A few weeks back when the world was falling apart, the stock market suddenly started climbing. And all the Wise Economic Pundits rushed to tell us that the wisdom of traders is so great they had already accounted for the massive death and destruction of the virus, and they were basing their buying on their great awareness that the economy would rebound sometime next year.
Yesterday there were good economic numbers, and the market zoomed up, and the Wise Economic Pundits rushed to explain that the market was responding to the jobs report.
So either the great and wise traders ignore the present condition and base their trades on their deep knowledge of the future or they respond to immediate stimuli…
…or we’ve simply transferred so much of this nation’s wealth to the tiny trading class that they have to put their money in the stock market when it’s remotely possible or face stuffing it in their mattresses.
It is possible that these traders are simply wiser than me. I say let’s find out. Let’s tax the hell out of them, use that money to restore America’s middle class, and let the market take care of itself.
5G: I have been studying and talking to various engineers and communications workers about this.
Over several years there have been health concerns about the use of cell phones, and risks concerning people who live near the high voltage power lines. There were cautious about the overuse of cell phones’ possible link to cancer. So far there seems to be no clear evidence that these may pose a health risk.
Now comes 5G and there seems to be no proof yet that this is any more of a risk then what we would get from the television satellite dishes, radio transmissions, and microwave ovens. We are literally surrounded by electrical devices that send signals through the air.
And there are legitimate concerns about possible EMP bursts that could take down the electrical grid, and the increasing instability of the magnetic field. There seems to be more incoming waves of energy from space, the source of which is not exactly clear.
Some of the neighborhoods around here do not want the 5G transmitters put in.
“The Science of why 5G is (almost ) certainly safe for humans (Forbes)
“Is 5G safe? We ask an expert”(Digital Trends)
Rick Wilson Retweeted
Christopher Orr
@OrrChris
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8h
Bill Barr: “My attitude was get it done, but I didn’t say ‘Go do it.'”
I’m not sure it’s possible to sound any more like a mob boss.
Quote Tweet
Kaitlan Collins
@kaitlancollins
· 11h
“I’m not involved in giving tactical commands like that,” Attorney General Barr tells AP. “I was frustrated& I was also worried that as the crowd grew, it was going to be harder & harder to do. So my attitude was get it done, but I didn’t say, ‘Go do it.’” https://apnews.com/1a993a6e99b4ec
“Any moment might be our last. Everything is more beautiful because we’re doomed. You will never be lovelier than you are now. We will never be here again.”
When the U.S. government’s official jobs report for May came out on Friday, it included a note at the bottom saying there had been a major “error” indicating that the unemployment rate likely should be higher than the widely reported 13.3 percent rate.
The special note said that if this “misclassification error” had not occurred, the “overall unemployment rate would have been about 3 percentage points higher than reported,” meaning the unemployment rate would be about 16.3 percent for May.
@wr: Years ago I saw a business writer admit that every morning he looked to see if the markets were going up or down, then he’d start going through his contact list asking why. When he first got a quotable remark from someone, that was it, whatever it was, that was the reason of the day.
@Tyrell: ow comes 5G and there seems to be no proof yet that this is any more of a risk then what we would get from the television satellite dishes, radio transmissions, and microwave ovens.
The thousands of low-altitude satellites may have some impact, however.
It is possible that these traders are simply wiser than me. I say let’s find out. Let’s tax the hell out of them, use that money to restore America’s middle class, and let the market take care of itself.
how should we think about proposals to tax the rich from a MMT perspective. First, we know we can raise more money by taxing the rich, so if the point is to raise revenue, that is where the money is.
But we know the point of taxes is not actually to raise revenue, the point is to reduce consumption to decrease demand in the economy.
…
Do we think this additional tax bill will reduce the number of times Bill Gates or Jeff Bezos goes out to dinner? Will they take fewer vacations or buy fewer cars, planes, and yachts? While I’m sure the effect will not be zero, especially for lesser billionaires or mere hundred millionaires, taking another $70 billion a year in taxes from these people will not have nearly as large an impact in reducing consumption as taking $70 billion out of the pockets of low and middle income people. (This is just the flip side of the argument that if we want to stimulate the economy in a downturn, a tax cut will be far more effective if it is directed towards people at the middle and the bottom of the income distribution, than people at the top.)
This means that in terms of creating room for government spending, higher taxes on the rich will not go very far.
@Kit: With all due respect to Dean Baker, that is the dumbest thing I’ve ever read. You don’t tax the hell out of the rich so they go out to dinner less frequently. You tax the hell out of the rich to return money to the government, which uses it for the people of the United States, and you do it to keep a handful of people from owning so much of the nation’s wealth they are allowed a huge political influence.
Look up MMT. I can’t pretend to explain it well enough while I am at work. (Or really, at all. But I have looked into it, so I know roughly why he wrote that.)
Short version:
The government can print money at will–inflation is the only barrier. Inflation accelerates at full employment.
EDIT: that last sentence should probably read accelerates as an economy reaches full employment. My understanding is basic, though.
I don’t know much about MMT. Anybody have a book recommendation? But our goal is to reduce consumption? On taxing the rich I’ll recommend Piketty. The point to taxing them is to prevent inherited wealth from hoovering up everything and cut down on the number of Adelsons, Mercers, Kochs, etc. that can afford to make a hobby out of ratfracking politics in this country.
Footnote – there appears to have been a long term, as in centuries, downward trend in interest rates, now approaching zero. Remember that 2008 was largely caused by the “savings glut” desperately seeking higher than market returns. If that is really happening, if we have so much accumulated money that it no longer commands a scarcity price, then all of econ, including Piketty, needs a serious rewrite. @Kurtz: we were pretty much at full employment pre COVID and everyone seemed puzzled that inflation, and interest rates, weren’t going up.
So let me get this straight: the purpose of taxation is to reduce consumption and/or keep the very wealthy from accumulating too much power? But it is not to raise revenue to do the things society needs done, such as funding schools and roads and healthcare? I’m not sure why reducing consumption is a goal apart from environmental concerns. And while I agree that the outsized power of the rich on our system needs to be reined in, I don’t know why that negates the need to raise revenue to make our society function.
But it is not to raise revenue to do the things society needs done, such as funding schools and roads and healthcare? […] What am I missing here?
The question is why you have to “raise revenue” (take money from one place in order to use it in another) rather than just printing more money to do the things you want to do. The historical answer is “because that would lead to runaway inflation”. What is the mechanism behind inflation? People being willing to spend more for a given thing, aka increased demand. So, in theory, if you can keep demand from growing, you can print money without inflation. The way to prevent your money from creating demand is to make sure it primarily goes to the people who can’t possibly consume any more than they already do.
Note: I don’t believe any of that, and I might have it totally wrong, but that’s my crayon-level understanding of the claim. The problem is that (on this theory) you can’t use the money to do anything that helps the poor, because that would put extra disposable income in their hands, which is inflationary. So you can only use your newly-printed money on things that don’t help the poor, like border walls and F-35s. Which defeats the purpose of raising government spending.
@Bill:
The Dionnes were born considerably before my time. What Altman movie?
My father was in the movie biz for a while, which is why I think I haven’t followed it closely.
There are a number of snowbirds who vote both in their northern home states and Florida.
That’s *illegal.* That IS voter fraud. I can’t tell if you’re joking or not with the “vote both in their home states and Florida,” Poe’s Law is killing me.
You have ONE state of residence, and it’s supposed to be tied to the amount of time you’re there. I’ll wait to see the evidence on this (I posted a similar link last night in the Friday open thread about this and the discovery that Kayleigh McEnany has also voted in FL, despite living in DC and having a NJ driver’s license).
There are supposed to be checks on this, and simply owning a house in a jurisdiction is not sufficient.
Each state has laws on what is necessary to consider someone to be a resident. In Florida, you are a resident if you live there for more than 6 months out of the year, and if that is the case you are required to get a FL driver’s license.
1.) The assumption that full employment itself increases inflation rates is predicated on an increase in demand pressure.*
-past a certain point of rising inequality, demand plummets.
2.) Supply is stickier than demand.
3.) I think there is likely good reason to suspect that consumer confidence as measured by a questionnaire is quite different from how it would be measured by consumer behavior.
From an MMT perspective:
I really only gave a partial explanation of that principle. I will try to find the in-depth articles I read a while back about MMT after work. I’ll post the links tonight.
For now, from the wiki:
a government that issues its own fiat money:
Can pay for goods, services, and financial assets without a need to collect money in the form of taxes or debt issuance in advance of such purchases;
Cannot be forced to default on debt denominated in its own currency;
Is only limited in its money creation and purchases by inflation, which accelerates once the real resources (labour, capital and natural resources) of the economy are utilized at full employment;
Can control demand-pull inflation[6] by taxation and bond issuance, which remove excess money from circulation (although the political will to do so may not always exist);
Does not need to compete with the private sector for scarce savings by issuing bonds.
Next we decompose the nondurable goods and services categories into the inflation contributions of their subcategories and compare the two expansions (Figures 2 and 3). For nondurable goods, the reduction in the total inflation contribution from the previous to the current expansion comes almost entirely from the energy subcategory (–0.42 ppts), which includes utilities and gasoline. For services, the reduction comes from a variety of sources, primarily health care expenditures (–0.28 ppts), followed by housing expenditures (–0.17 ppts). Note, however, that the reductions in the inflation contributions from these categories do not imply falling prices for these expenditures. Rather, the current-expansion inflation rates are simply lower than the previous-expansion inflation rates. In sum, these results demonstrate that the current low PCE inflation rate can largely be attributed to the reduction in inflation contributions from the energy, health care, and housing subcategories.
Although a below-target inflation rate may reflect weak demand for goods and services in the economy, it can also be driven by a strong supply of goods and services. In the case of a strong supply, policymakers typically have less cause for concern. Our analysis cannot determine whether the observed inflation reductions are caused by supply- or demand-side factors. However, our analysis does open the question of what factors might be at play. For example, the reduced energy inflation rate could be influenced by the wide adoption of hydro-fracking technology in the United States over the past decade. This new technology could be lowering the cost of oil production and thus depressing the inflation rate in the energy sector. More research is needed to determine what specific supply- or demand-side factors are driving the current low PCE inflation rate.
MMT is based on six principles, five of which are considered standard economic idea and one which is considered radical, but is a logical extension of the first five:
1. There are two types of countries: ones that can borrow money in their own currency and ones that have to borrow in another country’s currency
2. Countries that can borrow money in their own currency can’t actually default on their debt because they can always print whatever money they need to pay them off
3. The only limit on such a country’s ability to print money is that if the total supply gets too big, it causes inflation
4. Countries reduce the size of their money supply via taxation and by issuing debt
5. Government issued debt is bad because it crowds out private debt and reduces access to credit
6. Therefore, governments shouldn’t use taxation to finance themselves, but rather just print whatever money they need for their operations. Tax rates should be set not based on what revenue is needed, but rather what is needed to control inflation
Most developed countries are unintentionally already mostly doing MMT, switching to it explicitly is more a change in how we understand what we’re already doing instead of radical changes in what we are doing.
@Monala: I didn’t mean to imply reducing the number of obscenely wealthy individuals is the sole reason for taxes. Obviously we need to raise enough revenue to fund the level of expenditure we decide on. (OK, I know that balancing the budget has become a radical left wing idea.) But why we favor one means of raising revenue over another is a question of incentives and disincentives. This tax discussion was in response to @Kit: quoting Dean Baker saying taxing the rich is a bad incentive.
Amusingly, Laffer implies that tax rates should be set to maximize revenue, not just to raise enough.
It’s very common to argue that taxing the wealthy won’t raise enough money for everything, so why do it? That’s another argument we’re addressing. Also, that’s one of the standard conservative fallacies, that doing A won’t by itself 100% solve problem B, so there’s no reason to do it.
I would love to see Ds run on real tax reform. Among other things, replace our pretend progressive income tax with a VAT and a smaller, but actually progressive, income tax.
@DrDaveT: I’m pretty sure the goal of a government monetary policy should not be to deliberately explore bizarre edge cases of economic theory that maximize human suffering.
On the other hand, that would explain why inflation hasn’t really taken off since the Reagan Revolution, when the lower and middle classes have been continuously screwed over.
The way to prevent your money from creating demand is to make sure it primarily goes to the people who can’t possibly consume any more than they already do.
I think I have an answer here, but I need to find what I read about this before. I have to do it on my lunch break. Hoping @kit has a good grasp on this. If there isn’t a response in a couple hours, I’ll try to shed some light on this.
@Lynn: Satellites go through a thorough licensing process at the FCC regarding which frequencies they can use, how far the transmission spreads, how much power they can emit, etc. Even a low-level satellite is a hundred miles or so away from me at closest approach. SpaceX’s Starlight constellation is ~340 miles up. Given the power and distance constraints, satellites are far down on the list of sources to worry about.
Sanity check… OSHA’s workplace limit on microwave exposure is 10 milliwatts per square centimeter (mw/cm2). According to NASA, the power level at the center of the microwave receiver array for proposed space-based power stations in the gigawatt range — several orders of magnitude more than current satellites are allowed — would be about 23 mw/cm2. You could walk across the receiver array while the system was operating and not worry about the total exposure you would get.
I don’t want to get in a food fight over MMT, but to me it rests too strongly on the Efficient Markets Hypothesis. Markets generally, in aggregate, are fairly rational. But not always. 2008 is a case in point. When people get scared as hell, they want to hand their money over to an actor they feel is safe. And the US Government turns out to be the safest borrower in the world. And yet we failed to make use of that effectively. (And IMHO, we got Trump as a result.)
So while many of the things in MMT are accurate, and many of the people who advocate for it are very smart, it’s too ideological for me.
Countries that can borrow money in their own currency can’t actually default on their debt because they can always print whatever money they need to pay them off
Let us say, rather, that countries that can borrow in their own currency can only default on their debt by choice. So far as I know, the Supreme Court has never given an opinion on that aspect of the 14th Amendment. If Congress decides to default on US bonds, we would find out.
Historically default is common. Arguably, France lost one of its wars with England because it defaulted on the debt from the previous war and lenders were leery about financing the new war effort. England had raised taxes and paid off their war debt so had no trouble financing the next war.
That’s *illegal.* That IS voter fraud. I can’t tell if you’re joking or not with the “vote both in their home states and Florida,” Poe’s Law is killing me.
I know it’s illegal. Me and Dear Wife know at least two people* who do this. This is anecdotal but I have read once or twice mentions of this practice in the mainstream media.
When anyone says there is no voter fraud I always want to laugh.
*- It was three but the last one is now permanently in a nursing home up north.
@wr: I’m going to guess that you didn’t read the article based on your comments. Your second point for taxing the rich is clearly addressed:
So attacking levels of inequality that undermine democracy is a very worthwhile goal. I prefer other routes than just relying on taxation, but insofar as we using taxes for this end, we should be clear that our goal is not primarily raising revenue, or reducing demand in the economy, as is the case with other taxes.
Was that what you meant by it being the dumbest thing you read? As for the first part of why we tax, namely “to return money to the government,” I think you have a somewhat naive view on this and I recommend the article.
To the extent that you want the government to get something done, the issue is not really the money: that can always be printed. The issue is to get the manpower. If I, the government, wish to engage your services, but the private sector also wishes to do likewise, then there are really only a few options. Obviously, you can’t work two jobs. If one party must outbid the other, then we have serious inflation. If the government goes without, well, then the money didn’t really matter. Lastly, the government could tax you out of a job, by which I mean tax society such that you don’t have a job. It can then pay you with the taxed money to do a different job. The taxes have created room in the economy for the services government desires at the expense of the services the private sector desires.
Does that make sense? In think that it’s the best I can manage on my phone. Just like businessmen go wrong thinking that they can run government like a business, I think we all tend to think that money can just buy whatever we want. But the government isn’t just a mom and pop shop. It acts at such a scale that different factors come into play.
So let me get this straight: the purpose of taxation is to reduce consumption and/or keep the very wealthy from accumulating too much power? But it is not to raise revenue to do the things society needs done, such as funding schools and roads and healthcare?
@Mikey: George has stopped “smiling down on us” in the wake of this news, or so I assume. And on what planet does one have to be that 13% unemployment is great growth anyway?
According to newscentermaine.com. all the swabs manufactured yesterday by the company Trump visited will be tossed, since he didn’t wear a mask or any other protective equipment, and put a swab near his nose. Nice going, schmuck. My guess: They may end up disinfecting the entire plant.
There are lots of interesting points on this subject, and even if I had the time, I lack the expertise to do them justice. My basic point is that taxing the rich and spending tax money are two separate aspects of taxation. To be clear, I’m all for taxing the extremely rich out of existence. But that alone will not get us the government services we desire. For that, we need to tax the productive part of the economy, thereby idling productive manpower. That manpower can then be employed, directly or indirectly, by the government.
There are lots of aspects to this, and the level of unemployment is certainly key: idle manpower can basically be employed for free without raising taxes. Looking into why the government doesn’t do so has to do, as I understand it, with the desire to keep labor weak and capital strong.
I’m no expert on the issue and I’m happy to learn, so feel free to add your two cents. My original point was rather narrow: how taxing the rich does not mean that we can get the services we want. I feel that people have either misunderstood this point, or preferred talking about other aspects of taxation (which of course is always interesting).
As for the medical arbitrage, I’m counting on you for the heavy intellectual lifting on this one!
Wasn’t there a case of a woman who was charged with voter fraud for this exact thing, but found not guilty because she said she only voted on local issues in one jurisdiction?
It’s not the purpose, but one of the effects of taxing the rich is to push them to be more productive.
I know, crazy! I’ve been told repeatedly it’s crazy. Here’s why it’s not. I want X dollars to support Y lifestyle. If I have X dollars and thus Y lifestyle, why would I work more? But when the IRS and the California FTB take my money I have less than X and therefore cannot afford Y lifestyle. So, what do I do? I work harder, I become more productive.
For some people it’s not lifestyle, it might be a sense of competition, needing to be still richer just for the sake of being richer than the next rich guy. Doesn’t matter, you get the same effect. Person A needs X amount to feel superior to Person B. If Person A is taxed so that he no longer feels superior to Person B, he will work harder and be more productive.
Now, for most rich folk working harder means investing and evading taxes rather than doing useful work, but that still doesn’t change the mechanism. They’ll still be pushed to improve the productivity of their investments or their tax-avoidance schemes.
Taxes motivate productivity. And as you look around the world you find high productivity in countries with high tax burdens, which is to say the entire developed world. Taxes create infrastructure that makes productivity possible, while simultaneously motivating individuals to exploit that infrastructure to become more productive.
The reason the rich hate taxes is precisely because it forces them to be more productive, and who wouldn’t prefer being rich with little effort to having to work hard to be rich?
@Kari Q: Well, now *that’s* some hair-splitting. That “local issue” argument certainly wasn’t used in the case of the Black woman who was sentenced to jail for five years for voting in the wrong district to get her kid in a better school.
I get the feeling that there needs to be some voter education on this front, perhaps. You live in one place, even if you have two (or more!) homes. A former boss of mine traveled often to DC, often staying for weeks at a time, and he had to be very careful with his travel schedule because of residency requirements for tax purposes–the same issue (residency) would extend to voting.
As I noted above, every state has these types of residency requirements and a LOT of it is tied to your driving record. This is why you only have one driver’s license. I would love to hear McEneany’s excuse for voting in one jurisdiction, while living in another, and having a driver’s license from a third. I’m not even sure how one accomplishes that, to be honest. They’re certainly not checking HER license when she votes, are they?
I’m sure the vast majority of these issues are just people being unfamiliar with the law, but McEnany knows better, anyone who has worked in electoral politics knows this. Anyone.
Just know, I’m not really looking for a food fight here. I find it interesting, and it does jibe with some of my suspicions about economics. But I haven’t read enough thorough analysis of it, yet. But I have pushed it up my priority list due to this conversation.
But neither of your objections are strong, because neither uniquely address the tenets of MMT.
it rests too strongly on the Efficient Markets Hypothesis.
This is true of any system tethered to classical economics. Whether approaching liberalism via socialism or capitalism, aggregate rationality and the spontaneous order of markets are the foundation upon which developed economies are built.
On the other hand, I’ve made a similar complaint about economics specifically in the past, but I see it as a broader issue within all the social sciences.
And the US Government turns out to be the safest borrower in the world. And yet we failed to make use of that effectively.
Related to the noted point of (seeming) partial agreement, this is another particular objection I have with the modern practice of economics. The separation of economics from politics as a discipline has become a major problem after a little over a century. Classical economists of the 18th and 19th centuries considered themselves political economists–they are intertwined and must be analyzed as such.
So, your criticism rings a bit hollow, because there was plenty of political will on one side to inject more money throughout the economic crisis. What stopped that will was an archaic political system that allowed a minority to put political-economic ideology above economic-political sense. (I reversed the order on purpose.)
Rather than being a criticism of MMT, it simply does not apply to it.
I think I have an answer here, but I need to find what I read about this before. I have to do it on my lunch break.
While I will gladly learn about actual MMT from you (and Kit, and others) here, you should understand that my reply was at least 1/3 ignorance and 1/3 tongue in cheek. It does not deserve a really serious response — though as I said, I would appreciate one.
@Kurtz: Medicare would not pay one thon dime on an oral surgery outpatient non-elective procedure. That after telling me three different times by different people that they would.
That is one reason I wish I had my old plan.
For that, we need to tax the productive part of the economy, thereby idling productive manpower. That manpower can then be employed, directly or indirectly, by the government.
I think you palmed a card there when you assumed that private-sector labor is “productive”. If the labor that you draw from the private sector to the public sector (directly or indirectly) was engaged in purely parasitic activities like market arbitrage and real estate shenanigans, then it’s a win-win to get them doing something actually productive instead of rent-seeking.
The trick, of course, is to have both the will and the knowledge to craft policies that focus their effect on the parasites. And to spend the taxes on things with high long-term returns, like infrastructure and justice and education.
Of course the difference is that Becket told Henry that he could not serve God and the Crown at the same time. Whereas, Barr, whose model for the American presidency does seem to be the 15th century papacy, is more than happy to serve the Boorgia in the White House.
The trick, of course, is to have both the will and the knowledge to craft policies that focus their effect on the parasites. And to spend the taxes on things with high long-term returns, like infrastructure and justice and education.
Honestly, I’m not quite sure where this discussion (?) stands. Originally, I just passed on an article I thought was interesting. Then, I tried to clear up some confusion. While I certainly tried to make a good-faith argument, I was writing quickly on my phone. Still am, in fact. When I tried to draw a distinction between productive and unproductive, it was not private vs public, but people who add to GNP through actual work vs pots of money. Given how I suspect that we are generally close politically, I’m not sure if there is a disagreement here, or a misunderstanding.
Given how I suspect that we are generally close politically, I’m not sure if there is a disagreement here, or a misunderstanding.
I can’t tell whether my quibble is actually more than a quibble. I suspect we agree on the big stuff. The quibble goes like this:
You said:
For that, we need to tax the productive part of the economy, thereby idling productive manpower.
I am quibbling that the correct formulation is “For that, we need to tax the profit-making part of the economy, thereby shifting labor from that sector to the public sector”. That phrasing does not assume that every profit-making part of the economy is productive (even in GDP terms) over medium horizons, or that manpower applied to the public sector is “idle”.
More concretely: I would argue that many profit-making financial sector activities do more harm through induced volatility than their immediate GDP contributions are worth. On the flip side, properly targeted public sector spending is the equivalent of preventive maintenance and tooling — it hurts the bottom line this quarter, but it increases productivity over longer horizons.
@DrDaveT: Ok, thanks for that. I’m going to think about this more closely, but my first impression is that you are going a step deeper than I really intended with my basic point.
The aspect of this the really interests me and for which I do not have the answer is this: what would it mean if the profit extracted by the rich simply sent to the workers? Wouldn’t that mean that there would be a natural (additional) inflation inherent to the economy? Maybe the makes sense, but I’m off to bed in any case…
I believe you. It is also 50+ pages of academic macroeconomics. (Well, 40+ pages — the other 10 are sniping at opposing academics.) I can deal reasonably competently with applied microeconomics, game theory, structural models, or even econometrics. Macroeconomics… not so much, and monetary theory least of all. I am not equipped to make use of this document to resolve my basic questions.
In the article Kit pointed at originally, I can at least focus my question: what does it mean to say that governments must “create room in the economy for government spending”? What does that mean in concrete terms? What are the consequences of failure to “make room”? [Other questions deferred until I’m more sure I understand this part.]
Here is the relevant part of Baker’s article. Emphasis mine.
I don’t consider myself an MMTer, but there is a basic Keynesian concept which has been associated with MMT, which is both true and important. For the federal government, taxes are not about raising revenue, taxes are about reducing consumption to prevent inflation.
The point is that the federal government does not need taxes for revenue, since it can just print money. It instead taxes to create the room in the economy for government spending. This view is sometimes wrongly taken as a “get of jail free” card, where the government can spend whatever it wants without worrying about raising revenue.
That could be true in a deep downturn. However, if the economy is near its full employment level of output, where additional demand will lead to rising inflation, we are pretty much back in the world where we need taxes to offset spending. Any major increase in government spending will lead to higher inflation, unless we have higher taxes or have some other mechanism to reduce demand in the economy.
He is imagining a world in which we are “at full employment levels of output.” what he means by making room for government spending is simply controlling inflation. The key is actually in the first sentence of the paragraph, when he invokes the Keynes.
Keynes’s basic argument was that in a downturn, the government should enact policies of profligate spending to stabilize demand. But once demand is stabilized, the economy goes into recovery – – > productivity increases, unemployment decreases. Continuing to print money into an economy with robust demand risk hyperinflation.
I think the mistake people make is that in summaries of MMT, the emphasis tends to be on full employment, rather than the output levels/resource usage associated with full employment.
we were pretty much at full employment pre COVID and everyone seemed puzzled that inflation, and interest rates, weren’t going up.
“Full employment” and “full output” are linked but distinct concepts. To those who were puzzled, I would say, “well, no shit.” The added jobs don’t produce anything–they’re mostly consumption-oriented service jobs that are either low-paying relative to the prices of necessities or unstable. It’s a liquidity trap, but not due to low interest rates, but because of an over-leveraged private economy.
So, Fairfax County VA has its own excessive violence against African Americans incident today, caught on extended video. The Fairfax Chief of Police gave an extended press conference, and I have to say that I’m impressed. He said all the right things, he refused to speak on the things he is prohibited by law from speaking on, and he sounded 100% sincere and on the side of the righteous throughout. He spoke at length about the revised standards for use of force that were put in place a few years ago after extensive community discussion.
We’ll see how the prosecutions and administrative actions play out, but I am tentatively hopeful.
what does it mean to say that governments must “create room in the economy for government spending”? What does that mean in concrete terms? What are the consequences of failure to “make room”?
In felt like I addressed this, or at least tried to. Did you find my explanation unclear or simply unconvincing?
I’ll try to give a concrete (although imaginary) example (if that makes sense). Let’s say that it’s the year 2000, and the government wishes to launch an ambitious IT project, something really huge requiring thousands of engineers. They have the money, but there are not enough engineers. They can throw money at the problem, at the cost of salaries rising, but no more engineering happens at the national level. No room has been created, and inflation is the consequence of failure. However, if through the tax code some of the new internet companies had been discouraged, then these engineering resources would be available.
I believe this concept is useful, even if in the real world so many more variables need to be taken into account.
Getting back to my original idea, the one many here agree “is the dumbest thing [they’ve] ever read,” whatever advantages taxing the rich might have towards creating a more equalitarian society, the money it raises does little to create room in the economy for actually spending the money efficiently (although this will be less true the higher the rate of unemployment).
@wr: A few weeks ago we could tell by the return of normal traffic in the mornings and evenings that people had returned to work.
The business and residential construction boom never stopped. Housing is in demand. Another mill has reopened. Restaurants are busy once again. The swimming pools, beauty shops, and nail salons are picking up where they left off. Many people kept their businesses going “underground”. A lot of people here were not laid off. Most work in utilities, construction, machine shops, real estate, factories, trucking, delivery, repair companies, and medical. The stores are now stocked as normal. Meats are available, but higher.
The tourist places are reporting good bookings for the summer. Beaches and the mountains were busy on Memorial Day.
I think I understand the broad outlines now, yes. Thank you (and @Kurtz).
I don’t want to go down a rabbit hole on a defunct daily forum thread, but am I right that corporate tax policy would be a lot more relevant here than personal income tax? The link to crowding-out seems much more direct (and immediate) on the corporate side.
am I right that corporate tax policy would be a lot more relevant here than personal income tax? The link to crowding-out seems much more direct (and immediate) on the corporate side.
You have immediately taken me out past my depth! While I feel that general principles like these can be eye-openers, I have the sense that they are not particularly useful with regards to actual policy.
For what it’s worth, I suspect that you are right about corporate tax policy.
I think I’ve exhausted what (very) little I have to offer on this topic. If anyone feels like continuing, let’s move over to the current daily forum.
A few weeks back when the world was falling apart, the stock market suddenly started climbing. And all the Wise Economic Pundits rushed to tell us that the wisdom of traders is so great they had already accounted for the massive death and destruction of the virus, and they were basing their buying on their great awareness that the economy would rebound sometime next year.
Yesterday there were good economic numbers, and the market zoomed up, and the Wise Economic Pundits rushed to explain that the market was responding to the jobs report.
So either the great and wise traders ignore the present condition and base their trades on their deep knowledge of the future or they respond to immediate stimuli…
…or we’ve simply transferred so much of this nation’s wealth to the tiny trading class that they have to put their money in the stock market when it’s remotely possible or face stuffing it in their mattresses.
It is possible that these traders are simply wiser than me. I say let’s find out. Let’s tax the hell out of them, use that money to restore America’s middle class, and let the market take care of itself.
More on defunding the police.
5G: I have been studying and talking to various engineers and communications workers about this.
Over several years there have been health concerns about the use of cell phones, and risks concerning people who live near the high voltage power lines. There were cautious about the overuse of cell phones’ possible link to cancer. So far there seems to be no clear evidence that these may pose a health risk.
Now comes 5G and there seems to be no proof yet that this is any more of a risk then what we would get from the television satellite dishes, radio transmissions, and microwave ovens. We are literally surrounded by electrical devices that send signals through the air.
And there are legitimate concerns about possible EMP bursts that could take down the electrical grid, and the increasing instability of the magnetic field. There seems to be more incoming waves of energy from space, the source of which is not exactly clear.
Some of the neighborhoods around here do not want the 5G transmitters put in.
“The Science of why 5G is (almost ) certainly safe for humans (Forbes)
“Is 5G safe? We ask an expert”(Digital Trends)
The ‘I am glad you made that clear’ headline of the day-
Val Demings’ Orlando police career could hurt — or help — her chances to become Joe Biden’s running mate
In other news it will be either sunny or rainy today……
The Florida headline of the day-
Lawyer says ex-Minneapolis officer Derek Chauvin illegally voted in Florida, asks Aramis Ayala to pursue charges
Will there be more revelations in the days to come? Jaywalking, overdue parking tickets, being mean on the schoolyard in the 5th grade?
Let’s be serious for a moment. There are a number of snowbirds who vote both in their northern home states and Florida.
Rick Wilson Retweeted
Christopher Orr
@OrrChris
·
8h
Bill Barr: “My attitude was get it done, but I didn’t say ‘Go do it.'”
I’m not sure it’s possible to sound any more like a mob boss.
Quote Tweet
Kaitlan Collins
@kaitlancollins
· 11h
“I’m not involved in giving tactical commands like that,” Attorney General Barr tells AP. “I was frustrated& I was also worried that as the crowd grew, it was going to be harder & harder to do. So my attitude was get it done, but I didn’t say, ‘Go do it.’” https://apnews.com/1a993a6e99b4ec
Let’s not forget today
“Any moment might be our last. Everything is more beautiful because we’re doomed. You will never be lovelier than you are now. We will never be here again.”
Homer
About that positive jobs report…
A ‘misclassification error’ made the May unemployment rate look better than it is. Here’s what happened.
Oopsie!
https://timetosaygoodbyepod.substack.com/p/black-protester-white-protester
Damn good piece here. Well worth the read. Gotta love Longform.org
@wr: Years ago I saw a business writer admit that every morning he looked to see if the markets were going up or down, then he’d start going through his contact list asking why. When he first got a quotable remark from someone, that was it, whatever it was, that was the reason of the day.
@wr: “The stock market is not ‘the economy.’ It’s a mood ring for the plutocracy.”
https://twitter.com/TheTattooedProf/status/1266467918772142082?s=20
@Tyrell: ow comes 5G and there seems to be no proof yet that this is any more of a risk then what we would get from the television satellite dishes, radio transmissions, and microwave ovens.
The thousands of low-altitude satellites may have some impact, however.
@sam: Bill Barr: “My attitude was get it done, but I didn’t say ‘Go do it.’”
Will no one rid me of this troublesome priest?
@wr:
I found the following article by Dean Baker very useful on this score: Modern Monetary Theory and Taxing the Rich:
@Kit: With all due respect to Dean Baker, that is the dumbest thing I’ve ever read. You don’t tax the hell out of the rich so they go out to dinner less frequently. You tax the hell out of the rich to return money to the government, which uses it for the people of the United States, and you do it to keep a handful of people from owning so much of the nation’s wealth they are allowed a huge political influence.
@Lynn: thanks for your. attention. All the space satellites and junk represents a challenge for any spacecraft as it goes into orbit and beyond.
@wr:
Look up MMT. I can’t pretend to explain it well enough while I am at work. (Or really, at all. But I have looked into it, so I know roughly why he wrote that.)
Short version:
The government can print money at will–inflation is the only barrier. Inflation accelerates at full employment.
EDIT: that last sentence should probably read accelerates as an economy reaches full employment. My understanding is basic, though.
@Kit:
By the way, I’m still trying to figure out which surgeries I can perform on myself to arbitrage insurance reimbursements.
I still think this is one of the funniest things I’ve read in recent years:
http://www.thedailybeast.com/breaking-from-trumps-doctors-most-remarkable-physical-specimen-of-all-time
Duplicate.
@Kit: What @wr: said.
I don’t know much about MMT. Anybody have a book recommendation? But our goal is to reduce consumption? On taxing the rich I’ll recommend Piketty. The point to taxing them is to prevent inherited wealth from hoovering up everything and cut down on the number of Adelsons, Mercers, Kochs, etc. that can afford to make a hobby out of ratfracking politics in this country.
Footnote – there appears to have been a long term, as in centuries, downward trend in interest rates, now approaching zero. Remember that 2008 was largely caused by the “savings glut” desperately seeking higher than market returns. If that is really happening, if we have so much accumulated money that it no longer commands a scarcity price, then all of econ, including Piketty, needs a serious rewrite. @Kurtz: we were pretty much at full employment pre COVID and everyone seemed puzzled that inflation, and interest rates, weren’t going up.
@CSK:
CSK,
I always felt, even if you discuss Robert Altman movies, that you were too young for those five kids in Canada.
It will greatly disappointing if you don’t know the movie I’m alluding to.
So let me get this straight: the purpose of taxation is to reduce consumption and/or keep the very wealthy from accumulating too much power? But it is not to raise revenue to do the things society needs done, such as funding schools and roads and healthcare? I’m not sure why reducing consumption is a goal apart from environmental concerns. And while I agree that the outsized power of the rich on our system needs to be reined in, I don’t know why that negates the need to raise revenue to make our society function.
What am I missing here?
@Monala:
The question is why you have to “raise revenue” (take money from one place in order to use it in another) rather than just printing more money to do the things you want to do. The historical answer is “because that would lead to runaway inflation”. What is the mechanism behind inflation? People being willing to spend more for a given thing, aka increased demand. So, in theory, if you can keep demand from growing, you can print money without inflation. The way to prevent your money from creating demand is to make sure it primarily goes to the people who can’t possibly consume any more than they already do.
Note: I don’t believe any of that, and I might have it totally wrong, but that’s my crayon-level understanding of the claim. The problem is that (on this theory) you can’t use the money to do anything that helps the poor, because that would put extra disposable income in their hands, which is inflationary. So you can only use your newly-printed money on things that don’t help the poor, like border walls and F-35s. Which defeats the purpose of raising government spending.
@Bill:
The Dionnes were born considerably before my time. What Altman movie?
My father was in the movie biz for a while, which is why I think I haven’t followed it closely.
@Bill:
That’s *illegal.* That IS voter fraud. I can’t tell if you’re joking or not with the “vote both in their home states and Florida,” Poe’s Law is killing me.
You have ONE state of residence, and it’s supposed to be tied to the amount of time you’re there. I’ll wait to see the evidence on this (I posted a similar link last night in the Friday open thread about this and the discovery that Kayleigh McEnany has also voted in FL, despite living in DC and having a NJ driver’s license).
There are supposed to be checks on this, and simply owning a house in a jurisdiction is not sufficient.
Each state has laws on what is necessary to consider someone to be a resident. In Florida, you are a resident if you live there for more than 6 months out of the year, and if that is the case you are required to get a FL driver’s license.
@gVOR08:
Yes. Excluding MMT…
My take on that anomaly would be two-fold:
1.) The assumption that full employment itself increases inflation rates is predicated on an increase in demand pressure.*
-past a certain point of rising inequality, demand plummets.
2.) Supply is stickier than demand.
3.) I think there is likely good reason to suspect that consumer confidence as measured by a questionnaire is quite different from how it would be measured by consumer behavior.
From an MMT perspective:
I really only gave a partial explanation of that principle. I will try to find the in-depth articles I read a while back about MMT after work. I’ll post the links tonight.
For now, from the wiki:
*I found this from the St. Louis Fed:
MMT is based on six principles, five of which are considered standard economic idea and one which is considered radical, but is a logical extension of the first five:
1. There are two types of countries: ones that can borrow money in their own currency and ones that have to borrow in another country’s currency
2. Countries that can borrow money in their own currency can’t actually default on their debt because they can always print whatever money they need to pay them off
3. The only limit on such a country’s ability to print money is that if the total supply gets too big, it causes inflation
4. Countries reduce the size of their money supply via taxation and by issuing debt
5. Government issued debt is bad because it crowds out private debt and reduces access to credit
6. Therefore, governments shouldn’t use taxation to finance themselves, but rather just print whatever money they need for their operations. Tax rates should be set not based on what revenue is needed, but rather what is needed to control inflation
Most developed countries are unintentionally already mostly doing MMT, switching to it explicitly is more a change in how we understand what we’re already doing instead of radical changes in what we are doing.
@Monala: I didn’t mean to imply reducing the number of obscenely wealthy individuals is the sole reason for taxes. Obviously we need to raise enough revenue to fund the level of expenditure we decide on. (OK, I know that balancing the budget has become a radical left wing idea.) But why we favor one means of raising revenue over another is a question of incentives and disincentives. This tax discussion was in response to @Kit: quoting Dean Baker saying taxing the rich is a bad incentive.
Amusingly, Laffer implies that tax rates should be set to maximize revenue, not just to raise enough.
It’s very common to argue that taxing the wealthy won’t raise enough money for everything, so why do it? That’s another argument we’re addressing. Also, that’s one of the standard conservative fallacies, that doing A won’t by itself 100% solve problem B, so there’s no reason to do it.
I would love to see Ds run on real tax reform. Among other things, replace our pretend progressive income tax with a VAT and a smaller, but actually progressive, income tax.
@gVOR08:
With millions out of work and, crucially, losing their health insurance, they better run on that first. Tax reform to those folks is quaint.
@DrDaveT: I’m pretty sure the goal of a government monetary policy should not be to deliberately explore bizarre edge cases of economic theory that maximize human suffering.
On the other hand, that would explain why inflation hasn’t really taken off since the Reagan Revolution, when the lower and middle classes have been continuously screwed over.
@DrDaveT:
I think I have an answer here, but I need to find what I read about this before. I have to do it on my lunch break. Hoping @kit has a good grasp on this. If there isn’t a response in a couple hours, I’ll try to shed some light on this.
@Lynn: Satellites go through a thorough licensing process at the FCC regarding which frequencies they can use, how far the transmission spreads, how much power they can emit, etc. Even a low-level satellite is a hundred miles or so away from me at closest approach. SpaceX’s Starlight constellation is ~340 miles up. Given the power and distance constraints, satellites are far down on the list of sources to worry about.
Sanity check… OSHA’s workplace limit on microwave exposure is 10 milliwatts per square centimeter (mw/cm2). According to NASA, the power level at the center of the microwave receiver array for proposed space-based power stations in the gigawatt range — several orders of magnitude more than current satellites are allowed — would be about 23 mw/cm2. You could walk across the receiver array while the system was operating and not worry about the total exposure you would get.
I don’t want to get in a food fight over MMT, but to me it rests too strongly on the Efficient Markets Hypothesis. Markets generally, in aggregate, are fairly rational. But not always. 2008 is a case in point. When people get scared as hell, they want to hand their money over to an actor they feel is safe. And the US Government turns out to be the safest borrower in the world. And yet we failed to make use of that effectively. (And IMHO, we got Trump as a result.)
So while many of the things in MMT are accurate, and many of the people who advocate for it are very smart, it’s too ideological for me.
@Stormy Dragon:
Let us say, rather, that countries that can borrow in their own currency can only default on their debt by choice. So far as I know, the Supreme Court has never given an opinion on that aspect of the 14th Amendment. If Congress decides to default on US bonds, we would find out.
Historically default is common. Arguably, France lost one of its wars with England because it defaulted on the debt from the previous war and lenders were leery about financing the new war effort. England had raised taxes and paid off their war debt so had no trouble financing the next war.
@Jen:
I know it’s illegal. Me and Dear Wife know at least two people* who do this. This is anecdotal but I have read once or twice mentions of this practice in the mainstream media.
When anyone says there is no voter fraud I always want to laugh.
*- It was three but the last one is now permanently in a nursing home up north.
@CSK:
First I may have gotten and another commenter* (wr?) mixed up. Sorry if I sound more confused* than my normal self.
The duplicates line I’m referring is from the Marx Brothers classic ‘A night at the Opera’
Fiorello: Yeah…Isa duplicate…Duplicates ah? (Looking senselessly.)
Driftwood: I say they’re duplicates!
Fiorello: Oh sure. It’sa duplicates.
Driftwood: Don’t you know what duplicates are?
Fiorello: Sure, those five kids up in Canada.
Driftwood: (Looking at Fiorello/audience.) Well I wouldn’t know about that. I haven’t been in Canada in years.
*- At least I don’t believe in Sanity Claus either.
@wr: I’m going to guess that you didn’t read the article based on your comments. Your second point for taxing the rich is clearly addressed:
Was that what you meant by it being the dumbest thing you read? As for the first part of why we tax, namely “to return money to the government,” I think you have a somewhat naive view on this and I recommend the article.
@gVOR08:
To the extent that you want the government to get something done, the issue is not really the money: that can always be printed. The issue is to get the manpower. If I, the government, wish to engage your services, but the private sector also wishes to do likewise, then there are really only a few options. Obviously, you can’t work two jobs. If one party must outbid the other, then we have serious inflation. If the government goes without, well, then the money didn’t really matter. Lastly, the government could tax you out of a job, by which I mean tax society such that you don’t have a job. It can then pay you with the taxed money to do a different job. The taxes have created room in the economy for the services government desires at the expense of the services the private sector desires.
Does that make sense? In think that it’s the best I can manage on my phone. Just like businessmen go wrong thinking that they can run government like a business, I think we all tend to think that money can just buy whatever we want. But the government isn’t just a mom and pop shop. It acts at such a scale that different factors come into play.
@Monala:
It can do all three.
@Mikey: George has stopped “smiling down on us” in the wake of this news, or so I assume. And on what planet does one have to be that 13% unemployment is great growth anyway?
According to newscentermaine.com. all the swabs manufactured yesterday by the company Trump visited will be tossed, since he didn’t wear a mask or any other protective equipment, and put a swab near his nose. Nice going, schmuck. My guess: They may end up disinfecting the entire plant.
There are lots of interesting points on this subject, and even if I had the time, I lack the expertise to do them justice. My basic point is that taxing the rich and spending tax money are two separate aspects of taxation. To be clear, I’m all for taxing the extremely rich out of existence. But that alone will not get us the government services we desire. For that, we need to tax the productive part of the economy, thereby idling productive manpower. That manpower can then be employed, directly or indirectly, by the government.
There are lots of aspects to this, and the level of unemployment is certainly key: idle manpower can basically be employed for free without raising taxes. Looking into why the government doesn’t do so has to do, as I understand it, with the desire to keep labor weak and capital strong.
@Just nutha ignint cracker: and the fact that black and Asian unemployment went up.
@Kurtz:
I might have dashed those hopes by this point!
I’m no expert on the issue and I’m happy to learn, so feel free to add your two cents. My original point was rather narrow: how taxing the rich does not mean that we can get the services we want. I feel that people have either misunderstood this point, or preferred talking about other aspects of taxation (which of course is always interesting).
As for the medical arbitrage, I’m counting on you for the heavy intellectual lifting on this one!
@Jen: I suspect that the very same people shuttling back and forth to Florida and voting in both locations are paying state tax in neither….
@Jen:
Wasn’t there a case of a woman who was charged with voter fraud for this exact thing, but found not guilty because she said she only voted on local issues in one jurisdiction?
Gee, turns out the IRS isn’t going after rich tax cheats. Hoocodaknown?
Every other developed nation does health care and how it is paid for better than we do.
It’s shameful.
Linking access to health care to employment is stupendously unhelpful.
It’s not the purpose, but one of the effects of taxing the rich is to push them to be more productive.
I know, crazy! I’ve been told repeatedly it’s crazy. Here’s why it’s not. I want X dollars to support Y lifestyle. If I have X dollars and thus Y lifestyle, why would I work more? But when the IRS and the California FTB take my money I have less than X and therefore cannot afford Y lifestyle. So, what do I do? I work harder, I become more productive.
For some people it’s not lifestyle, it might be a sense of competition, needing to be still richer just for the sake of being richer than the next rich guy. Doesn’t matter, you get the same effect. Person A needs X amount to feel superior to Person B. If Person A is taxed so that he no longer feels superior to Person B, he will work harder and be more productive.
Now, for most rich folk working harder means investing and evading taxes rather than doing useful work, but that still doesn’t change the mechanism. They’ll still be pushed to improve the productivity of their investments or their tax-avoidance schemes.
Taxes motivate productivity. And as you look around the world you find high productivity in countries with high tax burdens, which is to say the entire developed world. Taxes create infrastructure that makes productivity possible, while simultaneously motivating individuals to exploit that infrastructure to become more productive.
The reason the rich hate taxes is precisely because it forces them to be more productive, and who wouldn’t prefer being rich with little effort to having to work hard to be rich?
@Kari Q: Well, now *that’s* some hair-splitting. That “local issue” argument certainly wasn’t used in the case of the Black woman who was sentenced to jail for five years for voting in the wrong district to get her kid in a better school.
I get the feeling that there needs to be some voter education on this front, perhaps. You live in one place, even if you have two (or more!) homes. A former boss of mine traveled often to DC, often staying for weeks at a time, and he had to be very careful with his travel schedule because of residency requirements for tax purposes–the same issue (residency) would extend to voting.
As I noted above, every state has these types of residency requirements and a LOT of it is tied to your driving record. This is why you only have one driver’s license. I would love to hear McEneany’s excuse for voting in one jurisdiction, while living in another, and having a driver’s license from a third. I’m not even sure how one accomplishes that, to be honest. They’re certainly not checking HER license when she votes, are they?
I’m sure the vast majority of these issues are just people being unfamiliar with the law, but McEnany knows better, anyone who has worked in electoral politics knows this. Anyone.
I cannot recall the exact details.
A woman voted provisionally in a state that did not allow convicted felons to vote. She was unaware of that. She had done her time and been released.
She got sent back to prison on that.
That is unjust.
@Jay L Gischer:
Just know, I’m not really looking for a food fight here. I find it interesting, and it does jibe with some of my suspicions about economics. But I haven’t read enough thorough analysis of it, yet. But I have pushed it up my priority list due to this conversation.
But neither of your objections are strong, because neither uniquely address the tenets of MMT.
This is true of any system tethered to classical economics. Whether approaching liberalism via socialism or capitalism, aggregate rationality and the spontaneous order of markets are the foundation upon which developed economies are built.
On the other hand, I’ve made a similar complaint about economics specifically in the past, but I see it as a broader issue within all the social sciences.
Related to the noted point of (seeming) partial agreement, this is another particular objection I have with the modern practice of economics. The separation of economics from politics as a discipline has become a major problem after a little over a century. Classical economists of the 18th and 19th centuries considered themselves political economists–they are intertwined and must be analyzed as such.
So, your criticism rings a bit hollow, because there was plenty of political will on one side to inject more money throughout the economic crisis. What stopped that will was an archaic political system that allowed a minority to put political-economic ideology above economic-political sense. (I reversed the order on purpose.)
Rather than being a criticism of MMT, it simply does not apply to it.
@Kurtz:
While I will gladly learn about actual MMT from you (and Kit, and others) here, you should understand that my reply was at least 1/3 ignorance and 1/3 tongue in cheek. It does not deserve a really serious response — though as I said, I would appreciate one.
@Kurtz: Medicare would not pay one thon dime on an oral surgery outpatient non-elective procedure. That after telling me three different times by different people that they would.
That is one reason I wish I had my old plan.
@Kit:
I think you palmed a card there when you assumed that private-sector labor is “productive”. If the labor that you draw from the private sector to the public sector (directly or indirectly) was engaged in purely parasitic activities like market arbitrage and real estate shenanigans, then it’s a win-win to get them doing something actually productive instead of rent-seeking.
The trick, of course, is to have both the will and the knowledge to craft policies that focus their effect on the parasites. And to spend the taxes on things with high long-term returns, like infrastructure and justice and education.
@Michael Reynolds:
I was lucky to be born with a disdain for flash.
The Joneses can do the competitive thing; no skin off my butt. I am completely uninterested in keeping up.
Save and invest enough when you are young, and be okay with a non rich guy lifestyle, and you can retire young and happy.
Many folks, when they start earning well, spend well too. You don’t have to. I stopped working for money before I was 50.
It is liberating. No one gets to dictate how to spend your time. Work sucks. Stop doing it as quickly as you can.
Living cheap is the best revenge.
@Kit: @DrDaveT: @gVOR08:
This is well worth the read. it gives both the overview and answers to common counter-arguments.
@Lynn:
Of course the difference is that Becket told Henry that he could not serve God and the Crown at the same time. Whereas, Barr, whose model for the American presidency does seem to be the 15th century papacy, is more than happy to serve the Boorgia in the White House.
@sam:
“Boorgia”
Nice! Heartily approve.
@DrDaveT:
Honestly, I’m not quite sure where this discussion (?) stands. Originally, I just passed on an article I thought was interesting. Then, I tried to clear up some confusion. While I certainly tried to make a good-faith argument, I was writing quickly on my phone. Still am, in fact. When I tried to draw a distinction between productive and unproductive, it was not private vs public, but people who add to GNP through actual work vs pots of money. Given how I suspect that we are generally close politically, I’m not sure if there is a disagreement here, or a misunderstanding.
@Kurtz: I’m going to quote the very first line from the article I mentioned:
Did anyone read the original article?!
I’ve got your article in a new tab, Kurtz, and I’ll try to have a look at it tomorrow.
If citizen videos routinely discount and contradict police reports, it means we have a massive criminal justice system problem.
Always have.
This didn’t happen since the advent of video. It has always been there.
Police brutality is not a new thing.
@Kit:
I can’t tell whether my quibble is actually more than a quibble. I suspect we agree on the big stuff. The quibble goes like this:
You said:
I am quibbling that the correct formulation is “For that, we need to tax the profit-making part of the economy, thereby shifting labor from that sector to the public sector”. That phrasing does not assume that every profit-making part of the economy is productive (even in GDP terms) over medium horizons, or that manpower applied to the public sector is “idle”.
More concretely: I would argue that many profit-making financial sector activities do more harm through induced volatility than their immediate GDP contributions are worth. On the flip side, properly targeted public sector spending is the equivalent of preventive maintenance and tooling — it hurts the bottom line this quarter, but it increases productivity over longer horizons.
@DrDaveT: Ok, thanks for that. I’m going to think about this more closely, but my first impression is that you are going a step deeper than I really intended with my basic point.
The aspect of this the really interests me and for which I do not have the answer is this: what would it mean if the profit extracted by the rich simply sent to the workers? Wouldn’t that mean that there would be a natural (additional) inflation inherent to the economy? Maybe the makes sense, but I’m off to bed in any case…
@Kurtz:
I believe you. It is also 50+ pages of academic macroeconomics. (Well, 40+ pages — the other 10 are sniping at opposing academics.) I can deal reasonably competently with applied microeconomics, game theory, structural models, or even econometrics. Macroeconomics… not so much, and monetary theory least of all. I am not equipped to make use of this document to resolve my basic questions.
In the article Kit pointed at originally, I can at least focus my question: what does it mean to say that governments must “create room in the economy for government spending”? What does that mean in concrete terms? What are the consequences of failure to “make room”? [Other questions deferred until I’m more sure I understand this part.]
@Kit:
Good luck. It’s an academic white paper. I will continue looking for a shorter, less technical primer.
But I do plan on reading it a little tonight.
@Kurtz: Printing a copy. Thanks.
For whatever it’s worth, and I haven’t digested it, here’s Dr. K.
@DrDaveT:
Here is the relevant part of Baker’s article. Emphasis mine.
He is imagining a world in which we are “at full employment levels of output.” what he means by making room for government spending is simply controlling inflation. The key is actually in the first sentence of the paragraph, when he invokes the Keynes.
Keynes’s basic argument was that in a downturn, the government should enact policies of profligate spending to stabilize demand. But once demand is stabilized, the economy goes into recovery – – > productivity increases, unemployment decreases. Continuing to print money into an economy with robust demand risk hyperinflation.
I think the mistake people make is that in summaries of MMT, the emphasis tends to be on full employment, rather than the output levels/resource usage associated with full employment.
Does that answer your question?
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Check my logic here, if you don’t mind.
Look at the situation @gVOR08: points out here:
“Full employment” and “full output” are linked but distinct concepts. To those who were puzzled, I would say, “well, no shit.” The added jobs don’t produce anything–they’re mostly consumption-oriented service jobs that are either low-paying relative to the prices of necessities or unstable. It’s a liquidity trap, but not due to low interest rates, but because of an over-leveraged private economy.
So, Fairfax County VA has its own excessive violence against African Americans incident today, caught on extended video. The Fairfax Chief of Police gave an extended press conference, and I have to say that I’m impressed. He said all the right things, he refused to speak on the things he is prohibited by law from speaking on, and he sounded 100% sincere and on the side of the righteous throughout. He spoke at length about the revised standards for use of force that were put in place a few years ago after extensive community discussion.
We’ll see how the prosecutions and administrative actions play out, but I am tentatively hopeful.
@DrDaveT:
In felt like I addressed this, or at least tried to. Did you find my explanation unclear or simply unconvincing?
I’ll try to give a concrete (although imaginary) example (if that makes sense). Let’s say that it’s the year 2000, and the government wishes to launch an ambitious IT project, something really huge requiring thousands of engineers. They have the money, but there are not enough engineers. They can throw money at the problem, at the cost of salaries rising, but no more engineering happens at the national level. No room has been created, and inflation is the consequence of failure. However, if through the tax code some of the new internet companies had been discouraged, then these engineering resources would be available.
I believe this concept is useful, even if in the real world so many more variables need to be taken into account.
Getting back to my original idea, the one many here agree “is the dumbest thing [they’ve] ever read,” whatever advantages taxing the rich might have towards creating a more equalitarian society, the money it raises does little to create room in the economy for actually spending the money efficiently (although this will be less true the higher the rate of unemployment).
Make sense?
@wr: A few weeks ago we could tell by the return of normal traffic in the mornings and evenings that people had returned to work.
The business and residential construction boom never stopped. Housing is in demand. Another mill has reopened. Restaurants are busy once again. The swimming pools, beauty shops, and nail salons are picking up where they left off. Many people kept their businesses going “underground”. A lot of people here were not laid off. Most work in utilities, construction, machine shops, real estate, factories, trucking, delivery, repair companies, and medical. The stores are now stocked as normal. Meats are available, but higher.
The tourist places are reporting good bookings for the summer. Beaches and the mountains were busy on Memorial Day.
@Kit:
I think I understand the broad outlines now, yes. Thank you (and @Kurtz).
I don’t want to go down a rabbit hole on a defunct daily forum thread, but am I right that corporate tax policy would be a lot more relevant here than personal income tax? The link to crowding-out seems much more direct (and immediate) on the corporate side.
@DrDaveT:
You have immediately taken me out past my depth! While I feel that general principles like these can be eye-openers, I have the sense that they are not particularly useful with regards to actual policy.
For what it’s worth, I suspect that you are right about corporate tax policy.
I think I’ve exhausted what (very) little I have to offer on this topic. If anyone feels like continuing, let’s move over to the current daily forum.