Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
A long read but it makes some thought-provoking points. One of them is: we are all accustomed to the idea of tax first, then spend. Under MMT, it's spend first then tax. The author makes the case that the only way for the nation to achieve maximum capacity utilization is through government spending; this will cause incomes to go up and the excess can be sopped up with taxes later. His rough estimate of deficit spending needed is 27% of GDP, or about $6T per year.
Also: "The only spending that is truly inflationary is the spending that outstrips the ability of the economy to meet that particular demand with supply." I believe the data certainly bears that out, prior to the pandemic there were years of near zero interest rates with lots of money creation, record levels of cash (or their equivalents) in private and institutional hands and inflation was very muted. Post-pandemic we are seeing inflation, and while the jury is still out, it appears to be a disrupted supply chain issue. The supply chain issue is still a problem, as of Sep't 10, there were 50 container ships at Long Beach backed up out to sea.
Again, I'm sharing this because it's an interesting take, not that I endorse or agree with all of it.
Question: If the deficit spending is at 27% of GDP per year, how would the government pay for the interest on that debt after about 3-4 years when the interest on the debt = 100% of gov't budget? Pay the interest with issuance of even more tbills? Lower the interest rates to negative? Historically, I believe, the government would just inflate the money to wipe down their debt via inflation or confiscate stored excess money from corporations and individuals like they did, for example, in 1934 Germany and substitute cash with some kind of coupon rationing system.
The reasons why dollar inflation was very muted are very complex. One contributor is the demand for dollars from overseas, so our inflation was being mopped up by rise in demand for our currency from foreign entities. If Europeans, Japanese, and Chinese all at once decided to sell off their USD reserves, we'd have bigger inflation.
I assume under MMT-UBI they would pay for that interest with taxes on the additional income that the 27% stimulus would create, additional printed money, or a combination of both.
While I don't concur with everything the author wrote, I do believe that fundamental changes in how we view the economy are inevitable. For centuries we believed it is virtuous to earn money by trading our labor and time for it. That's becoming a quaint notion as billions are being made not through labor or capital investment, but through rent seeking, passive income, quasi-monopoly IP, and so on. Automation is slowly making manual labor obsolete. UBI will be necessary to prop up consumer demand -- the pandemic helicopter money drops are a preview of what's to come.
A long read but it makes some thought-provoking points. One of them is: we are all accustomed to the idea of tax first, then spend. Under MMT, it's spend first then tax.
I would argue that neither is accurate, and that we spend first and then borrow. Tax increases have only led to spending in excess of the increased taxes.
Meanwhile, the "national debt" is just an ongoing tally of how full the tub is each year. It's not like household debt at all. It's a record of government-issued assets.
A full-to-the-brim tub is an economy at maximum capacity. All resources are being utilized in the most efficient way possible using state-of-the-art technology.
Does the tub represent national debt or labor utilization? This metaphor is confusing.
And I don't think maximizing employment leads to maximum economic efficiency. Maximal employment typically means the economy is overheating which means it's temporarily inefficient.
Maximum efficiency depends on the various factors of production being used according to the ratios required by current productive techniques. Productive techniques could require more iron ore than steelworkers, for example, in which case hiring more steelworkers without mining more iron will just lead to waste.
The last sentence does not follow from the premise of maximizing employment. To maximize production you need to maximize what you need not what you have. And in many places there are too many people relative to other factors of production.
I would argue that neither is accurate, and that we spend first and then borrow. Tax increases have only led to spending in excess of the increased taxes.
It didn't in the 1990's when the Bush-Clinton tax increases were followed by a tight-fisted Congress, resulting in a budget surplus. And here in California tax increases also resulted in budget surpluses, a tax rebate and revenue stuffed into a rainy day fund. A corollary to that is that cutting taxes does not mean reduced spending -- we saw that with Trump's budgets, even prior to the pandemic.
Does the tub represent national debt or labor utilization? This metaphor is confusing.
And I don't think maximizing employment leads to maximum economic efficiency. Maximal employment typically means the economy is overheating which means it's temporarily inefficient.
I think the author made it clear he does not believe full employment should be the primary focus of economic policy. He really trashed the proposed Federal Jobs Guarantee idea as creating unproductive meaningless jobs, quoting Friedman who said if you want a full employment program then give construction workers spoons instead of shovels.
Really MMT-UBI is based on the premise that full demand, not full employment, is the key to an economy churning out maximum GDP. If you want full demand then put money in people's pockets so they can spend it. I think he's more right than wrong, our pre-pandemic economy wasn't that great in terms of capacity utilization, largely because of stagnant wages that held aggregate demand down.
Really MMT-UBI is based on the premise that full demand, not full employment, is the key to an economy churning out maximum GDP. If you want full demand then put money in people's pockets so they can spend it. I think he's more right than wrong, our pre-pandemic economy wasn't that great in terms of capacity utilization, largely because of stagnant wages that held aggregate demand down.
Then we dont need bankers then. Why need get money from the banks? Just get more UBI/Stimulus direct from govt/taxpayers.
In fact, the rent seeking, passive income, quasi monopoly IP likely never happen if no bankers around.
The whole article is like a solution to a problem that never had to exist.
The eventual endgame to the whole complete automization of society is that people wont need other people for anything, so dont need money to exchange for services. Or society will split in two. One portion will not need the other portion because automation will give everything needed and desire. The other portion will still utilize labor and exchange. But the two portions will not interact with each other at all because one side does not need to.
Last edited by NJ Brazen_3133; 09-14-2021 at 10:08 AM..
Question: If the deficit spending is at 27% of GDP per year, how would the government pay for the interest on that debt after about 3-4 years when the interest on the debt = 100% of gov't budget? Pay the interest with issuance of even more tbills? Lower the interest rates to negative? Historically, I believe, the government would just inflate the money to wipe down their debt via inflation or confiscate stored excess money from corporations and individuals like they did, for example, in 1934 Germany and substitute cash with some kind of coupon rationing system.
The reasons why dollar inflation was very muted are very complex. One contributor is the demand for dollars from overseas, so our inflation was being mopped up by rise in demand for our currency from foreign entities. If Europeans, Japanese, and Chinese all at once decided to sell off their USD reserves, we'd have bigger inflation.
Under the MMT model, all Federal government spending is money created from nothing, and all Federal tax receipts are money being annihilated. "Deficit" does not necessarily mean "debt".
Whether to create debt as part of the deficit (or independent of a deficit) is a matter of the economic incentives you want to create, not the government's financial necessity. For example, the Social Security Trust Fund is required by law to be invested in Federal securities, so you would presumably issue debt for that purpose. The financial system as a whole relies on treasuries as a safe investment asset. So even when buying into MMT you may wish to issue debt for practical purposes aside from financing deficit spending.
Edit: To clarify, the government spends the necessary amount to maximize GDP, and taxes the amount necessary to control inflation. Those two numbers might be equal or close to equal, but might also be fairly dissimilar, depending on the state of the economy; the author estimates that currently the gap between optimal spending and taxation is 27%.
Only lazy, unambitious and retarded (I don't mean disable or handicapped) people want UBI. All they want is to just sit there and have little income (enough for their monthly food, clothes and rent) to come in every month. But then, eventually, they want more money (want the UBI to be increased, like they are entitled for it) for booze and drugs and gambling for fun because they say people who work have more money than they have, and those people who have more can have more fun than they (the lazy ones) - that's not fair. All they want to do is not to work and just whine.
If there's UBI, the people who work hard will have to pay more and more tax; otherwise, where can the government have money to give the ones who don't work? The hard working people will be mad; and millions of them may become lazy because who would want to work hard and pay lots of tax for the lazy ones? Then they will have not much left either.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
