Recent Items

Biden and Ryan Tee Up “The Grand Bargain” in the Vice Presidential Debate

Posted on by

Mithradates, he died old. — A.E. Housman, Terence, this is stupid stuff

I started out wanting to make a simple point — it's in the headline — about the Biden/Ryan debate, but as I dug deeper, the post started to turn into a case study of Big Lie management by the political class, with an appendix on transcription technology. Yes, "started," and I didn't say "'finished," but perhaps this approach will prove useful in post-game analysis of tomorrow's spectacle, because we can see all the players working together for shared goals (in this case, bringing austerity Social Security and Medicare (Down, Pete!)). So a post that started out as a standard media critique using close reading might have ended up as something more. 

The Biden hagiography after last Tuesday's debate was pretty thick. A quick tour of the blogs of Obama loyalists and/or apparatchiks:

Daily Kos (front-page staffer Georgia Logothetis):

Biden delivered an eviscerating performance because he hit a trifecta that's wholly absent on the Romney-Ryan ticket: (1) deep knowledge; (2) huge heart and (3) brutal honesty

Shakespeare's Sister (Melissa McEwan):

Rep. Paul Ryan would say something dishonest or stupid; Vice President Joe Biden would react with incredulity, exasperation, and fury. It was pretty awesome. [Biden] utterly destroyed everything Ryan was saying, and called him out, point-blank, on his "malarkey."

Balloon Juice (Sarah):

Ryan sat there and spluttered and dissembled like a smug teenager who's been caught puffing on a joint, while Biden hit him with facts on topic after topic, in between taking every opportunity to stick on the shiv (Sarah Palin and Jack Kennedy, anyone?). … I mean it Joe. Call me and I'm yours.

(Note the Palin reference. We'll get to it below.)

Smirking Chimp (William Rivers Pitt):

Biden – at times laconic, at times incredulous, at times simply pissed – gave a clinic on debate management over the course of 90 minutes. He left no stone unturned in attacking the weak points of his opponent's arguments and general philosophy, handily managed to make Mitt Romney the absent and hopeless star of the show, and in the process delivered a rousing defense of both the Obama administration and Democratic Party principles that was deeply reminiscent of Bill Clinton's speech at the Democratic National Convention. Mr. Biden's presentation was, like Clinton's, both folksy and factual, and – most important of all – he did not allow Mr. Ryan to slip even one lie into the conversation without covering it with bite-marks, bruises and blood.

Talking Points Memo (Josh Marshall):

On each successive encounter, Biden was on the offensive and owned the conversation. I don't think it was close. Biden made the whole Democratic argument — on policy and values and he hit Romney really everywhere Democrats wanted him to. He left nothing unsaid. … I suspect Ryan's equivocations and unwillingness to give details will be the day 2 and weekend stories. But the most critical point in terms of the trajectory of the debate was that Biden left it all on the field.

Phew. Paper towels, anyone? Cigarettes? Of course, all these fine posts — "honesty," "dishonest," "dissembled," "lie," "equivocation" — hit the key D talking point: "The other guys are liars."* Good party discipline! Anyhow, when Josh Marshall says Biden said "left nothing unsaid," my faithful tinfoil hat tells me to go look for what Biden left unsaid. To the transcript! ** For Grand Bargain™-brand Cat Food aficionados, this is the key exchange:

[32:24]MS. RADDATZ: Let's talk about Medicare and entitlements. Both Medicare and Social Security are going broke and taking a larger share of the budget in the process. Will benefits for Americans under these programs have to change for the programs to survive, Mr. Ryan?

REP. RYAN: Absolutely. Medicare and Social Security are going bankrupt. These are indisputable facts. …

MS. RADDATZ: Vice President Biden, two minutes.

VICE PRESIDENT BIDEN: You know, I heard that death panel argument from Sarah Palin. It seems that every vice presidential debate, I hear this kind of stuff about panels. But let's talk about Medicare. …

Notice the premise Raddatz [genuflects] sneaks into her question: That Medicare and Social Security are "going broke." Ryan immediately accepts and amplifies the premise: "These are indisputable facts." And Biden, by what he left unsaid, accepts Raddatz's premise and agrees with Ryan.

Big Lie #1: Social Security is going bankrupt. Well, no. Social Security is not going bankrupt. America's Most Loved [Quasi-]Nobelist

The serious (as opposed to Serious) thing to say here is that on current projections, Social Security faces a shortfall — NOT bankruptcy — a quarter of a century from now. OK, I guess that's a real concern. But compared to other concerns, it's really pretty minor, and doesn't deserve a tenth the attention it gets. It's also worth noting that even if the trust fund is exhausted and no other financing provided, Social Security will be able to pay about three-quarters of scheduled benefits, which would mean real benefits higher than it pays now.

(Krugman, I might add, is quoted in many, many other contexts by the bloggers cited above, I might add, making what they leave unsaid as curious and explicable as what Biden left unsaid. Or not.)

Big Lie #2: Medicare is going bankrupt. Another D-leaning and prominent economist, Mark Thoma

Jared Bernstein notes that over the longer run, we do need to find a way to control the growth of health care costs. But in the nearer term, stories about Medicare going broke are overstating the problem in order to win the political and ideological battle:

Misleading Medicare Mantra, by Jared Bernstein: When you criticize the Republican's plan for Medicare privatization, their kneejerk comeback is to claim that Medicare is going bankrupt. They've got to break it to fix it. It's a misleading non sequitur that should not go unchallenged. … If the trust fund were to exhaust in 2024, income coming into the fund would still finance 90% of benefits. That's something to be avoided, but it's a different kind insolvency than that implied by the R's mantra.

Big Lie #3: Medicare and Social Security are going bankrupt. The rebuttals to Big Lies #1 and #2 reflect the Washington consensus that Krugman, Thoma, and Bernstein share. However, the United States government — and by extension, the programs it funds — cannot go bankrupt. No government that is sovereign in its own currency can.*** James Galbraith:

A government borrowing in its own currency need never default on its debts; paying them is simply a matter of adding the interest to the bank accounts of the bond holders. A government can only decide to default — an act of financial suicide — or (in the case of a government borrowing in a currency it doesn't control) be forced to default by its bankers. But a US bank will always cash a check issued by the US Government, whatever happens.

The common thread tying these themes together is simplicity itself. It's that modern money is a spreadsheet! It works by computer! When government spends or lends, it does so by adding numbers to private bank accounts. When it taxes, it marks those same accounts down. When it borrows, it shifts funds from a demand deposit (called a reserve account) to savings (called a securities account). And that for practical purposes is all there is. The money government spends doesn't come from anywhere, and it doesn't cost anything to produce. The government therefore cannot run out.

The United States government can no more run out of money than a bowling alley can run out of pins.**** 

Does anybody call bullshit on these Big Lies in real or near-real time? Heck, let's lower the bar. Did anybody even notice them? To the live blogs: Daily Kos: No and no. Shakespeare's Sister: No and no. Balloon Juice: No and no (and Andrew Sullivan: No and yes ("classic left right fight" (classic he said/she said, you mean)). How about the majors?  The Guardian notices, but does not call bullshit:

So Paul Ryan gets some breathing space here, as we move on to Medicare and social security. They are both going bankrupt indisputably, he says, and rabvbits on about the ills of Obamacare. "You know I heard this death panel stuff from Sarah Palin. Seems like every vice presidential debate I hear about these panels," smiles Biden. Zingy-zing-zing [Note again Palin reference].

The WSJ notices but does not call bullshit:

Paul Ryan knows his stuff on Social Security and Medicare [and Biden, by what he leaves unsaid agrees]. The question still remains whether a majority of Americans would ever support his solutions. Most current polls suggests the answer is "not yet."

Izvestia notices, but does not call bullshit, doing some fact checking in its annotations on Medicare only. Politico notices, but in its annotations calls bullshit using bullshit:

"Ryan quickly chimed in calling Raddatz's claims "indisputable facts." There's little doubt that the programs are headed towards insolvency as the baby boomers retire, but their demise is not imminent."

US News, of all people, not only notices, but calls bullshit using better bullshit:

Even [!] moderator Martha Radditz got this a bit wrong. Medicare is the big concern, and it will in fact bankrupt the nation if nothing is done to arrest mushrooming costs that might eventually swamp the entire federal budget. Social Security is not really going bankrupt [incroyable!], and can be fixed [it ain't broken!] with some relatively minor [to whom] changes, such as raising the retirement age and reducing SS benefits for wealthy retirees. All we need on that are a few politicians willing to do it. Medicare is the big deal, because medical costs are rising so fast and nobody really knows how to stop that. 

So, to sum up: On the bankruptcy of Social Security and Medicare, we have all the participants in the debate — the moderator, both "opponents," and almost all of the press; the entire “political class” — refusing to calling bullshit on a very obvious untruth: That Social Security and Medicare are going bankrupt. And even if Republicans accept the untruth (as the WSJ did), you'd expect some Democratic commentators to call bullshit, given that two prominent Democratic-leaning economists, one a Nobelist, called bullshit on the same ideas previously from their respective very bully pulpits. (Note that even if you don't accept MMT, and hence wouldn't classify Big Lie #3 as a lie, Big Lies #1 and #2 still hold.)

Now that's Big Lie management!

* * *

Before I tear myself from the debate transcript, I'd like to point out one very interesting tactic Joe [genuflects] Biden used. He began his answer to Raddatz this way:

[34:52] JOE BIDEN: You know, I heard that death panel argument from Sarah Palin. It seems every vice presidential debate, I hear this kind of stuff about panels. But let's talk about Medicare.

Now, our Democratic loyalist friends may not have have noticed or called bullshit on Big Lies about the crown jewels of the New Deal and the Great Society, but ring the Palin bell and they salivate right on cue (see Balloon Juice and the Guardian live blog, supra; see comments here).

Finally, Joe Biden, to his credit, poses the essential question:

[42:11] Look, folks, use your common sense. Who do you trust on this? A man who introduced a bill that would raise it $6,400 a year, knowing it, and passing it, and Romney saying he would sign it? Or me and the president? 

Can I answer "neither"? Because here's Biden's debate bafflegab on Social Security. Starting at [36:38]:

And with regard to Social Security, we will not — we will not privatize it. … Look, I was there when we did that with Social Security, in 1983. I was one of eight people sitting in the room that included Tip O'Neill negotiating with President Reagan. We all got together, and everybody said, as long as everybody's in the deal, everybody's in the deal, and everybody is making some sacrifice, we can find a way. We made the system solvent to 2033. … [W]e will be no part of a voucher program or the privatization of Social Security. … The idea of changing — and change being, in this case, to cut the benefits for people without taking other action [Oh? Like what?] you could do to make it work — is absolutely the wrong way.

Contrast Biden in debate to Biden before the debate. Robert Borosage:

Then Joe Biden announced yesterday that the ticket would guarantee no changes in Social Security. "I guarantee you, flat guarantee you, there will be no changes in Social Security," Biden told patrons of the Coffee Break Café in Stuart, Virginia, "I flat guarantee you."

Come on, "folks." Does what Biden said in the debate sound like a "flat guarantee" of "no changes" to you? 

To conclude: Here are the elements in the Biden/Ryan debate that "tee up" the Grand Bargain:

1. Biden glorifies the previous Grand Bargain ("I was one of eight people sitting in the room").

2. Biden, Ryan, the moderator, and almost all of the press, along with the Democratic commentariat, accept the Big Lie that "Social Security and Medicare are going bankrupt."

3. These Big Lies by the political class are the essential ideological justification for the policy objective of The Grand Bargain: Sacrificing elders, the sick, and the poor on the altar of austerity, whether in the lame duck or after the election (no matter which legacy party candidate wins).

4. Given a direct opportunity to refute the Big Lies — "Social Security isn't going bankrupt! It's good for thirty years!" would have done the job; could none of Axelrod's minions have put it on an index card for Joltin' Joe? — Biden said nothing, accepted the premise, and in fact threw "progressive" a tiny morsel of red meat in the form of a Sarah Palin reference as a distraction.

5. Given a direct opportunity to repeat a "flat guarantee" of “no changes,” Biden left that unsaid, and proffered prolix and discursive bafflegab.

Get our your can openers! Because the fix is in.

* * **

NOTE Readers, and Yves, I apologize for the early release of this post. I had a "fat finger" moment with the WordPress administrative interface. A hat tip to Alexa for first drawing my attention to this subject matter (at 1:17AM the night of the debate).

NOTE * A note on the "Liars!" narrative:

In 2008 the Obama narrative was "hope, change, and the other guys are racists, especially that Clinton bitch." In 2012 the Obama narrative seems to have evolved into "The other guys are liars." (For loyalists who want to play along at home.) Much more simple and clean! Actually, the "liar" narrative is a fine example of scorched earth tactics. You don't see GM saying Ford cars are death traps engineered by lying weasels, for the very good reason that the general public would soon conclude that all cars, no matter the manufacturer, were the same; the message would boomerang. Similarly, the general public, faced with a consistent narrative that "the other guys are all liars", will conclude that all politicians, of whatever stripe, are liars, both big and small, because every politician is some other politician's "other guy." Of course, this conclusion would have the great merit of being true, at least for operatives of the legacy parties. 

Romney, most wonderfully, can't deny the charge ("I am not a crook", have so stopped beating my wife, etc). And one can only wonder what would happen if Romney copped to it! In any case, watching the Obama campaign treat the Democratic Party's remaining good will as an asset to strip rather than build, one can only wonder what the 1% has in mind for the parties and the electoral system generally. Nothing good, would be my guess. Anything regarded as disposable will be disposed of.  

NOTE ** A note on transcription technology:

Near real-time transcripts are at NPR, ABC, Pravda. Politico has a kinda sorta interactive embedded unshare-able transcript widget that includes annotations keyed to page numbers, which doesn't help me check the transcript against the video; only time codes can do that (and I couldn't get their annotation permalink to work; YMMV). Izvestia has functionality similar to Politico's with better page design and without the user experience-crippling widget.

AlJazeera, however, has this awesome tool that lets you search the transcript for a word (say, "bankruptcy"), shows how often each speaker uses the word, provides a handy bar chart of those words, lets you click the bar chart and scroll to where the word appears in the transcript, and then synchs the video to the clicked-on word, which is an easy way to grab the time codes.. Then they let you select and share the snippet. For the evidence- and cite-obsessed, that's a very big deal. If in some happy alternative universe there were ever a show trial for criminal banksters, or if Obama, Bush, etc. ever found themselves in the dock at the The Hague, a tool like Al Jazeera's is the one I would want to use.

NOTE *** Zimbabwe prophylactic.

NOTE **** The Greens should read, mark, learn, and inwardly digest the MMT paradigm. They haven't. The rich should be taxed not to "fund" the Green New Deal — because taxes, in that paradigm, function to regulate aggregate demand, not to "fund" spending – but so the rich can't buy the electoral system with all the loose cash they've got lying about, and so a multi-generational aristocracy can be prevented from talking hold. All pre-requisites to preventing austerity (in essence a terrorist attack by elites on "their own" people) and implementing Green policies, I would think. 

UPDATE I’d love to be wrong. Obama could remove my uncertainty very easily tomorrow night. Jon, take this down: “There will be not one penny of cuts to Social Security or Medicare. Any cost savings on my watch will be returned to beneficiaries.” And, while, we’re at it, reduce Social Security eligibility to say, 60, so some jobs can get freed up for younger people. Oh, and Medicare for All, but that’s a topic for another day.

Print Friendly
Twitter7DiggReddit0StumbleUpon0Facebook31LinkedIn0Google+0bufferEmail

57 comments

  1. SocraticGadfly

    Oh, Raddatz blew far more than these questions. Let’s start with her quasi-neocon-to-Zionist claim that Iran’s nuclear weapons program is the US’s top security threat. Wrong. It’s not even top three, and arguably not even Israel’s top threat.

    It gets worse from there (including, as you note, Social Security, along with the Catfood Commission, etc.).

  2. Kokuanani

    You could characterize this whole situation as “watching a train wreck,” except that rather than sitting on a ledge watching the wreck happen, the train is coming at YOU. And there seems to be little opportunity to get out of the way.

  3. Doug Terpstra

    Bravo, Lambert. It appears from all the gushing veal-pen accolades for smilin’ Joe, I must have missed a killer debate. I tuned in for only about a minute, right around the “malarkey” exchange and that was quite enough.

    But you’ve now reassured us that the script was standard fare after all, complete with all the duopoly’s usual stipulated “facts in evidence”. But the “big lie” perception management is so striking, I’ll now need a second liner of HD foil for my hat. The conspiracy is now out in the sunshine, with even the media in open collusion.

    Speaking of “Smirking Chimps”, if one didn’t know the context or had the sound off on the VP debate, it really looked like Biden was auditioning for a role as Batman’s Joker. All he lacked was a bit of vivid face paint. Cartoonist’s and SNL should have a lot of fun with it, if they dare.

    Apparently, the liberal apologentsia is so desperately starved for signs of a Democratic spine they slurped up Biden’s combative performance like lap dogs. But from the brief snippet I endured, it came off as derisive, disdainful, scornful, rude and self-righteous. But hey, we still have a horse race. I can’t wait to watch a minute or two of the upcoming show between Robama and Obamney, so I can finally decide which is the lesser of two weevils.

  4. Bert_S

    It is disturbing that the “moderator” set the bar so low for the “debate”. Maybe we can get Brad Delong to chime in and cry out for a better press corps.

    I also wonder when will someone point out the USG owes federal pension funds almost as much as the SS Trust fund.

    Also that Boomers and the Trust Fund disappear at about the same time, and we are the ones that put it there.

    Also, Daily Kos didn’t really say that, did they?

    1. Jim

      All sites have their problems.

      Has NC ever called for the only rational choice in the Eurozone – the dissolution of the monetary union, so that the non-core countries can grow again?

      1. Yves Smith

        We don’t make recommendations outside the US except as far as banking regs are concerned. The future of the eurozone is as much as political question as an economic one, and since no one who writes here is a citizen of any of the eurozone countries, it seems pretty presumptuous to dictate when we only have a secondary stake in the outcome. However, that is different than saying what is NOT working in the hopes that pols, the bureaucrats, and citizens will course correct.

      2. scraping_by

        Being parochial, we mostly bring up the outcome of the Eurozone when some neoliberal starts talking up the Amero.

  5. Jim

    Is Biden perfect? Far from it.

    But he’s a FAR more honest and capable pol than the third-rate EuroCrats, like Draghi, in Brussels who are eviscerating democracy in the EZ.

  6. ScottW

    And if/when Obama is re-elected and pursues cuts in social security the Daily Kos and its ilk will boast about how Obama never broke a campaign promise since he stated during the debate that he and Romney essentially agreed on social security. But for now, if Romney is elected the social safety net is doomed.

  7. Stephen Malagodi

    But, my brother, have you not taken a very long time to state and restate the obvious, while not actually ever getting there?

    The two parties collaborate to manage the affairs of State. The affairs of State are the interests of money, not ‘the people’. The parties, acting in collaboration, compete for dominance within the system of graft and contracts. The dominant party gets the better part of the graft, the subordinate party gets the lesser part of the graft. None of the professionals actually gets hurt. There are no gulags for the professional political losers.

    At the bottom of your complaint seems to be my old joke… “The difference between the Democrats and the Republicans is that the Democrats say that they like you.”

    So, in short, the fault of the Republicans is that they are arrogantly honest on behalf of their elite patrons and the fault of the Democrats is their bald-faced hypocrisy on behalf of their elite patrons. You, as a man of principle, rail against the dishonesty as a matter of moral rightness. Good for you.

    It is not news that the fix is in, and has been for a long, long time.

    1. ScottW

      “This is not news the fix is in. . . .” Maybe not to you, but it would be news to 95% or more Americans if they bothered to listen.

      1. Ms G

        Yes, and repetition is as essential a device in documenting the atrocities as it is in their perpetration via (in this case, masterfully unmasked) propaganda.

  8. Gerard Pierce

    It’s a bipartisan deal…

    The one thing that Democrats and Republicans are agreed upon is the need to welsh on social security.

    Despite the fact that the social security trust fund is solid as a rock, repaying the money borrowed by the general fund is a problem for politicians.

    Every dollar that goes to pay a social security check is one more dollar not available to the moochers that make up the 1% and the defense industry.

    Congress doesn’t have to cheat, but they will – if we let them. If they don’t cheat the current generation, they will cheat following generations.

    Biden isn’t going to challenge the inaccuracies about social security because he is part of the swindle.

    1. tom allen

      Who could have predicted that Biden, the Senator from MBNA, would push further cuts in Social Security and Medicare? Sure he helped repeal Glass-Steagall, made personal bankruptcy far more difficult, and enjoyed cutting Social Security with Tip’n'Ronnie — but hey, he wanted John McCain to be John Kerry’s running mate, so he’s a real liberal, right?

  9. Max424

    I jumped off the fiscal cliff yesterday, because it was there, because it needed to be done, because I am … an American psycho!

    I’m a little embarrassed to say, but I must admit, I sprained my baby toe in the endeavor.

    When I was a kid, I tell ye, with my youthful body, I could’ve leapt and landed on my snoz, and done a nose (no)hand-stand, that’s how un-daunting a challenge it was. But I’m 52 now, and I can hurt myself watching TV (I severed an optic nerve I believe eyeballing the debates).

    The toe will heel, however, and I will try again, for no matter how high that fiscal fucker gets, I will leap, because I am … an American psycho!

  10. Doug Terpstra

    Excellent insight into “big lie management” dynamics also comes from Golem XIV via Jesse’s Cafe, with respect to bank bailouts:

    “Goebbels and A.H. said that if you repeat a big enough lie often enough people will come to believe it. What this maxim leaves out is ‘how’ people come to believe something they once knew, or at least suspected, was a lie. Why does a big lie work better than a small one? I think the mechanism is not forgetting or the over-writing of truth with lies, but relies on escalating mental dissonance. A small lie leaves the rest of reality untouched. The unmasking of a small lie does not require any great re-adjustment of the rest of your beliefs or your grasp of reality.

    “A big lie, a very big lie, however, ties in to itself so much of the rest of your judgment of what is real and reliable that to question it becomes a painful mental act. It requires you pull the rug out from beneath yourself. It requires you undermine the very ground upon which you stand. That ground which you used to feel, still need to feel, is solid and firm.

    “To tackle a big lie can feel as if you are weakening yourself more than those you oppose. You feel the branch you are sitting on starting to weaken. Which makes it all the harder to defend what you are doing and saying against those who cast doubt not just upon what you say but upon your motives and even your sanity.”

    http://jessescrossroadscafe.blogspot.com/

  11. Eureka Springs

    Wow, Thanks lambert! Well done. Wading through the D-fender zone looks like nasty work. Now I remember why I haven’t read any of those sites in an age.

    I managed to watch about half the VP debate. Yet again, two terrible excuses for human beings promising to stay that way. It’s no small coincidence two arrogant, mean-spirited war criminals would turn on their own in the ways you highlight here. Like banksters our failure/death/sickness/hunger/low wage is their success.

  12. Paul Tioxon

    http://www.youtube.com/watch?v=ijxf3NN1B_s

    Hope and Change you can believe in.

    Obama declares in Clinton’s face that the age to retire should NOT BE RAISED, BUT THE CAP ON THE FICA TAX SHOULD BE RAISED!
    So Lambert, what does your direct line to corporate masters central say about this Potemkin Trojan Horse Kabuki Goebbels propaganda move? I’m so confused. I need a guide for the complex that I can believe in no matter what.

    1. Bert_S

      Hard to believe that debate was less than 5 years ago. You have to admit, debates were a lot better back then.

      Too bad the next 4 years sucked so bad and you can’t even have a good debate anymore.

    2. scraping_by

      But Barry’s masters want something else. So, they get what they want.

      I’ve sometimes wondered: do they make him grovel in private? I know that Shrub compensated for his slavey position by bullying his inferiors (making Rove hang up visitors’ coats, for example).

      When Barry calls them fat cats in public, do they force him to snivel and bow in private? I mean, White House cufflinks only go so far…

    3. Both Sides Do It

      A cattle-call debate from five years ago is perhaps not the most compelling evidence for predictions about the future policy decisions of an incumbent president.

      Especially when Obama’s first point was about fiscal responsibility, and was given before the financial crisis.

      And especially when his actual record includes what Clinton said she wanted to have, a bi-partisan commission, and when he offered a plan to Congress on the basis of that commission that included raising the retirement age.

  13. Klassy!

    I>In any case, watching the Obama campaign treat the Democratic Party’s remaining good will as an asset to strip rather than build

    well done. And appropriate for our bankster friendly prez.

    1. scraping_by

      Reputation as a quantifiable asset. Because reputation can be either earned or built up from talk talk talk.

      PR claims to be able to deliver an amount of reputation per dollar spent. Advertising is an act of faith, but perhaps this is the faith of the 1%.

  14. TimR

    Re Lie #3 -
    I think the response from conservatives at least would be, that if the government acts on this ability to “print” money, it will devalue the currency and perhaps lead to the fabled situation of needing wheelbarrows of money to buy a loaf of bread.

    I confess I don’t know (I’ve probably read it but it didn’t register) exactly what response MMT would give to this objection. Do they say the money creation must be overseen by technocratic experts to prevent this calamity? That it is best handled as counter-cyclical policy, “printing” mainly in deflationary depressions and abstaining in good times? This stuff doesn’t come naturally to me so please explain.

    1. Bert_S

      It’s best not to bring up the point of “questionable claim #3″.

      For one thing, under current rules, the government cannot just print money and hand it out. The treasury can borrow, and the Fed can print money to buy government debt. With the nifty innovation of QE, the Fed could print and buy 30 year treasuries (if the markets stand for it) and this money would be out there a long time, but then the treasury still has to pay it back.

      In their infinite wisdom, MMT says you can do this pseudo printing and enable any amount of government debt, until you see inflation (all of a sudden they know inflation when they see it – ha, sarc)at which point you raise taxes to drain excess liquidity from the economy until inflation goes back down again.

      Of course, problem is the average American is still leveraged to the hilt as always, and couldn’t pay more taxes, the rich are safely in tax havens, and the national debt is so huge by that time more taxes won’t even make a dent in it. Then the USG also needs to roll it over as it comes due (which is a 4 year cycle for all of it at this point), and at some level of debt/GDP bond investors refuse to buy it anymore.

      Some think the end game is for the Fed to finally “forgive” the debt they hold from the treasury. But you can be sure that if the Dollar hasn’t already tanked by this time, it will go to zero.

      There doesn’t really need to be a world reserve currency, if push comes to shove. Tt is purely a matter of convenience for central bankers and world trade.

      I just read a little Argentina history. In 1991 the peso exchange rate was 10,000 pesos to the dollar. Can happen.

      1. Bert_S

        “which is a 4 year cycle for all of it at this point”

        whoops. I should say 4 year cycle for half the public debt* traded part.

        I estimate that because the average duration is 4 years. That means that in aggregate, it has the interest rate sensitivity of a 4 year bond. I figure it doesn’t take a huge leap of faith for the lazy to assume then that roughly half the debt needs to be rolled over in 4 years.

        * The def of public debt in this context is total debt (16T) less the intergov debt (5T – SS, gov pensions and some other stuff), or 11 trillion in market traded treasuries.

        1. Bert_S

          Yes, yes, the platinum coin trick. I did read the so called law this is all based on, and it was quite vague and probably was passed under completely different context. I’m sure it will find it’s way to the supreme court for interpretation in a jiffy if anyone tried to use it to turn $1800 of platinum into a trillion dollar electrons.

          Besides, its not even necessary if you just have the fed roll over more and more long term treasuries. With a HFT trading platform they could do a bazillion jillion, no problem.

          The point is you say goodby to any semblance of a market economy and hello command economy. That may make some of the comrades happy at NC, but I wouldn’t try selling the concept anywhere in the developed world.

          1. Bert_S

            Well, ok. I just remembered the debt ceiling.The coin gets around that, but the fed doing HFT QE stills runs into it.

            But they have been voting up the debt ceiling for as long as we’ve had one. And the coin trick will still run afoul of rating agencies and real bond buyers. At some point the Fed will end up buying all of them, the currency goes to zero, we get capital controls, and we get an Econ Czar to run the American economy which consists of banks, fast food joints and overpriced med stuff. And no one can afford imports of any kind, and we sell all our food to China so we can buy oil.

          2. skippy

            @Bert_S… There has always been more than – one – economy present at any given time… It just depends on what level of social strata you inhabit, as to, you can discern the others.

            Skippy… the command economy is presently run by the MIC/TBTF-Financial /Connected mob. Before it was mobs such as oil, car Mfg, Railroads, early industrialization, cough… slave owners, et al.

            PS… watch out for the overlaps, they do trip folks up something fierce…

          3. Bert_S

            Yes, and we’ve had a long history of fighting those things (and eventually losing – it seems at the moment).

            But the basic idea is to not let that happen, and it happens in command economies too.

          4. bluntobj

            “As for “commmand economy,” feh.”

            A simply amazing rebuttal. I truly wish that necromancy existed so I could poll the dead to see how many heard exactly the same rebuttal back in the 30′s, or heck, any given decade.

            As I have argued before, currency issuance in whatever form without physical limit inevitably degenerates into command economies. As value is debased, demand side price controls are instituted (Blue Eagle, anyone?) and then a whole rack of economic effects occur, which I don’t need to reiterate.

            In short, history demonstrates that these kind of currency games, wether debasing coinage or playing with electrons, inevitably lead to command economy based states, and collapse.

            The internet bubble was not a new paradigm.
            Housing does not always go up.
            The current situation is not “the new normal.”
            Fundamentals matter.
            Forecasting 30 years into the future and making categorical statements is stupidity to the Nth degree. (both sides!)

            This is a repetition of history, and only the players change. To say otherwise, while undertaking the same actions that have always lead to suffering, is the real big lie.

          5. skippy

            @bluntobj… Ref Command economics. Try large scale capital formation, this occurs with out deference to hard or soft money.

            The hard or soft option is a false choice when considers all the evidence.

            http://www.youtube.com/watch?v=p3j2NYZ8FKs&feature=related

            Skippy… Heck… most of what we call – civiliztion – is a byproduct of command economics and what some call – the free market – is where the rubes duke it out for chump change / extraction from the top. If one can archive a modicum of success they might be invited to the folding table – next too, in the corner – of the big table or be bought out or squashed flat.

      2. Calgacus

        Bert S: The point is – why on earth do you, does anyone, think “printing money” rather than “printing bonds” is inflationary? Yes, it could be, a bit, in some circumstances, but not always.
        And in some circumstances, like now, maybe even most circumstances, it is probably less inflationary than issuing “debt”, for a given size & pattern of deficit spending.

        But with any adequate financial regulation of banks in place, it should not have a major effect. Why should one think that when the central bank or treasury “magically” creates a dollar bill, it is doing something inflato-evil, but not when the treasury “magically” creates a T-bond, which is nothing but a dollar bill with a date in the future printed on it? Currency is debt. Government currency & government credit are one and the same thing, to quote FDR.

        Why not look at some US history? All the difference boils down to is keeping interest rates down. So WWII was financed by printing money, more than printing bonds. For the size of the war, precious little inflation, then and after. Less than WWI, when you didn’t have people who understood what they were doing, like Keynes.

        It has nothing to do with “market economy” vs “command economy”. It just has to do with proper, correct, simple understanding of accounting & money.

  15. Lune

    Lambert-

    Political parties aren’t stupid: there’s a reason why political campaigns can get away with destroying each other scorched-style while car companies can’t. Namely, consumers can always *not* buy a car (or buy fewer), whereas no matter what happens, *someone* will be declared President after the election. Even if you manage to piss off the entire American population – 1, whomever that one person votes for still has just as much power as a President elected by 100% of the population.

    Indeed, for campaigns, it’s far better to turn off as many voters as you can because of a simple mathematical inversion: while every American represents a potential source of income to GM as a potential purchaser of a car, every American who votes represents a *cost* to a political party: his / her vote must be purchased one way or another, either with media buys, GOTV, promises of future pork or policy giveaways, etc.

    Think about it: if you could reduce the voting population to a hundred people, then you wouldn’t need to spend a billion dollars on your campaign. And it costs far less to turn off a million people (especially the fickle independents / undecideds) than to buy 500,000 votes for your guy. And since either action gets you just as close to your goal, why not spend your campaign money wisely?

    1. Both Sides Do It

      I think the point in the post is more about the divergence in interests of voters for the Democratic party and the Democratic establishment themselves.

      Democratic voters want a fairer economy, more environmental protection, etc. But the money’s all on the other side of those issues, so one of the few concrete advantages those policy positions have is their popularity with the public. So the more people are turned off by the political process and politicians in general, the less that advantage is worth.

      The point is that Obama is strip-mining that resource for short-term political gain and depleting it for future use.

      (I think this is probably true, but on a list of Shitty Things Obama is Doing would probably go toward the bottom)

  16. Nathanael

    Biden’s a mumbler, but he still came across pretty damn well.

    Of course, he’s not President, and you know exactly how much influence a Vice President has on anything.

    1. minimus

      I am so glad I stopped my subscription to Naked Capitalism. Yes, I am sure Yves is correct…there is not an iota of difference between Republicans and Democrats…I recall the exact same arguments being made in the 2000 election by people who voted for Ralph Nader…no difference between Al Gore and George Bush…I guess if you don’t count 250,000+ dead Iraqis, yes, there was no difference…Tell that to their relatives. I am confident, if you exclude the future body count in Iran, there is also no difference between Obama and Romney.

      1. Nathanael

        Al Gore was the best Presidential candidate we have had in my lifetime.

        Obama is doing exactly what Bush did, right up to and including extension of the Bush tax cuts.

        Um. I don’t know why he’s doing this. It’s not what his voters wanted and it’s not popular.

  17. Mary Bess

    By the way, Radditz is the daughter-in-law of Robert Rubin, one of the chief instigators of privitizing Social Security.

Comments are closed.