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Hey Patriotic Billionaires, You Can Do Better Than the Buffett Rule, Anyway!

letsgetitdone's picture

Well, the legislation implementing “The Buffett Rule” has been voted down in Congress as we all knew it would be. But so what? The Federal Government doesn't really need your money, since it can generate all the money it needs to pay off the national debt and also close any gap between tax revenues and Federal spending that Congress may want to legislate for the foreseeable future.

There's no problem of Federal solvency. There hasn't been since 1971, when the US went off the Gold Standard! The idea that we risk insolvency is just a fantasy of people who won't acknowledge that the US Government is the monopoly supplier of fiat currency to the non-Government sector of the economy, including all of the private sector.

However, even though your money isn't needed by the Government, it is very badly needed to help fund two things, I'll describe below. But, before I do that, since your patriotism has moved you to advocate for higher taxes for yourselves, I hope and expect that you will be motivated to spend the same amount in the two areas of activity where your money is most needed and would be much more effective in bringing the United States back to the state of a healthy democracy, than it would be if you and and other similarly situated patriots paid it to the Government in taxes.

I know you've frequently heard the Republican response to your proposals for higher taxes on very wealthy people like yourselves, namely that if you're so sure that higher taxes on the very wealthy are the right thing to do, then you can always contribute the additional money to the government, if you really want to. Well, my view is that you can equally well, and with much greater effect on restoring fair and effective functioning to our democracy, contribute that money directly to activities that will change key background conditions that are driving our democracy towards plutocracy right now. Here are the two areas of activity.

Countering Economic Myths Standing In the Way of Change By Spreading the Economic Approach Called Modern Monetary Theory (MMT)

The old neo-liberal economic ideology neither explains nor predicts events or outcomes in the economy. Its failures are routine and legion. They are now to be expected, and one of neo-liberalisms greatest failures is its theories about what “fiscal sustainability” and “fiscal responsibility” mean. For neo-liberalism, fiscal sustainability is a budget that is not too deeply in deficit, a public debt-to-GDP ratio that is stable over time, and a gap between the projected revenues and expenditures of the National Government that is closing. Fiscal responsibility, on the other hand is legislating budgets that provide for fiscal sustainability.

These ideas however, assume that National Governments are necessarily constrained by their debt-to-GDP ratios, absolute levels of public debt, whether or not the projected gap between revenues and spending is closing over time, whether or not they can borrow back their own currency from the private sector, and, ultimately by their need to fund spending by either taxing or borrowing to avoid becoming insolvent. These assumptions however, are flat-out wrong when one is talking about a government with its own non-convertible fiat currency, a floating exchange rate, and no debts in a currency it can't create.

That kind of Government isn't limited by its ability to tax or borrow. It has the constitutional and legal authority to create whatever money it needs, and since it does “fiscal sustainability” and “fiscal responsibility” mean different things for that sort of Government than for a Government that's on the gold standard, or is subject to some other currency standard it doesn't control.

”Fiscal sustainability” is the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purposes. “Fiscal responsibility” is fiscal policy intended to achieve public purposes while also maintaining or increasing fiscal sustainability.

So, the REAL Government fiscal responsibility problem for the United States, or other nations with sovereign fiat currency systems is not the problem of everyone “sucking it up” and responsibly accepting austerity. It is not targeting the debt-to-GDP ratio and managing Government spending to try to stabilize it.

Instead, for the US, it is the problem of people facing up to the need to use fiscal policy to stop our out of control economy from ruining the lives of any more Americans. This means that the REAL solution to the REAL fiscal responsibility problem is for Congress and the Executive Branch, to remove fiscal constraints and use the fiscal powers of the Government to fund solutions to the many national problems we face, starting with creating full employment, and a real universal health care system in which no one is shut out, or forced into foreclosure or bankruptcy by medical bills, and then moving on to all the other serious problems we face, but now will not handle because all our mainstream politicians and media voices claim a non-existent fiscal incapacity of the Federal Government.

But, there is no incapacity! We have not run out of money! We have only run out of will and courage and new ideas about economics! We need to get those back, and do what must be done to reclaim the future. But before we can get to that we need to get beyond neo-liberalism and its views on fiscal sustainability and fiscal responsibility because the dominance of these views in our political system means that every discussion about what we can do to solve our problems begins and ends with the question of whether we have the money to implement the solution, and, if not, how are we going to pay for it?

That question and its answer with reference to neo-liberal ideas about fiscal sustainability and fiscal responsibility limits and constrains the policy options we consider. It is a lens through which we see the world of policy options, and it is a lens that forces us to look at the world through a glass darkly. We need to replace that lens because it prevents us from seeing the world as it really is, and acting upon our real options.

So, we need to teach people what fiscal sustainability and responsibility mean for a 21st century America with a sovereign fiat currency. Millions of people are going to have to learn the point of view and basic ideas of the economic approach called Modern Monetary Theory (MMT), and more broadly the more general outlook of Post-Keynesian Economics (PKE). Once they learn these ideas, they then will be a position to give up on the austerity programs being advocated both by the Romney candidacy and the Obama Administration. This is critical because unless we abandon austerity and the neo-liberal view of the need for long-term deficit reduction to achieve their notions of fiscal sustainability/responsibility, we're sure to slip into another recession or depression, that will probably be even deeper than the one we've been slowly recovering from.

Don't believe me? Look at what's happening all over Europe. Governments tightening up, trying for austerity-led growth, and what's the result? Collapsing economies, ruined lives, civil unrest, increasing emigration from nations mired in poverty, and the spectre of threats to democracy. In the US, Canada, Australia, and New Zealand, the economies aren't in a total funk, but the retreat from short-lived fiscal stimulus and increasing emphasis on the fairy story of “fiscal sustainability” is resulting in flat or only very slowly recovering economies, still far away from full employment. In Japan, in spite of continuing near-zero interest rates, passive fiscal policy continues to result in a long-term “balance sheet” recession.

In short, the continuing failure of neo-liberal economic policy all over the globe, is telling us that the world as well as the United States has to change course. That change is to move to post-Keynesian economics and specifically to the MMT approach, because policies based on that approach are most likely to restore full employment and sustainable economies operating at full capacity.

However, a major barrier to the spread of MMT is funding comparable to that available to think tanks, policy advocacy organizations, research institutes, and university centers devoted to the neoliberal approach to economics. But there are only a handful of university research centers heavily involved in MMT work; not a single policy advocacy organization, no think tanks, and no non-university research institutes. There are also very few conferences devoted to spreading the MMT approach.

So, patriotic billionaires, I think this is one area where the money you won't pay in taxes can do much more for the United States than if it had been paid in taxes. Part of it can fund the network of think tanks, policy advocacy organizations, research institutes, and university centers needed to support MMT economics in its challenge to failed neo-liberalism. With that funding we can greatly speed up the process of economic and political paradigm change, and we can avoid the worst of the neo-liberal failures that otherwise are very likely to come over the next decade. Use your patriotism here! Help spread ideas about economics that can give the 99% a share and that can help move the US away from plutocracy and back towards democracy and open society. I know you value democracy and think it has an economic and social justice aspect to it. Otherwise, why would you have supported the idea of higher taxes for yourselves in the first place?

So, here, here, here, here, and here are the web sites that are at the heart of the MMT movement. They're the place to start if you want to learn more about it and to contact people who can help you to plan the MMT network needed to change economic thinking in the United States and around the world.

The MMT support effort may require in the neighborhood of $500 million of support annually because the entrenched neo-liberal paradigm that MMT has to overturn is supported by literally billions of dollars annually. This funding is not trivial. But, along with the second area I'll discuss just below it will change everything in American politics and make us capable of becoming a nation that can solve its problems in a way that serves both freedom and equality of opportunity: the two main values that are the reason for being of our nation.

A Meta-layer for Restoring Democracy and Open Society

(Parts of this section were written with the help of my friend Henk Hadders)

The second area in which the patriotic billionaires can have the most impact in revitalizing democracy in the United States is in funding a meta-layer for restoring democracy and open society in the form of bottom-up e-participation platforms that enable people to self-organize at little or no cost into extremely large voting blocs and political coalitions around political agendas and then to monitor, evaluate, and hold office holders accountable to these agendas, while neutralizing the influence of big money on politics. Efforts to create such platforms and some existing platforms don't envision or provide the functions necessary to create such a meta-layer and some of them also fall short because they're aimed at mobilizing people in the service of specific policies in a top-down fashion.

They don't provide an environment for letting voting blocs self-organize as much as they provide one for supporting a pre-conceived voting bloc being created to support a particular kind of agenda and particular kinds of candidates. Other e-participation platforms may be bottom-up oriented, but the business plans of their creators include anticipated revenue from selling data and information to all comers including groups representing existing political parties and other interests representing oligarchical elites for their use in astro-turfing the users of these platforms for purposes of the oligarchy. To help in understanding what's at issue in creating the right kind of e-participation platform, here's some background on the context and requirements for the kind of platform we need to strengthen and restore American democracy.

The movement toward oligarchy in human-based systems happens because powerful people and institutions don't like continuous bottom-up self-organization, and the appearance of new ideas, ideologies, and power structures that come along with it. So, they intervene to stop or regulate it, and, in doing so, destroy the essence of democracy; the ability of people to always organize anew and disturb and even displace the policies, power structures, elites, and institutions of the past with new ones, more adaptive in solving the problems of the present and future.

That is what is happening in the world and in the United States today. A globalizing corporate and financial multi-national elite has emerged, and in nation after nation is nullifying the will of the majority and placing national governments, even formally democratic ones under its control.

The task of any Complex Adaptive System (CAS), like the United States, is to maintain itself at “the edge of chaos.” This is difficult enough in the face of environmental influences that tend to transition CASs either to chaotic dynamics, or to closed systems inexorably driven toward a sterile mechanical equilibrium. It is even more difficult in the context of continuing political or management interventions that frequently may amplify the strength of tendencies toward one extreme or another by changing the internal environment affecting self-organization. management, leadership, and politics.

In nations that want to maintain open democratic societies, the task is about implementing policies and programs that will support self-organization in distributed knowledge processing and problem-solving by maintaining openness in problem recognition, developing alternative solutions, and error elimination, as well as openness in communicating and diffusing new solutions across the enterprise or across society. Conversely leadership, management, and politics in such systems that undermines self-organization by repressing or otherwise manipulating it, will transition human CASs away from openness and democracy, and towards extreme conflict systems, or authoritarian or totalitarian oligarchies.

But that's exactly what is not happening in the United States today. Instead, we see very well-funded political parties and corporate and financial front groups astro-turfing anger and rage into channels acceptable to the elites doing the funding. It's all “top-down,” with funding coming from an oligarchy. This isn't just what's happening with the tea party. We see it throughout politics with front groups of all kinds trying to mobilize discontent into petitions, protest demonstrations and organizations whose program and policy advocacy is formulated from the top-down with input from elite major contributors.

The elites decide which policy proposals and agendas are beneficial to, or at least okay with, them. The organizations representing their interests are expert at using idealistic slogans and rhetoric to get support for proposals that do very little to solve the problems they call out.

Ever notice the hyperbole in e-mail appeals for contributions coming across your computer screen these days? Ever notice the disconnect between that hyperbole and what you're being asked to support or the contribution you're being asked to make?

We're being told that if x or y or z occurs then the results will be catastrophic. But what we're often being asked to do will either not stop x, or y, or z or some slight variation of these things from occurring, or even if what we're being asked to support would be effective by itself, it would do nothing to solve the underlying problem that is really responsible for the proposals we're seeing and are being asked to support or oppose. It's as though the elite is keeping millions busy with trivia so that they can't organize a comprehensive effort to break the emergent oligarchy that is originating a steady stream of attacks on the public interest.

So, for democratic societies today, including the United States, an important question hangs in the balance. How can we counter tendencies toward oligarchy in our democracies by restoring self-organization and distributed knowledge processing to their proper place in reinforcing open society, democracy, and adaptiveness to environmental and societal change?

Many are looking to web-based e-participation platform innovations to provide an answer to this question. But if e-participation is to serve that purpose, rather than the purpose of elite astro-turfing, and manufacturing consent within a totalitarian oligarchy, then e-participation platforms have to fulfill certain requirements. We won't be able to stop the movement toward oligarchy unless we can create a new institutional framework that allows us to change those aspects of our present situation supporting oligarchy and undermining open society. We need a framework that will operate within the context of existing rules and laws to create changes supporting increased self-organization and distributed knowledge processing shifting our formally democratic CAS back towards an open state.

The new institutional framework must provide a meta-layer of political interaction and networking that places new ecological constraints on the current political system, driving it back towards a condition in which the ability of individuals to both arrive at more accurate constructions of reality, and act on them, through increased self-organization and distributed knowledge processing, is dominant. The meta-layer can be provided by a web-based platform eventually incorporating most of the eligible voters in a political system, and providing capabilities for political organization that can overcome the impact of big money and media on political parties, legislators, legislatures, and politics generally.

Here are the requirements for such a framework. It must provide or enable:

-- social contexts and milieus within which people can organize themselves and others around public policy agendas, comprised of policy options and policy priorities, into voting blocs and electoral coalitions ranging from very small to blocs of millions of voters without needing sizable financial resources from sources external to these social milieus, and without being subject to external mass media communications influenced by financial oligarchs and other special interests;

-- social contexts and milieus offering the possibility of informal group and social network formation around these policy agendas;

-- social contexts and milieus that are transparent and inclusive in providing participants with previously developed data, information, and knowledge, and in allowing them freedom to participate in communicating, organizing, collaborating, critically evaluating, problem solving, and decision making within voting blocs and electoral coalitions;

-- social contexts and milieus in which participants have a modicum of trust in other participants and the highest level of trust in the neutrality of the web-based platform, its administrators and management, in: 1) maintaining the absolute privacy of information about individuals gathered in the context of the platform, except for information necessary to allow participants to contact and communicate with one another to form voting blocs and electoral coalitions and information individuals choose to disclose themselves in accordance with rules existing in voting blocs they choose to join; and 2) supporting all voting blocs wanting to self-organize, grow, and create electoral coalitions with other voting blocs.

-- participants and voting blocs to communicate their policy agendas to candidates for public office and office holders, and also securing either commitments to these agendas, or clear refusals to support them;

-- participants and voting blocs to continuously monitor and rate performance of office holders against agendas and to decide whether to continue to support them after performance ratings are arrived at;

-- tools for voting blocs and electoral coalitions to organize efforts to get both major party and third party candidates and initiatives onto ballots, and to get people to the polls to vote. Simply, it must provide tools to enable voting blocs to do all the things political parties now do to support candidates they want to elect and ballot initiatives they want to pass.

In short, the new institutional framework must provide an alternative network of social and political relations to the contemporary world of political parties, established interest groups, and astro-turfing organizations. This alternative world must embody the key attributes of open society, which means it must provide an informal communications and knowledge network that is very much independent of the mass media, and also capable of enabling creating highly cohesive voting blocs and electoral coalitions of many millions of people, and even new political parties, which can offer decisive support to candidates and office holders in return for their continuing support of voting bloc agendas. The alternative world will then work as a meta-layer constraining the prior political world, and preventing it from concentrating power in oligarchies, by subjecting them and their representatives to continuous self-organization, critical evaluation, new emergent candidates for office independent of the oligarchy, and a cultural background of new knowledge arising from distributed knowledge processing.

Aristotle pointed out that monarchies were subject to transformation to tyrannies, aristocracies to oligarchies, and constitutional governments to democracies (mob rule). He had no way of knowing that such transformations may have something to do with whether the processes of self-organization decay to such a degree that lack of adaptive success in each of these systems drives their transformation to their perverted forms.

He also had no way of envisioning the need for modern constitutional liberal democracies to continuously renew themselves with new distributed ‘wicked’ problem-solving capabilities and accountability mechanisms that can only be produced through openness and self-organization supported through modern IT web-based e-participation platforms. These platforms can provide a meta-layer of new knowledge, cultural norms, and self-organization, for democratic political systems, unconstrained by and not open to, manipulation by emergent globalizing elites.

Without these new e-participation platforms, and the continuous self-organization they will bring, the iron law of oligarchy will continue to dominate representative democracies, and they will travel further along the real road to serfdom. With them, we can create the meta-layer necessary to strengthen self-organization into voting blocs, electoral coalitions, and web-based social networks in such a way, that new policy solutions can be continuously introduced, along with new mechanisms of accountability. That meta-layer can ensure that policy elites either become representative, or are quickly replaced by new officeholders who won't rely on the financial and organizational resources now co-opting self-organizing movements, the heart and soul modern democracies. With it we can repeal the Iron Law!

So, the second area in which funding from patriotic billionaires is needed is in getting the right kind of e-participation platform working as quickly as possible. The amount of funding needed is much less than in the area of supporting the new MMT approach. Rather than $500 million annually to set-up and maintain a powerful network supporting economic paradigm change; e-platforms enabling creating the meta-layer for revitalizing democracy would take about $5 million to get off the ground, if done right, and might well be self-supporting during the second year of their operation.

Funding in this area won't require nearly as much of a commitment from patriotic billionaires as paying higher taxes would. But the returns from this funding would be way out of proportion to the size of the investment, since it could well mean the survival of American democracy itself. A very good place to find out about some of the things going on in e-participation, and some available tools is Demo-net. Another with some interesting perspectives and tools is here. In addition, elsewhere, Henk Hadders and I have discussed an e-participation platform under development -- a case study fulfilling the meta-layer requirements I laid out earlier. The platform is called the Interactive Voter Choice System (IVCS) and is based on a US patent.

(Time for Full Disclosure: I'm part of a community of MMT bloggers attempting to educate people about the MMT approach, but I'm not a regular contributor at any of the cites mentioned above. Nor do I receive any support from any of the universities or MMT research centers I've linked to.

I blog in the e-participation area too, and have written a good deal about IVCS. I'm also part of a team of advisors, all volunteers, helping Nancy Bordier, the inventor of IVCS, to implement the platform. I am not an employee of IVCS however, nor do I sit on the Board of Directors of any entities associated with it.)


I know, I know, there's one big and obvious issue I've yet to consider. Here I am calling for patriotic billionaires who've been advocating for paying higher taxes themselves, to spend a sizable proportion of what they would have been willing to pay, on two things that I think are important: educating people about MMT, and implementing an e-participation web-based platform enabling a meta-layer for revitalizing democracy in the United States and eventually everywhere. But, the truth is, there are so many worthwhile things the patriotic billionaires could do with that money, and may already be planning to do with it. So, what makes me think that these two activities are so important that they are the two out of many worthwhile activities that should be supported at the levels I've suggested?

I think it comes down to a question of leverage. Replacing neo-liberalism with MMT and overturning the iron law of oligarchy by creating a meta-layer for revitalizing democracy are the two most important things we can do to create the America of our dreams.

The first will allow us to formulate fiscal policies that can produce full employment, sustainable growth, and reduce economic inequality. The second will allow people to make their elected representatives accountable to them, rather than the oligarchs, once again. The two together will allow us to fix the long list of problems that still remain unsolved because solving them isn't in the interest of the oligarchy. That's why these two are the critical things we need to get done, and are also the best use of the funds the patriotic billionaires were willing to give up to the tax man. Hopefully, they'll agree with this analysis, and help make an MMT network of organizations, and a meta-layer for strengthening democracy both vibrant realities over the next year.

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mtngun's picture
Submitted by mtngun on

Re: "Millions of people are going to have to learn the point of view and basic ideas of the economic approach called Modern Monetary Theory (MMT), and more broadly the more general outlook of Post-Keynesian Economics (PKE). "

I'm skeptical that millions of people will ever understand economics, especially a counter-intuitive economics model like MMT.

A more realistic goal would be getting many elites to understand MMT. If a significant number of pundits, academics, and think tanks supported MMT, that's probably the best we can hope for.

As for the masses, what you could do is pay off the national debt, either with magic coins or with keystrokes, and by so doing demonstrate that the national debt is meaningless, that we can pay it off at any time we choose, that it merely involves transferring money from a savings account to a checking account.

Good essay. :-)

letsgetitdone's picture
Submitted by letsgetitdone on

Thanks for the comment. But I never give up where the people are concerned, and don't believe that MMT is so hard to comprehend that the basics cannot be taught to millions. In our lifetimes we're seeing System Dynamics being taught to high school students. Compared to that the basics of MMT are easy. Have you ever read Warren Mosler's 7 Deadly Innocent Frauds? I think high school students can understand that, especially if Warren adds some graphics to it.

mtngun's picture
Submitted by mtngun on

Yes, I enjoyed 7DIF. The banking part of it was the furthest thing from intuitive, though. I've been pecking away at MMT for about a year now and am just barely getting comfortable with how Uncle Sam's banking transactions work.

When I first encountered MMT -- which may have been here at Corrente -- it contradicted everything I believed in. I'm pretty open minded and logical, so I kept plugging away at it, but most people will just scoff and walk away from MMT.

When I try to explain to my friends how we don't need to worry about the deficit, they think I'm crazy. They keep reverting to the household analogy, or to how "taxes are the price of democracy," or they point out how Clinton balanced the budget, or how Ike had 90+% tax rates.

It's hard to counter that without getting technical and breaking out charts and equations, at which point non-technical people will tune out. So I just don't see it ever being widely understood.

That said, the US has been in debt for most of its history, and until recently the majority didn't seem to care. The public has been whipped into deficit-phobia due to the Euro-mess, Pete Peterson, and due to the 3 most recent Democratic presidents, who seem to sincerely believe in deficit reduction.

letsgetitdone's picture
Submitted by letsgetitdone on

seem commonsensical to everyone. But 7 DIFs is a pretty good start, and also we don't need to convince everyone. All we really need to do to improve the situation is to get progressives off the deficit reduction idea, so that they're not operating with an inherent conflict between different things they want to do. We want them to go back to the older view in FDR's time that a progressive party ought to "Tax and tax. Spend and spend. Elect and Elect!" We also want them to judge fiscal policy by its effect and not simply with reference to some arithmetic measures that have meaning only in the context of neo-liberalism.

That shouldn't be too hard.