of the most important parts of the collective effort to spread the good news about the Modern Money Theory approach to macroeconomics is popularization of MMT views. Read more about The Smart Bunny's Guide to Debt, Deficit and Austerity: A Review
In October 2011 Marc Lavoie, a post-keynesian economist, very friendly to Modern Money Theory (MMT) wrote a paper presenting a friendly critical look at MMT. In his conclusion, Lavoie states that “. . . the neo-chartalist analysis is essentially correct . . . “ affirming his substantial agreement with MMT's analysis of banking operations and fiscal realities in nations with non-convertible fiat currencies, with floating exchange rates and no debts in currencies they do not issue, as well as MMT's analysis of Eurozone viability. But he goes on to say (p. 25):
“There is nothing or very little to be gained in arguing that government can spend by simply crediting a bank account; That government expenditures must precede tax collection; that the creation of high powered money requires government deficits in the long run; that central bank advances can be assimilated to a government expenditure; or that taxes and issues of securities do not finance government expenditures.”
So, Lavoie questions the wisdom of MMT economists and writers making certain counter-intuitive statements he perceives as certainly questionable, perhaps untrue, and also confusing to people, economists and decision makers trying to understand MMT writings. He considers these statements an important barrier to understanding, and he wants this 'baggage' to be discarded because he thinks it hurts MMT and post-keynesian efforts to get important new approaches to economics accepted. Read more about Lavoie's Critical Look at Modern Money Theory: A Reply
It makes a good headline; but it’s dangerous to say “austerity is dead,” just because new budget projections indicate that the deficit has already been cut by $200 Billion more than in previous projections, and because the Reinhart-Rogoff study has been debunked successfully, and, hopefully, irretrievably. Austerity will only be dead when legislators, Presidents, Prime Ministers, Central Bankers, and international lending organizations stop trying to implement it, whether or not they stop because deficits have already been cut.
Of course, those claiming austerity is dead, mean by their claim that deficit cutting efforts have already been successful enough in the United States that future projections in all the mainstream budget plans now show only “moderate” deficits (See the Table which now includes CBO revised budget projections.) These don’t signal a debt crisis, and instead suggest that we can now turn to the really serious economic, health, and environmental challenges we face. Read more about Sorry Folks, Austerity’s Not Dead Yet!
On May 9, 2013, The Republican House passed H.R. 807 the Full Faith and Credit Act. The Bill says in part:
(a) In General- In the event that the debt of the United States Government, as defined in section 3101 of title 31, United States Code, reaches the statutory limit, the Secretary of the Treasury shall, in addition to any other authority provided by law, issue obligations under chapter 31 of title 31, United States Code, to pay with legal tender, and solely for the purpose of paying, the principal and interest on obligations of the United States described in subsection (b) after the date of the enactment of this Act.
(b) Obligations Described- For purposes of this subsection, obligations described in this subsection are obligations which are--
(1) held by the public, or
(2) held by the Old-Age and Survivors Insurance Trust Fund and Disability Insurance Trust Fund.
So, in brief, the Bill provides for the Treasury, even when it is about to reach the debt ceiling, to issue additional debt to pay principal and interest on debt instruments issued to the public including foreign nations, and to pay principal and interest on Social Security (SS) “trust fund bonds” in the course of paying SS recipients. Read more about Mr. President, End Debt Ceiling Hostage-taking for Good!
Make ‘em Prove the Causality before They Cause Any More Suffering: Part Three, Reinhart - Rogoff Retrospective
This post is a more complete statement of my conclusions based on the analysis in Parts One and Two of this series. Read more about Make ‘em Prove the Causality before They Cause Any More Suffering: Part Three, Reinhart - Rogoff Retrospective