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Tweet of the day

If -- and I'm sure I over-simplify, but people smarter than I am will correct me -- the function of taxes is not to (a) "fund" the government but to (b) regulate the economy, it should not be surprising that (1) we had an uptick in the economy with the payroll tax cut and (2) now a downturn with the payroll tax hike.

In fact, you could look at the fiscal policy engineered by the political class in its totality during the Obama years as a controlled experiment showing that MMT's sectoral balances approach is correct: The other candidates for regulating the economy are so feeble (the stimulus), so financialized (QE) as to leave the real economy unaffected,* or also reinforce MMT (the sequester and deficit cuts reduce aggregate demand).

NOTE * Rereading the tweet, Mosler says QE is a tax "forever," which means it's a constant, that is, controlled for.

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letsgetitdone's picture
Submitted by letsgetitdone on

But I don't think they know enough to plan a controlled experiment. Nevertheless, you've got cause and effect just fine here.