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MMT as opponent of democracy and tool for entrenching inequality

danps's picture
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Cross posted from Pruning Shears.

Disclosure: I am not an economist and have no formal training in the field. What follows are the observations of a layman.

1. Clerics

Last week Naked Capitalism had a post by Randy Wray about Modern Monetary Theory (MMT). The theme was taxes and inequality, and the comment thread on the post is fascinating. Funny enough, while (unbeknownst to me) the debate there was raging over there, I was on Twitter having a much less edifying argument with an MMTer on roughly the same topic. Sublime to the ridiculous, as it were.

Between the two I was able to bring into focus some nagging, amorphous reservations I've long had about MMT. Here is my brief understanding of the concept, and corrections/clarifications from knowledgeable theorists are appreciated:

Taxes do not fund spending, and there may in fact be no connection at all between the two. Their macroeconomic purpose is to, as Wray writes elsewhere, prevent a "huge increase of aggregate demand, [which] could cause inflation." The federal government simply determines what it wishes to spend on, creates the reserves to fund them, and spends away. Taxes are, at best, a distant concern in MMT. They may in fact be entirely irrelevant, as evidenced by the very first two words in Wray's headline: Forget Taxes.

If that sounds like an oligarch's wet dream to you, you're not alone. Dan Kervick thought so too and commented (emph. in orig.) (also - "schmunding" is my new favorite word):

The Federal government cannot simply create all the dollars it wants and spend them without blowing up the currency. It has to tax back at least a substantial portion of what it spends. Now some think it it is really important to jump up and down at this point and say, "That's not funding! It's...it's...schmunding!" But it doesn't matter. From a policy point of view it's the same thing. You can and should convince people to run reasonable deficits. It would be nice to convince people at the same to make sure the Fed holds treasury rates down next to nothing so that Federal deficits aren't a tool for the rich to rent-farm the public treasury. But the free-wheeling, what-me-worry fiat money mania that MMT has allowed itself to be turned into is for the birds. It's both a political and economic dead-end.

There was a time when its seemed like the MMTers were going to get serious about price theory, about defining the inflation constraint in more precise theoretical and mathematical terms, and about coming up with policy rules that turned an airy framework into something policy-makers could really grab hold on. But instead they decided to stop doing research, stop engaging with any other economists and focus everything on marketing and "framing" with slogans and pictures.

And of course it matters what we spend public money on, and not just that we spend it. But if you want to expand the state, expand public education, build a national health care system and build an honest-to-goodness national pension program that works, you're going to have to raise revenues. Every hour spent kneecapping the people who want to go this route by imagining that there is a magical free money path that lets us spend freely, lets all the billionaires keep their money, and that even a hedge fund manager could love, is an hour wasted an an agenda which will never succeed politically and is crackpot policy in any case.


Lambert responds: "I don't recall claiming there was a bottomless money well; and I'm thoroughly familiar with the 'ZOMG!!!! Zimbabwe!!!' argument and how to debunk it." He doesn't do any actual debunking, though. This is one of my reservations about MMT: its adherents seem extraordinarily reluctant to address concerns head on. I've followed MMT casually, and I've seen lots and lots and lots of (virtual) ink spilled about how government can simply fund what it wants, period. MMTers are nothing if not voluminous. But boy howdy does inflation get treated lightly. You've really got to comb through the writing to find it, and it typically is relegated to a brief, oblique reference ("when potential inflation threatens" and such).

In the same comment lambert writes "If you want MMT to propagate widely, its exposition needs to be simplified and popularized." That's exactly why Kervick is right on this one. The way MMTers put the goodies front and center, and barely (if at all) discuss the risks, makes the "bottomless money well" caricature stick. They may discuss it substantively elsewhere, but it is not presented in commentary packaged for public consumption. Again, not addressed head on. If the best response MMTers have to that is "please see [48 page PDF]," then popularization fail. Requiring casual readers to have a near-comprehensive understanding of a topic is called a contradiction.

As for the charge that MMTers have stopped doing research, engaging with other economists and focused everything on marketing, at least one adherent essentially pleads nolo contendere. Joe Firestone describes himself as something of an authority on MMT ("one of the MMT writers, immersed in the MMT community") and had this to say about Warren Mosler's prospects before a theoretical Congressional committee:

Warren would have the support of the other [MMT economists], all academic economists with plenty of publications...Warren's really brilliant; all the others I've named really think so, and his common sense wrap is very plausible. Finally, he's unflappable, and knows his theory very, very well.


Epistemic closure? Check. Absence of an economic model? Check (also, I should hope he knows his own theory very well!) Emphasis on marking? You betcha. What's being described here is not a field of technical expertise but a priesthood.

What emerged in both my Twitter shitfight - where the individual I was arguing with could not get off the "taxes don't fund spending!" talking point even after I had conceded as much four times - and the thread at Naked Capitalism was an almost bristling opposition to discussing tax policy, at least among some MMTers. Lambert ("Obviously, we should tax the rich painfully,") and Joe ("Measures like that worked in this country for a very long time to reduce inequality, and I think they can work again") are in favor of taxing the rich, but they - and MMTers generally - only say so parenthetically. Forget taxes, right? The justification for taxes, if it exists at all, does so outside the ordinary scope of MMT. Taxes, as characterized by MMT's would-be popularizers, exist only as caveats and footnotes.

This makes MMT a tool that can be used for progressive ends or regressive ones. The MMT church of lambert, Firestone et. al. includes a book that calls for taxing the rich. A more fundamentalist denomination would seem to consider that book apocryphal, heretical even. After all, the next step after forgetting taxes is to do away with them entirely. Raise them? Burn the witch!

2. Wizards

There is a kind of magical thinking among MMTers about the possibilities of their new theories, combined with a steely-eyed realism about the shortcomings of the existing system. I'm not quite sure how to reconcile that. For instance, Wray says this about the rich: "Trying to punish them with taxes is a fool's errand." (How does he explain the increase that occurred when the Bush tax cuts expired?) His preferred solution? "Put a thousand of Wall Street's 'finest' behind bars."

So, trying to increase the top marginal rate: A pipe dream. Having a starved and captured regulatory authority assemble the monstrously complex case required to prosecute individual executives - when the Attorney General of the United States has already explicitly said these very people have been granted a free pass - THAT, my friends, is the real-world approach MMT favors.

And what kind of bullshit is this:

Let's raise sin taxes on the rich to reduce the sin of ill-gotten gains.

How high? 100%? Nay, 1000%. Take everything: all their income, all their wealth, the house, the car, the dog. Don't let crime pay.


Calling prosecution a "sin tax" is a transparently phony way to get people to think a fundamentalist MMTer is actually (finally!) proposing a tax. The only problem is that it doesn't, you know, actually tax anyone - most especially not our precious, irreplaceable rich. Nay, not 1000% thanks. How about we start with a marginal income tax of, say, 75% at $5 million? And leave your sin tax in that fabulous world that has a functioning justice system for elites.

More magical thinking. Lambert has no illusions about the problem of translating additional raised revenue into just and equitable spending: "Suppose we raised a trillion new dollars with progressive taxation, and then blew it on a manned space mission that the oligarchs to build Galt's Gulch on Mars?" Yes, that sort of useless outcome is a very real possibility - and given our recent history even a likely one.

Yet look at how Firestone characterizes the MMT alternative: "using by platinum coin seigniorage [PCS] to fill the TGA with enough to pay down the debt and cover deficit spending for a long time to come." How exactly does PCS get used for such a public-spirited purpose when existing (and probable future) spending mechanisms get wrenched by the 1% to their own purposes? Is the novelty of PCS our secret weapon? If so we've only got one shot; it will just be re-appropriated for boondoggles once the powers that be know to expect it. (Um, shouldn't we be taking this discussion offline?)

The liberal denomination of MMT is already getting set up for a "MMT cannot fail but only be failed" outcome. They want it to be used to create just and popular policies, but seem to think MMT will provide some kind of painless shortcut. No, the fight is the same either way, and it will inevitably be ferocious. There's no sneaking it past anyone. As soon as MMT gets traction in Washington, it will be used to slash taxes on the rich, and pre-distribution will go where the current owners wish. At which point, please spare the rest of us your "where's my fucking pony?" outrage.

Instead of going to all the effort of establishing a new economic paradigm, one that is agnostic on taxes and as likely to be hijacked as the existing one, why not have the fight right now on the same ground? Because it's not, as Yves Smith incorrectly notes in her introduction to Wray, about redistribution for redistribution's sake, but redistribution for democracy's sake:

Scandalous as it may sound to the ears of Republicans schooled in Reaganomics, one critical measure of the health of a modern democracy is its ability to legitimately extract taxes from its own elites. The most dysfunctional societies in the developing world are those whose elites succeed either in legally exempting themselves from taxation, or in taking advantage of lax enforcement to evade them, thereby shifting the burden of public expenditure onto the rest of society.


(Fukuyama's piece is a bit, shall we say, heterodox. For as resonant as I find the preceding quote, there are some other items that are a bit eye-opening. For example, on the newly installed Obama White House: "Administration principals thought they had a mandate to move the country sharply to the Left...But as it turned out, Obama was not riding a tide of left-wing populism. While the Democratic majorities in Congress succeeded in moving this ambitious legislative agenda forward, the results fell far short of expectations." That's not quite the 2009 I remember!)

Taxing the rich is important because it measures our health as a democracy. It's not something to put, as Firestone would, at the end of several "staging initiatives.". Or rather, maybe that's an acceptable sequence from an MMT perspective but it's completely unacceptable from a democratic one. Demonstrating the ability to once again extract wealth from elites needs to be one of our highest priorities, not an afterthought. And it needs to be done directly via the income tax.

Wray has literally no proposal for extracting wealth from elites, and once again: the intellectually dishonest "sin tax" he describes ain't it. Firestone approves of taxing the rich; but he also wants to "diminish the importance of conventional corporate forms in our society, and measures limiting total compensation of executives," and to do so by "legislating structures of vigilance" (needz moar popularizing!) But again, that just highlights the problem with MMT: It's being sold as a theory that is inherently just and progressive when it's just a tool. It might liberate those who have suffered the most under the current system. It might be inequitable and exacerbate current problems.

Why re-invent the wheel? The answer to Firestone's structures of vigilance is hinted at by washunate: "We still have the IRS, too. And the SSA. Taxation and social insurance are two of the things that have survived the assault on Constitutional governance and rule of law, comparatively speaking, the best over the past few decades." The link between being able to collect what is owed and the provision of public goods is underappreciated. Both are key for equitable redistribution, but the former is also radically democratic because it extracts wealth from elites. The fact that the both agencies are objects of great antipathy among the wealthy is also instructive.

As for the argument from MMT that the rich will just get new loopholes, give themselves raises, and otherwise subvert any attempt to extract their wealth, the response is simple (though not necessarily easy): Prioritize and fund tax collection. Think of it as democracy insurance, and like with other insurance you get what you pay for. Consider this from Econned (pp. 187-8, emph. added):

But there are much deeper problems with risk management as commonly practiced. The junior risk managers will earn more if they can apply their analytical skills on the product side. Anyone who is thinking about making that change is unlikely to ruffle the feathers of the producers. In addition, risk managers are bound to sound some false alarms. If they escalate every one, they wind up looking like nervous Nellies and lose credibility. And if they win and have exposures cut back on what turns out to be a nonevent, the traders will be sure to broadcast how much they "lost," as in failed to make, thanks to the interference.

That narrow view illustrates a deeper problem: risk management is a form of insurance. Effective insurance is costly. You expect to miss a few calls, quite a few. But the noise back from the "money colonels" and the perceived importance of maximizing current extractable value means that the expense of taking protective measures is deeply resented. The predictable result was that the banks wound up being underinsured.

In fact, the obvious failings of risk management reveal an ugly truth: it is an exercise in form over substance. If a firm was serious about this sort of thing, it would not structure a supposedly crucial activity in such a way that guarantees that it is politically weak and easily suborned. Risk management is often an exercise in providing cover for managers and directors, and thus serves as another tool to hide looting.


If the IRS is viewed as being linked to social insurance, Smith's point is especially true: good insurance costs money. (And the ongoing attacks against the agency are an attempt to make it politically weak.) If you raise taxes on the rich, you damn well better be prepared to purchase a good policy for enforcement. The IRS would need to be expanded, its agents made knowledgeable of loopholes and encouraged to go after tax cheats (instead of its current state), and generally have to become much more robust than it currently is. It would need, in short, to be an object of screaming horror among the rich.

But the point is, the needed mechanism already exists. We don't need a new one, or some comparable thing, we just need to make use of what we've got. And we also need to understand that efforts to address inequality will never be settled. It will always be a fight, and each generation will have to fight it. There is no spell that will vanquish it for all time. MMT is being sold as just that, as a cure-all. It isn't. It's a tool. Why not just use the tools at hand? It will be a struggle no matter what. Why make it harder than it already is?

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Comments

quixote's picture
Submitted by quixote on

Danps, you've summarized some of the same doubts I've had about MMT. The "go read a book" answers don't help either, as you say.

My biggest problem is the what-goes-up-must-come-down feeling. You can't confuse accounting and economics. Liabilities and assets can be shoved around into different categories (within limits), and so long as everything zeroes out, you're good. But potatoes can't turn from dinner into debt without people starving to death.

Free money is definitely something the lower 90% of the economy needs right now, but right now isn't forever. So I went looking for the MMT answer for the opposite situation. Wikipedia has one sentence about MMT's take on that. Politicians are supposed to raise taxes to calm down overheating economies.

I know. I can hear the groans about wikipedia now. If that's wrong, fix it (in a few lucid sentences!).

If that's MMT's Rx, then I could see that working theoretically. In practice? Not going to happen. Back to the drawing board.

A fundamental issue behind all this that you touch on is the attempt to find fairness as an emergent property of an economic system. That's what hasn't worked with capitalism (It was supposed to. Really.) or communism. I don't think it can ever work. Fairness is a moral judgment, not an economic one, and it has to come from outside the economy and regulate it explicitly.

This is where I can make the same bloomer as the MMTers and note that I have an interminable chapter on economics. I try to follow through the implications of limiting money to its proper function and regulating the economy for maximum fairness.

letsgetitdone's picture
Submitted by letsgetitdone on

Free money is definitely something the lower 90% of the economy needs right now, but right now isn't forever. So I went looking for the MMT answer for the opposite situation. Wikipedia has one sentence about MMT's take on that. Politicians are supposed to raise taxes to calm down overheating economies.

It's not free money. MMT advocates deficit spending on goods and services or on the safety net when the context is right. You might say that safety net spending is "free money." But I think it's more about the right of people to have a decent living in retirement in a democracy, after a lifetime of work. See FDR's second bill of rights.

On cooling off the economy one can raise taxes, or cut spending. But MMT would do both in areas that would not negatively impact of full employment and price stability. so it's about targeting too.

quixote's picture
Submitted by quixote on

I was using flippant shorthand by saying "free money." I do know what you mean by it.

Isn't the point though that the progressive values have to come from *outside* the economic system, whether MMT or anything else? I agree with those values. Like danps, I'm not seeing why MMT would necessarily enforce progressive values.

I do take your and lambert's point that understanding the framework is a powerful tool of consciousness raising. But I don't think that's enough either to necessarily enforce progressive values. It would simplify matters a lot if I'm wrong! :)

letsgetitdone's picture
Submitted by letsgetitdone on

We're sensitive about the "free money" epithet because we don't advocate helicopter drops that would cause inflation. Also, the deficit spending we advocate is primarily for goods and services, so it's productive, not just aimless "printing."

Apart from that, I don't know what you mean by "outside the system." The construction of what MMT is, is up for grabs. My view is here, and if you read it, then you'll see that the values are most definitely not outside the system, but are part of MMT proper. Would all MMTers agree with this probably not. Some of them may be of the opinion that they make no value commitments. But reading their writing, you could have fooled me. Public purpose is a value commitment, and MMTers have a lot of consensus about the components of public purpose.

DCblogger's picture
Submitted by DCblogger on

Your objections will have to be met point by point with someone with better chops than I have. My response is that currency has value only because it is taxed. We must pay our taxes, and we must pay them in dollars (unless we live in another country.) So without taxes, currency has no value.

The government must use public funds for public purposes, or it will be inflationary. If production capacity collapses, then you will have inflation becaue you have too few goods. Thus investing in a jobs program is not inflationary because by its nature a jobs program enhances produciton.

Submitted by lambert on

Don't you feel that's a little trivial?

There seems to be a wish, not only from the poster, for a theory or a worldview that will, in itself, prevent wrong-doing. There isn't any other way to interpret this statement:

Yes, that's the good witch version of MMT. Then the bad witch invents the MMT equivalent of the Laffer curve and everything goes to hell.

Than as implying there is, somewhere, theory T let's call it, that will of itself prevent bad people ("witches") from using it.

First, I would like an example of such a Theory T. Are there no bad witches in Keynesianism? Are there no bad witches in Marxism? Are there no bad witches for the Theory of Relativity? (Hiroshima) Are there no bad witches in Christianity, Islam, or Buddhim? If you cannot give me an example of a witch-free Theory T, then you're strawmanning.

Second, I think this request is destructive of democratic impulses and an evasion of responsbility. It's not up to Theory T ot keep the witches away; it's up to us, as democratic practitioners. (There are counter-examples: "Slavery as a positive good" theories have witches built in. However, Dan's not suggesting that MMT is in that class, or he wouldn't admit the post hoc presence, or absence, of witches.)

At bottom, I suggest the impulse to look to Theory T rather than ourselves to keep the witches away is religious in nature, like looking to heaven to save us instead of using real resources here on earth to bring concrete material benefits. Hence the religious projection evident in the poster's subheads, which I have yet to address....)

danps's picture
Submitted by danps on

MMT, again as presented by would-be popularizers, is your Theory T. DCB's "government must use public funds for public purposes" is a great example. Her lay understanding - the impression she got from would-be popularizers - is "MMT therefore public purpose."

No, MMT is as likely to be used to push "free trade" monstrosities as a 21st century New Deal. But liberal MMTers don't present it that way. They bundle the theory with the wish list, and do you know what impression that is likely to leave with lay readers? Theory T.

As to "look to Theory T rather than ourselves to keep the witches away," that was something I tried to get at in the post. Nihil obstet nailed it:

Keynes argued for deficit spending in economic slowdowns, and high taxing in boom times. His arguments were validated in the Great Depression experience, and in the 50 years that followed. Despite this history, the austerian narrative revived because it benefits the elites; does anyone really think that the new theory will convince where 50 years of history didn't?

We have a tool, with a long history of being proved right and being used for public purpose. Why not push as hard as we can using that? Seems a much less daunting task than getting an entirely new economic paradigm accepted and then going through the same damn fight against its demonization. Let's just fight the bad witches over here rather than propose a new theory (that implies bad witches don't exist) and go back to square 1.

paintedjaguar's picture
Submitted by paintedjaguar on

"Why not just use the tools at hand? It will be a struggle no matter what. Why make it harder than it already is?"

Because, as conservatives like to say, Ideas Have Consequences? (A would-be mentor once pushed that book onto me.) Because people are susceptible to Arguments from Authority?

Ever try to argue with a Libertarian? Their whole ideological structure is built upon unquestioned assumptions that don't correlate with the real world. Therefore, trying to directly "address their concerns" about concrete issues is utterly useless, angels on pinheads territory. The only way forward is to force discussion of basic axioms. I've thought for a long time that the same is true of conventional economic thinking. What is the value of "technical expertise" in alchemy or astrology? Isn't it clear by now that economics has been much more a tool to enforce political ideology than anything like an objective discipline? Matt Bruenig has done some great writing on the need to shift the argument from "Redistribution" to "Distribution" period (and therefore Basic Income).

I don't claim any particular knowledge of economics and I'm not up to speed on MMT. However, it's always been readily apparent that most people have no understanding of the actual nature of money. This is just basic map/territory stuff, confusing money with actual wealth, and it's been terribly uselful to the oligarchy's propaganda efforts. Seems likely that's where you have to start, when it comes to re-education. Maybe David Graeber's doorstop needs to be distilled to a pamphlet? As for taxation, people are finally having their noses rubbed in the need to reduce concentrations of wealth for democracy's sake, but there might also be other ways to shift the ground under that issue.

We've all been indoctrinated with the idea that inflation, the supreme bugaboo, is the result of too much money in the hands of consumers. Is that even true or are we again arguing on the basis of false assumptions? Let's say for instance, that inflation is rather the result of excessive profits/rent-taking which leads to speculative bubbles bidding up the price of basic commodities. Now where are we when it comes to arguing policy? Maybe we should be making an argument for supply-side taxation.

I find it hard to follow parts of your post, but you seem to be saying that it's better to continue fighting on ground that our opponents have hand-picked than to divert energy to trying to shift to a better position. Or you're saying that MMT is not a better position, but it's hard to see why not (could be my ignorance of course). It's just a tool? Using the right tool is actually pretty important in most situations.

danps's picture
Submitted by danps on

you seem to be saying that it's better to continue fighting on ground that our opponents have hand-picked than to divert energy to trying to shift to a better position...It's just a tool? Using the right tool is actually pretty important in most situations.

I'm saying we'll never have the commanding heights in the battle, and even the most wildly optimistic possibility for MMT is a one-time sneak attack advantage, which better get absolutely everything right the first time ("you come at the king, you'd best not miss.")

I also tried to get across that MMT is not the best tool inasmuch as it would require an enormous amount of work and political capital to get us to...the fight we can have right now. I say we save ourselves the time and hassle and just take the bastards on right away.

Submitted by lambert on

... and just take the bastards on right away."

First, it's good to know what the post is actually about. I had thought I was supposed to take it seriously as a critique; now I see that we're in "any stick to beat a dog" mode. Good to know.

Second, when the battle is won, your way, and during the battle, we will still need MMT to understand how fiat money is created. Unless you believe that ignorance is a good thing, or unless you plan to return to the gold standard.

danps's picture
Submitted by danps on

as any stick to beat a dog. You've been using that bit of shorthand more and more lately, and while it might allow you (in your own mind, anyway) to neatly dispose of troublesome points, it isn't the rhetorical vorpal sword you seem to think.

And I've never made any secret that I write about this stuff because I care about it, and am sincerely passionate about it. Public policy has an effect on people's lives and I believe it is urgent that we get it right. I thought you felt the same way, but I guess you take a more detached and sanguine view. My bad, sorry about that.

Submitted by lambert on

The poster writes:

And I've never made any secret that I write about this stuff because I care about it, and am sincerely passionate about it. Public policy has an effect on people's lives and I believe it is urgent that we get it right. I thought you felt the same way, but I guess you take a more detached and sanguine view. My bad, sorry about that.

Apparently, the poster feels that I've spent nine (9) years keeping Corrente alive -- a blog that, among other things, is deeply concerned about public policy[1] -- because I'm detached and not passionate. Seems odd to me; I hadn't thought of detachment as such a powerful motivating force. But thanks for the very personal evaluation!

* * *

I've never understood why passion and sincerity, as such, are considered important values. For me, whenever I read an About page that contains the phrase "my passion is," I cringe; it's so obviously a self-marketing device (not to say that the poster is doing that here). And people are sincere about all sorts of stuff. I like to think I'm passionate about the truth, and sincere in pursuing it it, but passion and sincerity in themselves are like the difference between mere speed and velocity; the latter has directon, and the former does not.

As for sanguine... Well, I have to say that's the first time I've ever been accused of cheerful optimism. I do try to think carefully about intellectual and material resources, and try to take considered positions on political issues; that's why advocating major public policy decisions on the basis of "casual" reading is not for me.

That's why I put the 12-Point Platform through several iterations, a discussion the poster participated in, and why I modified it several times in response to feedback, including changes the poster suggested. At least two of those iterations (the "reform") included MMT as a point, which is why I was more than a little surprised to see this post, since it would have been so very useful to have brought up the topic earlier in this midterms season. Perhaps the poster, in their reading, simply missed the point.

NOTE [1] 1276 posts from lambert, 906 from dcblogger including the string "single payer." I can't speak for DCBlogger, but if 1276 posts is the product of a detached attitude toward public policy, one can only imagine what passion would produce!

letsgetitdone's picture
Submitted by letsgetitdone on

but it's a fight which will most likely lead to the roach motel. On the other hand, we can fight for deficit spending programs right now educating people as we go about the reality that we are not running out of money. I think that's a fight we are likely to win because people want to believe they can have a better economy, a better safety net, full employment, and all the rest because we can, after all, afford it!

Submitted by lambert on

MMT provides:

1) an understanding of how money is and can be created, which so far as I can tell (I haven't read the whole thread) dan hasn't had a glove on;

2) an understanding of how concrete material benefits that successful politics demands[1] can be provided without the inflation and austerity bugaboos that our opponents -- our enemies -- will throw in our way. "Ideas have consequences" indeed as you say. So far as I can tell, Dan hasn't laid a glove on the possibility of those benefits either. And he hasn't explained how some other economic toolkit than MMT is going to deliver them. Man, if I'm going to take the bastards on, I want to know what's in it for me.

I want a lot of New Deal-style programs. MMT shows me how to pay for them. It's all really very pragmatic.

[1] For the Bolsheviks, "Peace, land, bread" wasn't a slogan. It was a platform. Not that Russia might not have been better off with a leetle more complexity, but notice the focus on concrete material benefits.

danps's picture
Submitted by danps on

I didn't address #1. MMT's description of that makes sense to me, and I don't have any question about it.

My question is with #2: the presentation I've seen for MMT is not "MMT shows how to pay for New Deal-style programs" but "MMT implies New Deal-style programs."

First, no it doesn't - and as I lay reader I urge MMTers to be extremely careful not to imply as much. Second, Keynesianism shows how to pay for them too (well enough for present circumstances anyway), so why:

A) Spend all the time and effort to get MMT accepted, then
B) Have the entirely separate fight for New Deal-type programs

when we can use Keynesianism to

A) Have the fight for New Deal-type programs.

If one really does care about policymaking for public purpose, I just don't understand why MMT is a necessary prerequisite.

Submitted by lambert on

... then I suppose it doesn't matter what economic toolkit you use. Personally, if I'm going to war, I'd rather go to war with artillery designed with a true understanding of ballistic, rather than artillery designed by Aristotle, who had no notion of gravity. That's why I prefer not to remain ignorant.

I'll address the rest of your comment later; I have other work to do now. To the careful reader, however, my answer will be apparent.

letsgetitdone's picture
Submitted by letsgetitdone on

My question is with #2: the presentation I've seen for MMT is not "MMT shows how to pay for New Deal-style programs" but "MMT implies New Deal-style programs."

First, no it doesn't - and as I lay reader I urge MMTers to be extremely careful not to imply as much. . . .

Whether it does or not depends on how one constructs MMT from its literature. I've put together a reasonable construction including the value gap concerns that MMT economists address in their work. Read this and then tell us it doesn't imply New Deal - style programs.

Second, Keynesianism shows how to pay for them too (well enough for present circumstances anyway),

Actually, no it doesn't. Neo-keynesianism of the kind we see from Paul K. and Brad Delong may tell us how to get out of the long depression; but the advice it prescribes will only get us back into recession in a very few years when we quit running deficits. The reasons why are given here.

so why:

A) Spend all the time and effort to get MMT accepted, then

B) Have the entirely separate fight for New Deal-type programs

Don't spend the time persuading people about MMT. Just advocate for the programs and when you hear we're running out of money tell them there's no debt problem, and we can't run out of money and give them the reasons and then repeat and repeat and repeat. Never, never, again reinforce that we have a debt problem and only accept that we have a deficit problem at full employment.

when we can use Keynesianism to

A) Have the fight for New Deal-type programs.

You can use Keynesianism to argue for the programs, but not justify the continued existence of deficit spending, without which we will shortly fall back into stagnation.

If one really does care about policymaking for public purpose, I just don't understand why MMT is a necessary prerequisite.

Because Keynes tells us to back off deficit spending when the economy recovers, and even run surpluses. That's erroneous and damaging economic advice.

MMT tells us that deficit spending needs to continue for as long as there is a desire to save an appreciable percentage of GDP, and a desire to import more than we export. So, MMT will bring full employment and price stability, while keynesianism will, at most bring us some good times followed by more bad times.

The bottom line is that Keynesian policy won't work for the economy even in the medium run, while, MMT-based policies will work in the long run.

letsgetitdone's picture
Submitted by letsgetitdone on

We've all been indoctrinated with the idea that inflation, the supreme bugaboo, is the result of too much money in the hands of consumers. Is that even true or are we again arguing on the basis of false assumptions? Let's say for instance, that inflation is rather the result of excessive profits/rent-taking which leads to speculative bubbles bidding up the price of basic commodities.

There are a number of causes of inflation too much money in consumer hands is demand pull inflation. There's also supply-push inflation. Asset inflation caused by bubbles and other sources of inflation also. You're also right that policies need to be tailored to the type of inflation that exists. Supply-push inflation needs to met by finding new sources of supply or by using price and wage controls, not by raising interest rates or withdrawing Government support for full employment. See the references on inflation I've given in my long reply below.

Submitted by lambert on

SInce today is the first genuinely sunny warm day, and I had planned to spend most of Memorial Day out in the garden -- and tomorrow it's going to be back to a miserable 60°F and rainy, again -- I may not be able to exhaustively address all of dan's points. However, there are a number of them that I simply can't let stand. Let me say that I'm a blogger on political economy, so I, too, have only a layperson's understanding of MMT. But that's what bloggers do, or often do: Translate well documented and thoroughly grounded academic work into material that can be discussed around the water cooler, if offices have water cooler any more.

Let me begin with some overviews:

Democracy and oligarchy. Leaving aside that that the headline is inflammatory, it's wrong. One can make the argument that we live in an oligarchy, and therefore that any political effort short of overturning the capitalist order through revolution[1] supports the oligarchs, but I don't see dan making that argument. Less trivially, I see MMT concepts and policies as enabling more democracy -- by definition less political power for oligarchs[2] -- and not less, for two reasons:

Democratic control over the money supply. We live in a regime where money is created by fiat today, but it's created by a "public private partnership" between the government, the banks, and that strange amphibious creature, the Fed. (Since Nixon closed the gold window in the 70s, the dollar isn't "backed by" any commodity, including gold.[3]) However, the dull and stupid reality of fiat money is concealed by the complexity of the system whereby fiat money is created, which not coincidentally involves paying the banks interest to "borrow" the money our own government wishes to create, by fiat, in the first place. It's also concealed by the gutter financial press, which perform to neat trick of claiming to abhor what it knows very well is going on, by yammering about "printing money." Of course, money isn't "printed'; it's keystroked into existence at the Fed!

What MMT does is clear away the obfuscation, thereby creating the possibility of democratic control. When Joe advocates for the Platinum Coin, that's exactly what he's doing; an elected President can create fiat money. And it's not that Joe is enamored of coins; it's that there is at least a prima facie and quite strong case that it's perfectly legal. Personally, I think Congress already has the power to create fiat money under Article 1 section 8; but that's because I'm flexible about what "regulate the value thereof means."[4]

The economy is no longer regulated by throwing people out of work. Very crudely put, if "inflation" gets too high, the powers that be deliberately "contract" the economy, thereby throwing people out of work. This is an inhumane, cruel, barbaric policy that involves misery for the working class and leads to suffering of all sorts, including suicides and "domestic violence." [5]

MMT proposes to regulate the economy through the tax structure. If you want the economy to cool off, raise them. If you want to want the economy to heat up, lower them. (Progressivity and "soak the rich" are separate discussions over there.) We saw a little of that in the payroll cuts the Obama administration put in place (with, IIRC, some influence from MMTers there). Typically implemented in grudging and half-hearted way by the administration, the economy did in fact pick up when they did so, since when you give working class people a bit more money in their paycheck, they spend it, as opposed to hoarding it. And then, when the administration raised payroll taxes again, the economy sputtered. (MMT geeks correct me on the preceding, please.) "But Reagan and the Republicans!" I hear you cry. No, he didn't and they don't. "Regulating the economy through the tax structure" is not the same as "tax cuts." That's like saying turning your thermostat up when it's cold, and turning your thermostat down when it's warm is the same thing as turning your thermostat all the way down, full stop. And if you add in the Jobs Guarantee ("a job[5] for everyone who wants one") then the suffering of working people will be greatly reduced.[6]

A permanent end to the austerity narrative. One outcome, alas, would be the permanent disemployment of many members of the political class who are paid to push austerity propaganda; one weeps to think of the employees of the Peterson Institute. Fortunately, the Jobs Guarantee will be there to provide them work and income until they can figure out something to do!

MMT teaches (experts correct me) that the economy overheats or cools based on the deployment of real resources, and not because there is too much money or too little. (Yes, I know that "overheats" and "too much money" are, to an economist, gross oversimplifications. If you don't like them, propose better and equally simple language.) In shorthand, "If you have unemployment, your deficit isn't big enough." (To MMTers, like Keynsians, and unlike the Democratic nomenklatura, who believe in austererity, at least as long as Obama's doing it.) In my own town, if there are water and sewer pipes to be laid, and people who are willing to do that work -- "real resources" -- then there would be no inflationary impact to the Federal government keystroking fiat money into existence to pay for it. If you want New Deal programs, this is how to pay for them.

An ethic of "public purpose." Granted, the notion of "public" is contested, like every thing else, in the political system, but how exactly does that ethic square with explicit proclamation for rule by the rich, as in Silicon Valley, or by supposedly disinterested rule by technocrats, as in the Beltway? I don't think it does, and if it did, you'd see them adopting the rhetoric. In fact, in a market state like our own, the idea is to cut down "public" to as small a space as possible, and sell off everything else. MMT does not do that. Rather than quote chapter and verse, I'll give the result of a search, here.

So, summing up:

1) Democratic control over the money supply

2) No more suffering for working people from unemployment.

3) An end to the austerity narrative, one task item on implementing New Deal-style programs (if that's what you're into).

4) An ethic of "public purpose"

It's very hard to see (1) how these programs support oligarchs, since they hate, fear, and actively work against all of them.

It's also very hard to see why a putative left would fail to support them[6].

* * *

Let me finally, before turning to specific, address one Big Lie meme that is so audacious in falsehood that it's almost impossible for me to believe it's made in good faith.[7] However, because Dan is new and I know his work, I'll give him the benefit of the doubt. Here is it is: MMTers are unwilling to address criticism[8]. Dan pick up on that talking point this way:

[I]ts adherents seem extraordinarily reluctant to address concerns head on. I've followed MMT casually, and I've seen lots and lots and lots of (virtual) ink spilled about how government can simply fund what it wants, period. MMTers are nothing if not voluminous.

First, "extraordinarily reluctant" is easily refuted by looking at the historical record, although it may be that the poster is too new to the topic to be really familiar with it. To address only material easily available to the reader of the blog (no links, this time, you go look):

1) Correntians "addressed concerns head on" by driving the organiztion of an MMT conference in DC;

2) letsgetitdone has consistently, for years, "addressed concerns head on" by posting on MMT topics here; it's quite an oeuvre;

3) The successful propagation of the Platinum Coin concept (data available in both timeline and tabular form) was nothing other than a process that "addressed concerns head on" and by MMTers that's why it was successfully propagated!

There is also the "New Economic Perspectives" blog, which "addresses concerns head on" as they come up, and includes an MMT Primer, which also "addresses concerns head on" (links on request).

If anything, it's the willingness of MMTers to address concerns that's "extraordinary." And, I might add, their patience.

Second, the comment is internally contradictory. You can't, at the same time, be a "casual reader" and find make a judgment about what's extraordinary. That would be like me opening a comic book and exclaiming on the extra-ordinary prevalence of BAM! ZAP!!! POW!!!! when in fact I'd "casually" flipped open to the fight scene, and the rest of the comic didn't have those words at all. (In fact, a comic book fight scene is a pretty good metaphor for the poster's choice for sourcing: An NC comment thread.) This also takes care of the poster's "voluminous." Granting that the poster means means "of great volume," as opposed to "prolix" or "wordy," they are in no position to judge whether the volume of posting needed is fit for purpose or not; a casual reader just isn't. (Now, you can argue that there are rhetorical issues, but that's not the argument the poster makes. Popularizing economic concepts, especially counter-intuitive ones, is not easy.)

Third, the comment contains Junior High-level mindfuck. Let's look again:

... reluctant to address concerns head on.... nothing if not voluminous.

This is exactly like the question: "Why are you so defensive?" (another talking point recently deployed by anti-MMT.... folks). What is one to answer? "I'm not being defensive"? Because the MMT advocate is damned if they do, and damned if they don't. If they don't answer, or give a short-hand answer to a question already asked hundreds of times, they're "reluctant to address concerns." If they do answer, they're accused of being voluminous. The thread the poster went to was full of tactics like that, so it's unsurprising some of them would rub off. But still.

Fourth, perhaps the poster feels that MMTers are not "reluctant to address concerns head on" in general -- and how could they be, when the record is so to the contrary -- but that their particular point has not been addressed, that point being "ZOMG!!! Inflation!!!!!" I use that shorthand not at all because MMT does not address it, but because it's a straw man that MMT and MMTers address so constantly that only a "casual" reader would stake their argument on it. (See "real resources" in this comment; I'll let somebody whose chops are better than mine, like lets, give a better answer. This argument was originally framed that MMT would lead to Zimbabwe or Weimar, but you really can't make a case against democratic control over fiat money creation by citing an African dictator and a state in a county that had just suffered a defeat in war, famine, and needed to pay massive reparations to other states.)

And now, having shown my reluctance to address the concerns raised by your false and inflammatory headline head on by spending two hours writing this "voluminous" comment instead of gardening on the first sunny warm day in two weeks, I will close. Hopefully, I or another will have address your specific points when I return.

NOTE [1] I'm not a revolutionary. I'm a reformer, though I trust a radical one. That's what the 12-Point Platform is all about. Too many millions died in the 20th C because some revolutionary vanguard thought they had a good idea and/or were romantic or sanguine about violence.

NOTE [2] Placeholder for discussion of manufacturing consent and whether the representative democracy we have is a "true" democracy.

NOTE [3] The issue of whether money is ever backed by anything is another thread entirely. Just to poison the well, let me note that "sound money" advocates are generally austerity advocates, and often banksters.

NOTE [4] I hear you cry: "But Congress is controlled by the oligarchs, so you are just given the oligarchs more power!" See note [1]. Right now, if I reform my local municipal water supply, I'm could be said to support the oligarchs, since in an oligarchy -- follow me closely, here -- nearly everything supports the oligarchs. However, what I hope to do is put the public private partnership that has ended up poisoning our water delivering water that is not up to EPA standards out of its misery, and return it to the town, that is, to democratic control. If that be supporting the oligarchs, then it is so in exactly the same way that dan's anti-fracking efforts, which involve people being able to test their water, do so.

NOTE [5] The discussion of whether "jobs" and "work" are necessary or even ethical is over there; some anarchists and back-to-the-landers believe no, and I'm sympathetic. Personally, with some other MMTers, support a basic income as well as a Jobs Guarantee, for two reasons: (a) "starving artists" shouldn't starve, and (b) housework, still mostly performed by women as part of reproducing a family unit's ability to sell labor power, is unpaid work and should be paid for. And please, don't deploy the "crap jobs at low wages" argument. The Jobs Guarantee is under democratic control, like the rest of what MMT advocates; if you think the wages and working conditions are too law, then agitate to have them higher and develop a constituency, potentially of millions.

NOTE [6] See note [1].

NOTE [7] I've noticed that people often confused losing an argument on the merits with a failure to address criticism. They then repeat the argument, and if their interlocutor doesn't address every point made in the already lost argument all over again, an additional accusation of failure to respond is made. That's called trolling. Because it is.

NOTE [8] This talking point is now being morphed into the idea that MMTers are "elite" or "elitists." I'll address that with this video:

""...I'm going to end up like Bill Black, marginalized, an assistant professor at a small university somewhere...." That small university being UMKC -- and not Harvard, Yale, MIT, the University of Chicago, Stanford -- which is the epicenter of MMT thinking. Now, you argue that any tenured professor is a member of the "elite," or you can argue that the entire university system serves the oligarchy. For the first point, I prefer to know my enemy a little better and look to splits in the elite where they are to be found. For the second, see note [1].

danps's picture
Submitted by danps on

Re: the summary in the first section, I think you are conflating the theory itself with the purposes to which you would like to see it used. There's no reason why MMT has to be used for a jobs guarantee, for instance. That's what you (and I too) would like, but it's nothing more than that: our preference. I argue we should expect for other preferences, supported by novel developments in the theory, to win out in the end. Even you acknowledge the notion of "public" is contested. How do you expect that contest to end in Washington?

As to this:

You can't, at the same time, be a "casual reader" and find make a judgment about what's extraordinary

Fair enough. I should have worded that differently. But as to that and (related) this:

If they don't answer, or give a short-hand answer to a question already asked hundreds of times, they're "reluctant to address concerns." If they do answer, they're accused of being voluminous.

What I've seen in my casual reading is a refusal to either sharpen up good, concise responses to criticisms or to have easy links back to relevant quotes - which sites like citebite.com make dead easy. Instead what I see - and you do it once again in your comment - is to say "we've answered this before, we're tired of answering all the time, check the archives." That's not nearly as likely to persuade (or popularize) as "(insert quick, painless and cogent summary of point.)"

Submitted by lambert on

But then again, I'm not at all sorry. Quite frankly, I was putting off answering this, because I thought there'd be more. [1]

I will proceed to list what in my answer the poster agrees with by their silence. (Let me just take a minute to count the words... 2342. Hardly "voluminous.")

I provided a handy checklist of what I see as the major points of MMT. Here it is again:

[x] = The poster agrees.

[x] 1) Democratic control over the money supply

[x] 2) No more suffering for working people from unemployment.

[x] 3) An end to the austerity narrative, one task item on implementing New Deal-style programs (if that's what you're into).

[x] 4) An ethic of "public purpose"

I ask again how anybody who considers themselves on the left -- even one who wants to take the bastards on right away -- would not want a toolkit like that in their arsenal.

And given the poster's agreement with the four points above, I would like the poster to explain to me why I should not regard their headline as, at the very very best, deceptive. How on earth can those four points be regarded as anti-democratic, or pro-oligarchy?

* * *

Let me now take up the single point that the poster does address, except they don't. Let me simply quote it all:

As to this:

You can't, at the same time, be a "casual reader" and find make a judgment about what's extraordinary

Fair enough. I should have worded that differently. But as to that and (related) this:

If they don't answer, or give a short-hand answer to a question already asked hundreds of times, they're "reluctant to address concerns." If they do answer, they're accused of being voluminous.

What I've seen in my casual reading is a refusal to either sharpen up good, concise responses to criticisms or to have easy links back to relevant quotes - which sites like citebite.com make dead easy. Instead what I see - and you do it once again in your comment - is to say "we've answered this before, we're tired of answering all the time, check the archives." That's not nearly as likely to persuade (or popularize) as "(insert quick, painless and cogent summary of point.)"

First, it's not "fair enough." You simply replace "reluctant to address concerns" with more ... voluminous wording. There is no substantive difference whatever between "reluctant to address concerns" and "refusal" to "sharpen up responses." Second, I have no idea what it would take to persuade the poster, at this point; I think nothing, given that the poster's goals simply aren't analytical. However, what I am certain of is that the poster does not address the massive effort to do exactly what they claim they want, with sources that I list. Popularization and propagation are not easy tasks, as I am sure all readers here would be the first to know. But frankly, if I sharpen my explanation to the bullet points listed above, and get no response, what am I to think about the poster's willingness to engage in sharpening them? Or do the poster think that points are sharpened at the desk, or in the sky, as opposed to in collective engagement?

* * *

To the only point the poster answers:

The poster argues that JG is not an integral part of the MMT toolkit, and that anyone could implement it.[2] First, at least historically, the JG has been integral; it was first advocated by Bill Mitchell years ago, on humanitarian grounds. When Cullen Roche decided to fork his own version of MMT because it was "too political," the JG is what he dumped. Second, the poster writes:

There's no reason why MMT has to be used for a jobs guarantee, for instance.

So? Show me another "thought collective" that's advocating it. The neo-liberals? The progressives?

Second, what MMT uniquely brings to the table is the understanding that the JG can always be funded without inflation; if you've got people without work, by definition the economy is not at capacity, and so funding their employment is not inflationary. This should be welcome news to the poster, who has laid great stress on the importance of avoiding inflation.

Finally, the poster urges the following:

I argue we should expect for other preferences, supported by novel developments in the theory, to win out in the end. Even you acknowledge the notion of "public" is contested. How do you expect that contest to end in Washington?

No. The poster doesn't "argue" for these "novel developments." The poster makes an assertion about witches. The poster gives no reason for anybody to believe that the witches will win out. There is no "argument." (See the link for my response).

Next, "even you acknowledge the notion of 'public' is contested." "Even you," forsooth. The notion of "public" is always contested; it's being contested in Thailand right now. It was contested by the Chartists in the UK in the 1830s. It was contested by the suffragettes in this country. Can the poster really believe there is some abstract and unchanging essence called the public, outside politics? If so, the habit of thought is exactly the same as that which calls for a self-enforcing theory that will prevent "witches and bad people" from gaming it. Again I urge that this is destructive of democratic values, and quasi-religious in form, seeking solutions for this world in forces not of this world.

I'm not a prophet, so I won't bother to avoid answering the final rhetorical question. However, the poster seem to believe that a strategy of ignorance is the way forward. Needless to say, I disagree.

NOTE [1] Perhaps other readers, if not the poster, will understand why a certain irritation creeps into our tone; having invested a good deal of time addressing the putative unwillingness of MMTers to address concerns "head on," we find our responses ignored. And not for the first time.

Well, at least we can shitcan the supposed unwillingness to respond. Another straw man to cross of the list. And so we progress.

[2] To be fair, the poster frames their point with the claim that I make a category error. I reframed it. Sue me.

danps's picture
Submitted by danps on

For the record, #1 is a description of an economic theory. 2-4 are policy goals. Once more, and as simply as possible: You again conflate the theory with the policy preference. Your position is "MMT implies New Deal programs." I disagree.

letsgetitdone's picture
Submitted by letsgetitdone on

Re: the summary in the first section, I think you are conflating the theory itself with the purposes to which you would like to see it used. There's no reason why MMT has to be used for a jobs guarantee, for instance. That's what you (and I too) would like, but it's nothing more than that: our preference.

No, that's not right the Job Guarantee is at the living beating heart of MMT. It's an MMT key to dampening inflation. The debate over that is in my Job Guarantee series here, and also here.

It's really simple. If you're against the Job Guarantee, and you don't have an alternative proposal for a buffer stock automatic stabilizer to dampen inflation, then you're not advocating MMT.

letsgetitdone's picture
Submitted by letsgetitdone on

Brilliant piece. Much better than my ploddng critique. On this:

Personally, I think Congress already has the power to create fiat money under Article 1 section 8; but that's because I'm flexible about what "regulate the value thereof means."[4]

Not only does it have that power; but it has delegated it to the Fed to create reserves and to the Treasury to create platinum coins with face values to be determined by the Secretary.

joebhed's picture
Submitted by joebhed on

“”Democratic control over the money supply.”” “ We live in a regime where money is created by fiat today, but it's created by a "public private partnership" between the government, the banks, and that strange amphibious creature, the Fed. (Since Nixon closed the gold window in the 70s, the dollar isn't "backed by" any commodity, including gold.[3]) However, the dull and stupid reality of fiat money is concealed by the complexity of the system whereby fiat money is created, which not coincidentally involves paying the banks interest to "borrow" the money our own government wishes to create, by fiat, in the first place. It's also concealed by the gutter financial press, which perform to neat trick of claiming to abhor what it knows very well is going on, by yammering about "printing money."
Of course, money isn't "printed'; it's keystroked into existence at the Fed!”

This is actually a great advancement of lambert's description of the oligarchy-controlled debt-contract based system of money....," the money supply is created by a "public private partnership" between the government, the banks, and ........ the Fed", it stands in marked contrast with the standard line that "the government is the monopoly issuer of the currency".
Seems either 'monooly' needs a new definition, or that the 'money supply' is not the 'currency', or both.

There is no dull and stupid reality of fiat money. Unless your knowledge of a fiat based monetary system ends at Knapp’s State Money statement, and you think that a state-fiated unit of account is the role of government in that system, Fiat money is far more interesting than you seem to know.
Readers are well served to understand the complete relationship between MMT’s Bankers’School money system construct and that of the ‘Currency School’ of sovereign fiat money.
https://sovereignmoney.eu/modern-money-and-sovereign-currency/

When it comes to the real ‘money power’ in this country, that of creation and issuance of the things that will get you to either unemployment and war or full employment at peace, all of that ‘money’ (it buys stuff) is journal-entried onto the books of the banks as a demand deposit of the borrower and as a financial asset of the lender.
The Fed, as national CB, has nothing to do with money creation in a debt-based money system, except to play facilitator for settlement media in the payments system, in order to to make the whole thing work.
The Fed's role as operator of the national payments system has nothing to do with money creation and issuance.

quixote's picture
Submitted by quixote on

How is democratic control of fiat money implemented? I'm really asking. From the reading I've done, I hadn't realized that democratic control of it was a major plank. (I know. Says more about my reading comprehension than MMT, but there it is.) So how does that work? Occupy-type General Assemblies discuss until a solution emerges? Probably not. Representatives figure it out? That's more or less our current system, and that's not doing too well. What's the method in practice?

Rainbow Girl's picture
Submitted by Rainbow Girl on

Thank you for posing it Quixote, as I have been wondering the same.

That keystroking money into existence by the Fed means that the keystroking is "in democratic control" does not strike me as an accurate description of what is.

Haven't we been witnessing and discussing here at times that the Quantitative Easing program(mes) that have benefited solely the elites and looters (short for FIRE sector and its owners and makers) are an example of how the process described by MMT is (1) already in use, (2) in use for the sole benefit of the elites and (3) therefore is most assuredly *not* under democratic control?

This is a sincere question.

Submitted by lambert on

The Fed is a weird public/private amphibian; it can't possibly be democratic; it's independent. There is literally no way to hold it democratically accountable, except through the occasional election of the Fed Chair.

I cite the Fed to show that we already have fiat money, which a lot of people, even today, don't accept. The issue is that the Fed -- here I'm straying into finance geek territory, which I'm not, really -- is using QE to goose asset prices and nothing else; it's like a closed loop of money flowing that never reaches the real economy. (Sloppy language from me, not a geek. But we accept that QE hasn't done squat for us, right?)

The first step to wrenching control of money creation away from the Fed is knowing what they do and then asking ourselves "Why can't we do that?"

What the system would look like... Big question that I can't answer well. Let me try:

1) One answer is to at least have the President do the creation; he is, after all, an elected official. Better than having the Fed do it! That's what lets showed how to do with the Platinum Coin proposal.

2) A second answer would be to have Congress do it in the usual way, through hearings and legislation. Again, better than the Fed! I don't know whether a target would be set for the year, or it would be month by month, but it would certainly be less opaque and more subject to democratic accountability than the FOMC meetings (a misnomer if ever I heard one).

As somebody who watches Thailand closely, I'm very concerned about the state of democracy worldwide; I think it's in trouble. (Some, like anarchists, would say that representative democacy deserves to be in trouble.) But whatever method of democracy is chosen, up to and including crowdsourcing public policy on twitter, we need to wrench control of money creation away from the Fed. Understanding the nature of fiat money is essential to that task, and only MMT teaches it.

Rainbow Girl's picture
Submitted by Rainbow Girl on

Doesn't this sum it up?

"The Fed's been printing money without taxes to help Wall Street. Right method, wrong recipients. QE for the 99.9%. Return control of money printing to We The People!"

Because if the idea is to popularize the useful core of MMT -- that We The People can create the money we need -- I think We The People will get it a lot quicker than if the popularizing literature uses words like "MMT" "sectoral imbalances" "predistribution" and other technical terms that aren't necessary to convey the basic message.

The MMT dictionary is not necessary to explain/realize that (1) money doesn't depend on taxes because (2) We have the right to create it and then spend it on good things but (3) that power has been hijacked by the elites and FIRE to our detriment and their benefit.

Even "End The Fed" sort of gets to this more directly than a lot of the techno-academic language of MMT.

Unless the expoinents of MMT are interested in educating an audience of academics or policy wonks as opposed to We the People (which of course includes academics but you understand what I am saying).

paintedjaguar's picture
Submitted by paintedjaguar on

Absolutely what I've been thinking while following this and similar posts. One shouldn't need a course in acronyms and jargon to follow a debate about broad public policy. Bafflegab and bullshit are the first line of defense against implementation of things like single-payer and it doesn't pay to fight on your enemies' home turf. Although details matter, the fundamentals of most issues are not so difficult to grasp if rendered in plain language.

I'd like to put in another plug for Matt Bruenig ( http://mattbruenig.com/ ). He's one of the best writers I've found when it comes to clearing away false arguments and distractions while distilling concepts into simple, strong rhetoric, particularly on matters of wealth distribution. He's also my go-to guy for hoisting Glibertarians on their own petards.

Submitted by lambert on

Well, that's why I wrote the "MMT on a Postcard" post. Now, you may not like it, but that doesn't mean I didn't respond to the request!

letsgetitdone's picture
Submitted by letsgetitdone on

It's implemented through the Congress which makes appropriations, and through the Executive Branch which has the authority to fill the public purse by borrowing USD (subject to debt ceilings); and also by forcing the Fed to supply reserves by creating platinum coins with arbitrarily large face values and depositing these at the New York Fed. The Fed must credit such deposits and turn them into bank credits in the Treasury's reserve accounts.

Of course, our own democratic control of Congress is implemented through elections; so there is democratic control to the extent that we can exercise free decisions in the electoral process. Limitations on free elections result from voter suppression laws, limitations on the number of voting places so they are few and inconvenient to get to, limitations on when people can vote, manipulation of available information by the MSM, special interests, and the Government itself, actual attempts to intimidate voters at the polls, hacking into electronic voting machines, and stuffing of ballot boxes..

nihil obstet's picture
Submitted by nihil obstet on

A vibrant effective political movement will have people who disagree with each other and argue it out hammer and tongs. That's how we all learn, both to sharpen our thinking and to improve our ability to persuade others to our cause, which is kind of the definition of effectiveness in politics. It will lose both vibrancy and effectiveness if we start regarding those who disagree with us as dishonest and stupid. Corrente has a wonderful group of people who bring varying perspectives, argument styles, priorities, and talents to the community.

I've said in relation to the 12 plank platform that I think MMT is a distraction, but those working harder on the platform than I have been think it's crucial, so OK, I had the chance to make my point, wasn't persuasive enough, let it go. But then I found the argument in the comments section of the distributive/predistributive post destructive rather than enlightening (basically agreeing with transcriber), somewhat surprised at how rather long-time
members of the community were being dismissed. I don't know how to explain to the MMTers that you're not answering the questions, since you seem so very sure that you have answered. Anyway, acceptance of MMT and agreement with its proponents should not be a litmus test for the left, especially not a litmus test of integrity.

We need democratic control of the society, and therefore in the current system, of money. Will MMT give us democratic control of the money supply? No. The whole damned quantitative easing program is basic fiat money production. With more democratic institutions, we could do fiat money production for better purposes. We could get the same results with MMT. But the MMT doesn't produce the democracy. Meanwhile, I'm not planning to head down to street demonstrations with a list of links to articles that explain MMT so the people who need health care, education, and housing can read them and get more democracy. I'd rather they read Marx, actually.

Keynes argued for deficit spending in economic slowdowns, and high taxing in boom times. His arguments were validated in the Great Depression experience, and in the 50 years that followed. Despite this history, the austerian narrative revived because it benefits the elites; does anyone really think that the new theory will convince where 50 years of history didn't?

Since I've gone to substance rather than manner on the MMT, I'll throw in a comment on predistribution and distribution. I haven't seen in the MMT people the recognition of how much predistribution there is in our economy now. Read Dean Baker for a regular dose of how this works. Let's get rid of most of the so-called intellectual property laws and a lot of the licensing laws, which are all just predistribution to the wealthy. That's far more important to me than getting the right nuance on how MMT is better than Keynes. Does MMT start from a position that the current economic system is fairly neutral, and proposals about distribution and predistribution are just add-ons to a neutral system? If so, I would say that's where you misunderstand what Hugh says about the system.

Anyway, when the right says, "The government has to live within its means just as you do," and the left responds, "We've thoroughly refuted that in these PDFs and conferences. Go read them or you can't respond", I think the right's going to keep winning.

danps's picture
Submitted by danps on

I don't think I did that in my post. If you think I did, I'd appreciate a quote.

That said, I didn't think the "pre-distributive" post comment thread was especially bad, so maybe I've got a tin ear (or a thick skin). I'll have another look at it though.

"MMT doesn't produce democracy" is a great line that I might steal. The whole paragraph in fact, and the one after it as well. Thanks much for the thoughtful comment.

nihil obstet's picture
Submitted by nihil obstet on

No, I don't think you did either. When I try to be placating and not phrase in a way that people will take as a personal attack, I can sometimes appear to be damning everyone for sins that not everyone was committing. Look back at the comment section to the distribution/predistribution post and see how words like falsehoods and BS and bull crap and troll were being used. That's what I was objecting to.

Submitted by lambert on

... that on the Internet there really are trolls -- there really are trolls who troll MMT. And sad to say, there really trolls who are dishonest, and who don't argue in good faith.

As an argument from authority, I've been moderating for 10 years, and I know trolling when I see it; that's my stock in trade. If you want a series of litmus tests, you can check the moderation rules on this site, which are designed to prevent trolling. See especially points 4 and 5, which were absolutely on consistent display in two recent NC posts on MMT, bits of which were imported over here. (Because the poster is only "casual reader," he's not equipped to sort out all the trolling.) When letsgetitdone calls out Hugh for never quoting MMT sources in his denunciations, and for simply dropping arguments and shifting to new ones when his points are addressed, he's pointing out classic trolling techniques.

It's sad, but it's true. It's there in the written record.

transcriber's picture
Submitted by transcriber on

Last I saw I think he was saying he was banned from NC, so much for fearless commentary, which does have a ring or sting to it, I'd say. Is he banned here now too? I disagree that he's a troll, that he's trolling, because I remember the many valuable comments he's left in other places and the ones I just read here. Why should be become a troll now, and a troll to only expert eyes, when he wasn't one before?

As for Hugh's refusal to cite, what if he's original thinking, is what I wonder, not having followed this well at all. What if he's saying his own words? Or ozone shelling? As in, you want him to refer to your zoom level with a specific specific, while he's zoom levels away? How can it be that you guys can't talk to each other and be so angry about it? Abbott didn't kill Costello for who's on first.

Just checking in, trying to find my place, thx.

(also thinking of that obit I cited not too long ago, what the guy said about the Vietnam War and burning villages to save them; the more you win, the more you lose.)

(also thinking of quote from somewhere, I think it's French but it feels like American, "I disagree with what you say but I'll defend to the death your right to say it.")

Good morning

Submitted by lambert on

... I don't know where Hugh is; his account at this place is not affected whatever might happen to his accounts at other places.

As for the Voltaire quote: Fine in theory and at 4Chan or Eschaton. Check the Moderation rules, which you were advised to read in the email you got when your account went live. Corrente has been in existence for nine (9) years, in part because trolling behaviors (defined in the rules) are grounds for account termination.

transcriber's picture
Submitted by transcriber on

I don't even KNOW 4chan and Eschaton! Not my universe! Not my physics!

Moderation rules! Did not know. My brain is very shallow. So, good, let's have a trial. You're charging Hugh with #4 + #5 = #2? Might be better to get to the point and put MMT on trial, but anyplace to start is good.

Thing is, no pulling Bubama and Kill List Tuesdays, you can't be prosecutor, judge and jury if this experiment in Mighty Correntian Democracy is going to work.

Also, thanks for youtube above, Martin look at my suit never gets old, I'm laughing again. Do what you need to do in RI and take care and come back. Hu--

letsgetitdone's picture
Submitted by letsgetitdone on

As for Hugh's refusal to cite, what if he's original thinking, is what I wonder, not having followed this well at all. What if he's saying his own words? Or ozone shelling? As in, you want him to refer to your zoom level with a specific specific, while he's zoom levels away? How can it be that you guys can't talk to each other and be so angry about it?

This part is real simple. Hugh made certain claims about what MMT says,and what MMT thinks, and similar statements about Randy Wray's views. I thought Hugh's claims were wrong, so I asked him to quote, a reasonable request, I think. He did not even fulfill a single request for a quote. It's not unreasonable to conclude from that either he hadn't really read the MMT material or even perhaps the posts he was commenting on, or that he wasn't telling the truth about what MMT says because he wanted to discredit the MMT approach for political reasons of his own. In other words, he wasn't debating honestly, but was trolling MMT posts.

joebhed's picture
Submitted by joebhed on

Lots of people hve been banned from NC.
Including me and anyone who agrees with me, and pretty much anyone who disagrees with MMT's basic premises, not from any neoLiberal, or neo-classical or orthodox or Austrian perspective, but anyone who is a monetary reformer, who agrees with the likes of Martin Wolf and Lord Adair Turner about what's wrong with the money system.
I count on Joe to keep this thread open to a full dialogue.
http://www.youtube.com/watch?v=wTTLoKLmYD4

nihil obstet's picture
Submitted by nihil obstet on

I disagree with you on much of this issue. I'll go away if you want me to, but I would like acknowledgment that I go away because I've already said what I think and further discussion will hit a brick wall. I ask this because you've written that a poster agrees with your points by silence. Meantime, you're seeing this as a waste of time in fighting dishonesty that refuses to go away, and I'm seeing it as an exercise in how social and political allies who disagree on a specific issue can work things out. In other words, I'm enjoying it, and you're not, and so you do have the right to say, "Just stop!" However, as I go forward, I'm going to cut back on the time-consuming effort to be placating by avoiding specific references to things written.

Written records don't speak for themselves -- each of us interprets them. You find this a convincing statement:When letsgetitdone calls out Hugh for never quoting MMT sources in his denunciations, and for simply dropping arguments and shifting to new ones when his points are addressed, he's pointing out classic trolling techniques. Actually, Hugh did quote Wray -- "Forget Taxes for Redistribution . . . ." He then interpreted the argument in terms of its potential results. Lets didn't like the interpretation and demanded a specific quotation in which Wray explicitly gave the same interpretation. I would be very surprised if there is one.

This is fundamentalism, the need for an explicit quotation. It's like the Supreme Court in Wal-mart Stores vs. Dukes declaring that Walmart couldn't be shown to discriminate against women because it hasn't issued a corporate policy statement instructing managers to do so. Or like those who claim that there is no constitutional right to privacy because the right isn't explicitly put into a quotation from the constitution. Few tyrannies explicitly state their plans to enslave their citizens. This does not mean that any interpretation can be asserted for any document. But when you have a political propaganda system that insists over and over that taxes on the rich just hurt us all ("there aren't enough rich people to make a difference", "taxes mean that jobs won't be created", "people shouldn't be penalized for success") in support of concentrations of private wealth, then there is reason to criticize yet another statement about how advocating taxes on the rich will just hurt us all. And you know, Wray isn't the only one who doesn't explicitly state, "I want an oligarchy". The Koch brothers don't state it either. I just glanced briefly at a new comment up by lets, in which he objects to danps's quoting by saying it's "too selective." Well, holy shit!

The point is that analysis can reveal the underlying concepts that the speaker doesn't explicitly acknowledge. The analysis may be wrong, and it may be dishonest, but that's different from its being a written record that clearly condemns the analyst of dishonesty. That's something that needs to be shown.

What you say about dropping points and shifting to new ones may indicate dishonesty or trolling, but again, I look at the written record and I just don't see it in the thread with Hugh. For one thing, as I started this comment noting, one reason for silence with me is that a conversation is going nowhere, and I don't see the point of "You're wrong" "No, you're wrong", "No, you're wrong" although sometimes I can get into it and have fun. The other point is that given how very specifically you're looking for addressing what you think is an important point, you're not understanding that you're getting another approach to a systems critique of the position.

What I got from the discussion is that there was a perception that Hugh had personally attacked Wray, and people who know him felt that he had been done an injustice. Wray could be a saint, but that doesn't put his opinions beyond criticism. For that matter, I could be among the world's most loathsome, but that doesn't make everything I say wrong. In short, this has struck me as tribalism.

There are many projects to try in order to get our society to a better place. You're interested in co-ops and local sharing of expertise in growing food for our needs. The Occupy movement tried their witness against oppression. The occupation of state houses in Wisconsin and North Carolina have pushed electorally. Supporters of MMT think that it is an important project. Some of us will disagree and warn about potential traps in all of these efforts. Let's keep up the passion for the principles without getting personally judgmental.

transcriber's picture
Submitted by transcriber on

There are many projects to try in order to get our society to a better place.

I'm still surfing and haven't grasped the whole whole. Sorry! But it's like ducking out of work and skipping over through a great meadow with many flowers to sniff, and I am so small, and time is so short. I found this comment wonderful, as I have almost every comment I've landed on, and I even read it all the way through.

The thing you said about many projects to try. The one great insight I've ever felt I had about any system is that for it to be sustainable it has to loop. Like an ecosystem. I think it's true about justice, hence juries where the lowest checks the highest, or the first checks the last, and I keep looking for that in money theory, that it has to touch ground someplace, it has to mean something, some king can't just say X to the sky. I don't know if that's Hugh's problem with MMT, but it's what I keep wondering about. When people here are trying to make a tie between democracy and money, that's interesting to me, and I wish I understood it. When Lambert talks about money in terms of the Constitution and Article I and Article II, I think, let's talk about that, how was it supposed to work? Back when the experiment was set up, before it fell apart?

Thing is, world is fucked. My country can't find its own butt anymore, and when I see Lambert offing Hugh over a disagreement, I just... god damn it. God damn it.

Look, can't we do better, start here? Can we have a trial? I actually don't know what the charges are, and that would be a nice place to start, even better if it was postcard size. I'd be happy to be a juror if someone could lay out the charges and evidence and arguments before me. Like, truly, I'm kind of fixated on the thought that America could think its way out of a paper bag again if we went back to juries that could hear truth, whole truth, and nothing but the truth, instead of siphoned prosecutorial dribble, and then could think outside the law box to figure things out. Why else have juries to begin with? They're not [Edit: They weren't] there to window dress and rubber stamp the emperor. Why have labor? If capital can make itself up.

I don't think the big thing about juries in the Constitution is to find and punish the guilty, burn the witches, kill the trolls, but to keep us reasoning together and give us a chance, a venue, a fundamental, constitutional framework to do so. Reasoning is what we do! We want good arguments! Even if that got confused before we were born, I think that's at least still possible if we took another look at what those words actually say and mean, got under the hood, stepped back and looked at the thing. Are Lambert and Hugh so black and white wrong and right that only one can be allowed to walk among us, or are they looking at different parts of an elephant and then getting mad as hell at each other? If the tusk wins by offing the knee, I don't think it's going to be good for the elephant. Look at butchered America, we are not getting better with every whack.

Can we have a trial? Judge is there as umpire/anthologist. How about you? Not sure if Lambert and Hugh would be lawyers or have lawyers. Maybe MMT is on trial and they're the lawyers. (What are we arguing about?) Jury deliberations public, and I think must include punishment (or "punishment") too because look at Cecily OWS, if the jury hates the court result, something's gone wrong. Whole thing could be fabulous. Hollywood movie! Magnificent 12! Shootout at the Mighty Corrente Building!

Oh look, my coffee's gone.

transcriber's picture
Submitted by transcriber on

1794:

In this case, the first Chief Justice, John Jay, wrote: "It is presumed, that juries are the best judges of facts; it is, on the other hand, presumed that courts are the best judges of law. But still both objects are within your power of decision… you [juries] have a right to take it upon yourselves to judge both, and to determine the law as well as the fact in controversy".

Hello.

Alexa's picture
Submitted by Alexa on

and yourself [or maybe Lambert--I can't tell anymore, and I've actually read all the comments] "being able to walk among us."

But is Hugh even participating in the conversation, anymore?

I hope Hugh hasn't "jumped ship." His voice is an important one, IMHO.

;-)

transcriber's picture
Submitted by transcriber on

I assume or feared Hugh had been offed by Lambert in his great anger and frustration and righteous proprietorhood. But Lambert says Hugh's account still stands, so my assumption was wrong, and so if Hugh isn't here among us, it's because Hugh doesn't want to be. He's ok. So, I'll slip back to the muddle. I agree that Hugh makes important points. I think Lambert and Joe and Wray and nihil and hipparchia and everyone whose name I just left out, everyone, do too. I liked the idea of a trial just so I could get clear on what we're arguing (I'm confused), and also to kind of get to that point where I think trials should go: Everyone wears each other's hat. We learn and feel each other's reasons. We connect. It's not the top rubberstamping the top. It's not Martin look at my suit. Gross punishment of lessers and losers as the job to be done and the necessary point of conflict seems like a miscarriage of the Constitution to me, if we do this right. And if we could do it, right here in public, kids try this at home, maybe there'd be something there. And maybe the same idea of connecting the loop so we're all in it equally and then testing it and testing it and testing it so the wheel trues and we don't fly off really does have something to say to MMT, though I feel my brain shrink to a sudden pea when I say that. Deep end! Still, I mean, isn't the MMT arguing here going like should Uncle Sam be the Easter Bunny (predistribution!) or Santa Claus (redistribution!)? What's he going to give us? What magic powers? What church will we be in? If that's the story we're looking for... I think something is seriously wrong in the republic, in the planet. Which it is, we know that already. But what exactly? Apparently something that fits on a postcard. I don't know.

Thanks.

Submitted by lambert on

People are given explicit warnings, several times, and a link to the Moderation rule is given.

I don't just "off" people.

For Fuck's sake.

Accounts are front-paged; anybody can start whatever sort of post they want. As we see here.

I have no idea what a "trial" would look like. I'm never especially enthusiastic about having my time allocated for projects of nebulous scope. In any case, people are responsible for what they write. They don't get to kick the responsbility up to a jury. Next, we'll be having Kos-style thumbs up and thumbs down buttons, with all the game playing that implies. No thanks.

joebhed's picture
Submitted by joebhed on

For the record....
I was never given warnings of any kind, and find that disagreeing with Yves about the Fed and Beardsley Ruml is sufficient evidence by the owner of the private property with which you consort (not a criticism) to decide to ban a point of view.
But that IS the legal right of any private property owner .....to post a no trespassing sign on that property and enforce same to their ability.
But the 'fearless' among us don't hide behind 'no tresspassing' signs.....more of a big joke out here among the banned.
And for all the good thinking and good intentions of the 'modern monetary theorists' out there, some of us didn't discover the money system after the CRASH, and for that reason we KNOW that the day before and the day after FDR dissolved the monetary gold standard for our internal economy, and the day before and the day after Nixon did the same for external transactions under Bretton Woods, the banks were creating and issuing this nation's money.
Always were.
Still are.
That our sovereign government is the monopoly issuer of the currency is the great myth of MMT, and the great hope of reformers throughout the world.
Reconciliation is where we should all be aiming.......if you can just drop your 'holier than thou' identity because you find the MMTers the smartest guys, and gals, in the room.
There is real work to be done.

Apologies to Joe F.

Alexa's picture
Submitted by Alexa on

when this thread plays out.

His job report analyses were always stated in such a straightforward manner that even an "economic moron" like "moi" could understand.

;-D

Submitted by lambert on

I don't want you to go away. I am, however, not available 24/7 to respond to your very much appreciated comments. I have to keep the blog in the air with additional posts, I have spent perhaps three days moderating and responding to comments (!!!!), and I have additional work to do in RL. I am, moreover, under extreme personal stress for reasons that are entirely independent of the time I spend on this topic. If you want to interpret a lack of real-time response as a wall, that is up to you.

nihil obstet's picture
Submitted by nihil obstet on

Egad! I wasn't objecting to the timeliness of your comments. Relax the pressure on yourself. It's about what conversations are useful to continue, given how much energy it's taking you. Unless the revolution is planned for this evening, we can all wait a little while for the next round of disagreement.

Alexa's picture
Submitted by Alexa on

Few tyrannies explicitly state their plans to enslave their citizens. This does not mean that any interpretation can be asserted for any document.

But when you have a political propaganda system that insists over and over that taxes on the rich just hurt us all, including:


[Photo Credit: Associated Press]

Former President Bill Clinton, who is the richest living president, said on Wednesday he doesn't mind paying higher taxes than other Americans, 'But you could tax me at a hundred percent, and we couldn't bring growth back into the economy enough to balance the budget . . .'

and,

The point is that analysis can reveal the underlying concepts that the speaker doesn't explicitly acknowledge.

The analysis may be wrong, and it may be dishonest, but that's different from its being a written record that clearly condemns the analyst of dishonesty. That's something that needs to be shown.

Thank you, thank you!

Personally, I have no argument with MMTers. (I wouldn't know enough to question it.)

However, I have sincere questions [once our family members return home] regarding the difference between their concept of "Predistribution versus Redistribution," as compares to the version that I hear discussed by economists and politicians as it pertains to the "Grand Bargain."

I hope that I can find some audio for review here, since it would state my concerns/questions much more accurately and/or effectively than I could probably ever manage to do.

letsgetitdone's picture
Submitted by letsgetitdone on

Actually, Hugh did quote Wray -- "Forget Taxes for Redistribution . . . ." He then interpreted the argument in terms of its potential results. Lets didn't like the interpretation and demanded a specific quotation in which Wray explicitly gave the same interpretation. I would be very surprised if there is one.

That's not how I see. "Forget Taxes For Redistribution . . . " isn't an argument. It's a slogan. Hugh interpreted Randy as saying that taxes have no function in MMT and that MMTers are against taxing. He said words to that effect. But he couldn't prove his inference either by quoting Wray or any other MMTers.

Also, there's a context for this. Hugh and I have contended on what MMT says on numerous occasions before this. Each time Hugh makes a claim that he cannot document with quotes. I frequently produce quotes and links to show him that his interpretation is just not right. But on the next occasion he makes the same or similar claims about MMT, always without proof, as if we were interacting for the first time. Given this history, over time, I've come to the conclusion that Hugh isn't interested in fact-based exchanges about what MMT says , but is mainly interested in painting a negative picture of the MMT approach for reasons of his own.

Submitted by lambert on

... an accusation somewhat like that is most definitely there. I'd like it clarified.

MMT is not an "opponent" of democracy and does not "entrench" inequality. Only people can do that.

Presumably, MMTers.

So I would like to know which MMTers do that and why they do. See below.

Submitted by lambert on

I don't recall making that claim. People doing politics produce democracy.

There is no magical theory that will come down from the sky and "produce democracy"; surely, it's up to us voters and activists to do that. So, that's a pretty clear straw man, no? Personally, I try to avoid stealing straw men lines, but YMMV.

What MMT does is produce an account of money creation that can be harnessed by a functioning democracy; it doesn't create that democracy. I don't think an account of money creation that says we cannot harness real and unused resources because of baseless inflation fears can do that; it not only keeps people ignorant -- never a good thing for democracy -- and prevents the political system from delivering concrete material benefits that would solidify democratic programs and gains.

NOTE Ya know, I keep getting what I interpret as amazed looks when I get cranky about this stuff. Perhaps it's headlines like the one above that do that, since I, personally, as well as MMT supporters, are apparently either covert supporters of oligarachs and against democracy, or dupes, or fools. Out of curiousity, which is it?

danps's picture
Submitted by danps on

I don't recall making that claim.

I didn't say you did. That's a critique of Wray, not you. The reasoning: Extracting wealth from elites is necessary in a functioning democracy. Wray says don't bother with that ("forget taxes"). Then either he thinks democracy is a small matter or he thinks MMT somehow produces it. I think the latter is the more generous interpretation, so that's what I went with.

You do, however, relegate the topic to "over there." Considering the hazard Forget Taxes has for democracy, I'd prefer to not see it sidelined. In other words, if the message is "MMT plus democracy," sign me up. That, to me anyway, requires a pretty clear and forceful repudiation of Forget Taxes.

And I'll just note, once again, the conflation of the theory with the wish list: "What MMT does is produce an account of money creation that can be harnessed by a functioning democracy." Yes, and it also can be harnessed by less enlightened ideologies. It simply isn't true that MMT implies New Deal 2, yet you have repeatedly suggested as much.

Submitted by lambert on

Here is the claim the headline makes:

MMT as opponent of democracy and tool for entrenching inequality

Of course -- speaking of category errors -- that's a category error, since MMT, as an intellectual construct, isn't an opponent of anything; only people are opponents; to strike a blow at random, people like the faculty in the UMKC, or lets and myself.

So, leaving UMKC out of it, I would like the poster to explain whether lets and I oppose democracy and support oligarchy entrench inequality because:

[ ] 1) We are stupid; that is, we really don't understand MMT;

[ ] 2) We are dishonest; that is, we understand the nefarious nature of MMT all to well, and are seeking to rope others in;

and trying to make the alternatives exhaustive here;

[ ] 3) We are dupes, that is the unwitting victims of ideas that other MMTers put forward;

[ ] 4) We are victims, as for example of some cult;

[ ] 5) We are simply misguided, that is wrong for some reason the poster cannot explain.

Needless to say, the poster, as a self-admitted "casual reader" -- not only of the "voluminous" literature, but of the material on the very blog to which he contributes -- is hardly in a position to make such an accusation, making it all the more remarkable that they make it.

I take the accusation that I support oligarchy and oppose democracy very seriously, given that it's a reputational assault.

quixote's picture
Submitted by quixote on

I doubt very much that danps considers either of you any of those things. The point isn't what people with integrity will do with a theory but what those without will do. Of course the theory itself doesn't do anything. People do. So the question is how resilient is the system in the face of attempted subversion by people with ulterior motives?

I, for instance, would say that a monetary system which relies on politicians to raise taxes in a timely fashion and in a fair way to cool an economy, and then presumably to reduce taxes in a fair way when the economy needs help, I'd say that's doomed. Unless there are rules in the system outside of MMT that force the politicians to act for the common good. Simply having democratic accountability (as people currently understand it) doesn't seem to be sufficient for the purpose, judging by our current experience.

I'd also say that hoping for good effects from democratic control of a fundamentally technical skill like controlling financial flows in a nation is also doomed. It's like hoping that legislators or a plebiscite can decide which food additives are safe and which aren't. (That's even assuming no political pressures on legislators or advertising pressure on voters.) People with the necessary knowledge need to make decisions that require knowledge. The role of non-specialists is to establish overall policy compatible with the common good, and to come down on regulators who turn out not to be working for the common good. For that you need transparency, so that independent specialists can see what they're doing and alert the rest of us. I'd say where our current system falls apart is in the "coming down" aspect. Not enough transparency and no real way to get rid of people and policies that are obviously not working for the common good.

So, anyway, the point of this longwinded comment is to say that danps's and others criticisms of MMT aren't saying anything about you, but to say that the system seems open to tampering by people with less integrity. At least those are the doubts I struggle with concerning MMT.

letsgetitdone's picture
Submitted by letsgetitdone on

Will MMT give us democratic control of the money supply? No. The whole damned quantitative easing program is basic fiat money production. With more democratic institutions, we could do fiat money production for better purposes. We could get the same results with MMT. But the MMT doesn't produce the democracy.

I think you are truly, truly, confused. First, MMT is an approach to economics which includes theoretical frameworks, factual assertions which may or may not be true, normative assumptions, tools for analysis, and models. We can choose to decide whether to accept the MMT understanding of the financial system we live under; but if the MMT account of the money system is correct, then we cannot choose whether or not to live without MMT, since MMT descriptions will correspond to reality whether we choose to accept it or not.

Second, one of the things MMT says is that our current system is a non-convertible fiat money system with a floating exchange rate and a Government that owes no money denominated in currencies it doesn't issue. It follows that the our government cannot be forced into insolvency by external parties or economic conditions. It literally can't go broke unless it voluntarily chooses to stop producing the money it needs to fulfill its obligations. How can that happen? Only if the combination of fools and sinister people who inhabit the Congress decide to default on our obligations, out of ignorance or malice.

Third, if people know and believe this core MMT proposition then they will no longer believe politicians when they say that the Federal Government is running out of money. This can be empowering for people who previously thought that as responsible Americans they had to be concerned about debt reduction, because they might eventually become individually responsible for repaying our huge national debt. If people use that understanding, it can fuel movements for progressive legislation aimed at social and economic justice. But, it cannot, alone create such movements, because that requires action and not simply belief.

But, fourth, of course, without the necessary beliefs there is much less likely to be useful political in the interests of the 99%. So, MMT cannot create democratic control of fiscal policy, but it can faclitate it by showing people that there is no barrier of impending insolvency that would stop the Government from funding the programs they want.

Fifth, you're assuming that our goal should be democratic control of the money supply. But why should we care about that? We care about full employment, price stability, social and economic justice. But do we need the government to control the money supply for us to get those and other things? What if the Government just controls the creation of new net financial assets and lets the money supply float with the issuance of bank credit. Why is that a problem.

Keynes argued for deficit spending in economic slowdowns, and high taxing in boom times. His arguments were validated in the Great Depression experience, and in the 50 years that followed. Despite this history, the austerian narrative revived because it benefits the elites; does anyone really think that the new theory will convince where 50 years of history didn't?

Keynes's argument were not validated during the recession. In particular, the idea of running surpluses in boom tiles wasn't validated. One difference between MMT and keynesianism, is that MMT thinks that deficits should be allowed to float in the context of savings desires and the trade balance. Let's say people want to save about 6% of GDP, and they want to run a trade deficit of 3% of GDP, then MMT says that the Government should compensate for the 9% demand linkage by running a 9% Government deficit and spending it wisely on productive things. This recommendation obtains whether or not the economy is healthy, since if you don't maintaining the 9% deficit the result will eventually be a recession due to the Government's failure to compensate for the demand linkage. In fact, MMT says that is the demand leakage to savings and trade continues at 9% then the Government would have to continue running that deficit for as long as those leakages last.

I haven't seen in the MMT people the recognition of how much predistribution there is in our economy now.

No, what do you think Bill Black is always writing about? What do you think the unemployed buffer stock to control inflation is? What do you think the bias toward deficit spending accompanied by Treasury debt rather than coin seigniorage is? I think MMTers are very aware of exisitng predistribution in the economy; but perhaps the predistribution they call attention to isn't the same that Dean Baker writes about. And perhaps that because he doesn't think about predistribution in the context of analysis of how are current fiat money arrangements are benefiting the financial sector every single day.

That's far more important to me than getting the right nuance on how MMT is better than Keynes.

That's because you don't understand the sectoral financial balances model. If you did you would realize that Keynesian policies of the sort advocated in the Congressional Progressive Caucus budget, if followed, would very likely needlessly cause the next recession. While if MMT policies are followed that recession would never happen. That is not a difference of nuance between and MMT and keynesianism as currently understood.

Does MMT start from a position that the current economic system is fairly neutral, and proposals about distribution and predistribution are just add-ons to a neutral system? If so, I would say that's where you misunderstand what Hugh says about the system.

No. What makes you think that MMTers think that the current economic system is fairly neutral? MMTers would prefer it, if the Fed were within the Treasury. They also dearly wish that the "buffer stock" used to ward off inflation were not "the reserve army of the unemployed," but rather a reserve army of those employed under a Job Guarantee program that paid a living wage and full fringe benefits. They also think the present economic system is rife with control frauds and looting that redistributes the financial resources of the poor and middle class to the rich, and that comprehensive regulation is needed for such a system. MMTers also believe that the payroll tax is terribly regressive and a very poor instrument of retirement policy. They also believe that we should have a true universal health care system funded by the Government. They also believe there should be a tax system that runs according to certain rules that would regulate inflation in the economy. So, no MMTers don't believe that the present economic system s fairly neutral. They think it is biased towards the wealthy and is full of economic and social injustice.

Anyway, when the right says, "The government has to live within its means just as you do," and the left responds, "We've thoroughly refuted that in these PDFs and conferences. Go read them or you can't respond", I think the right's going to keep winning.

I do too, so fortunately this is a straw man. It s not what we do when we write about the above proposition. We directly refute that view and then site the pdfs and the Conferences if people want further information.

nihil obstet's picture
Submitted by nihil obstet on

Amen, brother! I am truly, truly confused.

We can choose to decide whether to accept the MMT understanding of the financial system we live under; but if the MMT account of the money system is correct, then we cannot choose whether or not to live without MMT, since MMT descriptions will correspond to reality whether we choose to accept it or not.

I think you're saying that it's like the theory of gravity -- Newton's theory provides a better explanation of falling objects that prior theories of natural placement. If so, I agree. An accurate description of how things work is going to be true regardless of whether it's been articulated or not. Where I'm confused is that you have appeared to be presenting it not so much as a theory, but as a political program. Is it one? One example:

All, from Warren Mosler to the newest MMT graduate student, believes that spending should be for public purpose only. That, and only that is the MMT standard. What MMTers mean by public purpose was specified by myself here based on my reading of the MMT literature. No other MMT writer has disputed my characterization. In addition, MMTers make clear that what they mean by public purpose is ultimately to be determined democratically by the voters in a democracy.

When your adherents "believe . . . should . . ." and characterize how terms like "public purpose" are to be determined, you're not talking about a scientific theory. So I write about MMT as a political program, and you say I'm confused because it's a scientific theory. You are absolutely right. This confuses me.

Your "Second" doesn't seem to address anything I wrote, but explain to me how it does if I'm wrong.

Third, if people know and believe this core MMT proposition then they will no longer believe politicians when they say that the Federal Government is running out of money.

Another problem I have is understanding the audience for your writing. Who are these people? Here on this blog you have readers who have the interest, time, and energy to work on political/economic issues, and you see how much difficulty there is in convincing us of your premises. We may laugh about Tea Partiers who say "Keep government out of my Medicare," or sneer when George Bush says, "some in Washington. . . want the federal government controlling the Social Security like it’s some kind of federal program," but it's much less usual to understand details of how that check gets in your mailbox than I think you acknowledge. I know a number of well educated, politically active people who think that FICA taxes are income taxes -- it's a tax on their income, so . . . .

And then there's the issue of which government. Americans live under three or four governments -- federal, state, county, and municipality. It may be possible to get them to understand that MMT applies to federal programs, but not to any of the others, but I wouldn't want to try this as part of a mass movement. I can say from experience in disaster recovery programs run in the same region by various levels of government that people really don't spend time keeping them all straight.

Or by people, do you mean a political class? A technocratic class? A select readership, few though fit.

In short, your "Third" and "Fourth" state a different view of what we can accomplish in getting a democratic mass of people to know and believe a theory that apparently takes a great deal of explaining. And the more explaining it takes, the easier it is for the talking points to be highjacked, for insidious explanations to be thrown in, for experts to tell the people that they are just too uninformed and ignorant to speak. Or as it's been stated in this comment thread, "casual readers" should quietly accept that the authorities on the subject are right. This is a characteristic that does not promote democracy.

Fifth, you're assuming that our goal should be democratic control of the money supply.

To be more precise, I agreed with Lambert, because I'm just a sucker for democracy. I'm sure the two of you could come to an agreement about whether it's a good thing.

I then said a number of things about what I have and haven't seen in MMT people and MMTers. To specify, what I've seen in MMT people and MMTers is the writing on this blog. I was trying to disagree in a way that didn't seem to be calling out anyone personally. My thinking was that those of you writing on MMT here believe strongly not only in the theory but in the need to get others to believe in it. So when I say I haven't seen something, and you reply, "No, what do you think Bill Black is always writing about?" Control fraud, maybe? Or to be more serious, I am talking about what you have not communicated to me on a subject that you're trying to communicate on. Yours apparent urprise should be not at my knowledge gap but at your communication gap.

And this goes for the rest of your comments on what I don't know about your subject. Everybody from the Unabomber to the Pope in Rome has vital manifestos that they believe I ought to read. I don't even watch a movie without considering whether it's worth my time. So frankly, unless you can convince me that reading all the stuff that you say I should read to understand your subject is a better use of time than all the other stuff I would have to give up, it's not going to happen. I mean David Graeber convinced me that his massive book on debt was worth reading, so I read it. That's to say that I can be convinced that relatively dense time-consuming reading on economics is worth the time, but you haven't done so. And this works for everybody. As you say in regard to my link,

I think MMTers are very aware of exisitng predistribution in the economy; but perhaps the predistribution they call attention to isn't the same that Dean Baker writes about. And perhaps that because he doesn't think about predistribution in the context of analysis of how are current fiat money arrangements are benefiting the financial sector every single day.

And perhaps he does.

I hope you can understand what I wrote here. I apologize if I'm simply too confused to write sentences that have any meaning.

letsgetitdone's picture
Submitted by letsgetitdone on

My second point was required for my third. It did not directly answer anything you wrote.

The primary components of the MMT Knowledge Claim Network (KCN) include: the Social/Value Gaps; the Knowledge Gaps (Problems); the Descriptive Components (including Solutions); the Policy Prescriptions; and the Narratives. MMT is all of it. Sorry things are so complex, but that's the way it is. I've described them here.

I think one problem your having with what I say is that you have a view of scientific theory as purely descriptive. Scientists believe this alright. But it's a myth, there's no fact-value dichotomy that makes science value free. See here for more on this point.

Now to communications. The points I want to communicate to most people are actually fairly simple. They're contained in a speech I'd like the President to make one day. It's in this post. I really don't think Americans watching it will have a problem understanding it. Economists may have a problem. But other Americans, no!

As for explaining MMT, how I'd tackle that is not overly complex either, though it's aimed more at politically aware people than others. It's here.

For economists and people who are knowledgeable about public affairs, there are plenty of MMT posts, research papers and blogs available. Some have technical language, others are written very simply. It depends on the audience, ad the skill of the writer. Sometimes we pitch our writing to our audience successfully, sometimes not. Some of us are nearly always more successful at communicating than others. That's life in the fast and slow lanes I think.

We think we're making progress in getting some communicators on board. People like Chris Hayes, Thom Hartmann, and Sam Seder. The more of those people who come to understand what we say, the better, because they normally can communicate more skillfully than we can, and they have more influential platforms anyway. Anyway we'll keep trying to spread our views to communicators like that and to the public at large until we break through.

jo6pac's picture
Submitted by jo6pac on

the cycle-0-paths are removed from the running the show no matter what is put in place it will be kidnapped so the cycle-0-pathes can use it to their advantage.

Submitted by nihil obstet on Mon, 05/26/2014 - 5:42pm

I agree

Submitted by lambert on

I hear this argument all the time and I don't believe it. We need to do a lot of things in parallel. There's no reason to wait for the cycle-0-paths to disappear.

And if the idea if to make cycle-0-paths disappear magically by, say, shooting them:

1) We then become cycle-0-paths ourselves, as the history of the slaughters of the 20th C shows;

2) The system then filters more cycle-0-paths to the top again, as it is designed to do.

What MMT is trying to do is make the con game that the cycle-0-paths run about how money is created visible so people, understanding it, don't fall for the con any more. And not falling for the con, they can really ask for what democracy delivers....

Submitted by Ben Johannson on

@danps,

I'll be honest with you dan, I don't find this piece a particularly effective criticism as it is riddled with internetspeak.

Internetspeak is a form of argumentation whereby one implicitly claims for themselves extraordinary powers, most commonly the capacity to read minds, look into the souls of others through a monitor and the wisdom to make sweeping judgements and vague generalizations about things not so easily categorized. It's a phenomenon that is thoroughly pernicious, degrading communication and preventing effective exchange of ideas as innuendo and logical fallacy can be the only outcome. Note that I am not stating this a problem particular to you or your post; humans communicating from an isolated environment, with no repercussions or checks on their excesses seem to quickly transition to hyperbole and it's a tendency I have to watch for in myself.

An example:

So, trying to increase the top marginal rate: A pipe dream. Having a starved and captured regulatory authority assemble the monstrously complex case required to prosecute individual executives - when the Attorney General of the United States has already explicitly said these very people have been granted a free pass - THAT, my friends, is the real-world approach MMT favors.

That is simply not true. Prosecution is Wray's preferred solution, but Wray is not MMT. You've accused a toolset for analysis of being a fantasy because you don't like the political opinions of one of the men who constructed it. A hyperbolic and polemical statement like this serves no purpose but to stop thinking by the reader.

Calling prosecution a "sin tax" is a transparently phony way to get people to think a fundamentalist MMTer is actually (finally!) proposing a tax.

Again, consider the multiple pejoratives you've included in the sentence. Wray, whose mind you claim lay before you like an open book, is a "fundamentalist", a "phony", a man whose efforts are "transparent" because you can see into his soul a la Bush looking into the heart of Putin. Again the reader finds themselves jarred from the purported topic to process what amounts to a litany of personal abuse. Is your goal here to engage, or to win? Your writing indicates the latter which, if true, means there is no point in any response as you aren't open to persuasion.

Wray has literally no proposal for extracting wealth from elites, and once again: the intellectually dishonest "sin tax" he describes ain't it.

That is simply false. He has no proposal which you like.

Firestone approves of taxing the rich; but he also wants to "diminish the importance of conventional corporate forms in our society, and measures limiting total compensation of executives," and to do so by "legislating structures of vigilance" (needz moar popularizing!)

Joe is not the earthly embodiment of MMT and cannot speak for it in any sense, nor can anyone else including you. If Joe supports using what it reveals about the totality of transactions in a country to fuel change, he has that right and is free to advocate for it. The "needz moar" stuff is childish and I'll just pretend it wasn't written. Suffice to say that adults don't speak this way and I think you're smart enough to understand that.

But again, that just highlights the problem with MMT: It's being sold as a theory that is inherently just and progressive when it's just a tool.

Here I assume you've misunderstood. Anything which reveals a greater understanding is progressive, that's how science works. Post-Keynesian scholars accepting MMT have been very up front in acknowledging it is politically agnostic. Any conservative, liberal, libertarian, fascist or communist can accept it as an advance in describing the existing financial system and its interactions with the real economy at an aggregated level.

The overarching problem bedeviling your argument is that, rather than write a criticism of what has come to be called MMT, you've criticized methods of advocacy and political opinions. MMT itself survives unscathed as you've avoided confronting it directly. If you're really serious about a discussion then you need to be specific and direct; I am therefore asking you to answer the following so that discussion can begin and even be advanced:

1) What are your specific objections to the Sector-Balances or Sectoral Balances model?

2) Why is creating and destruction of net financial assets not under control of the state?

3) Why is Lerner's Functional Finance not workable?

4) Why do you favor increased use of mathematics as practiced by the neoclassical mainstream?

5) What is inflation why do you find MMT more problematic in this regard than other approaches and what approach you think more effective?

6) What are the flaws in Beardsley Ruml's description of the monetary system and the use of taxation?

6) What political and economic systems and institutions are, unlike MMT, immune to corruption and misuse?

7) Why do you reject Keynes' and Kalecki's theories of effective demand?

Do that and we can talk more.

danps's picture
Submitted by danps on

Starting at the end, I suspect you already know my answers to your seven mandatory questions. I said up front I'm not an economist and have no formal training. Your questions make it pretty clear you don't believe laymen are qualified to discuss MMT. Fair enough. Let me know how the popularizing goes!

I suppose that last sentence contains the dreaded Internetspeak, sorry. I'm not going to do a point-by-point response to your blockquoted critiques, both for brevity and because I think one well-explained answer should give you an idea on how I'd answer the others. So:

Prosecution is Wray's preferred solution, but Wray is not MMT. You've accused a toolset for analysis of being a fantasy because you don't like the political opinions of one of the men who constructed it. A hyperbolic and polemical statement like this serves no purpose but to stop thinking by the reader.

Wray calls taxing the rich a fool's errand (how is it hyperbolic to say he's characterizing it as a pipe dream?) and does not mention - or even allude to - anything beside prosecution. If that's a preference then it's an exclusive. As for "Wray is not MMT," I never said he was the entirety of it. He's presented as an expert, and if he presents weaksauce arguments you need to do better than say "he's not MMT." His so-called toolset for analysis is a fantasy because, as I linked to in the article, the nation's top law enforcement official has explicitly taken it off the table.

I have no idea what Wray's politics are, and even if I did I would have kept them out of the piece. Words like "neoliberal" have already proved to be enormously (and IMO needlessly) divisive, so I'm not interested in trying to divine the political persuasion of any MMTers.

I will gladly cop to the piece being polemical though. I understand that runs the risk of turning people off, which it clearly has in your case, but I think it's the best style for grabbing people's attention and demanding an answer. Which is what I want, because I post about topics that are more than theoretical to me. These things are of sincere and passionate interest to me, and putting in a bunch of "my distinguished colleague" throat clearing makes it come across as a purely academic inquiry.

I must say, I appreciate your candor here:

Any conservative, liberal, libertarian, fascist or communist can accept it as an advance in describing the existing financial system and its interactions with the real economy at an aggregated level.

That actually gets to the heart of my concern. One of my main points is that MMT is just a tool. It is not inherently just or equitable (or unjust or inequitable). All depends on how you use it, right? But the impression I've gotten (moderate reading and with selection bias of course) has been that there's something inherently progressive about it.

There isn't. Could be used that way, but no guarantees. Thanks for saying as much.

Submitted by lambert on

Ben writes two things. The poster quotes only one. Here:

I must say, I appreciate your candor here:

Any conservative, liberal, libertarian, fascist or communist can accept it as an advance in describing the existing financial system and its interactions with the real economy at an aggregated level.

That actually gets to the heart of my concern. One of my main points is that MMT is just a tool. It is not inherently just or equitable (or unjust or inequitable). All depends on how you use it, right? But the impression I've gotten (moderate reading and with selection bias of course) has been that there's something inherently progressive about it.

There isn't.

But there is. Here's what the poster left out:

Anything which reveals a greater understanding is progressive, that's how science works.

I agree. This is how we learn to engineer better airplanes, say; or garden better; or learn. All forms of progress.

Pro tip: When you're going to take statements out of context, don't do it on the same thread.

UPDATE Adding, once again, the poster seems to be demanding an intellectual tool that can be used only for good, and never for evil. I would like to have an example of one such. I don't think there is one. The poster claims some sort of victory after having trapped his interlocutor into admitting a truism.

Submitted by lambert on

I am not so instrumental in my writing that I regard out of context claims as trivial.

This one is important, because the idea of progress, civilizational advance, as a process of truth-finding and truth-telling is, I think, useful and interesting.

danps's picture
Submitted by danps on

I am, however, not available 24/7 to respond to your very much appreciated comments.

As to what I "left out," you appear to be unclear on the concept of block quoting. One takes what one thinks is a relevant excerpt, copies and pastes it, then comments. There is sometimes controversy over allegations that ellipses are misleadingly placed, and I try to avoid using them for that reason.

That's not what happened here. The point that I have been trying, vainly, to get you to understand is that MMT can be used in the service of any ideology. It can be used in the service of liberalism, or libertarianism, or conservativsm, or any other political school of thought.

The block quote was used to point that out. The part about greater understanding is not relevant to that point so I did not include it. Yet in your fertile imagination that is a great deception.

And frankly, your unwillingness to acknowledge (much less rebut) that point is the real crickets in this thread. That and your silence regarding one of the main themes of the piece (the antidemocratic nature of Forget Taxes, just to refresh your memory (if it made it that far the first time)).

You've gone totally off the rails here, lambert. You haven't addressed the thesis at all. I've tried to address the issues you've raised as forthrightly as possible. You don't seem to be able to process those answers (I responded to the "once again, the poster seems to be demanding an intellectual tool that can be used only for good" charge earlier today, for instance). You've reduced your arguments to crazypants Internet Debate Club moderation (blockquote foul!) and painfully minute text examination (hm, here's what I think about "passion," and "equanimity," and "sincerity").

So I'll keep an eye on the comment thread but I won't be responding to any more of your comments on it. Feel free to call that crickets, and say I concede because I am simply unable to respond to your sublime answers, and am guilty of not addressing points head on which oh my gosh did you see where I accused MMTers of that in the post itself?! Interpret it to the best of your creative ability. I'll never accuse you of lacking that.

Submitted by lambert on

But that's life, I guess. I'll clean up this thread tomorrow. It should take more than four or five hours. Thanks for the opportunity to serve.

UPDATE Sadly, what with horribly connectivity problems, and travel, I didn't get to this. Hopefully tomorrow, in the context of "poisoning the well."

Submitted by lambert on

.... think insulting the moderator is a clever move. In fact, it's a suicide request (see rule 6), which I am granting, for reasons I will sum up in a forthcoming post saluting you, Dan, for your very useful compendium of techniques for poisoning the well, both in your posts and your comments.

I'll address the single point at issue: Did you take a statement out of context?* Yes. Je repete:

[LAMBERT:] Ben writes two things. The poster quotes only one. Here:

[DAN:] I must say, I appreciate your candor here:

[BEN:] Any conservative, liberal, libertarian, fascist or communist can accept it as an advance in describing the existing financial system and its interactions with the real economy at an aggregated level.

[DAN:] That actually gets to the heart of my concern. One of my main points is that MMT is just a tool. It is not inherently just or equitable (or unjust or inequitable). All depends on how you use it, right? But the impression I've gotten (moderate reading and with selection bias of course) has been that there's something inherently progressive about it.

There isn't.

[LAMBERT:] But there is. Here's what the poster left out:

[BEN:] Anything which reveals a greater understanding is progressive, that's how science works.

[LAMBERT:] I agree. This is how we learn to engineer better airplanes, say; or garden better; or learn. All forms of progress.

Your answer:

[DAN:] As to what I "left out," you appear to be unclear on the concept of block quoting. One takes what one thinks is a relevant excerpt, copies and pastes it, then comments. There is sometimes controversy over allegations that ellipses are misleadingly placed, and I try to avoid using them for that reason.

OK, so the question is what is relevant, right? So here we go:

[DAN:] That's not what happened here. The point that I have been trying, vainly, to get you to understand is that MMT can be used in the service of any ideology.* It can be used in the service of liberalism, or libertarianism, or conservativsm, or any other political school of thought.

The block quote was used to point that out. The part about greater understanding is not relevant to that point so I did not include it. Yet in your fertile imagination that is a great deception.

Bullshit. The part about "greater understanding" is Ben's definition of what "progressive" means! If Ben claims that MMT is progressive, and you deny Ben's claim, you need to take his definition of "progressive" into account! When you don't, that distorts Ben's meaning. That's exactly what Rainbow Girl did immediately below; that's because she is arguing honestly, where you are not. See See rule 4.

* * *

As for your expectation that I, personally, answer all of your points ("your silence"), sadly, I wasn't put on earth to live up to your expectations. My mother always said: "Do what only you can do." There are other people at Corrente who are far better at explaining MMT than I am, so why should I do that? What I am equipped to do is detect bullshit where found, and deal with it, as here. The whole "debate" riff is just pounding the table.

NOTE * Definition, quoting Wikipedia:

The practice of quoting out of context, sometimes referred to as "contextomy", is a logical fallacy and a type of false attribution in which a passage is removed from its surrounding matter in such a way as to distort its intended meaning.[1] Contextomies are stereotypically intentional, but may also occur accidentally if someone misinterprets the meaning and omits something essential to clarifying it, thinking it non-essential.

NOTE ** Elsewhere on the thread I show that I understand this point perfectly well. What Dan wants is a pony that can be ridden only in one direction. The good direction. This is futile.

UPDATE You may find the textual examination of your points painfully minute; that's because they were designed to be painful. To you. As, by your reaction, they seem to have been.

Rainbow Girl's picture
Submitted by Rainbow Girl on

If in order to square Mr. Johannsen's post with a claim that he thinks MMT is "progressive" the definition of "progressive" is now "anything that furthers understanding," aren't we straying a bit far from the heart of the matter -- creating an economically just society? I think we're all on board with the notion that "gaining better understanding" of things in general is a good thing, but I don't think even Mr. Johannsen meant to say MMT was "progressive" when he spoke about "furthering understanding."

Elsewhere in this thread Johannsen says that MMT is politically agnostic. I can't wrap my head around how that squares with a claim that MMT is "progressive" in any sense related to the pragmatic issue of formulating policy.

Really confused, and I don't think I'm the last turnip to fall off the truck. Also, I am not a troll.

joebhed's picture
Submitted by joebhed on

How 'bout the platform of the last Progressive Party?
It's the least progressive of those going back to the Greenback Party in the 1860s.

The 1912 Progressive Party Platform……
Currency
We believe there exists imperative need for prompt legislation for the improvement of our National currency system. We believe the present method of issuing notes through private agencies is harmful and unscientific.

The issue of currency is fundamentally a Government function and the system should have as basic principles soundness and elasticity. The control should be lodged with the Government and should be protected from domination or manipulation by Wall Street or any special interests.

We are opposed to the so-called Aldrich currency bill, because its provisions would place our currency and credit system in private hands, not subject to effective public control.
END

MMT? Progressive?

The evolution of political economics has long been about this exact issue. Which is what I don't understand about MMT's defense of the private, debt-based system of money creation and issuance.
It ought to be undone.
Lord Adair Turner, former chief of the UK's Financial Services Authority, and noted Economics author and Financial Times editor Martin Wolf agree with this point, except Turner would not end private money creation completely. Yet.

Submitted by lambert on

.... is notoriously confused, and often by Democrats. "Left," "liberal," "progressive," and even "populist" are all intermingled together and used more or less interchangeably. When Joe (I have too many windows open now, but his quote is "near" this one) suggests using the platform of the Progressive Party to define progressivism, he proves the point, really.

So, I rather like Ben's definition of "progress," and I regard the word "progressive" as so polluted by the career "progressives" who wrecked single payer's chances in 2009 that I would never use it to describe any set of policies I supported without a long and suspicious look.

UPDATE Adding no, you're not a troll, because you're dealing fairly with Ben's point.

Submitted by lambert on

The poster writes:

I'm not going to do a point-by-point response to your blockquoted critiques, both for brevity and because I think one well-explained answer should give you an idea on how I'd answer the others.

I can only imagine the flaming coals the poster would heap on the head of the MMTer who tried to run that riff. Because doesn't it remind you rather a lot of this?

... a refusal to either sharpen up good, concise responses to criticisms or to have easy links back to relevant quotes ...

[I]nstead what I see - and you do it once again in your comment - is to say "we've answered this before, we're tired of answering all the time, check the archives."

Alas, the weather seems to be interfering with the reception on my telepathic helmet and I'm getting too much static, so, no, I have no idea whatever how the poster would answer the others. In any case, why should I do their work for them? (To be fair, one difference between MMTers and the poster is that the poster, as a "casual reader," has no archives, not having done either any scholarly work or much blog posting on the topic besides this one example.)

More seriously, we see once again in this comment, as we saw in the poster's response to my own comment, the poster's unwillingness to take careful, point-by-point responses seriously.[1]

Finally, if you believe that MMT commenters are acting in good faith, then you will also believe that they, too, in the cut and thrust of ill-paid and time-consuming online debate, resort to shorthand, get tired, have stuff to do, and write much as the poster did here. Perhaps the poster wanted to go out and garden; I sure did.

Isn't it time that the poster granted MMTers the same license that he grants himself?

NOTE [1] And to then accuse MMTers of being unwilling to address concerns "head on" really takes chuzpah!

danps's picture
Submitted by danps on

In case you hadn't noticed, there is quite a bit of commenting on this post. I'm keeping up as best I can, checked in early this morning to respond to what I could, I've just checked in again to respond to what I could, and I'll try to keep up with the threads both here and elsewhere.

But no, I can't necessarily give a complete reply to every comment. But there's quite a bit of difference between this:

You just left a very long, multi-point comment that touches on several themes. Here is my response to the first of them, and please use it as a template for the rest. You say hyperbolic, I respond....(etc)

And:

ZOMG Zimbabwe PS check the archives.

I don't have enough hours in the day to chase down nonsense like that - no matter how many hours in the day there are. I'll periodically check responses elsewhere as I can, but I'm not going to have anything else to say in this part of the thread. Seriously lambert - this one was a reach.

Rainbow Girl's picture
Submitted by Rainbow Girl on

You wrote:

"Any conservative, liberal, libertarian, fascist or communist can accept it as an advance in describing the existing financial system and its interactions with the real economy at an aggregated level."

Simply for clarification, as there has been much debate here and at the NC thread on this issue, are you then saying that MMT is not inherently a system of values that requires or prescribes a more equitable distribution of money in our society? As opposed to, for example, an agnostic description of "how money creation actually happens" (rather than "how money is distributed through the economy and our society").

(Also, I've never heard the phrase "as an advance" - if that is an MMT phrase that I should know about already, please accept my apologies in advance.)

Submitted by lambert on

... as being "value neutral." It's certainly quite different from the ethic of "I've got mine, now you get yours" that permeates neo-liberalism.

That said, there's no question that "public purpose" is contested, generally by restricting the definition of what the public is, as they are doing right now in Thailand. Once again, there is no theory that will come down from the sky and deliver democracy to us; but there are theories that make democracy harder or easier to attain.

The Nazis, for example, surely practiced military Keynsianism. That doesn't make Keynianism fascist, so far as I can tell.

Similarly, MMT could be used for good or ill; it's a toolkit, as Ben said.

I like to think of MMT as handling the plumbing. Good plumbing is very important, as you know if you ever had the pipes fail. There is also an ethic to plumbing; the plumber should exercise all this skills of their craft as a contractor, shouldn't put in cheap stuff when good stuff was specified, needs to deliver toilets that actually flush and sinks that actually drain, needs to make sure sewer gas doesn't blow up the whole house, and so on. (We could think of neo-liberals as rotten plumbers who did blow up the house.)

All that said, the house design as a whole is not up to the plumber, but the architect. In a democracy, we the people are the architect! And it is up to us to design an ethical house, and also to determine the plumbingin the house.

NOTE If MMT speaks to distribution as a toolkit I'm not aware. However, MMTers definitely speak to distribution in the policies they recommend; that's what Wray did in advocating for pre-distribution; as you know, I happen to agree with him, for reasons stated in the post.

Rainbow Girl's picture
Submitted by Rainbow Girl on

I like your metaphor of the plumber and the architect and their respective roles in building a good house.

I do have one "hmm", though. Applying this metaphor, isn't it the case that the Neo-Liberals have been using MMT as "plumbing" in the Quantitative Easing program? In other words, haven't neo-liberals been using what you call "good plumbing" (MMT money creation in the form of QE) to build the wretched house of inequality we have now? I'm not sure if any of the MMT experts have written on the QE programme(s) as examples of MMT's descriptive plumbing (so to speak!).

Submitted by lambert on

They could say "crapper" so they said "toilet" and even that was too much so they said "water closet."

We live in a fiat money regime. What The Powers That Be (very much including the Fed) do is use the power of fiat money to their own ends, and then obfuscate the very existence of what fiat money is and what they do with layers and layers of bullshit.

What MMT does is clear away the obfuscation. With clear sight and understanding, we can see the possible alternatives and press for them.

[The "clear sight" and "understanding" are necessary, but not sufficient, like anything else. What Dan seems to be claiming is that they are not necessary. I don't agree.]

I do think the best word is "thought collective." All the MMTers are using tools from the same toolkit but with different emphases. For example, on the Jobs Guarantee, Mosler believes in lower wages than others. But all accept the necessity. The level is for us to battle for, like anything else.

I'm sure there's an MMT paper on QE, but it's late and I don't want to look for it. And I'm not a QE maven anyhow....

nihil obstet's picture
Submitted by nihil obstet on

Shades of The Fountainhead!

I think democracy took a big hit when the supposedly liberal party of Democrats started defining governance as a technical issue back in the 70s. The final decision about the house we live in should be ours, and all of us will no more train as architects than we will as plumbers.

The focus on technical issues has permitted the argument, "If you citizen can't define how to do it, it can't be done." And it's been effective in creating helplessness to the people. Instead, we should hold firm to the argument, "We are a rich nation. We can feed, clothe, educate, and house our people. If you professional can't figure out how to do it, we'll give you a job in retail service and get a professional who can." If we rely on substituting a new, improved technical framework, we don't address the basic issue of democracy.

Submitted by lambert on

The 12-Point platform is all about delivering concrete material benefits.

But that needs to be backed up by "how to get there." I really don't agree that we should punt to the professionals with "if you don't know how to do it." Because then we're empowering them, and we get right back to whatever fucked-up neo-liberal concept they've got going.

For example, when we get to the point of implementing single payer, I wouldn't want to hand the job over to the public option crowd without very firm parameters about what they couldn't do.

And on MMT, see the postcard post. I like MMT because it cripples so many of the fiscal arguments neo-liberals use, and provides the framework for us to do what we need to do. Do the real resources exist? They do. Then the money for them can be made. (MMT also has the great merit, as Kissinger said, of being true. (True not as religion is true, but as plumbing is true.)

nihil obstet's picture
Submitted by nihil obstet on

I started commenting on this post for two reasons. One was to express distress at the splintering between those who should be working together. The other was that I think the 12-Point Platform is a very useful project, and I have reservations about including MMT as a necessary part of it. After reading these several posts and the comments, I'd have to decline signing on to something that includes MMT as a necessary belief.

Part of it is that I don't understand how language is being used. I don't see a significant difference between "RELYING on" and "needs to be backed up by . . . ." On the other hand, I thought I was clear on dismissing any professionals who don't give us what we want (in the same way I dismissed the plumber who couldn't give me the shower controls I wanted), but you see it as "punting to the professionals" and being hauled back to "whatever fucked-up neo-liberal concept they've got going." No, it's not the concept; it's the real world result! As I say, this is the other hand where I see a significant difference and you don't.

I don't see that the discussion has been persuasive to either of us on the effectiveness of theory. I'd paraphrase Upton Sinclair, it is impossible to get a man to agree to something when his interests depend on his not agreeing. So Reagan and Bush 1 ran up huge deficits, Clinton brought them down, Bush 2 ran them up again because as Dick Cheney famously declared, "Reagan proved that deficits don't matter." and clearly deficits don't matter to bank bailouts and quantitative easing. In other words, the elites' desire for tax cuts, wars, and massive giveaways to themselves do not cripple neo-liberal arguments, so I don't see MMT doing it. There will always be new justifications for greed and its supporting policies. This is not to demean work to develop accurate descriptions of how things work, but I still find it a distraction for activists, and an occasion for internal squabbling.

While I have a number of issues with what appear to be MMT positions, I'm not seeing enough clarity here for anything I say to be anything other than incitement to anger, so I'll just give one more reservation on agreeing to MMT as a necessary component of an activist platform. That is, that I wouldn't know what I was agreeing to. What's very clear to me is that I can't carry on a discussion with those advocating MMT here without getting a lot more into the implications than I can see it's worth. And I've been in enough controversies where the opponent says, "You want X. Or at least you say you believe in theory A, and that's what Dr. ExpertInA says, so if you now claim you don't want X, you're a hypocrite." I'm not going to subscribe to a set of positions unless I know the positions. The MMT postcard addresses a few of the points, but having read these posts and comments, I have difficulty believing that it's complete.

Rainbow Girl's picture
Submitted by Rainbow Girl on

Understood. But the poster's sentence (the one in block quote in my reply post) seems naturally to imply (since it doesn't mention public purpose) that MMT could equally be used in the service of a fascist public purpose as in the service of a libertarian one, etc.

Looping back to your comment, then, I'm scratching my head a bit on how a fascist public purpose would be "better than" "I've got mine, now you've got yours." (*)

(*) Though from a historical point of view, political economies of the fascist regimes in post WWI Europe may have had a (positive) "distributive" effect on the majority of the subject populations. I have not studied this subject. The focus of the history classes I had in high school and college that dealt with Hitler's Germany and Mussolini's Italy was primarily on the non-economic subject of the genocide programs against "undesirables" (including Jews, gypsies, and the "mentally feeble.")

Submitted by Ben Johannson on

Well, every economic system that's existed has been used to evil purpose. And they've also been used for good. If our condition for moving into the future is that whatever we do must be impossible to misuse, we'll be sticking with what we've got which is being misused anyway. I do not consider myself to be wise or particularly intelligent, but I do think that fear exists to warn us of danger, not to have us run from it. People are suffering terribly, neofeudalism is openly declaring itself, the fascist right is on the rise in Europe and democracy across the planet is all but dead.

We have to keep the good and excise the bad.

joebhed's picture
Submitted by joebhed on

And the practice of corporate money creation and issuance for private profit, at the expense of the compound interest paying public out there, is the good part?
There's gonna be a revolution, Ben.
The science, the history and the law are all on our side.
This is OUR sovereign fiat money system, and the 'partnership' thing has not worked out.
https://archive.org/details/roleofmoney032861mbp

Submitted by Ben Johannson on

I think politically agnostic is a very accurate term.

MMT at its core is an integration of Post-Keynesian literature from the past seventy years.
The sectoral balances model for example tells us that one sector's deficit is another's surplus. Observations by a number of economists like Keynes, Knapp and Ruml inform our understanding of money in the new system we adopted after the Great Depression. So when I say "advance" I mean it provides a better understanding of the world around us than the mainstream narrative. Someone spending a few weeks learning the fundamentals will be able to predict interest rate changes better than Paul Krugman or Bill Gross or any politician.

Economists on the left have been the "early adopters" of MMT because it offers an alternative to the current description that keeps tens of millions in poverty and on the unemployment line. Could conservatives adopt it? Sure, but what would change that they aren't doing already? These are people who already pay themselves up to $3 billion per year while the Republicans spend freely on wars and the military-industrial complex, because some of these things are already common knowledge among the elite. Paul Ryan and Pete Peterson are well aware Social Security can't run out of money and that we don't borrow from China. But they prey upon the ignorance they have helped to create. Most of what you see coming from the MMT "camp" is intended to spread the same knowledge to the people. In that sense MMT is largely a public education effort.

Rainbow Girl's picture
Submitted by Rainbow Girl on

How does this square with the MMT claims about making a better, more equal, more humane society? Because the latter lie in the realm of policy, not "descriptive plumbing" or "technical toolkits."

Now I'm confused all over again.

joebhed's picture
Submitted by joebhed on

“” and Ruml inform our understanding of money in the new system we adopted after the Great Depression.””

Really?
There was a new money system adopted after the Great Depression?
Where was I?
Do you mean Bretton Woods?
To say we adopted anything would command a record of that adopting and the new thing adopted……the new money system.
Where would that record be, and what was the new system of money adopted?
None.
No new system of money was adopted.
Same old, same old.
The corporations create 'money' which represents real purchasing power in the economy through their debt-contract based issuance powers.
And they use that money-power to run our government.
And it’s just been legalized by the Supremes.
Hey, if that’s okay, ‘nothing to see here.’.

Alexa's picture
Submitted by Alexa on

I'm too tied up now to search for bookmarks, but will try to post a couple next week on the "taxing of the mostly poor" for social services (specifically the expansion of CHIPS).

Also, proposed in the Administration's Budget--possibly already passed, but I need to check this out to make sure, since it's been a while since I've read anything about this budget proposal--is yet another raising of the federal cigarette excise tax in order to pay for yet another social program--universal pre-K.

And, IIRC, approximately one-third of cigarette smokers are in "deep poverty."

Per The Urban Institute:

"This is deep poverty: living on less than $6,000 a year, or raising a child alone on roughly $7,600. More than 20 million adults and children in the United States get by on that or less."

And since the dismantling of the New Deal program AFDC (Aid To Families With Dependent Children) in the 90's, per The Urban Institute:

". . . piecemeal supports for food, health care, and child care aren’t designed to lift people from poverty, much less deep and persistent poverty; neither is cash assistance, which reaches fewer than one in three poor families through a fixed block grant that has eroded in value since 1996. What’s more, TANF does not count “poverty reduction” as one of its goals.

And all this is going on, while Dems and Repubs are planning to slash marginal tax rates for the wealthy and corporations, most likely in the 6-8 months following the midterm elections.

C'mon, now--Dave Camp didn't put forward his noxious tax "reform" plan for his health. From what I understand, he and Max Baucus ran around like Punch and Judy for several years shilling for their almost flat tax "reform."

What I don't get is why so-called progressives aren't up in arms over tax reform which will considerably raise taxes on lower income Americans, while slashing them for corporations and "the wealthy." (PBO has assured Repubs that the closing of loopholes will be done in a "revenue neutral" manner. I've linked to the Financial Times piece here several times in the past.)

We may have less than half a year to try and beat back this legislation being proposed. Yet, since the blogging community got fired up in Spring 2013 against the passage of a Grand Bargain, it has mostly gone silent on this topic.

Remember what Rep Jan Schakowsky had to say about the Grand Bargain:

The Sham Of Simpson Bowles

Have Simpson-Bowles’ champions read it? Given any real scrutiny, this plan falls far short of being a serious, workable or reasonable proposal – from either an economic or political analysis.

In one of its few specific points, for example, Simpson-Bowles mandates a top individual tax rate of 29 percent “or less.”

Much like the vague Romney proposals, the Simpson-Bowles plan would make up the shortfall by eliminating tax loopholes, suggesting options such as having employees pay taxes on their health benefits. Not only is this likely to increase costs to middle-income families, it could threaten coverage altogether.

[And I'm one of them who's going to be "madder than h*ll."]

The proposal for corporate tax reform would eliminate taxes on profits earned overseas, rewarding companies that move jobs offshore.

What's wrong with this picture?

;-)

letsgetitdone's picture
Submitted by letsgetitdone on

But what's the rationale for the BS plan in the first place? The faux deficit/debt reduction problem. So what's the quickest and easiest way for the president to take that faux problem off the table while demonstrating it WAS a faux problem. Minting the $60 T and coin and depositing it at the Fed.

Alexa's picture
Submitted by Alexa on

support the addition of any more social welfare programs, etc., in a climate where the wealthy and corporations insist of the lowering of their marginal tax rates.

It is absolutely unconscionable to tax those living in "deep poverty" to fund CHIPS and Pre-K, while letting the Elite Powers That Be completely off the hook, in regard to implementing a hike in their marginal (income) tax rates.

And I've also had enough of the Democrats' "defined contribution" proposals, which are destroying ALL of our employee benefits--what few we have left, that is.

(Don't care if that want to set up a voluntary system for those with no benefits, but will vehemently resist being drug into another of their hairbrained programs.)

Frankly, the ENTIRE Democratic Party is the "more effective evil." They can all take it and shove it--from Reps Schakowsky and Grijalva to the most corporatist DLCers/Third Wayers/No Labelers.

Trust me--I'm being quite charitable when I say this. What I really think, would not be fit for "family hour." ;-)

V. Arnold's picture
Submitted by V. Arnold on

...even the possibility of abuse is wrong.
Capitalism as practiced is inherently detrimental, destructive, of society and environment.
I'm strictly an intuitive person, which has served me well, these 70 years; and this whole discussion seems bent on theory, while failing to see the results of, what?, 80+ years of failure!
What I see is a total lack of common sense. And that is as simple as I can put it...

quixote's picture
Submitted by quixote on

Harrumph. I beg to differ. Those are exactly my objections: how is this applied in practice and how does it resist abuse? Because you can count on attempted abuse of financial systems. I feel fairly innocent of the charge of lacking common sense! :D

letsgetitdone's picture
Submitted by letsgetitdone on

Me too. That's one of problems intuition and common sense both. Mine will be different from yours most of the time, and I'm just as convinced as you are that my own intuition and common sense are more valid then yours. So do me a favor. Don't tell me about intuition and common sense. Show me how my arguments are wrong and yours are right!

scottfullwiler's picture
Submitted by scottfullwiler on

So many straw men in this post that I'll just go at a couple corrections. But suffice it to say I find it odd that one who is admittedly a "casual reader" of MMT sees himself fit to write a five bazillion word post critiquing it. It's not like we haven't seen that before, though--apparently when it comes to economics, politics, and religion (and now science if you're on the right), everyone's an expert.

Anyway, here goes . .

Regarding requiring a tool that isn't corruptible--and assuming that MMT is--as others have remarked, that's a ridiculous standard. And you're inconsistent with your own standard as you cite both traditional Keynesianism and Marx approvingly here--Keynesianism repeatedly in the comments, too. Talk about two that have been "corruptible"! Ever heard of Military Keynesianisms? Or Bastard Keynesianism as Joan Robinson called it? And Marx!?! Wow.

Regarding "what MMT offers that Keynesianism doesn't" how about this: Social Security and Medicare are not in trouble now or ever, and CANNOT be. How many traditional Keynesians have you seen say that? Not Krugman. Not DeLong. Maybe there's someone I've missed, but if so, he/she is not within the traditional Keynesian paradigm. In one fell swoop, you've undercut the Petersons, Bowles, etc.

Another one--there cannot be bond vigilantes, not now or ever, unless the govt allows it through it's own stupidity. The interest rate on the national debt is always a policy variable, even if by neglecty. I've never seen a traditional Keynesian say this. And again we see most arguments against deficits eliminated in one fell swoop.

Regarding the view that you can do MMT without the job guarantee--WRONG.

The point here is that via MMT we recognize a necessary choice--you are in favor of an unemployed buffer stock along with all the socio-economic problems that brings, or you are in favor of an employed buffer stock. Those are the only two choices. We argue via evidence and logic--i.e., scientific inquiry at least as it goes in the social sciences--that the employed buffer stock is the better choice regardless of whether you are coming from the left or the right.

As I like to put it, think of whatever your favorite solution is to a recession--whether you are on the left or the right--and now recognize that your favorite solution requires either an employed or unemployed buffer stock necessarily. So, then I challenge them to explain why their favorite solution + an unemployed buffer stock could possibly be better than their favorite solution + an employed buffer stock. And MMT shows that you can always afford financially AND in terms of real resources an employed buffer stock--traditional Keynesianism does not.

Now, some favor a basic income guarantee to deal with unemployment. Again, we challenge them--how is a basic income guarantee alone better than the choice of the basic income guarantee vs. a basic income guarantee + a job guarantee?

So, to conclude, returning to "what can we do with MMT that we can't with Keynesianism?" we have three things that you get out of MMT that traditional Keynesianism lacks:

1. SS and Medicare have no problems now or in the long run, and CANNOT
2. Interest on the national debt is necessarily a policy variable
3. There is always the option of an employed buffer stock over an unemployed buffer stock, and the employed buffer stock is logically and empirically the better option regardless of your politics. MMT shows that you can always afford the employed buffer stock in both financial and real terms.

I challenge you to explain why it's better for a liberal to go with a theory that doesn't recognize these 3.

And for the record for those commenters that have suggested otherwise--MMT HAS ALWAYS BEEN AGAINST QE. ALWAYS. If you don't know that, then you shouldn't even call yourself a "casual reader," IMO.

scottfullwiler's picture
Submitted by scottfullwiler on

I’m going to add a bit to my main points here. Hopefully that’s ok.

Dansp’s own preference for traditional Keynesianism as opposed to MMT since the latter “can be corrupted” or “co-opted” or whatever is ridiculous and internally inconsistent.

Any basic look at real-world economic policy will show that the traditional Keynesians have their fingerprints all over the problems dansp rails against. THEY have already been corrupted. In fact, it started over fifty years ago with the so-called neoclassical synthesis, where the Keynesians (who had already corrupted Keynes—MMT goes back to the original Keynes, btw, which Krugman and other traditional Keynesians butcher) were seen as a “special case” of the neoclassical view, adding mostly just the “problem” of fixed wages that lead to the labor market not clearing. Then there was Nixon saying “we’re all Keynesians now,” Reagan and Bush II’s tax cuts which were essentially “Keynesianism for the Rich,” and so forth.

From there, we have traditional Keynesians like Krugman that believe all of the following, even now:

1. SS and Medicare can become insolvent
2. Deficits and the debt will eventually be a problem if we don’t do something at some point
3. “Printing money” is inflationary by definition if you don’t have interest on tbills roughly equal to zero just like money.
4. There is a loanable funds market.

These all lead rather seamlessly to the following views; even if Krugman doesn’t agree with them, they logically follow . . .

1. Peterson Institute and Bowles/Simpson
2. Don’t raise the debt ceiling, or don’t raise the debt ceiling unless you reduce deficits in the future in kind
3. We can never allow democratic control over money creation or interest rates. In the current environment, we should encourage banks to lend through QE designed by “independent” central bankers.
4. We must encourage owners of capital and rentiers through lower taxes to save and invest so that we can have more economic growth.

Note that it was the Keynesians advising Clinton that recommended signing off on the Gramm-Leach-Bliley Act and the deregulation of futures and CDS. Clinton and Dems could have stopped both, but their Keynesianism had already been corrupted. This is partly because traditional Keynesians, like all neoclassicals, have no financial system in their model. But MMT incorporates the financial system at the outset, and—via Minsky and Bill Black in particular—views the financial system as inherently procyclical and ultimately destabilizing if left to its own or poorly regulated (or if regulations are poorly enforced).

All of this is not to mention that the Keynesian Clintonians believe that their deficit reduction plans are what brought us prosperity in the 1990s—missing that it was the greatest stock market bubble of all time that brought the surpluses, and that it wasn’t prosperity really but rather THE GREATEST STOCK MARKET BUBBLE OF ALL TIME. (I should note that Wray was writing at the time via the same Godley/Minsky-based tools we use now just that—things were very, very fragile, and prosperity wasn’t really happening to the degree most thought. He also showed in real time that Clinton’s “rising tide” was most definitely not lifting all boats.)

Anyway, YES, MMT could be corrupted. But the traditional Keynesianism dansp prefers is ALREADY corrupted in ways that MMT could not be, and it’s created much of the problems we all are complaining about on blogs like this one.

joebhed's picture
Submitted by joebhed on

Scott,
In discussing the obvious benefits of the MMT view over the Keynesian theory of how the economy is and should be working, I am confused by the CANNOT assertion.
That there cannot ever be a funding problem for either SS or Medicare.
That is the claimed benefit of MMT versus the Keynesian view...... of what exactly?
What is it that MMT sees differently that makes it impossible for there to be a funding problem for Medicare?

Thanks.

letsgetitdone's picture
Submitted by letsgetitdone on

Here is my lengthy reply to Dan ps's critique of posts by Randy Wray, and Lambert, and views I've expressed in various places. Please forgive the length.

Dan ps begins:

. . . Here is my brief understanding of the concept, and corrections/clarifications from knowledgeable theorists are appreciated:

Taxes do not fund spending, and there may in fact be no connection at all between the two. Their macroeconomic purpose is to, as Wray writes elsewhere, prevent a "huge increase of aggregate demand, [which] could cause inflation." The federal government simply determines what it wishes to spend on, creates the reserves to fund them, and spends away. Taxes are, at best, a distant concern in MMT. They may in fact be entirely irrelevant, as evidenced by the very first two words in Wray's headline: Forget Taxes.

If that sounds like an oligarch's wet dream to you, you're not alone.

First, isn't this a just a bit selective. What about the next two words “. . . for redistribution”? Don't they count? Also, Randy is quite clear that taxes are relevant for other things apart from redistribution.

All one has to do to see that is to read the blog you link to just above on the MMT approach to taxes. There Randy begins with the point that “taxes drive money.” In other words we must have a certain level of taxation to maintain the value of the currency. Then he quotes Beardsley Ruml:

(1) as an instrument of fiscal policy to help stabilize the purchasing power of the dollar; (2) to express public policy in the distribution of wealth and of income as in the case of the progressive income and estate taxes; (3) to express public policy in subsidizing or in penalizing various industries and economic groups; and (4) to isolate and assess directly the costs of certain national benefits, such as highways and social security. (ibid p. 268)

Randy goes on to clarify what he means by each of these functions of taxation. Does he think that 2) redistributes wealth? No. Instead he thinks it can remove wealth accumulated by certain groups. And also, that Government spending is needed to add nominal/financial income, which can result in accumulation of wealth, to certain other groups.

In short, Randy never claims that taxation is “a distant concern for MMT.” Nor can that conclusion be inferred from his treatment of taxation, since one of the major concerns of MMT is price stability, and another major concern is certainly maintaining the need for the currency.

While 2), 3) and 4) above may seem at first glance to be less important than 1), that really doesn't follow from MMT's basic assumption that fiscal policy ought to fulfill the public purpose. So, if the public defines the elements of public purpose as involving specific instances of 2), 3), and 4), which I think it does, then fiscal policies to perform functions 2), 3) and 4) are certainly based in the MMT view in economics.

As it happens, my own preference is for using taxes in functional areas 1), 2), and 3), to create outcomes that are in accord with the public purpose as I interpret it. And I also think that such uses are certainly consistent with MMT. I think area 4) is much less important and using taxes for that purpose is a distant concern of mine.

As for using taxes for redistribution, I think you miss the point when you say that this is a distant concern of MMT. That's because Randy's point is that in a monetarily sovereign nation like the US, the Government simply cannot use taxes for redistribution, because the banking system doesn't work that way.

The way it works is that taxation destroys private sector money; and then the Government has to spend reserves into the private sector to create new reserves there. For MMT that's just a fact; so taxation for redistribution is not a distant concern for MMT, it's an impossibility. And if people think that's any part of the reality in such systems, then they're just not understanding how things actually work.

As for this being “. . . an oligarch's wet dream . . . “, remember that MMT recognizes 2) as a possibility, subject to the political context. Randy is saying that trying to do that would be ineffective given the present state of the political system, but not all MMT writers believe that; nor is such a point a basic tenet of MMT.

Instead, it's a judgment about what will work in the political system. There is plenty of room for other judgments in MMT; and there is also room for judgments like this to apply differently over time. So, even if someone agrees that Randy may be right at present, that doesn't at all exclude the possibility that next year the political system may change sufficiently to make policy initiatives in the area of 2) quite effective.

Once again, Randy's overall point is that taxes on the wealthy are a heavy lift right now, and that to couple proposals about increased taxation to proposals for benefiting the 99%, is just making it that much more difficult to get things done that the 99% really need. So, he's proposing that the spending and the taxing be decoupled, since they are conceptually distinct, and that the spending ought to occur first, instead of making the 99% wait until both spending and increased taxing can be legislated.

. . . Dan Kervick thought so too and commented (emph. in orig.) (also - "schmunding" is my new favorite word):

The Federal government cannot simply create all the dollars it wants and spend them without blowing up the currency. It has to tax back at least a substantial portion of what it spends. Now some think it it is really important to jump up and down at this point and say, "That's not funding! It's...it's...schmunding!" But it doesn't matter. From a policy point of view it's the same thing. You can and should convince people to run reasonable deficits. It would be nice to convince people at the same to make sure the Fed holds treasury rates down next to nothing so that Federal deficits aren't a tool for the rich to rent-farm the public treasury. But the free-wheeling, what-me-worry fiat money mania that MMT has allowed itself to be turned into is for the birds. It's both a political and economic dead-end.

There was a time when its seemed like the MMTers were going to get serious about price theory, about defining the inflation constraint in more precise theoretical and mathematical terms, and about coming up with policy rules that turned an airy framework into something policy-makers could really grab hold on. But instead they decided to stop doing research, stop engaging with any other economists and focus everything on marketing and "framing" with slogans and pictures.

And of course it matters what we spend public money on, and not just that we spend it. But if you want to expand the state, expand public education, build a national health care system and build an honest-to-goodness national pension program that works, you're going to have to raise revenues. Every hour spent kneecapping the people who want to go this route by imagining that there is a magical free money path that lets us spend freely, lets all the billionaires keep their money, and that even a hedge fund manager could love, is an hour wasted an an agenda which will never succeed politically and is crackpot policy in any case.

OK. First, MMT writers have never claimed that one could deficit spend an unlimited amount of money into the private sector, without suffering the consequences of demand pull inflation. I defy either Dan K, or you to find an MMT quotation that says that. Dan K, just sets up a straw man here, and you buy into it hook, line, and sinker. There is no “ what-me-worry fiat money mania that MMT has allowed itself to be turned into.” It just doesn't exist!

Second, I'm not sure what Dan means by “price theory,” and why he's calling for rules to more precisely define the limits of deficit spending to avoid demand-pull inflation. MMTers think one can deficit spend up to the point of full employment (defined as a state in which everyone who wants either a full-time or a part-time job at a living wage w/ full fringe benefits, can find one) and then no more. But, the truth is that there is a moving target here, and any rules would be quite complex and context-dependent. One needs a better system of automatic stabilizers that will increase deficit spending when the economy is cooling off and that will decrease it when it is reaching full employment in key economic sectors. Such a system needs to contain automatic tax increases and cuts depending on changing contexts. MMTers do propose policies for creating such an improved system. They have to do with taxes based on housing square footage, and payroll tax holidays involving differing degrees of adjustment to the payroll tax rate depending on the state of the economy.

Dan K. says MMTers have stopped doing research. While I believe they are doing all they can to popularize MMT, it is untrue to say that they've stopped doing research. All you have to do is go to the Levy Institute web site, or to CFEPS, or to CofFEE to find new MMT research papers being generated. Bill Mitchell, Randy Wray, Pavlina Tcherneva, Scott Fullwiler, Stephanie Kelton, Yeva Nersisyan, Jan Kregel, Mat Forstater, also continue to publish in academic journals and to extend their research.

Third, no MMTer has ever claimed that it doesn't matter what one spends, or deficit spends, on. All, from Warren Mosler to the newest MMT graduate student, believes that spending should be for public purpose only. That, and only that is the MMT standard. What MMTers mean by public purpose was specified by myself here based on my reading of the MMT literature. No other MMT writer has disputed my characterization. In addition, MMTers make clear that what they mean by public purpose is ultimately to be determined democratically by the voters in a democracy. So, by coupling economics normatively to the public purpose, and the public purpose to the will of the people expressed in elections, it ought to be clear to everyone that MMT is a democratic approach to politics at its root.

Fourth, Dan says that to build what we need, we will have to raise revenue to avoid inflation. That may be. But 1) if MMT-based spending fiscal policies encompassing job guarantees, payroll tax holidays, state revenue sharing, enhanced Medicare for All, infrastructure, education, climate change, and energy foundations are implemented, then the economy will be booming and tax revenues will automatically increase, while safety net spending will greatly recede.

That means that more space for Government spending without inflation will be created. In addition, a stronger economy, will probably result in both increased savings by the 99% and a higher trade deficit as a percent of GDP, creating still more space for deficit spending in absolute dollars than we have now.

Even now, however, the policy space for deficit spending is considerable. Let's assume that private sector savings desires are currently at 6% and that desires for imports are such that we can expect a trade deficit of 3% of GDP even now. The sectoral financial balances model then implies that we have policy space for a Federal Deficit of 9% of GDP or roughly $1.6 Trillion in deficit spending, about a Trillion in excess of current CBO projections.

That will pay for a lot of new spending program initiatives and the amounts available will grow larger as the economy heats up for reasons, I've just stated. So, in sum, it's not at all clear we will need to raise tax rates. And it won't be clear until we get most closer to reaching and maintaining full employment, and have to be concerned about either demand-pull inflation on the one hand or too little spending on the other.

And fifth, no MMTer is saying that there is a “magical money path.” Again, every MMTer knows and says that there are consequences for excessive spending including inflation. But what we also insist on is that there no consequences for solvency of the United States Government if it deficit spends even excessively.

Can we at least agree on that? If so, then we ought also agree that views stated every day by our politicians, neo-classical economists, and austerians, claiming that the US is running out of money and can't afford to spend on this or that because it will go bankrupt, are in error and are damaging to the fiscal policy debate.

Lambert responds: "I don't recall claiming there was a bottomless money well; and I'm thoroughly familiar with the 'ZOMG!!!! Zimbabwe!!!' argument and how to debunk it." He doesn't do any actual debunking, though. This is one of my reservations about MMT: its adherents seem extraordinarily reluctant to address concerns head on. I've followed MMT casually, and I've seen lots and lots and lots of (virtual) ink spilled about how government can simply fund what it wants, period. MMTers are nothing if not voluminous. But boy howdy does inflation get treated lightly. You've really got to comb through the writing to find it, and it typically is relegated to a brief, oblique reference ("when potential inflation threatens" and such).

I think your problem may be that you follow MMT only casually. Here's a post by myself written in 2012 covering the MMT view on inflation expressed in the fiscal sustainability conference of April 2010. The post also contains links to many other posts and papers on inflation and hyperinflation both before and since the conference by Rob Parenteau, Wray, Mitchell, Fullwiler, John Harvey, Eric Tymoigne, Cullen Roche (before he seceded from MMT), and myself.

Since then, Bill Mitchell has done a number of posts on inflation here, and Randy has discussed inflation here, and here (Chapter 7). And I've treated it here. In this post on MMT scholarship you'll find links to discussions of inflation by various MMT economists. Finally, this post by Tymoigne and Wray deals with inflation in the context of criticisms of MMT offered by post-keynesian economists.

Given these many links, I think this statement “But boy howdy does inflation get treated lightly. You've really got to comb through the writing to find it, . . . “ is clearly false. Again, perhaps you need to either follow MMT more than casually, or do a better job of googling.

In the same comment lambert writes "If you want MMT to propagate widely, its exposition needs to be simplified and popularized." That's exactly why Kervick is right on this one. The way MMTers put the goodies front and center, and barely (if at all) discuss the risks, makes the "bottomless money well" caricature stick. They may discuss it substantively elsewhere, but it is not presented in commentary packaged for public consumption. Again, not addressed head on. If the best response MMTers have to that is "please see [48 page PDF]," then popularization fail. Requiring casual readers to have a near-comprehensive understanding of a topic is called a contradiction.

Well, it's one thing to say that MMTers ignore x or y objection, and another to say that MMT is experiencing “a popularization fail. . . “ because it barely discusses the risks of accepting the MMT point of view. Popularization is difficult because the vehicles for it usually allow for limited space to discuss all the relevant points relating to MMT.

MMT writers have usually focused on policy and solvency issues in blog posts at places like the Nation, The Huffington Post, The New York Times, the Los Angeles Times, various business outlets, and radio and video appearances. I think it's hard to fault them for that, since that's what popular outlets are interested in.

That said, the subject of inflation frequently comes up when Warren, Stephanie, or Randy gives a talk or is interviewed. If you check out the various videos at NEP over a period of time you will see, that those of us who are visible to the media, do not ignore inflation in these conversations, but give answers that have an appropriate level of detail for the format they are dealing with.

As for the charge that MMTers have stopped doing research, engaging with other economists and focused everything on marketing, at least one adherent essentially pleads nolo contendere. Joe Firestone describes himself as something of an authority on MMT ("one of the MMT writers, immersed in the MMT community") and had this to say about Warren Mosler's prospects before a theoretical Congressional committee:

Warren would have the support of the other [MMT economists], all academic economists with plenty of publications...Warren's really brilliant; all the others I've named really think so, and his common sense wrap is very plausible. Finally, he's unflappable, and knows his theory very, very well.


Dan ps, that's not a plea of" nolo contendere." Popular appearances and writing by MMT principals don't imply that research has stopped. Certainly, they imply that time has been taken away that may have been used for basic research by the principals. But plenty of other economists (Paul Krugman, Brad Delong, Jared Bernstein, all come to mind) do the same, and plenty of MMT research continues, especially since the ranks of MMT researchers are expanding all the time. See the reference I gave you above to MMT scholarship for past and more recent research by important MMT principals. You might also check the NEP site for reports on research being done by graduate students learning the MMT approach.

Epistemic closure? Check. Absence of an economic model? Check (also, I should hope he knows his own theory very well!) Emphasis on marking? You betcha. What's being described here is not a field of technical expertise but a priesthood.

What emerged in both my Twitter shitfight - where the individual I was arguing with could not get off the "taxes don't fund spending!" talking point even after I had conceded as much four times - and the thread at Naked Capitalism was an almost bristling opposition to discussing tax policy, at least among some MMTers. Lambert ("Obviously, we should tax the rich painfully,") and Joe ("Measures like that worked in this country for a very long time to reduce inequality, and I think they can work again") are in favor of taxing the rich, but they - and MMTers generally - only say so parenthetically. Forget taxes, right? The justification for taxes, if it exists at all, does so outside the ordinary scope of MMT. Taxes, as characterized by MMT's would-be popularizers, exist only as caveats and footnotes.

Where's the epistemic closure in what I wrote? I'm a critical rationalist. I don't practice epistemic closure; the possibility of refutation always remains in my thinking.

As for the absence of an economic model in MMT, what do you mean by that? MMT is not a model. It is an approach to economics. Sometimes it uses models such as the sector financial balances (SFB) model. Sometimes it uses simulations models as in Scott Fullwiler's work. Sometimes it uses mathematical models as in some of Pavlina Tcherneva's, Bill Mitchell's and Eric Tymoigne's work. So, how do you define the notion of an economic model that leads you to say that economic models are absent from MMT?

The idea that MMT is "a priesthood" is just labeling of the approach in a pejorative way implying that MMTers are dogmatic and don't reply on evidence or logic. But, MMT relies heavily on empirical work in its research, and has a much larger component of empirical work than one finds in many other approaches to economics. Also, MMTers never dismiss empirical data out of hand in the way some austrians or neo-keynesians do. Nor do they advance untestable metaphysical propositions such as the Inter-temporal Governmental Budget Constraint postulated in this exchange.

As for talking about taxes parenthetically, whenever I talk about taxation and its functions, I always mention the leveling function and its importance. In addition, Lambert's 12 word platform includes “soak the rich.” So, at least for us, the leveling function of taxation is pretty central to our thinking.

This makes MMT a tool that can be used for progressive ends or regressive ones. The MMT church of lambert, Firestone et. al. includes a book that calls for taxing the rich. A more fundamentalist denomination would seem to consider that book apocryphal, heretical even. After all, the next step after forgetting taxes is to do away with them entirely. Raise them? Burn the witch!

Again, Wray says forget about taxes for redistribution, not “forget about taxes.” Also, I don't know an MMTer who says forget about taxes. It's the austrians who say that; not us. As for MMT being only a tool, some MMTers would agree with that. But not I. See here. MMT as an approach is saved from being merely a tool by its emphasis on public purpose and the interpretations of tis term given by its practitioners. So, it is not a tool. It is, instead, an approach to economics with valuational components that are part of the approach. In the above piece I call it a fact-value knowledge claim network.

2. Wizards

There is a kind of magical thinking among MMTers about the possibilities of their new theories, combined with a steely-eyed realism about the shortcomings of the existing system. I'm not quite sure how to reconcile that. For instance, Wray says this about the rich: "Trying to punish them with taxes is a fool's errand." (How does he explain the increase that occurred when the Bush tax cuts expired?) His preferred solution?

"Put a thousand of Wall Street's 'finest' behind bars."

So, trying to increase the top marginal rate: A pipe dream. Having a starved and captured regulatory authority assemble the monstrously complex case required to prosecute individual executives - when the Attorney General of the United States has already explicitly said these very people have been granted a free pass - THAT, my friends, is the real-world approach MMT favors.

And what kind of bullshit is this:

Let's raise sin taxes on the rich to reduce the sin of ill-gotten gains.

How high? 100%? Nay, 1000%. Take everything: all their income, all their wealth, the house, the car, the dog. Don't let crime pay.

Calling prosecution a "sin tax" is a transparently phony way to get people to think a fundamentalist MMTer is actually (finally!) proposing a tax. The only problem is that it doesn't, you know, actually tax anyone - most especially not our precious, irreplaceable rich. Nay, not 1000% thanks. How about we start with a marginal income tax of, say, 75% at $5 million? And leave your sin tax in that fabulous world that has a functioning justice system for elites.

More magical thinking. Lambert has no illusions about the problem of translating additional raised revenue into just and equitable spending: "Suppose we raised a trillion new dollars with progressive taxation, and then blew it on a manned space mission that the oligarchs to build Galt's Gulch on Mars?" Yes, that sort of useless outcome is a very real possibility - and given our recent history even a likely one.

I don't read Randy as contending that prosecution and conviction is a “sin tax,” and think you're just wrong about that. What he advocates along with Bill Black, myself, and Lambert is prosecution and also “sin taxes” on wealth and income. His post isn't contending that there shouldn't be any tax increases, but only that in the present climate such taxes won't work, while prosecutions and progressive spending de-coupled from increased taxes have a much better chance of being implemented.

I thnk he's right about that, in the short run. That doesn't mean I'm not in favor of heavy income and wealth taxes on the 1%. I am. But, when talking about legislative strategy I think it's better to clear away the spending and prosecution needs first and then move to increased taxation, after political credit has been accumulated for easing the way for most people, and cleaning up the frauds, systematic dishonesty, and moral hazards in the financial system.

Yet look at how Firestone characterizes the MMT alternative: "using by platinum coin seigniorage [PCS] to fill the TGA with enough to pay down the debt and cover deficit spending for a long time to come." How exactly does PCS get used for such a public-spirited purpose when existing (and probable future) spending mechanisms get wrenched by the 1% to their own purposes? Is the novelty of PCS our secret weapon? If so we've only got one shot; it will just be re-appropriated for boondoggles once the powers that be know to expect it. (Um, shouldn't we be taking this discussion offline?)

Why take it offline? I've explained in detail in my book why minting a $60 T would work to free up progressive politics by taking the debt issue off the table. Progressives would be free to advocate needed deficit spending without worrying about an answer to the “how you gonna pay for it” question. Would the 1% be able to tap the deficit spending once the reserves were created? That depends on the politics of it. If the money is there to spend, then it will be much easier to fuel a powerful progressive movement dedicated to reducing inequality by lifting people up.

I think having $60 T in the TGA would change the background of politics and fuel great pressure on the Government from the 99% to spend on progressive priorities without spending on the 1% or further tax reductions for them. I may be wrong about that. But I don't think one can automatically assume that politics will remain the same when the austerity excuse is no longer structuring our political discourse, and I also think that the 1% don't loot by magic.

They're able to loot because they distract the 99% with fiscal responsibility, war-mongering, and social issue controversies. Take the fiscal responsibility/deficit reduction BS away from them, and I think they'll be greatly crippled in distracting attention from their looting and the profound and dangerous economic inequality that afflicts the US.

The liberal denomination of MMT is already getting set up for a "MMT cannot fail but only be failed" outcome. They want it to be used to create just and popular policies, but seem to think MMT will provide some kind of painless shortcut. No, the fight is the same either way, and it will inevitably be ferocious. There's no sneaking it past anyone. As soon as MMT gets traction in Washington, it will be used to slash taxes on the rich, and pre-distribution will go where the current owners wish. At which point, please spare the rest of us your "where's my fucking pony?" outrage.

You have no basis for claiming that the fight is the same whether or not the public realizes that the US Government has all the money it needs to fund the needs of the 99%. That may be your hunch; but we won't know if it's true until we try to remove the debt/deficit issue from political discourse. One thing is certain, and that is that the Peterson and allied groups believe that their austerity doctrine is very important in distracting people from strengthening entitlements, because they know about fiat money and know also about the impossibility of involuntary insolvency for the US. Yet they insist on lying about this, because they know that austerity can only be justified by fears of insolvency which they must continue to legitimate.

Instead of going to all the effort of establishing a new economic paradigm, one that is agnostic on taxes and as likely to be hijacked as the existing one, why not have the fight right now on the same ground? Because it's not, as Yves Smith incorrectly notes in her introduction to Wray, about redistribution for redistribution's sake, but redistribution for democracy's sake:

Scandalous as it may sound to the ears of Republicans schooled in Reaganomics, one critical measure of the health of a modern democracy is its ability to legitimately extract taxes from its own elites. The most dysfunctional societies in the developing world are those whose elites succeed either in legally exempting themselves from taxation, or in taking advantage of lax enforcement to evade them, thereby shifting the burden of public expenditure onto the rest of society.

Well, I agree that we ought to heavily tax our elites for the sake of protecting democracy. That said, taxation doesn't accomplish redistribution by itself, while deficit spending by itself can decrease inequality by increasing the savings and spending of the 99%.

So, the issue of sequencing legislative measures is raised again. The prosecutions and the deficit spending on full recovery and safety nets should happen first. The taxation to decrease the wealth of the rich should come later, unless the political power of progressives is enough to pass the spending and the taxation at the same time. That is, I am raising only the political question of phasing in measures, not contending that heavy taxation for the wealthy isn't good for democracy.

(Fukuyama's piece is a bit, shall we say, heterodox. For as resonant as I find the preceding quote, there are some other items that are a bit eye-opening. For example, on the newly installed Obama White House: "Administration principals thought they had a mandate to move the country sharply to the Left...But as it turned out, Obama was not riding a tide of left-wing populism. While the Democratic majorities in Congress succeeded in moving this ambitious legislative agenda forward, the results fell far short of expectations." That's not quite the 2009 I remember!)

Nor the one I remember. In early 2009 Obama could have gotten Reid to get rid of the filibuster and could have gone on from there to pass any progressive measure he cared to pass. His failure to take advantage of this situation is on his head, whether it was inadvertent or, more likely, by design.

Taxing the rich is important because it measures our health as a democracy. It's not something to put, as Firestone would, at the end of several "staging initiatives.". Or rather, maybe that's an acceptable sequence from an MMT perspective but it's completely unacceptable from a democratic one. Demonstrating the ability to once again extract wealth from elites needs to be one of our highest priorities, not an afterthought. And it needs to be done directly via the income tax.

Tell that to the 27 million people who want full time jobs and can't get them, or the people without enhanced Medicare for All, or the people with inadequate safety net support who have problems keeping food on the table or who lack shelter or whose families are breaking up over financial stresses. See if they think spending on them ought to wait for new taxes getting levied simultaneously with the spending they need. I think those people will prefer my phased plan to your all or nothing approach.

In addition, the phased plan isn't MMT per se. It's a political judgment on how best to get things done, beyond the scope of MMT-based expertise, other than making the point that taxing alone won't accomplish redistribution of wealth.

Wray has literally no proposal for extracting wealth from elites, and once again: the intellectually dishonest "sin tax" he describes ain't it. Firestone approves of taxing the rich; but he also wants to "diminish the importance of conventional corporate forms in our society, and measures limiting total compensation of executives," and to do so by "legislating structures of vigilance" (needz moar popularizing!) But again, that just highlights the problem with MMT: It's being sold as a theory that is inherently just and progressive when it's just a tool. It might liberate those who have suffered the most under the current system. It might be inequitable and exacerbate current problems.

No, it's not being “sold” as inherently progressive. It's being advocated as an approach to economics that can fuel progressive politics much more easily than an approach which insists on taxes that pay for spending and on planned deficit reduction. Of course, the approach can be misused by the 1%. So what? It can also be well-used by progressives, who have been getting their clocks cleaned with the approach you're still advocating.

Why re-invent the wheel? The answer to Firestone's structures of vigilance is hinted at by washunate: "We still have the IRS, too. And the SSA. Taxation and social insurance are two of the things that have survived the assault on Constitutional governance and rule of law, comparatively speaking, the best over the past few decades." The link between being able to collect what is owed and the provision of public goods is underappreciated. Both are key for equitable redistribution, but the former is also radically democratic because it extracts wealth from elites. The fact that the both agencies are objects of great antipathy among the wealthy is also instructive.

I think you miss my point. By structures of vigilance I mean a new ecology of self-organized voting blocs and electoral coalitions fueled by an IT application enabling people to create a metalayer of constraints on politicians to legislate the interests of the people they represent rather than the monied interests that are now buying them. I've described what I mean in more detail in the series ending here.

As for the argument from MMT that the rich will just get new loopholes, give themselves raises, and otherwise subvert any attempt to extract their wealth, the response is simple (though not necessarily easy): Prioritize and fund tax collection. Think of it as democracy insurance, and like with other insurance you get what you pay for. Consider this from Econned (pp. 187-8, emph. Added):

But there are much deeper problems with risk management as commonly practiced. The junior risk managers will earn more if they can apply their analytical skills on the product side. Anyone who is thinking about making that change is unlikely to ruffle the feathers of the producers. In addition, risk managers are bound to sound some false alarms. If they escalate every one, they wind up looking like nervous Nellies and lose credibility. And if they win and have exposures cut back on what turns out to be a nonevent, the traders will be sure to broadcast how much they "lost," as in failed to make, thanks to the interference. That narrow view illustrates a deeper problem: risk management is a form of insurance. Effective insurance is costly. You expect to miss a few calls, quite a few. But the noise back from the "money colonels" and the perceived importance of maximizing current extractable value means that the expense of taking protective measures is deeply resented. The predictable result was that the banks wound up being underinsured.

In fact, the obvious failings of risk management reveal an ugly truth: it is an exercise in form over substance. If a firm was serious about this sort of thing, it would not structure a supposedly crucial activity in such a way that guarantees that it is politically weak and easily suborned. Risk management is often an exercise in providing cover for managers and directors, and thus serves as another tool to hide looting.


Dan ps, do you think you're telling Wray and the rest of us something we don't know? Of course, we'd like to prioritize tax collection so that it is effective. But how will we get that passed in the short run, with everyone so paranoid about the IRS?

I think it comes back to sequence again. If we get another big electoral victory any time soon, then the first thing we need to do is to build political credit with most people by legislating measures that improve their lives. Once we get that done and we have the credit we need with people, we can then pass democracy-conserving measures including those involving increased progressive taxation which will give us more room for deficit spending. But, if we try to do everything we need to do at once then the likelihood of failure is much greater for us.

Whatever we do, spend, prosecute or tax, the rich will fight us ferociously. But they will save their most extreme efforts for opposing what they will claim is confiscatory wealth taxation. So I think that before we attempt that, we need to know that upwards of 70% of the voters across the country are behind us in that effort.

If the IRS is viewed as being
linked to social insurance, Smith's point is especially true: good insurance costs money. (And the ongoing attacks against the agency are an attempt to make it politically weak.) If you raise taxes on the rich, you damn well better be prepared to purchase a good policy for enforcement. The IRS would need to be expanded, its agents made knowledgeable of loopholes and encouraged to go after tax cheats (instead of its current state), and generally have to become much more robust than it currently is. It would need, in short, to be an object of screaming horror among the rich.

But the point is, the needed mechanism already exists. We don't need a new one, or some comparable thing, we just need to make use of what we've got. And we also need to understand that efforts to address inequality will never be settled. It will always be a fight, and each generation will have to fight it. There is no spell that will vanquish it for all time. MMT is being sold as just that, as a cure-all. It isn't. It's a tool. Why not just use the tools at hand? It will be a struggle no matter what. Why make it harder than it already is?

I've never said MMT was a cure-all, but only an approach that frees up progressives to be much more aggressive in getting needed deficit spending. As for building the IRS again, I certainly agree with what you say about that. I also agree that the effort to decrease inequality will be a continuing and constant struggle. The iron law of oligrachy tells us that. That's why we need the “new structures of vigilance” I referred to and wrote about in the linked post.

This has been a long reply. I've tried to be thorough and to answer all your points in a serious way. Obviously, I don't agree with every position Randy has taken in his post. I do think however, that his recommendation to avoid coupling spending and increased taxation is allowed by the facts of our monetary system and is also good advice from a political point of view.

I also think that if we ignore it, thenwe will be much more likely to find ourselves in Lambert's roach motel than if we do what he recommends. I'm pretty sure this is true because over the last number of years I've seen progressives try to push enhanced safety net programs and measures that would get us a healthier economy, while always being careful to acknowledge that, of course, we need “pay fors” from the rich to get these things done. The result has always been failure. So, I think it's time to try something new, and MMT provides an approach that can suggest different and better political strategies we can use to get better fiscal policies for the public purpose.

I'd now like to end with the following plea. If we're looking for progress from this exchange on MMT, then I think further replies need to directly confront previous replies. I've tried to this by replying directly and in detail to each part of your critique. That kind of reply is a lot of work bt continuing in that style is the only way to really have a rational exchange. Name-calling, labeling without supporting reasoning, and pure appeals to authority to justify statements really don't work. You charged that MMT writers don't directly confront objections and answer them. I think that I generally do that, and I think I've done it above. I hope you and others will treat this lengthy reply in the same way and not just reply with off the top of the head opinions unjustified by the slightest reasoning.

danps's picture
Submitted by danps on

  1. On "Forget Taxes":
    First, isn't this a just a bit selective. What about the next two words “. . . for redistribution”? Don't they count? Also, Randy is quite clear that taxes are relevant for other things apart from redistribution.

    I probably should have referenced this comment from lambert:

    That's not what Ray says. He doesn't say taxes on the rich "don't matter." Quoting him:
    [A]Trying to punish them with taxes is a fool's errand. They'll just raise their compensation package and buy tax exemptions from Congress.

    [B]And, as we know, Uncle Sam doesn't need any stinking taxes to “pay for” jobs and income and healthcare and decent retirements for the poor. [C] If you have unemployed resources, free lunches abound! Just put the resources to work, and you've got Bernstein's wish list filled.

    And my response:

    Yet all three perform a similar function:

    A: Don't even think about raising taxes.
    B: Taxes don't fund popular programs.
    C: Taxes play no role in what society can do.

    Notice the common thread? Wray is very forcefully advocating that people not consider tax policy. He is making the case, without explicitly saying as much, that tax policy is trivial. But don't say that means he thinks taxing the rich (or anyone!) doesn't matter. He just disparages the concept at every opportunity, that's all.

    Nihil obstet has a good take as well:

    Few tyrannies explicitly state their plans to enslave their citizens. This does not mean that any interpretation can be asserted for any document. But when you have a political propaganda system that insists over and over that taxes on the rich just hurt us all ("there aren't enough rich people to make a difference", "taxes mean that jobs won't be created", "people shouldn't be penalized for success") in support of concentrations of private wealth, then there is reason to criticize yet another statement about how advocating taxes on the rich will just hurt us all. And you know, Wray isn't the only one who doesn't explicitly state, "I want an oligarchy". The Koch brothers don't state it either.

    Sure, MMT discusses taxes and requires them as part of the theory. What I'm more interested in is the public face of MMT: what do its proponents choose to emphasize, and what do they choose to downplay? The light treatment of taxes and the attempts to redirect attention elsewhere have a cumulative effect. I don't think there is, or ever will be, an example of Wray writing "forget taxes for everything!" But the overwhelming impression that I (and it seems nihil obstet) get is...forget taxes.

    Wray's "judgment about what will work in the political system"...his framing of soak the rich as being proposed to pay for programs instead of a means to take the measure of our democracy...his emphasis that spending and taxing be decoupled, since they are conceptually distinct...any picture starting to emerge? MMT's "taxes don't fund spending" slides very easily into, if not forget taxes, then don't worry your pretty little head about them.


  2. "MMT's basic assumption that fiscal policy ought to fulfill the public purpose." My understanding of MMT is: a government that issues its own currency, not tied to any commodity or other currency, is always solvent. That's it. It's a theory of how money gets created and spent. Almost the entirety of my disagreement with you might just boil down to the quote above. MMT - core MMT as described above - makes no such assumption. It concerns itself exclusively with the creation of money. The purpose for which it is spent is an entirely separate issue.

    You think it ought to fulfill (your understanding of) the public purpose and that that those uses are consistent with MMT. I agree, but consistent with is not the same as expressed or implied by core MMT.

  3. Re: "Dan K, just sets up a straw man here, and you buy into it hook, line, and sinker." I referred to "bottomless money well" as a caricature.

  4. Re: MMTers and research. The sites you link to do indeed have papers. Have they been peer reviewed and are they also published in prestigious economic journals? Sincere question.

  5. Re: "All, from Warren Mosler to the newest MMT graduate student, believes that spending should be for public purpose only" That is a preference ("belief"), not something intrinsic to the mechanics of core MMT. And of course, it also depends on one's understanding of public purpose. Libertarians believe eliminating income taxes serves the public purpose by liberating our entrepreneurial job creators from the heavy hand of government thereby freeing them to create new businesses, which benefits everyone. I elaborate on that in my post. Similarly: "What MMTers mean by public purpose was specified by myself here based on my reading of the MMT literature." Fine, but it's not intrinsic to core MMT. What MMTers believe (some, anyway) could do a 180 in a heartbeat as soon as some sufficiently creative individual comes up with a novel understanding of public purpose that is also supported by core MMT. That's what my "bad witch/Laffer curve" comment was about. "Hey, we can use it for this too!" and all the MMTers who want New Deal 2 MMT can only splutter "but....but...that's not what we meant!"

    And really, a lot of MMTer's arguments against its neoliberal use basically amount to "we would never do that!" Here's a nother example: Tax rates. MMTers say "we're all for progressive taxation, it's in our papers, we had a conference for it," and so on. But guess what? Nothing in core MMT requires that. Core MMT can as easily accommodate a flat tax as a progressive one. That isn't the policy preference of lots of MMTers, but that is irrelevant to the theory itself.

    You're grooming this child, raising it as best you can, but you'll eventually (if you're successful) send it out into the world - and from there it will go its own way. The fact that none of you are advocating for a particular use at the moment should not preclude you from admitting if it is a legitimate use under MMT. Further, those outcomes are as important for MMTers to address as their preferred ones.

  6. Same with "if MMT-based spending fiscal policies encompassing job guarantees" etc. All that sounds wonderful, I completely support it, and I think MMT's description of how it is feasible makes sense. But it's not core MMT. It's not about how the currency is created. As soon as you start talking about purpose, you're off the MMT reservation and onto the political one.

  7. Re: "Can we at least agree on that?" Yes - there are no implications for solvency. But that presents the argument as a binary choice - solvent or insolvent. Inflation isn't about insolvency but degrading the value of the currency. That exists on a continuum. I think it's an overblown concern these days (I suspect you do as well) but it's still something that needs to be considered. I don't think taking insolvency off the table buys you that much politically, because I don't think austerians want to do away with social programs for that reason. Knock away that crutch and the inflation one replaces it.

  8. "I think your problem may be that you follow MMT only casually." Yes, that's true. Here's the thing though - if you want to popularize MMT you have to write for casual readers. Kervick's "bottomless money well" caricature is hardly his creation. When I first encountered MMT I got something like the same impression, and there are comments in the thread by other casual followers to the same effect. Instead of responding with: that's a canard there you go being dishonest again, it might be useful to reflect on why that seems to be such a common misperception. Sure, there may be some enemies of MMT trying to propagate that meme in order to discredit it, but I think its advocates have been not nearly careful enough in addressing the issue. Personally, I'd recommend addressing it in every post on the subject. It won't go away on its own.

  9. Epistemic closure: "Warren would have the support of the other [MMT economists]...Warren's really brilliant; all the others I've named really think so." MMT is right because....all the MMTers say it is and are persuaded by each other.

  10. "So, how do you define the notion of an economic model that leads you to say that economic models are absent from MMT?" Poorly written; I should have thought about it more and shouldn't have included it. What I was trying to get at is that we don't have anything but a theoretical understanding of how it would work. But there's no way to get real world data without trying it in the real world (we don't have a Beta Earth to test it out in first). The only way to see if all that theoretical stuff really works is to leap in and see what happens. Every real world economic model started out the same way though, they all started as a theory and then an economy jumped in and tried it. Like I said, I shouldn't have written it.

  11. "I don't read Randy as contending that prosecution and conviction is a 'sin tax,' and think you're just wrong about that." Holy crap. I don't see how there's any other way to read "Let's raise sin taxes on the rich...Don't let crime pay." I guess we'll just have to disagree on that one. And once again, the continual de-emphasis on taxes sends a very clear message.

  12. "Why take it offline?" Joke. If we need the element of surprise then talking about it publicly kind of ruins it.

  13. "But I don't think one can automatically assume that politics will remain the same when the austerity excuse is no longer structuring our political discourse." As above, I don't see the austerity excuse going away, but seamlessly transitioning from "because insolvency" to "because inflation." And hell, it's not like no one isn't already ringing that bell.

  14. Re: "You have no basis for claiming that the fight is the same...they know that austerity can only be justified by fears of insolvency." As above, the austerity excuse will just be justified by fears of inflation. And for God's sake Joe, neither of us has any basis for knowing with certainty how things will shake out. Your "MMT demands New Deal 2" belief is every bit as speculative. Again, once you start talking about purpose it's no longer core MMT but policy. You have no basis for knowing your preferred policies as justified by MMT would be implemented. We're both looking at the lay of the land and offering our best reasoned judgments. I'm pretty confident it isn't fear of insolvency but but hostility to social programs that's driving the austerity narrative. You seem to think that if insolvency gets knocked down, those who want to kill Social Security and Medicare will be exposed and unable to call for that any more. I think the underlying hostility will remain, and is the real problem. So they will continue to call for austerity as forcefully as ever, but with the next handy excuse - inflation. "But that's not a legitimate problem!" No it isn't. Neither is insolvency. Has that deterred them so far?

  15. "Tell that to the 27 million people who want full time jobs and can't get them." Pocketbook issues come first, as always. And they should - those are the ones that concern peoples' most basic needs. But your sequencing frame doesn't allow for other urgent priorities to be pursued at the same time. We need to be able to walk and chew gum. I know democracy is an abstract concept and is something (like civil liberties) that doesn't grab people in the same visceral way, but that doesn't mean it ought to be sent to the back of the line. Every good policy you advocate requires something like a functioning democracy, and if we can't do things to strengthen it then we give over ever more to anti-democratic forces. How do you think that will affect the public purpose over time? I just can't justify putting it so far back on the list.

  16. Re: "we'd like to prioritize tax collection," again - de-prioritizing. This time because it's not politically feasible (I don't recall that logic being very popular here during the health care reform debate), whereas prosecutions are.

Thanks much for taking the time to reply in detail. I know it must have been a lot of work, and I appreciate it.

letsgetitdone's picture
Submitted by letsgetitdone on

On "Forget Taxes":

First, isn't this a just a bit selective. What about the next two words “. . . for redistribution”? Don't they count? Also, Randy is quite clear that taxes are relevant for other things apart from redistribution.

I probably should have referenced this comment from lambert:

That's not what Ray says. He doesn't say taxes on the rich "don't matter." Quoting him:

[A] Trying to punish them with taxes is a fool's errand. They'll just raise their compensation package and buy tax exemptions from Congress.

[B] And, as we know, Uncle Sam doesn't need any stinking taxes to “pay for” jobs and income and healthcare and decent retirements for the poor.

[C] If you have unemployed resources, free lunches abound! Just put the resources to work, and you've got Bernstein's wish list filled.

And my response:

Yet all three perform a similar function:

A: Don't even think about raising taxes.
B: Taxes don't fund popular programs.
C: Taxes play no role in what society can do.

Dan, I don't think your reply really addresses my first objection. The reason why it doesn't is that you conveniently cut short your quote of what I said to include only my general point that you were bring selective about what Randy says and what he thinks. If anyone cares to check my the first part of my lengthy comment, they will easily see that there was ample evidence, even in another of Randy's recent posts that you quoted that he was not saying forget about taxes altogether; but only saying that we forget taxes for spending.

At this point, given your earlier reply, I'm afraid I think you're just trying to debate what no longer can be debated. Randy does not say, and does not believe, and MMT does not say, and does not hold that taxes are unimportant, a distant concern, or should be forgotten. Randy and MMT writers are just trying to make the points that 1) spending of tax money does not occur in our present system, so you don't need to tax to get the dollars you need to spend; and 2) there is therefore no justification of austerity in claims or fears of insolvency.

Notice the common thread? Wray is very forcefully advocating that people not consider tax policy. He is making the case, without explicitly saying as much, that tax policy is trivial. But don't say that means he thinks taxing the rich (or anyone!) doesn't matter. He just disparages the concept at every opportunity, that's all.

After reading my comment with its quotations from Wray, I don't see how one can hold this position in good faith. Please re-read what I said, and please next time you want to make this argument, make it after you fully quote my earlier rebuttal instead of selectively quoting from what I said. It is true that Randy Wray made his point in the primary blog post you're targeting in a very out front way. Obviously, he wanted to hammer home the point that tax money isn't what we spend in our current fiat system, and that taxes don't fund spending. But that emphasis in a single blog post, following by a few days another blog post which you cite in which he gives a much more comprehensive discussion of the functions of taxation, is no excuse for you to conclude that his remarks are about tax policy in general, or that tax policy is trivial.

Nihil obstet has a good take as well:

Few tyrannies explicitly state their plans to enslave their citizens. This does not mean that any interpretation can be asserted for any document. But when you have a political propaganda system that insists over and over that taxes on the rich just hurt us all ("there aren't enough rich people to make a difference", "taxes mean that jobs won't be created", "people shouldn't be penalized for success") in support of concentrations of private wealth, then there is reason to criticize yet another statement about how advocating taxes on the rich will just hurt us all. And you know, Wray isn't the only one who doesn't explicitly state, "I want an oligarchy". The Koch brothers don't state it either.

This isn't a good take, Dan. It's either a statement made in total ignorance, or it's just lying about MMT. But thanks for highlighting it again. I know I read it the first time around, but somehow failed to notice what an outrageous disgusting canard it is.

Anyone who has read Randy's papers, articles, and posts, and seen his talks and interviews over even a short and recent period o time, knows that he is a fierce democrat without an oligarchical bone in his body. In addition, not a single one of the statements attributed to the MMT "propaganda system" is quoted from a piece of MMT writing. They are statements made up by Nihil, that if anything reflect only the views of MMT's neoliberal opponents.

Sure, MMT discusses taxes and requires them as part of the theory. What I'm more interested in is the public face of MMT: what do its proponents choose to emphasize, and what do they choose to downplay? The light treatment of taxes and the attempts to redirect attention elsewhere have a cumulative effect. I don't think there is, or ever will be, an example of Wray writing "forget taxes for everything!" But the overwhelming impression that I (and it seems nihil obstet) get is...forget taxes.

Again, there is no "light treatment of taxes." MMT writers often emphasize that taxes do not fund spending because we are in opposition to austerity and want to counter the oft-repeated statement that to spend the Government must first get money by taxing or borrowing what is already out there. It is this assumption that puts most progressives into the Peterson/Bowles/Simpson/Obama austerity box, so that Bernie Sanders often begins his speeches with a statement that "Of course, we have a various debt problem here in America. Since we want to open up the political debate to spending what we need to spend to solve the many problems facing our society we often emphasize "taxes do not fund spending."

More seriously, I'm sorry Nihil and yourself received the impression that MMT is against taxes generally from Randy's post, but I don't attribute that primarily to what Randy said or how he said it. To charge someone with being an opponent of democracy, and a supporter of oligarchy, based on your impression from a single post that they have represented taxation as something trivial is a serious matter and should not be casually pursued.

In your case, you, yourself cited another recent post in which the same author presents a comprehensive view of the different functions of taxes and explains why we want and need to tax. That post should, alone, have given you pause in making the arguments and drawing the conclusions you did. But, in addition, numerous posts from Randy are available at the NE site and it would have been easy to do a little research on both Randy and MMT. In view of that, I have to conclude that you weren't interested in being fair to Randy or MMT, but only in playing gotcha, when you saw what you thought was an opportunity. I'm sorry I have to say that. But when it would have taken so little effort to test out your notion that MMT was against taxes and for oligarchy, and yet you failed to do so, I have to conclude that your piece just a hit job.

Wray's "judgment about what will work in the political system"...his framing of soak the rich as being proposed to pay for programs instead of a means to take the measure of our democracy...his emphasis that spending and taxing be decoupled, since they are conceptually distinct...any picture starting to emerge? MMT's "taxes don't fund spending" slides very easily into, if not forget taxes, then don't worry your pretty little head about them.

First, raising taxes on the rich is primarily proposed as a means of paying for programs by most "progressives." Relatively few of them mention their function preventing the threat to democracy posed by extreme income and wealth inequality, though that is starting to change now. Almost none of them mentions taxes for driving the currency, or taxes for regulating inflation, or taxes for discouraging undesirable behavior.

Second, the emphasis on decoupling taxes and spending is not because they are "conceptually distinct." Indeed they have always been that. Taxing is not spending, after all. Decoupling is advocated because spending and taxing are "operationally distinct" in our present financial system. Taxes simply do not "fund" spending anymore as an operayional matter.

Third, While "taxes don't fund spending" may easily slide into "forget taxes" altogether, that is not a reason to deny the truth of the matter or misrepresent what is really going on. It is a reason to discuss and communicate the various reasons why taxes are still needed, as Randy does in so many others of his posts including the one you cited.

"MMT's basic assumption that fiscal policy ought to fulfill the public purpose." My understanding of MMT is: a government that issues its own currency, not tied to any commodity or other currency, is always solvent. That's it. It's a theory of how money gets created and spent. Almost the entirety of my disagreement with you might just boil down to the quote above. MMT - core MMT as described above - makes no such assumption. It concerns itself exclusively with the creation of money. The purpose for which it is spent is an entirely separate issue."

You think it ought to fulfill (your understanding of) the public purpose and that that those uses are consistent with MMT. I agree, but consistent with is not the same as expressed or implied by core MMT.

What can I say, Dan. You say you're "a casual reader of MMT." I'm not. I've read a good part of the MMT literature, and I've written an MMT book, and am about to write a few more.

In addition, I've analyzed in some detail the core knowledge claims made by those who follow the MMT approach. Please read the post I've just cited. It makes plain that MMT is not just a claim about "solvency" in sovereign fiat money systems. That claim is just flat out wrong.

It also clarifies the place of "public purpose" in MMT and much more about the knowledge claim network constituting the MMT approach to economics. That's right. MMT is an approach and not "a theory," even though some theories are part of the knowledge claim network. And, finally, the notion of "pubic purpose" is absolutely core to MMT, in the precise sense that what comes first in MMT is the idea that economics ought to be practiced, as Galbraith, the elder said, to fulfill the public purpose, as determined by a democratic society.

Re: "Dan K, just sets up a straw man here, and you buy into it hook, line, and sinker." I referred to "bottomless money well" as a caricature.

Re: MMTers and research. The sites you link to do indeed have papers. Have they been peer reviewed and are they also published in prestigious economic journals? Sincere question.

Lots of peer-reviewed publications by MMTers. This page on MMT scholarship lists many such papers.

Re: "All, from Warren Mosler to the newest MMT graduate student, believes that spending should be for public purpose only" That is a preference ("belief"), not something intrinsic to the mechanics of core MMT. And of course, it also depends on one's understanding of public purpose. Libertarians believe eliminating income taxes serves the public purpose by liberating our entrepreneurial job creators from the heavy hand of government thereby freeing them to create new businesses, which benefits everyone. I elaborate on that in my post. Similarly: "What MMTers mean by public purpose was specified by myself here based on my reading of the MMT literature." Fine, but it's not intrinsic to core MMT. What MMTers believe (some, anyway) could do a 180 in a heartbeat as soon as some sufficiently creative individual comes up with a novel understanding of public purpose that is also supported by core MMT. That's what my "bad witch/Laffer curve" comment was about. "Hey, we can use it for this too!" and all the MMTers who want New Deal 2 MMT can only splutter "but....but...that's not what we meant!"

Again "public purpose" is core to MMT. It is refererred to every MMT book. It is discussed whenever MMTers talk policy. It is at the center of MMT's treatment of fiscal responsibility. It is central to the discussion of the Job Guarantee and MMT work on the environment by Mat Forstater and Miccael Hoexter. MMT isn't MMT without assuming that practicing economics s about the public purpose and that fiscal policy should always be aimed at fulfilling the public purpose.

What puzzles me here is that you describe yourself as "a casual reader of MMT." And then you deliver your opinion that "the public purpose" isn't at the core of MMT. Well, how do you know that. Have you got some quotes from the literature that deny that "public purpose" should be the goal of fiscal policy? Have you got some quotes that place other goals of fiscal policy or economic policy as primary rather than "public purpose." I'd really like to know because from the first book on MMT I read, Warren Mosler's Seven Deadly Innocent Frauds, in 2009, until today, I have never seen a piece of MMT literature that stated any other goal for MMT policy than public purpose or aspects of it such as full employment and price stability.

In fact, when Cullen Roche proposed other goals for MMT as primary specifically prosperity and economic growth and to insist on those grounds that the JG wasn't part of the MMT core, he received such severe criticism of his view that he quickly divorced himself from MMT and began marketing a new approach he called, at first, "monetary realism." MR rejects public purpose as its primary goal and elevates general prosperity and economic growth over full employment and price stability.

Now, I can see that you want to define MMT as a merely descriptive theory of money mechanics rather than as a more general approach to economics making normative economics. But I think most MMT writers reject our view. You can, of course, define our approach any way you like. But, we have a right to our own definition too, and I think that since we're the MMT practitioners and not you, that people will give more weight to our characterization of the MMT approach and what it is we do, than they will to yours.

And really, a lot of MMTer's arguments against its neoliberal use basically amount to "we would never do that!" Here's a nother example: Tax rates. MMTers say "we're all for progressive taxation, it's in our papers, we had a conference for it," and so on. But guess what? Nothing in core MMT requires that. Core MMT can as easily accommodate a flat tax as a progressive one. That isn't the policy preference of lots of MMTers, but that is irrelevant to the theory itself.

Well, again, that follows from your view of what core MMT is, which is an invention backed by little or no documentation. But, from our viewpoint, which includes public purpose, MMT sees progressive taxation as central to fulfilling public purpose. Again, see my analysis of the MMT KCN.

You're grooming this child, raising it as best you can, but you'll eventually (if you're successful) send it out into the world - and from there it will go its own way. The fact that none of you are advocating for a particular use at the moment should not preclude you from admitting if it is a legitimate use under MMT. Further, those outcomes are as important for MMTers to address as their preferred ones.

I'm sorry, but no. MMT doesn't approve of flat taxes. It approves only of progressive taxes, because only those can be linked to "pubic purpose." In fact, one of our big gripes about the payroll tax, other than its being a terrible drag on the economy, is that it is a punishingly regressive tax. That's one of the big reasons why we want a full payroll tax holiday, and many of us want the complete elimination of the payroll tax.

Same with "if MMT-based spending fiscal policies encompassing job guarantees" etc. All that sounds wonderful, I completely support it, and I think MMT's description of how it is feasible makes sense. But it's not core MMT. It's not about how the currency is created. As soon as you start talking about purpose, you're off the MMT reservation and onto the political one.

Jesus, Give me a break. I wrote a 16 part series on this subject. Did you read it? Have you cited and then refuted even one of my arguments or any other MMTers that the JG is core to MMT? Before making a bald-faced statement like that, I think you have a responsibility to at least examine previous writing on this very question. The fact that you don't only makes clear that you're uninformed and don't care to become informed. I'm not talking about agreement or disagreement here. Informed disagreement is fine. But just delivering your uninformed and totally unsupported opinion is a good way to lose all credibility.

Re: "Can we at least agree on that?" Yes - there are no implications for solvency. But that presents the argument as a binary choice - solvent or insolvent. Inflation isn't about insolvency but degrading the value of the currency. That exists on a continuum. I think it's an overblown concern these days (I suspect you do as well) but it's still something that needs to be considered. I don't think taking insolvency off the table buys you that much politically, because I don't think austerians want to do away with social programs for that reason. Knock away that crutch and the inflation one replaces it.

You're wrong again. First, MMT knows perfectly well, that the real issue is inflation and not solvency. See this piece by Warren Mosler pointing this out.

Second, so we know "inflation" will replace insolvency as the crutch of the austerians. But we want to have that argument. We won it most of the time between 1945 and 1975. We then lost it during the cost-push oil and Fed-induced stagflation of the 1970s, when Carter, Rivlin, and Volcker botched up the response to the cost-push inflation and treated it as a demand-pull inflation instead. Nevertheless, we think we can the trade-off of inflation vs. unemployment again this time around, because we know how to treat cost-push inflation now and we also know to avoid demand-pull inflation as well. But make no mistake about it, with no demand-pull inflation on the horizon the public will choose full employment and with the right people in chrage of Federal policy, we'll be able to contain inflation too.

"I think your problem may be that you follow MMT only casually." Yes, that's true. Here's the thing though - if you want to popularize MMT you have to write for casual readers. Kervick's "bottomless money well" caricature is hardly his creation. When I first encountered MMT I got something like the same impression, and there are comments in the thread by other casual followers to the same effect. Instead of responding with: that's a canard there you go being dishonest again, it might be useful to reflect on why that seems to be such a common misperception. Sure, there may be some enemies of MMT trying to propagate that meme in order to discredit it, but I think its advocates have been not nearly careful enough in addressing the issue. Personally, I'd recommend addressing it in every post on the subject. It won't go away on its own.

A lot of us do address it in things we write. But we can't always be in a defensive crouch, so we cannot address it in every approach. You know when you post, you often want to keep it short. You often can't write a 750 to 1500 word post on some subject and find space for a discussion of inflation too. Randy Wray has written voluminously on inflation. I've written a lot about it too, as have many of the rest of us, including Scott Fullwiler who has commented here. We keep trying to popularize. We think we're making progress. There will misunderstandings. There will be honest critiques and there also will be trolls. We can't develop a general strategy that will allow us to satisfy everyone. So, we'll just keep trying to do the best we can to popularize.

Epistemic closure: "Warren would have the support of the other [MMT economists]...Warren's really brilliant; all the others I've named really think so." MMT is right because....all the MMTers say it is and are persuaded by each other.

Well, of course, I'm not recommending epistemic closure or practicing it. You attacked Warren, and I tried to indicate the great opinion of him the rest of us have including the academics. Have you read Soft-Currency Economics first written in 1994. Perhaps if you did, you'd understand why we consider him an original thinker.

"So, how do you define the notion of an economic model that leads you to say that economic models are absent from MMT?" Poorly written; I should have thought about it more and shouldn't have included it. What I was trying to get at is that we don't have anything but a theoretical understanding of how it would work. But there's no way to get real world data without trying it in the real world (we don't have a Beta Earth to test it out in first). The only way to see if all that theoretical stuff really works is to leap in and see what happens. Every real world economic model started out the same way though, they all started as a theory and then an economy jumped in and tried it. Like I said, I shouldn't have written it.

That's true. But there are things we can do. We can examine data, events, and evidence relevant for key propositions MMT holds relative to neoliberalism and other competing programs. We can also formulate theories consistently and make sure they're consistent with whatever data is available. We can also use computer simulations. We do all these things and the track record of MMT knowledge claims is pretty darned good!

"I don't read Randy as contending that prosecution and conviction is a 'sin tax,' and think you're just wrong about that." Holy crap. I don't see how there's any other way to read "Let's raise sin taxes on the rich...Don't let crime pay." I guess we'll just have to disagree on that one. And once again, the continual de-emphasis on taxes sends a very clear message.

Not sure we're understanding each other. Didn't you say earlier that Randy was advocating arrest and imprisonment as a sin tax? My comment replied by saying he's for that, but also for taxes that take away the financial resources of the fraudsters

"But I don't think one can automatically assume that politics will remain the same when the austerity excuse is no longer structuring our political discourse." As above, I don't see the austerity excuse going away, but seamlessly transitioning from "because insolvency" to "because inflation." And hell, it's not like no one isn't already ringing that bell.

Already addressed. Politically, we'd rather deal with the inflation issue than the solvency issue and we have historical reasons for thinking that. Also, if we get rid of austerity say with a $60 T platinum coin, then the whole austerian propaganda machine will have to retool. They have a lot of money, but restructuring their web sites, campaigns and organizations should give us relief for at least a year.

Re: "You have no basis for claiming that the fight is the same...they know that austerity can only be justified by fears of insolvency." As above, the austerity excuse will just be justified by fears of inflation. And for God's sake Joe, neither of us has any basis for knowing with certainty how things will shake out. Your "MMT demands New Deal 2" belief is every bit as speculative. Again, once you start talking about purpose it's no longer core MMT but policy. You have no basis for knowing your preferred policies as justified by MMT would be implemented. We're both looking at the lay of the land and offering our best reasoned judgments. I'm pretty confident it isn't fear of insolvency but but hostility to social programs that's driving the austerity narrative. You seem to think that if insolvency gets knocked down, those who want to kill Social Security and Medicare will be exposed and unable to call for that any more. I think the underlying hostility will remain, and is the real problem. So they will continue to call for austerity as forcefully as ever, but with the next handy excuse - inflation. "But that's not a legitimate problem!" No it isn't. Neither is insolvency. Has that deterred them so far?

I think I've really addressed all of this above, and won't repeat what I've said. But, in connection with the point that austerity is being driven by hostility to social programs, I think you're missing the point. Sure it's true that much of the elite is against them and that is what drives their austerity propaganda. However, its relative success in blocking progressive economics is due to large masses of people finding the solvency excuse plausible. Once we blast that out of the water, they'll have to scare them with inflation. And they won't be as powerful politically then. Our real problem is not the hostility of the rich to social programs. That's a given we can't do anything about.What we have to do is unmask their distractions and rationalization and expose their campaigns as attempts to get closer and closer to an oligarchy.

"Tell that to the 27 million people who want full time jobs and can't get them." Pocketbook issues come first, as always. And they should - those are the ones that concern peoples' most basic needs. But your sequencing frame doesn't allow for other urgent priorities to be pursued at the same time. We need to be able to walk and chew gum. I know democracy is an abstract concept and is something (like civil liberties) that doesn't grab people in the same visceral way, but that doesn't mean it ought to be sent to the back of the line. Every good policy you advocate requires something like a functioning democracy, and if we can't do things to strengthen it then we give over ever more to anti-democratic forces. How do you think that will affect the public purpose over time? I just can't justify putting it so far back on the list.

I don't have it far back on the list. If we get power again, we can implement the programs we need to create real full employment and get Medicare for All in 90 - 180 days. We can then turn to climate change measures and reinventing energy foundations. Within 9 months we can be passing measures to enhance democracy including various progressive taxes designed to enhance it. Design work for that can begin immediately, as well. Only the cmpaign to push it through needs to wait for 9 months.

Re: "we'd like to prioritize tax collection," again - de-prioritizing. This time because it's not politically feasible (I don't recall that logic being very popular here during the health care reform debate), whereas prosecutions are.

I agree prosecutions are extremely important. I'd push them immediately. So would Bill Black and Randy Wray, I think.

Well, that's it. I'm sorry for another long reply. But I thought I owed you that. Thanks for the detailed discussion. Please read more MMT and learn what we're really about!

nihil obstet's picture
Submitted by nihil obstet on

Letsgetitdone, you do not appear to be able to read and comprehend what it is you've read, nor to make a coherent statement of your own position. I trust this is some sort of mental block rather than evidence of moral failing, but in any case, there is no reason further to attempt to reach your understanding. Thank you for your efforts and wishing you good will in your attempts.

Submitted by lambert on

... to rest simply by joining us and chiming in. Of course, the poster may not have time to respond to you.

Readers, it's a long comment, I know. But if you want to see interesting and useful ideas patiently, politely, and thoroughly explained, get yourself settled in a comfortable chair and study it.

letsgetitdone's picture
Submitted by letsgetitdone on

I don't think i's the one true path, hipparchia. However, I do think that it's the approach that gets closer to the truth than other approaches out there now. I can be moved from that belief however, all it would take is some facts and some good theories. But neo-classical economics or neo-keynesianism not so much. There's too much refutation of those, already.

Submitted by lambert on

... "The One True Path" with "The Best Path I've Found Yet."

Do you really think I'm motivated by religious impulses in this matter? I have programs I support and I think you support to. MMT is a tool to get those programs in place.

Submitted by Hugh on

An excellent post and an interesting thread. Thanks for the expressions of concern. My situation at Naked Capitalism is that any comment I make there will be put into moderation until approved by I would assume either lambert or Yves. I simply will not participate in a site that exercises that kind of censorship. It says something about both lambert and Yves and the hold that MMT has over them that they would engage in such an activity against someone who had invested so much time in the site and whose views there were generally respected and well received. Rather than address the outrageousness of Wray's views on taxes, Yves chose to concentrate on what she perceived as a personal attack I made on Wray by calling him elitist and neoliberal. Yet Wray in his post was sneering and dismissive of "progressives" and lambert has no trouble of throwing around the smear of troll. The problem is that dismissing taxation on the rich is the very core of neoliberalism and the centerpiece of the class war being waged against us. And has anyone ever read an MMT post that wasn't heavily elitist in style, filled with unnecessary jargon, convoluted prose, short on evidence and long on pronouncements? Can you imagine asking a random passerby on the street to read an MMT post? or what their reaction would be? It doesn't speak to ordinary Americans. It speaks at and about them. MMT is as elitist as it gets, but of course we are not supposed to notice.

The truth is I am tired of MMT and MMTers. As I said in a previous thread, I do not think they can ever be allies in our struggle to bring about real, meaningful, transformative change to our economic and political systems. For me, Wray's take on taxation of the rich was just the last straw on a small mountain of disagreements and doubts, the moment that MMT definitively jumped the shark. Listen, we all know that MMTers can not take criticism. This or any other MMT thread illustrates this. Has anyone anywhere ever witnessed an MMTer say, "Hey yeah, that's a legitimate criticism. We're going to need to rethink that."? (Unlike MMTers, I am not asking you to cite me chapter and verse and supply a link.) Do you have a memory of such a thing because I don't? How can there be any conversation or discussion with MMTers when your only options are to agree with them or admit you are wrong? If we treat MMT as a narrow theory of money, we are told it is so much more, an inclusive economic perspective. Conversely, if we start with it as an inclusive theory, we are told it is just a monetary theory. Sometimes it's just description, but when needed, it becomes prescriptive without missing a beat. If we argue principles, we are told we need specifics. If we use specifics as danps notes, we are told we are being selective. It just goes round and round. I have a solid background in intellectual analysis and the structure of ideas. I have taken apart and put back together theories going back to my undergraduate days. There is nothing special about MMT, not even the vehemence of its proponents. If you have ever asked yourself, what really is MMT, you have asked a legitimate question and one that MMTers, even after years to do it, have failed to answer. From where I sit, MMT is a poorly structured set of loosely related ideas. It has major intellectual holes and all kinds of unexamined premises. Structurally, it's a mess. To its adherents, it is beautiful, elegant, and any criticism of it must spring from the basest of motives.

My advice to all and sundry is don't forget taxes but do forget MMT. Take from it those ideas on fiat which make sense and move on. It's not worth the time or the aggravation.

scottfullwiler's picture
Submitted by scottfullwiler on

And still not 1 citation of an actual MMT post or paper to support your view. Par for the course for you, Hugh. If you could ever actually verify that you are even so much as a "casual reader" of MMT, someone might actually respond in kind to your (in that highly unlikely case) suddenly honest engagement.

Submitted by Hugh on

I am not playing your games anymore. Powerful critiques have been developed of modern economics by people who have never read Friedman or Hayek or Mosler. To an academic and those who subscribe to them, this must surely be impossible. How could such critiques have any academic validity? Well, that's just it. They don't. They also don't have the stamp of approval of the Lilliputian Board of Standards either.

You work and are credentialed in a field that is the modern equivalent of astrology. Yet you persist in demanding to set the rules and terms of debate as well as be the arbiter and judge of its outcome. It's not going to happen. I learned about MMT the way most others have done on the web by reading over a period of years the posts of its founders and promoters and the threads that followed them. Like most others, I did not keep links or make copies of them. I only do that if the material is very important or I think I may use it again some time in the future. When I critique an MMT piece, I work off my knowledge of its principles that I have acquired over the years and the material to be found in the text. For a more extended critique of the theory, I work off these principles and my knowledge of the structure of ideas as well as my knowledge of the all the questions that I and others have asked and which have not been answered by MMT's adherents over the years and, of course, their various bad behaviors while not doing so. I have no interest in citing chapter and verse to you from a bible in which I do not believe. My differences with MMT are fundamental. I am tired of waiting around for you and yours to get it that this is not about money or doctrinal correctness but about people and the quality of their lives. I do not see MMT as a partner in any struggle we the ordinary people are facing. As far as I am concerned, you belong in the same dustbin as Democrats, liberal economists like Krugman, and the faux progressives. You are a distraction, that is when you are not, as Randy "Forget Taxes" Wray was in his post, carrying water for the other side.

Submitted by Hugh on

Ooh wow, capitals. No content but capitals. Did you not read my comments in the Wray posts? Oh right, you MMTers are so lost in your dogmatism that you see, hear, and more especially answer to no one. You have created an echo chamber for yourselves and you mistake that for the world. I engaged in good faith debate with MMTers over a period of years. I am done with it. You want to find a critique of mine on MMT? Why don't you go out and read everything I have ever written on it? Does that seem like an extreme demand? It is the one you routinely make of me and every other MMT critic. I think you just don't like being called out from the progressive left or painted as the neoliberal elitists you really are and always will be.

Submitted by lambert on

... to your own work. You're anyone, right? This after repeated requests for links, by several posters, and by me. That's a Rule 4 violation; you were given a copy of the rules when your account was set up.

Perhaps you would be happier setting your own rules at your own blog?

UPDATE Adding, this blog -- although it may not seem like that, sometimes -- ins't about gladitorial combat between two posters. So, even granting that Fullwiller knows which comments on Wray, on which blog, Hugh is referring to, other readers won't. That's why the practice of links and quotes is not only preferred, but enforced; the back-and-forth of argument must be transparent to all readers and, since this is a group blog, to all bloggers. The door to 4Chan is that way.

letsgetitdone's picture
Submitted by letsgetitdone on

The game you're not playing is the game of honest engagement with your critics and the targets of your criticism, alike. What the above amounts to is that your views on MMT are views you've made up. You may have made them up based on inadequate memory, or you may have made them up through "creative" extensions of what you've read that have no basis in the writings themselves, to you may have made them up because you want to discredit MMT writers politically by claiming that they are parts of the oligarchy or dupes of the oligarchy running our lives. Whatever the basis for your charges, everyone who reads them has the right to demand documentation from you about what you say, or, in the absence of a reply from you, it is only reasonable for them to reply that your views on what MMT says are false, a fictional construct that is of no use to people wanting to understand either its strengths or its weaknesses.

You say:

I am not playing your games anymore.

implying that you did once. But, the truth is that you've never played either "our games" or even once produced a quote to document your charges against MMT, during four the years since the Spring of 2010, when you began to comment on my MMT posts. I've corrected you numerous times with links to blog posts and books that refute your characterizations of MMT, and while continuing to offer no evidence of your own to support your views, you've just doubled down on your baseless charges about MMT again and again.

You may be able to fool some of the latecomers here who haven't experienced this history with you, and who also are unfamiliar with the MMT literature, into thinking that you're a reasonable man with plausible views who's just being persecuted by Lambert, Scott, Ben, and myself. But Lambert and I know the truth. We know that early on you conceived a dislike of MMT for unknown reasons which you've not communicated, and that ever since then your comments have been politically (in the broad sense of the term) motivated, and politically framed to discredit MMT rather than to foster honest exchanges in comments.

Alexa's picture
Submitted by Alexa on

but I have a question and wanted to "catch up with you."

I am still looking for the audio with Chrystia Freeland that I want you to review.

In the meantime, I'm going to post a link of Stephanie Kelton being interviewed with Sam Seder (hope it works).

I am only concerned with MMT in regards to how it does (or does not) affect striking a Grand Bargain.

I do not have the ability to "clip" Seder's audio, so here's what Kelton says that concerns me:

"The federal government could safely LOWER TAXES, increase government spending, and allow aggregate demand to increase because that's the problem that we have today."

Personally, I want taxes to be raised on the wealthy--not lowered, as proposed by Bowles-Simpson.

Everyone laughed it off when I was concerned about a VAT tax being implemented, after hearing Norm Orstein and Thomas Mann (with Mort Kondracke) in a VAT Tax Forum THE DAY AFTER (IIRC) the President was reelected (2012).

I'm still reading where politicians and finance types are pushing for this. IOW, their plan is to almost completely flatten our federal income taxes, and come back and implement a VAT Tax and/or a Carbon Tax.

Does the MMT Theory support this?

Here's the Seder link below, which contains Kelton's "lowering taxes" remark. It was made within the first few minutes of the interview (after Sam comes back on from a break).

11/20 Stephanie Kelton: Why the Elite Are Living In an Economic Fantasy
Posted on November 20, 2012 by not-sam

Thanks.

Submitted by lambert on

... because it was empty.

Try the second.

There are plenty of reasons to raise taxes on the rich. (Note that Kelton is saying what's possible, not what she recommends.)

However, providing government services is not one of them, because -- and you've got to get your mind around it, but if you think you will see it is true -- taxes don't fund government spending. Ask lets to explain ;-)

Submitted by lambert on

... MMT nukes the Grand Bargain because it nukes the Austerity Narrative. We are not going to go bankrupt, we are not going to run out of money, etc. Link on request, but if you search for a long comment by me with "austerity" in it, you'll find more.

All of which makes the claim that MMT supports neo-liberalism a little.... off-kilter, to me. I mean, who want the Grand Bargain most?

letsgetitdone's picture
Submitted by letsgetitdone on

Hi Alexa,

No, I have never ever seen an MMTer support flat taxes. When they talk about taxes, they talk about progressive taxes, not flat taxes. Even when talking about taxes on real estate square footage, they still talk about progressive taxes. The B-S commission has been anathema to MMTers for as long as I've been involved with MMT. The Fiscal Sustainability Teach-In Counter-Conference was all about opposition to Peterson and to the B-S Commission.

When Stephanie made that comment to Sam, I think she was alluding to the frequent MMT proposal for a payroll tax holiday, ad the occasional proposal to eliminate payroll taxes altogether because of how "punishingly regressive" they are. MMTers never favor lowering taxes on the rich while using tax revenue from the poor to regulate inflation. MMTers would dismiss that as being inconsistent with the public purpose.

Alexa's picture
Submitted by Alexa on

audio. (Or at least read the transcript.)

Will try to transcribe the "key" statements for everyone's convenience.

Freeland's audio discusses [with a couple of other political talking heads] "predistribution versus redistribution."

This was the conversation that really concerned me.

Should be able to locate the audio (which will take some doing) by early next week, after family and other guests have departed.

;-)

Submitted by lambert on

Some people think there are three sides, and in electoral politics that's probably true.

Other people might say there are two sides: The 0.01% and the rest of us. Or the 20% and the 80%. Or the wage workers and the capitalists. Or people who are willing to kill for their beliefs, and people or aren't.

Democrats and Republicans think there are only two sides. Maybe that's what Hugh means.

I really have no idea, except whatever number of sides there may be, Democrats, Republicans, and the entire Beltway nomenklatura (including the Center for American Progress and the Heritage Foundation, etc.) aren't to be trusted to define them for me, or anybody remotely like me.

Submitted by lambert on

Let me take a moment to count up the evidence and links for any of Hugh's assertions about MMT, neo-liberalism, taxes, anything, or for any of the personal assaults that Hugh makes on MMT proponents.

The count will be zero, zip, zilch, nada. I have processed enormous quantities of material by Hugh on this topic and the count, if not zero in the totality of Hugh's commentary, approaches it. Words are wind, as they say on Game of Thrones.

Corrente moderation rules outlaw trolls; everybody gets a link to the moderation rules when they sign up; they appear at Moderation on the top menu bar. They are also designed to provide an operational definition of trolling, so that when trolls appear, we can get rid of them. Otherwise, trolls will destroy the blog, as has happened to other sites. Corente has survived for nine (9) years in part because of the process of thinking about and developing those rules. Here is Rule 4:

4. Continue to contaminate the discourse by failing to back up claims with evidence or links -- or refusing to back down on the claim -- after repeated requests.

Hugh, in his own words, doesn't believe the house rules apply to him:

Unlike MMTers, I am not asking you to cite me chapter and verse and supply a link.

His practice shows that. Hugh's work on unemployment seems good, and I wish him well. But his preferred practice of addressing MMT issues will not work here. letsgetitdone has asked him to follow the rules, I have asked him to follow the rules. It's not happening.

NOTE I tried to pick apart how Wray sneering at progressives (or rather, what Hugh believes progressives to be; I think it's a very fuzzy category) made him a neo-liberal. I sneer at progressives, but because they don't support single payer and a lot else I support. Show me a "career" progressive who does.

Submitted by Ben Johannson on

dan,

If your single goal (which isn't believable given your original post struck out in a dozen different directions) is to teach Lambert and everyone else that MMT is a tool anyone can use, then you're about two decades late to the party. Anyone who has done more than skim the material is well aware of this fact given that Wray, Mosler, Black, Mitchell, Fullwiler, et. al have repeatedly and openly stated this.

That you haven't even bothered to get into the specifics, even so much as to tell us what would be a superior approach is, to be blunt, rather damning. You have acknowledged you don't understand MMT and have no intention of making an effort to do so. Let's break that down:

1) You've skimmed twitter and a few blog posts regarding this methodology

2) You know it's "bad" even though you aren't prepared to discuss it

3) You can't think of anything better

Where is the wisdom in attacking a thing you do not understand? I can't quite wrap my head around this mentality of bearding a better armed opponent on her own ground, which is what you've done by criticizing people with a lot more knowledge of the subject than you. I notice that Scott Fullwiler joined the discussion at the bottom of the thread and can tell you there is no way I would cross intellectual swords with the man unless I were sure of solid ground under my feet.

This contempt for the expertise of others is remarkably similar to that shown by conservatives in attacking scientists.

letsgetitdone's picture
Submitted by letsgetitdone on

Ben, I understand what you're saying and you're also right that the main MMT figures have all at one time or another said that MMT is a tool "anyone can use." But I don't agree, or at least I think that the truth of that statement depends on how one defines or constructs (if you don't believe in definitions) MMT. If you define it as an approach having a number of different components including certain "tools" for analysis, then yes, there are tools in it that can be used by anyone.

But, and please note this well, using some or even all of its "tools" doesn't mean one is following the MMT approach, and doesn't mean that one is an adherent of MMT, or that MMT ought to be discredited because those tools or MMT perspectives are being used for objectionable purposes in objectionable ways. Everyone agrees that the key people who developed MMT including our friend Scott all agree that MMT is an approach dedicated to fulfilling the public purpose as ultimately defined by the voters in a democracy. That means that people who use aspects of MMT, but who don't use them to advance economic policies directed at achieving the public purpose are not practicing MMT, even if they are using some of its elements.

MMT also defines public purpose in terms of at least full employment and price stability. These components of public purpose have been a constant in MMT literature since the early days. That means that if people are pursuing objectives in conflict with reaching full employment and price stability, then they are not doing MMT, even if they are using MMT insights, perspectives, tools and theories.

When the Monetary Realism people split off from MMT to define their own approach they retained many perspectives and tools learned from MMTers, but they denied the need for full employment and also price stability to some degree and explicitly adopted targets of 4% unemployment and 4% annual inflation. Both in contradiction with key MMT objectives. When they did this they departed from MMT, and it became incorrect to say that they were following the MMT approach in their work.

Going further, they also denied one of the MMT core fiscal policies for achieving both full employment and price stability, namely the MMT Job Guarantee and declared their opposition to that policy. This too, made it incorrect to say that they were MMTers any longer.

I hope it's plain from these examples that we need more precision when we say that anyone can use MMT because it's a tool. It is a much more than a tool. It is a Knowledge Claim Network comprised of a number of types of components, including tools. People can use some, even many of its components, including its tools, without actually using the MMT Knowledge Claim Network and therefore MMT.

So, if people misuse some MMT components, that doesn't mean that MMT itself can be, or is being, misused. In fact, if people want to use MMT, then they must use not only its tools perspectives, models, propositions, and principles, but they must also commit to its moral core, beginning with public purpose, full employment, price stability, and other elements of public purpose universal health care for all, public education for all etc.

I've defined what I mean by a Knowledge Claim Network (KCN) here, and also listed what I think are the primary components of MMT at the time of writing the post I just linked to. I also revised some of the value gap components later in this post.

If you're wondering why I've used the term KCN it I didn't want to use the term "paradigm." I've always thought that Kuhn never formulated that concept in a clear manner, so I've just avoided the term, and used KCN instead because I could make a fresh start defining that idea. I point out this out here, because my KCN shares some elements with the kinds of things that are often associated with "paradigm." So, I talk about the MMT KCN, rather than the MMT paradigm.

Rainbow Girl's picture
Submitted by Rainbow Girl on

"... the truth of that statement depends on how one defines or constructs (if you don't believe in definitions) MMT"

Does this mean that "MMT" is whatever one's "construct" or "definition" of it is? Like a Roscharch test? Is it even possible to provide citations or links in responding to a discussion or post about MMT that consists of a "construct" or "definition" or "interpretation" of the large opus of MMT -- which is a corpus of separate writings by separate people several of whom seem not even to agree with each other on essential features like "public purpose," "tool" vs. "Policy," etc. (for example: you and Ben right here; another writer responding to a critique of Wray's "no taxes" post at NC saying "Wray is not MMT").

Getting confused-er and confused-er.

letsgetitdone's picture
Submitted by letsgetitdone on

When distinguishing and naming schools or approaches to any field of intellectual endeavor, one always has the problem of generalizing across a set of writers who one thinks is representative of an approach and, based on their writings, to offer a construction of the approach. Such a construction is always a proposal about how best to construct the approach or school in question in order to write, talk about, or analyze it.

So, people trying to make sense of an approach will vary in their construction and then they and others will evaluate the candidate constructions with critical evaluations of whether the competing constructions really do successfully explicate the approach involve. That's exactly what Dan PS and I are doing here. Dan's proposing one way to construct "MMT," I'm proposing another. To decide who's closer to the truth about what is the core of MMT you have to evaluate our arguments and compare them to your knowledge and research about the approach. Over a period of time, as more and more people go through that kind of evaluation a consensus on how to describe the approach may or may not emerge.

Even if it it does emerge, however, the consensus may be in error and future attempts at construction may provide more alternative constructs and disturb the consensus. That's life and research, I'm afraid. I'm saying that my construct of MMT, is more consistent with the MMT literature and is therefore closer to the truth than Dan ps's. It's for you and others to evaluate whether he or I is closer to the truth about MMT than the other.

Rainbow Girl's picture
Submitted by Rainbow Girl on

In this case, Mr. Firestone, I think that you and your desired audience of readers and listeners would benefit by starting to insert references to specific MMT individuals who are supporters/advocates of elements that you weave into your interpretation "generalizing across a set of writers."

I think that using citations in this manner would at a minimum eliminate a lot of the confusion and back and forth building over general statements about "what MMT is or isn't" and then others where a poster's question about the general statement is met with "but that's just Randy, or that's just Ben, and Randy and Ray "are not MMT"" (paraphrasing).

If you're presenting your synthesis/interpretation of what different thinkers/writers are thinking and writing it's proper form to attribute the pieces of your narrative construct so that one knows sources without being told to "go read all the literature out there." Likewise, those attributions should be matched with references to the individual MMT persons who do not agree with the particular elements that you are weaving into your narrative interpretation of "what MMT is or isn't."

I'm not being pedantic. In my life as a student and professional who has had to synthesize and boil down a lot of material (philosophical, factual, legal, etc.), I was always taught to hew very tightly to attributions and sources and to make them explicit in my written syntheses/narratives so that a reader is aware in the real-time of reading what the source is and what are the contrary views.

I just don't follow at this point, except that there's a loosely defined group of academics who define MMT as a description of how money is created in the U.S. And I'm not even clear if these "descriptive MMT'ers" acknowledge that our current money-creation system has been delegated to private banks, with the Fed (a "public private" (cough) "partnership") acting as a go-between to enable the private bankers to create money for their benefit while crashing everyone else.

For the rest of it - "job guarantee," "wage guarantee," "public purpose," I'm as clueless as I was at the beginning of this last round of MMT threads, notwithstanding the patient attempts to explain and simplify by Lambert and others. At the moment, I don't find this a compelling place to be thinking about in the slivers of time between the demands of RL in this the Seventh Year of the Second Great Depression.

So, wishing you all the best in this endeavour.

joebhed's picture
Submitted by joebhed on

Sorry, gang.
I will spend the day poring over the comments, but there obviously remains a fundamental, initial across the grain rub that I maintain is paramount, without which "the fog around the money" of MMT prevails.,
It goes like this.
Despite Stephanie's unsubstantiated and oft-repeated claims, the government is not the monopoly issuer of the nation's money(currency). The Guv creates and issues about One Percent of the Money (Funny how that works.)
Also, it is neither impossible nor illegal for anyone else to create the nation's money(currency).
It is legal and possible for the banks to create all(Ninety-Nine Percent) of the nation's money(currency); and they do exactly that, every day.

This comment purposefully joins the important historical issue that MUST be understood in order to have a rational discussion....to clear the fog around the MMT money.

WHEN exactly does MMT claim the government BECAME the monopoly issuer of the nation's money(currency)? And, HOW, exactly, did it do so?

Looking for a little "history" here, a little "law", and hopefully a little "science".......established and sustained by a string of non-stylized "facts".

Some fundamentals, eh?
For the Money System Common.

Submitted by lambert on

And after I'd actually increased the default settings for comments on one page! Let me see if I can bump that up again. (The "seam" between pages makes the reply nesting go pear-shaped, and there were one or two comments I didn't reply to because of that.)

I'm going go shovel some dirt and do some weeding now. I'll be back later to spend a quiet evening considering suicide requests. What fun!