Joe Firestone: Progressives Re-Arrange the Deck Chairs for Obama’s Austerity Budget

By Joe Firestone, Ph.D., Managing Director, CEO of the Knowledge Management Consortium International (KMCI), and Director of KMCI’s CKIM Certificate program. He taught political science as the graduate and undergraduate level and blogs regularly at Corrente, Firedoglake and Daily Kos as letsgetitdone. Cross posted from New Economic Perspectives

The Congressional Progressive Caucus (CPC) recently issued its “Better Off Budget” document as an alternative to the White House/OMB document, and the coming House budget document, a Republican/conservative alternative. The “Better Off Budget” has received enthusiastic evaluations from writers affiliated with the DC progressive community. Richard Eskow’s recent treatment is typical and provides other reviews that are laudatory. These “progressives” clearly see the CPC budget as anything but an austerity budget. But is it, or is it not?

Recently I posted an analysis of the White House OMB budget showing that it was a budget that brought the nation close to a macroeconomic austerity at best stagnation, and at worst recession or depression situation over the next decade. My analysis used the Sector Financial Balances (SFB) model and some estimates based on related data to reach that conclusion. I also pointed out that projected private sector aggregate savings were so small due to the OMB budget, that, if the Government succeeded in implementing it, was very likely to cause severe microeconomic austerity for working and middle class people with a longer term result that would accentuate economic inequality in America due to the power of large corporations and the FIRE sector to monopolize the savings left to the private sector by the Government’s very low deficit budgets over the period 2015 – 2024. Later we’ll see how the CPC budget looks from the point of view of the SFBs that would result if its budgets were carried through as projected. But first let’s review the SFB approach and its application to the idea of austerity.

The Sector Financial Balances (SFB) model is an accounting identity, and these are always true by definition alone. The SFB model says:

Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0.

The terms refer to balances of flows of financial assets among the three sectors of the economy in any specified period of time. So, for example, when the annual domestic private sector balance is positive, more financial assets are flowing to that sector, taken as a whole, than it is sending to the other two sectors. Similarly, when the annual foreign sector balance is positive, more financial assets are being sent to that sector than it is sending to the other two sectors. When the private sector balance is negative, the private sector is sending more to the other two sectors than it is getting from them, and so on.

Now let’s think about austerity. From the perspective of the SFB model, government macroeconomic austerity is medium to long-term fiscal policy characterized by a focus on reducing budget deficits, or increasing budget surpluses, and mostly on the former in today’s environment where many nations have trade deficits. In addition, it involves destroying private sector net financial assets by cutting government spending and/or raising taxes in such a way that Government additions of net financial assets to the non-government portions of the economy (government deficits) fall to a level low enough (even becoming government surpluses) that they are less than the size of the trade balance, whether in deficit or in surplus.

What about microeconomic austerity? Microeconomic austerity embodies the same idea as macroeconomic austerity, except that it applies to sub-sectors of the foreign and private sectors, rather than to each sector taken as a whole. So, we can have macroeconomic austerity with or without microeconomic austerity, depending on the sub-sector of the foreign and private sector we are talking about. However, if there is macroeconomic austerity, then there must be at least some sub-sectors within the private or foreign sector experiencing microeconomic austerity. Examples of macro- and microeconomic austerity are discussed in my previous post linked to earlier.

Issues of distribution of financial flows cut deeply here. If a nation’s economy is structured so that some parts of the foreign sector and some parts of the private sector have sufficient economic and political power to direct financial flows from outside and inside the sector disproportionately into their coffers, then macroeconomic austerity may translate into microeconomic prosperity for those sub-sectors, and into disproportionate microeconomic austerity for the sub-sectors with lesser economic and political power.

Here are the projections based on the OMB 2015 budget recently published by the White House, the CPC Better Off Budget and on quarterly time series data kindly provided in Spreadsheet format by Professors Scott Fullwiler and Stephanie Kelton.

Table One: Sector Financial Balance Projections 2015 – 2024 Estimated From OMB and CPC Budget Projections

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Table One shows that the decade 2015 – 2024 has very small domestic private surpluses projected for both the OMB and CPC budgets. The mean annual projected private surplus (aggregate) savings over the decade period is 1.2 % of GDP for the OMB budget and 0.7 for the CPC budget. This is not macroeconomic austerity, but throughout the decade the projections are getting closer and closer to that for both budgets.

Compare that figure to the mean of approximately 7.2% of GDP for the 6 year post-crash period of fiscal 2009 – 2014. Consider also that Government injections resulting in an annual average private sector surplus of 7.2% of GDP over that period haven’t created enough aggregate demand to produce a strong economy with rapid job creation, full employment and widespread prosperity. Instead, these surpluses have only been enough to end the recession and produce a slowly growing stagnant economy, whose rewards are vast for the already wealthy and for large corporations, but are miniscule or non-existent for everyone else. And then ask yourself the question of what the result of the projected small Government deficits over the next decade in the two 2015 budget projections, resulting in mean annual private sector savings of 1.2% of GDP in the OMB case and 0.8% of GDP in the CPC case are likely to do to the economy?

My answer is that both the President’s and the CPC’s budget plans, if either were enacted and followed, would first produce microeconomic austerity for the 99% with flat or shrinking aggregate demand, and then continued and exacerbated economic stagnation compared to what we’ve seen in past years. We will also see rapidly increasing economic inequality, resulting eventually in renewed recession whose time frame would be determined by the willingness of the private sector to extend credit to increasingly hard-pressed consumers and small businesspersons.

The bottom line is that microeconomic austerity in the United States won’t end if either the President’s budget or the CPC’s or others like them, or even more tight-fisted, are enacted. But, on the contrary, such budgets will mark the beginning of severe microeconomic austerity in the United States leading to even more severe suffering than we’ve experienced so far and to social turmoil and political unrest.

But, but, but . . . What about the claims made by the CPC for its budget? And what about the analysis of it by that redoubtable progressive icon the Economic Policy Institute (EPI)? I’ll consider these claims in more detail in a future post. But the important point is that the analysis by the CPC and the progressive organizations don’t sufficiently take into account the macroeconomic constraints imposed by the planned levels of deficit reduction.

The CPC story really begins in 2014 rather than 2015. CPC assumes passage of its budget in short order so that increased deficit spending over the 2013 level would stimulate the economy and lower the unemployment rate substantially during 2014. This is supposed to happen with total Government deficit spending, both State and Federal of about 7.0% (CPC’s specific projection is that the Federal component of the deficit would rise to 5.2% for 2014). Applying SFB considerations and assuming that the trade deficit rises to 2.65% which is where it was at the last time the total deficit was just a bit over 7%, that leaves private sector aggregate savings of 4.4% to boost demand.

That level of savings is very close to that in FY 2013, and if anything is a bit lower. In 2013 the unemployment rate fell from 7.9% in December 2012 to 6.7% in December 2013, a drop of 1.2%. CPC is projecting that its planned deficit for 2014 will reduce the unemployment by 1.2% again to 5.5%. However, that is unlikely for two reasons.

First, the lower the rate of unemployment, the more difficult it is to reduce it further without increasing the aggregate private sector savings rate, in the absence of a credit bubble supporting increased investment. And second, as more new jobs appear more and more people who withdrew from the labor force, causing that sharp drop in the unemployment rate in 2013, will re-enter it and make the resistance to further reduction in the U-3 unemployment rate greater than ever. The result could well be that the labor participation rate increases toward pre-recession levels, but the U-3 unemployment rate could well remain in the neighborhood of 6.2% rather than falling further, leaving the US with a still substantial output gap, even if one assumes that full employment is 5.5% (which is a very austerian assumption to make in the first place).

So, it is likely that even if the CPC got its way, the US would enter 2015 with relatively high unemployment, but at that point the CPC plan calls for a Government deficit of 3.5%. According to table one that will correspond to private sector aggregate savings of 2.8%, and that is not enough savings to support aggregate demand sufficient for the private sector to add jobs without a credit bubble of the kind we saw during the Clinton Administration, and later, the Bush 43 Administration.

As we move through the decade beginning in 2015 moreover, the private sector aggregate savings level very quickly will decline to a fraction of a percent annually. That kind of savings level won’t support sustainable job growth however, and CPC projections about decreasing unemployment over the decade will not come to pass. What’s even worse is that the smaller the deficit is forced to go, the less support for job growth will exist, and certainly within the 2015 – 20124 decade the increase microeconomic austerity will cause another recession, if not another Great Recession or a depression.

In short, the CPC budget isn’t an anti-austerity budget as claimed. It is another exercise by budgeteers in near macroeconomic austerity that is likely to result in microeconomic austerity for the many, and continued prosperity for the few. And the pity of it is that budget plans like this are so unnecessary.

None of the deficit and debt terrorism and miserly fiscal policy reflected in these budgets are necessary, because there is no shortage of Federal fiscal capacity in the United States, and no justification for the fiscal policies the US Government has followed since the Recovery Act was passed in 2009. To end austerity, the Federal Government needs to budget to create full employment and benefits for most Americans, including solutions for the major problems facing the US, while letting the trade and budget deficits float.

First create full employment through various programs, including a Federal Job Guarantee to get and keep the employment level there. And then, let the twin deficits float until we’re at that point. A policy like this one adjusts to the savings and trade balance desires of Americans, while creating full employment, with whatever government deficit spending is necessary to accommodate those needs.

That’s how you end austerity for most people without causing demand pull inflation, or cost-push inflation. The second of these may occur because of developments in commodity markets that have nothing to do with Government employment or safety net programs. But that is a story for another day, unrelated to austerity and its remedy.

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68 comments

  1. CB

    I get emails urging me to sign this and that petition for the Better Off Budget, but I haven’t because I don’t trust the morons in congress to actually understand the economy and budgets, I don’t trust the CPC one little bit given its dismal and perfidious history, and I didn’t know anything about the BOB nor am I qualified to pick thru its details.

    So glad I didn’t. Now, I won’t.

  2. Banger

    I can’t dispute your findings, JF, because I lack the chops in that area. I think, however, that what the CPC is trying to do is to offer a budget that will move in the right direction while still being an austerity budget. Since I don’t believe we live in a “democracy” but an emergent imperial structure run by an international class of oligarchs, I don’t see the point of fretting over budgets. In early 2009 (I think) the IMF released a paper that said that austerity is the proper policy for all governments as a result of the financial crisis. Most governments in the world have followed that script–interestingly, that script has had public support in the U.S. and the EU, more or less. Why? Because the vast majority of people have income and jobs adequate to live and carry on life–to put it another way, 2008 brought about a revolution in expectations.

    Most people don’t care about the poorer people, let’s say the bottom third of the population. In the U.S. poorer people are considered morally deficient and therefore are poor. Whether that is the case (I believe it certainly is not the case) people tend to believe that and I believe that idea has spread to Europe and elsewhere. The 99% versus the 1% doesn’t really resonate. Occupy did not receive much public support because people believe the poor are more of a threat and cost society more than the 1% or the 0.1%. That’s simply an unavoidable fact.

    The only chance progressives have is to tinker around the edges (which may be worth the effort) if they want to stay in the game. A full employment high growth economy is simply not possible for not just political reasons but for cultural reasons. Maybe, in time compassion and the ideas that have come to us from neuroscience will filter to the public at large–but that will take decades. We have been moving, for some time, into a deeply anti-progressive era that is likely to end in some neo-feudal set of arrangements that may provide compassionate and convivial situations for some people.

    1. diptherio

      “The only chance progressives have is to tinker around the edges (which may be worth the effort) if they want to stay in the game.”

      No. The only chance progressives have is to abandon the game and work like heck to get another game, with different rules, going. When you figure out the game is rigged, the smart thing to do is get up from the table and start looking for another game (or forming your own). Only the mentally deficient, realizing they are involved in a rigged poker game, will stay at the table hoping to win back a few chips and cut their losses.

      If the PTB are illegitimate (which they are) then ignoring them (“mutiny,” as Chris Hedges would say) is the adult thing to do. Most of us, however, act like children most of the time and so defer to illegitimate power, because we are too afraid to act like adults, too scared to say “no,” too cowed by authority. And despite your incredibly pessimistic take on people generally, I think more people are aware of the PTB’s illegitimacy now than at any time I can remember.

      What people don’t want, by and large, is violent revolution, or even confrontational protest (who wants to get pepper-sprayed?). What I think might find more traction is a non-violent, non-confrontational “silent” revolt against our corrupt overlords. Ignore all Federal rules and regulations…the .01% already do anyway. The Federal gov’t banning or requiring something is obviously not a valid justification for avoiding/engaging in said thing, and we would all do well to stop acting as though it does. We should be lead by our consciences, not by the corrupt legislating of a bunch of liars.

      You don’t try to reform a three-card monte operation, you just stay away from it. Similarly, I don’t see how reforming the current system is possible. We’ve already crossed the Gresham’s Dynamic event-horizon, so to speak. All we can do is try to deprive the current unsalvageable system of our energies and hope that it dies quickly and with a minimum of thrashing about.

      1. Banger

        I agree with you–the system is not reformable at this time. Some kind of resistance movement is a requirement and, as you say, that should be obvious. But, frankly where is that resistance going to come from? The left in the US is pretty much dead politically and I see no signs of life–only the libertarian right shows signs of life. We could organize and band together and create something but this has not happened and because of that the left is not a factor in politics at this time.

        1. Nathanael

          That’s what they said about the anti-slavery movement in 1840, and about the left wing in France in the 1770s.

          Organizing left-wingers is like herding cats. But they *spontaneously* organize given sufficient provocation. It happens very fast.

    2. James Levy

      Banger, I see it as a crisis of nerve. What those 40 or so Congressmen (and women) have to do is to stand up and say, “I support these programs because I value X.” The choice has to be presented to people: we value X, those other people value Y–what do you value? Such a stand may have resonance and appeal, at least in the longer run. Today, it will be ridiculed. But those who ridicule is will sound amoral and shrill to many ears. I think the only way forward is a calm, well-articulated appeal not to conscience, but to values.

      For those who would critique this for lack of specificity, I would posit that the values we should stress are fairness, equal opportunity and equality before the law, shared responsibility and shared governance. It’s a question of the responsibility to look after oneself and the responsibility to look after fellow citizens. Trying to do what I can to better myself and trying to make sure that the old, the sick, and the poor are taken care of are not mutually exclusive; in fact, they are complimentary in any rational, humane polity. I think many Americans would be happy to consider that message, if anyone had the nerve to tell it to them straight.

      1. Banger

        Rationally, James, you are right. But we don’t live in a rational moment of history. People are, in the main, not compassionate but tend towards narcissism. This is not because people are dramatically less moral but that the culture’s morality has shifted such that personal satisfaction trumps community satisfaction. A culture of narcissism has no room for real compassion–that is not to say that there are no truly compassionate people but that compassion, sensitivity, even thoughtfulness and courage are no longer considered virtues. How can progressive politics thrive in that atmosphere? Certainly some things progressive happen—gays can marry because they are asserting their preferences, marijuana is now considered to be benign because it allows us to indulge ourselves in pleasure not because of compassion for the poor wretches who are in jail because of a ridiculous law.

      2. susan the other

        Or maybe a crisis of ideology. That would be the “free trade” ideology. The nemesis of Germany and Japan right now, and certainly our nemesis too since we indulged it for too long. Free trade (oxymoron because it is extremely expensive for both the ravaged planet and all the workers of the world; as Germany knows well, see above about the EU) demands the highest return because it is competition driven. It is the most destructive force on the planet. So it demands that wages be kept ultra low; defacto austerity. And this whole budget nonsense is just a way to make free trade palatable by confusion, and deprive the nation of the things we need like single payer, good public transportation, more science and applied science; pristine-clean cars or no cars at all (that’s what Germany should be manufacturing!); decent food produced by decentralized agriculture and on and on and on. If we have an enemy it is free trade.

    3. Thor's Hammer

      “A full employment high growth economy is simply not possible for not just political reasons but for cultural reasons.”

      Perhaps there are cultural reasons, but more significant is the physical and mathematical reality of the world. An industrial civilization built upon cheap energy utilized to produce maximum waste and consumption through-put cannot sustain “high growth” regardless of of employment policies or income distribution. Exponential growth at any rate, be it low or “high” is clearly unsustainable as 7th grade mathematics demonstrates (if economists and political “leaders” bothered to use it.)

      Have no doubt that if a herd of buffalo are running toward a cliff and do not halt there will be a bloody pile of corpses at the bottom of the precipice.

      1. Banger

        Yes, I agree a high growth, by conventional standards, economy would be its own kind of disaster. I honestly believe that the push for austerity that the oligarchs have decided on is, in part, fueled by environmental concerns. However, another kind of economy could be instituted that would be a sort of high-growth economy based on alternative energy investments, pursuing a truly convivial economy using rational metrics–for example, if you have a more egalitarian society everyone benefits in the end except sociopaths.

        1. Thor's Hammer

          Let’s dream for a moment about how that “high growth economy based upon alternative energy investments” might work out in practice. If the investments were in renewable energy using current technology they would bump up against the base load/variable demand barrier at somewhere between 30 & 40% of total capacity. But let’s dream of an energy economy powered by thorium in fail-safe reactors, supplemented by solar panels on every roof and an automobile-based transportation system powered by Li batteries that have become too cheap to meter.

          And furthermore, let’s define high growth as only 3% per year– the favorite target of politicians and economists everywhere.

          And let’s wave our magic wand and allow the .01% only 30 times the average income instead of the 300 or 3,000% like it is now.

          So everyone has substantially more income to begin with—- let’s call it an average of 60k. If the growth rate is 3% per year while the value of a dollar remains constant everyone will have a real purchasing power income of 120k after only 23.3 years. But it gets even better: 240k at 47 years, 480k at 70 years, and nearly a million dollars annual income after 93 years. Remember that this increase in income is only due to a 3% annual growth rate, not to inflation or change in purchasing power of the dollar. Not just a few rich people have million dollar disposable incomes, but everyone. Are you starting to see that there might be a supply problem? Might there be a limit to how many Teslas or McMansions or motor yachts the real world could accommodate, given that it is indeed finite?

          What if everybody chooses to be a monk living in a cave and lets the dollars representing growth pile up at the cave mouth? In slightly more than three centuries of 3% economic growth the pile of dollars will be so large that it blocks not only the cave mouth but covers the entire surface of the earth.

          Dream all you want, but there is no such thing as sustainable growth in a finite word— regardless of whether it takes place in an egalitarian paradise covered with solar panels or a kleptocracy where all the surplus flows into the blood funnel of the Vampire Squid.

          1. MyLessThanPrimeBeef

            1. It’s possible to tax the rich and still have more money in the system (sorry, MMTers)
            2. It’s possible to have less money and still positive growth (hat tip to Fresno Dan’s link the other day), though, per Yves, GDP growth drives demand for credit and thus money creation.
            3. It’s possible to have less growth and have a just and happy world.

            Under GDP sharing (in modified form, where necessary), it’s possible to be happier and have less growth, because it’s more egalitarian.

            1. Thor's Hammer

              Of course its possible to be happier and have less growth. And it is possible to be even happier in a zero growth economy that is in balance with the ecosphere.

              What is not possible to have is sustained (ie exponential) growth in a finite world. A simple fact that liberals, communists, banksters and Tea drinkers are unwilling to even consider.

              1. Auburn Parks

                All your talk of exponential growth is completely irrelevant when talking about fiat money. As almost all fiat money is nothing but digital entries recording credit\debit relationships on bank and Govt servers. We can’t run out of money. Its not possible. Nominal is infinite.

                Real things matter like pollution and energy not units of measurement.

                The world is finite but fiat money its not of this world, it exists as an abstraction and not something physical.

                1. Thor's Hammer

                  Next time read the post before commenting. You will note that I couched my argument in terms of real goods purchasing power with no inflation or deflation of the dollars used to symbolize it..

                  And far from being irrelevant, the results of exponential growth are a mathematical certainty.

              1. MyLessThanPrimeBeef

                I have.

                And your math is sound.

                Moreover, I agree.

                With GDP sharing, it’s possible to have smaller GDP (my mistake for writing ‘less growth’ instead of that) and still a happier world. And I have commented on that here before, more than a few times.

                And I have always said less consumption is the way to go (without, again, being explicit about smaller GDP – i.e. negative GDP growth).

          2. Banger

            The alternative energy issue is dominated by the carbon fuels industry and thus “we” believe in another form of TINA. It is expensive because the energy industry doesn’t want it and research is discouraged. It is a fantasy, yes, not because of technical reasons (with economies of scale and what I call “elegant” engineering we should be able to convert most of our energy needs within a couple of decades) but because of political and cultural issues.

            There are many schemes out there too numerous to mention. One of the advantages of having a very high human population is that, theoretically, I know we can have extraordinary breakthroughs in this area if the oligarchs (dependent on fossil fuels loosened their grip politically.

        2. TheCatSaid

          We need to start including at the minimum triple bottom line accounting (financial, community/social, environmental), or better still some version of Integral Accounting (as per M-CAM).

          The economic models being bandied about are meaningless (or worse–because they keep people striving for “growth”), when they are only considering financial / money aspects.

          “Growth” only works if it’s growth in our planet’s natural resources (more soil, more species, more clean water, more clean air), growth in food for everyone, growth in health care, growth in well-being across all societies. But we don’t have good tools for measuring and comparing this yet. This is where we should be developing our modelling, so that a fuller form of accounting can be taken on board voluntarily or as a requirement.

          The planet and its balance requires this, and it is up to us to develop it sooner or, more painfully, later.

    4. Joe Firestone (LetsGetitDone)

      Hi Banger, I just don’t have the same perspective on what the public thinks or how concerned they are about the poor. Also, because of the crash, I think they’re feeling the insecurity that they could end up poor and homeless, and are changing opinions accordingly. The execrable AE had a post today reporting on a recent Gallup Poll. It reflects my view a bit more than yours, I think. http://www.aei-ideas.org/2014/03/gallup-more-americans-care-about-hunger-and-homelessness-than-illegal-immigration-or-terrorism/

  3. McMike

    As far as I can tell, this is the only budget coming from people in power that even mentions things like financial transaction taxes, reducing the military, investing in infrastructure, raising taxes on the rich, and starting a CCC-style jobs program.

    These ideas are very much universal single payer. Not allowed to see the light of day. But the CPC budget puts them front and center.

    How would you propose we get those ideas on the table?

    1. susan the other

      We need a campaign to cut thru all the bull about free trade. To explain what a disaster it is and how a good domestic economy is both planned and protected. If we do not indulge the corpocracy in their welfare-queen “free trade” looting we can accomplish a balanced, sustainable domestic economy. And if we happen to produce good, environmentally progressive products they will sell like mad regardless of the idiotic rules of various free trade agreements. And etc.

    2. Joe Firestone (LetsGetitDone)

      I’d propose we push back strongly against the CPC and get them to issue a REAL progressive budget that stops playing deficit hawk games. You don’t get what you want be reinforcing the wrong thing by saying it’s the right direction. We need to hit them until they quit selling out and start changing. They also have to start telling the truth. Where have nearly 40 years of pushing the fiscal responsibility meme gotten us. Time to hit back and tell ’em about REAL fiscal responsibility.

  4. Steven Greenberg

    The XL spreadsheet only served to confuse me. I was trying to get things to sum to zero or something like that. I obviously didn’t understand what it was trying to tell me. I’d suggest a way to improve it, but I don’t have the foggiest idea what it would take.

    That said, I will have to trust your judgment on the analysis. Contrary to what Banger said, I think critique’s like this are absolutely necessary. We won’t shift people’s current thinking if we only make critiques that are palatable to their current way of thinking. At least some people have to tell the average voter how far off their traditional thinking is from reality. Then these voters, seeking a compromise point of view, will start shifting away from the Tea Party interpretation of economics. That will be the start of the change we need.

    1. TheCatSaid

      I share your frustrations. On the previous related post with a similar spreadsheet, I gave up because nothing added up to 0.

      Now I see glimmerings–but it really needs some changes to be more comprehensible. In particular, crucial columns currently missing need to be added, and colour could be used to show the groupings if additional visual clarity is needed.

      It’s confusing that there’s nothing in these columns that relates to the basic formula of X + Y + Z = 0.

      We need to see those columns with their respective values, and they must be labelled clearly. Right now, we can see X, but Y and Z are only expressed as % of GDP (and not as values that we could add to X and get 0). Also, these 3 entities (X, Y, Z) should be presented in a consistent order. If the formula uses a certain order, then using that order in the spreadsheet columns will be helpful.

      If % of GDP is crucial, then put it in a separate column to the immediate right of the column of values to which it refers.

      Also, it’s not enough to state that the (missing!) financial numbers were estimated from state & national figures. The estimates should be shown, as well as their total. We need to see the underlying assumptions on which the conclusions are based.

      Creating clear spreadsheets is crucial to communicate and educate.

      It also might have been clearer to have 2 spread sheets one above another (one showing OMB scenario, the other showing CPC).

      1. Joe Firestone (LetsGetitDone)

        Cat,

        Thanks for pointing out the lack of clarity and pointing up an error. I’ll explain.

        Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0.

        Take row 1 — OMB private balance (+2.4) + OMB Domestic Government Balance (-4.9) + foreign balance (+2.5) = 0

        The lack of clarity arises from the fact that the foreign sector balance is positive from the viewpoint of the Rest of the World, because the US is paying out more dollars for exports than it is getting for imports when it has a trade deficit, as it has had for many years now.

        In the table I used a negative number because I wanted to indicate a trade deficit. But this was an error. Since I labeled that column the foreign balance I should have been consistent and made the numbers all 2.5% rather than -2.5%.

        So, change the table accordingly (at least mentally) in each row to 2.5% and then apply the equation and see if it works.

  5. McMike

    Whether or not you like the CPC budget, you do understand that this constant hammering on the word progressive is playing into the hands of the right.

    Having destroyed the words liberal and left, now the right is going after progressive. The attack from the right is coming by associating the word progressive with socialism – another word they destroyed by associating it with communism.

    Rush Limbaugh fairly spits the word out with derision every time he says it, just like you and some others here.

    Are you attacking the idea of progressivisim, or are you attacking people who drape themselves with that word, but are in fact corporatists (i.e. PINO’s). You might want to be clear about that, because right now you are aiding and abetting the right’s Orwellian campaign to take away our language – coincidentally, that’s a first step in genocide campaigns.

    Once the word progressive becomes toxic, people who are left-of-center will have nothing left to call themselves. Perhaps we’ll have to get by on not-Republican. Until that word is also destroyed.

    1. James Levy

      He’s make what I think is a valid point about how the Progressives in Congress buy into the balanced budget nostrums of the Washington Consensus and their budget shows this timidity and fear of being called bad names and irresponsible by the MSM. The author is not at all equating what the CPC is putting forward with socialism. On the contrary, he’s calling them out on sticking too close to the destructive model of austerity which has been sold to us as TINA.

      1. McMike

        So, he is accusing the CPC of being “PINO’s” – too timid, thus a tool of the austeritans. Ok, I disagree, but that’s fair.

        Nevertheless, by spitting out the word “progressives” in doing this, he is in service to the right’s campaign to destroy the word. Baby goes out with the bathwater.

        Note how when the right does this amongst themselves, by inventing the word RINO. They are careful to protect the word they want to elevate, and separate their target from it.

        1. James Levy

          What is he supposed to call them? They are, aren’t they, the Progressive Caucus? Should he refuse to name them, or, like the Obamabots, are we to kowtow to them because “the Republicans are EVIL” and so any criticism of the Great Leader empowers their evil? And where the hell does that all end?
          Is this a forum for discussing ideas or a venue for supporting the Democrats?

          How about we call a spade a spade?

          1. McMike

            Well, that’s why I asked. There is definitely a thread on some posts and some comments here on NC that join in on the thrashing of the word progressives by conflating PINO DLC Corporatists with actual progressives.

            In this they are following the GOP playbook, by painting corporatists as socialists, and thus moving the goalposts further right.

            The attack on Obama care is a good example: there is less than nothing about the bill that is progressive, let alone socialist. By passing a right wing corporatist health care law, and then letting the right call it socialist, Obama just president over the final death of left side language. But of course that is what he wants, because Obama is a corporatist, and cares not for progressives or socialists. Except maybe for their votes.

            On the one hand, his underlying critique seems to be that the CPC budget is not progressive enough. Ok, I disagree with that assessment, in many ways, the budget is the anti-Obama, raising all sorts of taboo ideas. Firestone seems to be following the right wing theme by co-joining the CPC with Obama in his headline and in effect tarring them as water carriers for Obama.

            He completely ignores the fact that the budget proposal entails major left side ideas that Obama won’t touch with a ten-foot pole.

            So, that’s why I asked. Is he aware that he is helping to kill the word progressive by ignoring the virtue of the ideas involved and joining instead in the usual liberal circular firing squad?

            Or perhaps the right already has managed to tie our shoelaces together.

            1. McMike

              Lemme try again… by lumping the CPC in with Obama-kowtowing corporatists, and dismissing their budget simply as more of the same austerity – without mentioning that the ideas themselves are in fact radical and indeed progressive – also while doing a bit of that “hissing the term progressive” Firestone is (consciously or not) helping the right destroy the left’s language. Maybe he is missing the forest for the trees, either way, he’s making it worse.

              And with the word progressive gone, there are none left for the left to use.

          2. McMike

            By the way, you are doing it too.

            If you think the progressive caucus is a sham, then you should not give them the dignity of calling them that. You should call them the PINO caucus.

            I submit that by pushing a budget that includes ideas that Obama will never endorse, they are in fact distancing themselves from him, and splintering leftward away from him, and creating a headache for him.

            The opposite of kowtowing.

            1. Ben Johannson

              To be honest I’ve never thought of the term “progressive” as anything but representative of cynical, power hungry insiders pretending to be on the left until they get into office; a lot of us on the radical end of the spectrum think that way. In that sense Obama, Booker and Sanders are perfectly representative of the progressive standard. They talk a good game until time comes to put up and then they fold like a cheap suit.

              I’ll call myself a libertarian communist and relish every syllable Limbaugh spits out. The label doesn’t frighten the young as it did their parents, and they have no respect for the blathering right.

    2. Joe Firestone (LetsGetitDone)

      OK McMIke, let’s review the bidding.

      Whether or not you like the CPC budget, you do understand that this constant hammering on the word progressive is playing into the hands of the right.

      I’m not hammering on the word “progressive.” I’m hammering on those who label themselves “progressive” but who are not REAL progressives in my estimation, but only establishment “seat at the table at any price” members of the establishment. How can someone be a REAL progressive and be constantly advocating budgets that will leade to mcroeconomic austerity? And no, I don’t agree that my hammering on “austerity” and faux progressives is playing into the hands of the right for reasons that will become clear as I continue.

      Having destroyed the words liberal and left, now the right is going after progressive. The attack from the right is coming by associating the word progressive with socialism – another word they destroyed by associating it with communism.

      True, but so what? The issue is what do we do to stop them. My view is that we don’t let the people you’re calling PINOs use the progressive brand any longer. We need to call them out and point that they are not REAL progressives.

      Rush Limbaugh fairly spits the word out with derision every time he says it, just like you and some others here.

      So, I’m guilty by association? How “progressive” of you! If you don’t like the insanity put forward by Rush, then spend your time by pointing out exactly why it’s BS. It’s easy enough to do that. But I’m going to spend my time critiquing people and organizations that are ruining the preogressive brand through self-labeling coupled with rightist or ignorant policy advocacy. I think they are a much greater danger to progressivism than Rush Limbaugh is.

      Are you attacking the idea of progressivisim, or are you attacking people who drape themselves with that word, but are in fact corporatists (i.e. PINO’s). You might want to be clear about that, because right now you are aiding and abetting the right’s Orwellian campaign to take away our language – coincidentally, that’s a first step in genocide campaigns.

      You’ve accused of me of attacking the word “progressive”. I deny I’ve done that, and I think you need to deliver quotes from the Post to document that charge.

      I’ve attacked austerity policies being proposed by self-labeled “progressive” groups and politicians. As for aiding and abetting an “Orwellian attack.” That’s an Orwellian distraction from the substance of my argument. Also, your reference to genocide here, is way over the top.

      Once the word progressive becomes toxic, people who are left-of-center will have nothing left to call themselves. Perhaps we’ll have to get by on not-Republican. Until that word is also destroyed.

      The only way the word “progressive” will become “toxic” is if progressives just roll over and play dead when PINOS use the word. They need to be called out whenever they do it as this site has done over the years and as I always try to do. If you’re a REAL progressive then that’s what you should be doing too, instead of reinforcing the PINOS in the CPC. But if you’re not then you’ll just keep attacking people like myself who are trying to create progressive policies both in economics and across the board.

  6. washunate

    I would continue observing that both major premises in this framework are flawed.

    1) Neither the Obama Administration nor the Congressional Progressive Caucus have proposed austerity budgets. Everyone in Washington is an MMTer in the ‘sovereign printer can’t default in nominal terms’ sense. Everyone knows that giving currency units to your friends helps your friends. The only (real) debates are which friends should get the currency units and what unintended consequences are created by handing out these currency units. (but of course, inflation isn’t a problem because everybody can afford a great house and college and healthcare and everything…)

    The CPC put a budget out there. What’s your budget? Not generic percents of GDP. Actual proposed revenues and outlays. I am very curious how much you advocate spending on the national security state, for example. Is it ‘austerity’ to propose cutting military spending by hundreds of billions of dollars? How about raising taxes on the wealthy? Ending the drug war? Abolishing the TSA?

    2) The SFB model does not say that spending more money makes things better. It’s just an accounting identity; it has no prescriptive qualities. It deals in the aggregate; it does not take into account the distributional variables impacting our system, like fraud, inequality, mismanagement, corruption, two-tiered justice system, assault on Constitutional rights, etc. I’m glad to see you trying to address this with the micro vs macro austerity framework, but making a flawed approach more complex doesn’t fix the underlying flaw.

    1. McMike

      I agree somewhat. This is a weird sort of hit piece. He barely mentions that this CPC budget is about getting concepts on the table that are currently fully taboo in Washington and the press.

      The idea of single payer got damned by faint praise. Firestone appears to be part of the effort to do the same to the major ideas of the CPC budget.

      1. washunate

        Yeah, your question above is spot on. The ‘how’ is what matters.

        I guess, to me, it’s less weird, because I have disagreed with Joe Firestone’s approach for a couple years now. I feel like I have read nearly this exact piece before. It’s long on irrelevant academic theorizing, short on concrete details that would actually improve people’s lives.

        How can someone using GDP as their primary metric be taken seriously as critiquing the system? It would be comical if it wasn’t in such a tragic context.

        1. McMike

          Having not followed him that closely, it is hard for me to figure where her’s coming from, except happily sticking a knife in the back of a budget proposal that puts on the table ideas that are about as far as Obama as one can get.

          I mean, what the hell does he want? I would view passing a budget with this truly progressive wish list a HUGE success, historic, even if it did nothing for nobody in its first year. Heck, I’d be happy to see it just debated and discussed in terms of the principles first, rather than just dismissed on the details (or ignored).

          Thanks for nothing Joe, you are carrying water for the 1% here.

          1. James Levy

            Your last sentence is unfair. The author is dealing in aggregates. He may be wrong, but what he is arguing is that the CPC budget follows the general “revenue neutral” logic (robbing Peter to pay Paul) of inflation-averse policy and budget-balancing that is the bane of the Washington austerity consensus. He wants a budget that really transfers massively from rich to poor and reflates the economy–that is not the objective of the 1% and he isn’t carrying their water. He may be wrong, and he may be looking too “big picture” and abstractly (you make a solid argument that he is) but insulting the man and misrepresenting his ends isn’t right.

            1. McMike

              Ok, retracted. But he could have said it in one sentence like you did.

              Like i said in a different reply, the progressive-bashing can run pretty heavy around here.

              In my defense, the headline set the tone (“rearranging the deck chairs”). I would argue that’s unfair. This budget is opportunity to get major progressive ideas out of purgatory and on the table. I cannot imagine how that is remotely feasible without a revenue neutral budget. One step at a time.

              So, if my words were too strong, ok, but I would point out, as I tried to do in one of my earlier posts, that we really ought to avoid these circular firing squads and not play into progressive-bashing, unless they are indeed PINO’s.

              1. TarHeelLeftist85

                I think it’s quite fair to bash pwogwessives. I don’t think any of them stood up to Obama in 2009/10 when they were running interference with a (never operationalized) “public option”-turned-private-mandate. They may give lip service to single payer, but they bail when it matters. Name me one progressive who has taken Obama and their party to task for ObamneyCare, for QE/ZIRP/HAMP, etc. – publicly and vociferously, to the point of ultimatums, especially leading up to the 2012 re-coronation? Liz Warren, “independent” Bernie Sanders (only worried about Democrats “caving” or being beholden to special interests when his bro Obama isn’t electorally compromised), Sherrod Brown, Alan Grayson, et al are all the super-duper good cops, meant to keep us in the Dem veal pin. I don’t know electoral alternatives, but I do know I wouldn’t leave a child with a “lesser evil” (Dems/Pwogs) to avoid selecting the “greater evil” (TP/Repubs); i’d stay home with the kid until i could find a better alternative. In fact, the “lesser evil” gets away with more upward redistribution and imperialism, the way that only Nixon could go to China. The pwogs are central to censoring any alternative narrative from the prevailing one that taxes “pay” for spending, even if they advocate “raising” taxes on the rich (who, i guess, don’t have accountants and tax lawyers). When the new “higher” taxes don’t “pay” for things, they’ll come in the room like a good cop and say, “sorry, bro, my hands are tied; we’re broke and need to share sacrifice, including Social Security [but will have a tolerance parade afterwards!].”

                At this point, i trust pwogs the least of any. They’re absolutely serpentine, whereas the TPs are paid to play the crazy bad cops.

    2. washunate

      FYI, for those unfamiliar with Constitutional governance in the American system of political economy, this is from Article 1, Section 9:

      “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”

      Either one has to propose amending the Constitution to allow the Executive Branch to spend without appropriations, or one has to propose specific appropriations. Generic concepts like a Federal Job Guarantee are not capable of being implemented. It has to have details, such as how much money the Treasury will be allowed to spend on the program and what oversight and reporting the Executive Branch will have to submit about the expenditures.

      http://www.archives.gov/exhibits/charters/constitution_transcript.html

      1. Banger

        By bits and pieces the Constitutional Republic I once knew is no more. Constitution? I don’t think it is in effect. Like the Roman Empire, we keep our outdated quaint rules and customs but when the Emperor had absolute power at least theoretically. Today, in the U.s. the Empire is a bit more complex and thus emergent so that the Deep State (a virtual Committed of One Thousand) has absolute power–they don’t need no stinkin’ badges either.

        1. James Levy

          Perhaps one way to look at it is to see it as the long-term creation of a class of money men and deep-state actors who operate by Lord Palmerston’s injunction that “we have no permanent friends or enemies, only permanent interests.” They don’t have to form committees (although in the Council on Foreign Relations, Bohemian Grove, and a couple of other instances, they do) because the process of integration and indoctrination rewards a certain personality type and molds a relatively uniform weltanshauung. There is little need for consultation because everyone “knows” what the objectives are and the standard means of attaining them (distraction, divide and rule, dissimulation, obfuscation, force). When things get confused certain elite leaders and elite media send the signals out to get everyone lined up behind the “right” policy. Occasionally, the consensus breaks down and factions turn to the wider public for support. That would be my model, based on Mills, of how the Empire seems to be operating today.

          1. Banger

            Precisely! Indeed, I wonder what people these days have against Mills? I love that you bring him up but his general line of thinking is not encouraged even by the left.

          2. Ulysses

            Your and Banger’s analysis of our current situation is spot on. Yet I am not so pessimistic as Banger that people can’t demand, and ultimately obtain, a far better world.
            We must not fall into defeatism! In fact, what you said upthread should give all of us hope:
            “Trying to do what I can to better myself and trying to make sure that the old, the sick, and the poor are taken care of are not mutually exclusive; in fact, they are complimentary in any rational, humane polity. I think many Americans would be happy to consider that message, if anyone had the nerve to tell it to them straight.”

      2. Calgacus

        That’s just silly, Washunate. Very frequently the exact amount of federal expenditures is not known beforehand – as that clause itself recognizes.

        There is no constitutional barrier to a Federal Job Guarantee, no prohibition on implementing “generic concepts”. For we already more or less had a Federal JG – the WPA & other New Deal initiatives.

        1. MyLessThanPrimeBeef

          Usurpation by the Executive branch on spenindg is one.

          Reducing Taxation-without-Representation to an administrative inflation-adjusting mechanism is another assault.

          Number three, denying money-creation for the people, of the people and by the people (by spending it into existence) .

          1. Nathanael

            Congress would pass a law to do this stuff, you know.

            There’s been a lot of executive usurpation lately. But a Jobs Guarantee *passed by Congress* would be entirely Constitutional.

        2. washunate

          You want me to say something ludicrous, like a proposal has to be exact to the penny. But I’m not making a silly argument. What I am doing is inviting Firestone into the real world, to make actual policy proposals that can be evaluated, rather than nonspecific academic speak.

          I addressed this in my comment. So let me repeat: What’s your budget proposal?

          1. Calgacus

            Well, then I don’t understand what you are saying. The Congress has the power to create and fund a JG program, just like it had the power to create similar things like the WPA, PWA, CCC, NYA etc etc. There is no constitutional obstacle, there is no special type of budget proposal necessary. The point of the JG is that the government will acknowledge its own lack of omniscience, as it does when funding the FBI without knowing how much crime there will be, FEMA when it doesn’t know how many floods, hurricanes and droughts. It will spend on employing the unemployed when the unemployed say, not when some nitwit in Washington advised by some charlatan from Harvard says to give crumbs to people who actually work for a living. Just as the other spending is determined by crime, hurricanes etc.

            The problem with the MMTers academic speak is that it is too specific to the point of obscuring the essential logic of the JG, of full employment, not non-specific. If you want to bore yourself with details and some particular, imho too detailed and restrictive job proposals – read their papers. But the important thing to realize is that EVERY human enterprise, every human institution from tribes to corporations to travel bookings are run by the logic of the JG, of full employment – because it makes natural, intuitive, mathematical sense – and it works! With the sole, unique and glaring exception of national monetary economies, which are run by beliefs as logically, mathematically and empirically grounded as witch-burning.

            1. washunate

              The Works Progress Administration was implemented by a government that wanted to invest in the public commons. And it was funded by specific appropriations. The FBI (which, ironically, became the FBI in that same year, 1935) is funded through a request for the Justice Department. Etc.

              But more to the point, why is it so hard to propose a budget in an article critiquing proposed budgets? President Obama is proposing $38 billion for the Department of Homeland Security. Do you propose spending more, less, or the same?

      3. MyLessThanPrimeBeef

        Thank you for bringing this up.

        First you create a crisis of wealth inequality.

        Then you stage a coup on the Constitution to allow the execute branch to spend as much as it wants, once a century during a depression for the working people, but always good (year in, year out) for imperial adventures.

        And that’s where we are – the total silencing of the 4th branch of government, a government that was set up by the Founders to be for the 4th branch, by the 4th branch, of the 4th branch. So total is the silencing that we forget that money creation can be and should be of the people, for the people AND, get this, by the people (spending it into existence).

    3. MyLessThanPrimeBeef

      SFB, Sector Financial Balance,

      Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0.

      The simplest way to understand this is to remember the old equation:

      Money you and I have + Money printed and spent (expressed as a negative) = 0*.

      Excluding foreigners for now

      This is to say, the more promises I give you, the more promises you have.

      And, in a stroke of newspeak genius, by calling the money you and I have ‘savings’ – a desirable item, implying you earn it by working hard and denying yourself hard, it becomes easier for the 99.99% to swallow.

      So, if you want more savings, let me spend more.

      This must be the happiest place in the world.

      Never mind that money can be created by the (Little) People spending it into existence.

    4. Ben Johannson

      Joe provided a concise definition of austerity in the post, so pretending you don’t know what he would consider austerity is rather dishonest.

      1. washunate

        “From the perspective of the SFB model, government macroeconomic austerity is medium to long-term fiscal policy characterized by a focus on reducing budget deficits…”

        Firestone’s definition doesn’t help illustrate anything, though. It is based on motive, not outcome, and it claims that SFB says something it doesn’t – namely, that all spending is of equal value. Rather, SFB is silent on value judgments about how resources ought to be allocated; it is merely an accounting identity.

        Plus, this austerity framework is just plain wrong, on two counts. First, the USFG has had over a decade of fiscal policy that is quite obviously not characterized by a focus on reducing budget deficits.

        Second, there is no such thing as medium to long-term fiscal policy. There is only short-term fiscal policy. The rest is hypothetical projection, not actual budgeting. I like Firestone’s passion, and I like his opposition to the Obama Administration.

        But he’s been harping on this faux austerity for years now. Where is it? Every year, there keeps magically being a budget that is in deficit, not balanced. It’s like Friedman units. The next six months, that’s when the austerity hits!

        This is from 2011, for example:

        http://my.firedoglake.com/letsgetitdone/2011/08/04/end-the-austerity-war-against-the-people-mint-the-platinum-coin/

        And P.S., I like that article, because he puts a specific figure on the JG wage: $8 an hour. I don’t think that poses any threat to the existing power structure. In fact, I’d wager they would love paying people $8 an hour to do what they’re told.

    5. Joe Firestone (LetsGetitDone)

      More inline replies:

      1) Neither the Obama Administration nor the Congressional Progressive Caucus have proposed austerity budgets. Everyone in Washington is an MMTer in the ‘sovereign printer can’t default in nominal terms’ sense. Everyone knows that giving currency units to your friends helps your friends. The only (real) debates are which friends should get the currency units and what unintended consequences are created by handing out these currency units. (but of course, inflation isn’t a problem because everybody can afford a great house and college and healthcare and everything…)

      If everybody in Washington knows that there’s no solvency problem, that why have the President, and a variety of other people in Washington been telling the public that “we’re running out of money?” If they ALL do know it, then we have to conclude that all of them including the President have been lying when they’ve said or acknowledged that we have no money unless we increase tax revenue. Is that your claim?

      On inflation. I’m afraid there aren’t very many in Washington or New York who share MMT views on inflation. Most uncritically accept some version of the Quantity Theory of Money, often accompanied by a belief in the loanable funds model, or at least develop inflation arguments based on those theories. MMT writers on the other hand, develop their views on inflation by insisting that there must be causal channels through which money affects the economy to get inflation, and they deny immaculate conception theories of inflation.

      We also think that Net Financial Asset increases sufficient to go beyond creating full employment are what is necessary for demand pull inflation; not just increases in reserves locked up at the Federal Reserve Bank.

      The CPC put a budget out there. What’s your budget? Not generic percents of GDP. Actual proposed revenues and outlays. I am very curious how much you advocate spending on the national security state, for example. Is it ‘austerity’ to propose cutting military spending by hundreds of billions of dollars? How about raising taxes on the wealthy? Ending the drug war? Abolishing the TSA?

      I won’t play the budget game because I don’t want to reinforce the notion that successful budgets are those that produce deficit reduction. But, I’ve written a good bit about the fiscal policies I favor. See my e-book for these: http://amzn.to/Z7kG5q

      My whole point here is that it’s not about such deficit reduction budgets and projections. Instead, it’s about the real fiscal impacts of any budget.

      But to answer your specific questions, I want to shrink the national security as much as you if not more, and I want to prosecute all those within it who have violated the law and the Constitution. I’m also for raising taxes on the wealth to something like post- WWII levels while closing the loopholes that existed back then and exist now. I also agree on the TSA and the drug war.

      All that said, however, any budget that approaches macroeconomic austerity will cause micro austerity among the powerless. You can take that to the bank. So, the CPC needs to be advocating for budgets with deficits in the neighborhood of 10% of GDP if it wants to provide space for a decent amount of savings and for Americans to be able to maintain a trade deficit of 2.5% per year. That’s just arithmetic. Of course, within those parameters progressive policies would favor fiscal policies involving both spending and taxing that will create social and economic justice, as well as full employment with price stability.

      2) The SFB model does not say that spending more money makes things better. It’s just an accounting identity; it has no prescriptive qualities. It deals in the aggregate; it does not take into account the distributional variables impacting our system, like fraud, inequality, mismanagement, corruption, two-tiered justice system, assault on Constitutional rights, etc. I’m glad to see you trying to address this with the micro vs macro austerity framework, but making a flawed approach more complex doesn’t fix the underlying flaw.

      As an accounting identity, the SFB model has no prescriptive implications, but when coupled with the value gap concerns of MMT writers, it certainly does imply substantial and continuing deficits in the neighborhood of 8.5% to perhaps 10% assuming trade deficits of 2.5% of GDP or more and savings levels of 6% of GDP or more.

      And finally, of course, I realize that the distributional issues are critical too. That’s why I distinguished between macro and micro austerity. One can’t charge the Obama Administration with macro austerity yet. But, fiscal policy during his Administration has been all about increasing microeconomic austerity, and the macro screws have tightened with increasing deficit reduction and deficit terrorist tactics about entitlements. The CPC budget pretends to ease some of the distributional problems; but its macro constraints ensure another deep recession if it is implemented, and in the end that will exacerbate inequality; not reduce it.

      1. washunate

        Professor, I appreciate the detailed response. That’s an interesting angle to take to simply refuse to propose an alternative budget.

  7. Steven Greenberg

    Yesterday, I blogged about an analysis of the CPC budget by Robert Pollin on TRNN.

    Congressional Progressive Caucus Budget Strikes Back Against Austerity
    http://ssgreenberg.name/PoliticsBlog/2014/03/19/congressional-progressive-caucus-budget-strikes-back-against-austerity/

    I criticized Pollin for saying “Now, if you spend more money in these areas, obviously, you have to pay for them somehow. So what do they do in terms of taxes?”

    After reading this article today, I see that I may have been too timid in my criticism. Yet, my suggestion from yesterday is still worth reading.

    “I think the best thing that Robert Pollin could have said instead is the following:

    “At this point in the economic cycle, deficits aren’t harmful if they are spent for the right things. Too much of the money pumped into the economy by deficits and the Fed’s QE policy are going primarily to the wealthy. They use the money for speculative investments. Not only are these investments harmful to the economy for the instability they produce, but they also don’t involve creating many jobs, and certainly not useful jobs.

    “So, in this case, it actually helps the economy to tax this money away from the people who are misusing it. Rather than encouraging people to create these harmful investment products, we should be doing everything we can to discourage them.

    “This kind of tax increase is not a job killer, but in fact is a job creator. This is especially true when the money collected is put to a use of creating jobs and producing things the economy desperately needs, anyway.”

    In defense of what I said yesterday, I blogged the following in my commentary today:

    “I still worry about the overhang of liquidity when the economy starts to pick up. I don’t have the faith that the Congress will be able to raise taxes when it becomes necessary.”

    1. Nathanael

      Andrew Cuomo is STILL trying to cut taxes on rich people.

      Bluntly, we need more hate against the evil superrich tax-dodgers. They have to be reviled, spit upon, castigated whenever they appear in public. Because right now, Congress and state governments and even the President seem to be obsequious to them.

      1. bob

        King Andy’s been great to the lords. His property tax freeze is just the latest in his long list of gifts to the well propertied people.

  8. Dan Kervick

    I think we all need to think about major structural reforms to the US public financing system – indeed, the entire financial system. Under the current system, running deficits means selling US Treasury debt instruments to people and institutions with the surplus cash to invest in such instruments.

    Now here is what the ownership of financial assets looks like in the US:

    http://houseofdebt.org/2014/03/19/capital-ownership-and-inequality.html

    The current system of public financing allows very wealthy individuals and institutions to become investors in the operations of the state, and to collect rents on those operations. We need to smash that racket, and the architecture of plutocratic domination and concentration of capital it helps support. Under the current public system with its obscenely unequal distribution of financial capital, it’s going to be very hard to get any self-respecting progressives to buy into any program for expanding deficits, thereby pumping more free money into the capital class.

    The problems in the US are much bigger than those that can be addressed with Keynesian aggregate demand management and a low-wage job program. We need major structural reforms addressing finance, capital structure, public investment systems, the employment system, retirement systems, health systems, the distribution of wealth and income and the rights and social power of working people.

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