Normally I would not engage in such a shameless bleg, but as you may know, I’m on a panel at a conference Tuesday and only last night was given the topics and the names of the fellow participants.
From the agenda:
Outlooks on the Domestic Economy
Moderated by: Derek Thompson, Senior Editor, The Atlantic @DKThompson
· Jared Bernstein, Senior Fellow, Center for Budget and Policy Priorities @econjared
· Heather Boushey, Chief Economist and Director, The Washington Center for Equitable Growth@HBoushey
· Bill Hoagland, Senior Vice President, Center for Bipartisan Policy @billhoagland
· Maya MacGuineas, President, Committee for a Responsible Federal Budget@MayaMacGuineas
· Yves Smith, Publisher, Naked Capitalism; Author, ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism @yvessmith
I knew the day was going to be dominated by neoliberals (this is DC, after all, you just get slight differences in coloration within that school of though) but in past years, my panel has had at least one other pretty progressive voice (the genuine kind, as opposed to progressives) and a centrist or two.
This is a completely different kettle of fish. Maya MacGuineas was head of Fix the Debt, which has now been rebranded. Bernstein and Boushey are loyal water-carriers for the Administration. And all three can dial this session in, they’ve got well-honed talking points for occasions like this.
On the one hand, it’s a compliment of sorts to be on a panel with “establishment” figures of some repute, but the flip side is the fact that I am on this panel says the picking on the left get mighty thin once you get past Joe Stiglitz.
Yours truly is at a considerable disadvantage by the mere center of gravity on the rest of the panel. I have some ideas as to how to surmount that, and since I am hours overdue from turning in, I’m afraid I won’t bore you (particularly since one can only do a bit of prep for events like this and then respond in real time).
What would help is if readers can provide me with some good examples/links (PARTICULARLY WITH DATA) of how intellectual (or actual) corruption and bad incentives are having large-scale impact. For instance, Andrew Smithers at the FT has been writing about the scale at which large companies are borrowing and buying back their own stock. I need op-ed or article length treatments; papers are too long and complex to recap in a setting like this.
A second area is help in rebutting the “government debt is a problem” theme, particularly as relates to pensions. This audience will go glassy-eyed if I use MMT based arguments, so don’t go there. For instance, it’s pretty common to blame the Detroit bankruptcy on pensions when they weren’t a meaningful culprit, as this Alternet article explains.
A few, well-selected pieces or factoids would be helpful. I’ll have some time to do my own searching but it would be preferable if I can gander through some pre-screened material and pick out ideas and facts that are useful.
And wish me luck!!!
Speak the Truth as you understand it, boring or not. I posit that if the moderator feels obligated to cut you short it doesn’t matter, then just move on. The audience will see what has happened and follow up on your thread if it interests them. What matters is you tried. If enough people are curious about the censored material the issue will eventually get addressed. Beyond that I am clueless. Good luck.
Use the IMF itself. I think it’s important to try and overcome this austerity/deficit mindset. Stress that the government can fund programs that are good for business in that they can help create useful jobs so that people have money to spend. If you really want to go out on a limb you could suggest that these jobs could even be used to better the environment and social conditions.
““The IMF’s evidence is clear: The solutions to fighting inequality are investing in health care and education, and progressive taxation. Austerity policies do the opposite, they worsen inequality … We hope this signals a long-term change in IMF policy advice to countries – to invest in health and education and more progressive fiscal policies.”
For the past half-century, the Washington-based IMF has operated as the world’s “lender of last resort” for failing economies. In return for offering short-term loans to governments in economic crisis, the fund typically demands the imposition of a range of often stringent austerity measures aimed at solidifying the country’s finances.
After years of frustration over these conditions by anti-poverty campaigners, the IMF has recently engaged in a broad reappraisal of this approach. In November, the fund proposed an overhaul of its debt-restructuring guidance,
So glad you’ll be there! How about citing Martin Wolf? Among others, his March 13 article seems apt: “Fiscal challenges in impoverished Britain. It is mad to subsidise debt to buy houses while not allowing borrowing for social amenities”. Granted, it’s the UK not the US, but the issues are quite similar.
I’m sure you will kick ass and your brilliance will shine.
America is now the most heavily indebted nation in the history of the world,
approaching an astronomical $18 trillion debt.
In addition, the short and long-term unfunded local, state and federal liabilities
increase at an alarming rate; currently, over $100 trillion.
Now, what could possibly go wrong?
The answer is easy, the stock market is at all-time highs! It must mean the economy is doing great. Hmm but wait the Fed says money is free, and they haven’t instituted systemic bank bailout controls required by Dodd-Frank and are three years late. They have emergency hair-on-fire policies in force…so that must mean things are really bad. Normally I’d say the real answer is somewhere in between…but I guess it depends if you want to measure real or nominal wealth. In that case we’re all doing great but our standard of living is declining.
Is this government debt or like personal debt?
Attack the debt canard historically. For example:
If Congress appropriates more money than Congress levies taxes to pay, then, there is naturally a deficit, and the Treasury is obligated to borrow. The fact that they cannot go directly to the Federal Reserve bank to borrow does not mean that they cannot go indirectly to the Federal Reserve bank, for the very reason that there is no limit to the amount that the Federal Reserve System can buy in the market. That is the way the war was financed. Therefore, if the Treasury has to finance a heavy deficit, the Reserve System creates the condition in the money market to enable the borrowing to be done, so that, in effect, the Reserve System indirectly finances the Treasury through the money market, and that is how the interest rates were stabilized as they were during the war… So it is an illusion to think that to eliminate or to restrict the direct borrowing privilege reduces the amount of deficit financing. Or that the market controls the interest rate. Neither is true…
It’s hard to argue the national debt is a crisis when the government is borrowing from itself.
The ridiculous thing is that what they call debt is what most who are buying the debt consider “investment.” The reason Social Security excess was put into treasuries is because historically its the safest investment that can be made.
What they’re balking at is paying out on the investment working class Americans made in order to secure their retirement. It pisses me off because you don’t hear them talking about shortchanging the Fed or foreign entities who are bondholders. Nope, it’s just screw the working class for DC(after insinuating that many who have contributed to the general fund via Social Security are “takers.”)
That is the very key point. Why are investments through private funds that steal through management fees considered good and investments in a public fund that doesn’t considered bad?
Investments in a public fund that doesn’t steal through management fees are not really considered bad. They are merely spun as bad by Overclass tools who want to privatize all that beautiful money and make it available for stealing from through management fees. Eager Tool In Chief Obama wants to put SS on the road to privatization in part to collect personal payoffs after office from a grateful Overclass. But part of his reason must be a burning hatred for the sort of people who will need SS to live.
Use your knowledge of CALPERS to point out that it is not funding that is a problem, it is (mis/non)management, fees bordering on theft, obfuscation and secrecy.
Anything common pool resource related i.e. “The current Chairman and former CEO of Nestlé, the largest producer of food products in the world, believes that the answer to global water issues is privatization. This statement is on record from the wonderful company that has peddled junk food in the Amazon, has invested money to thwart the labeling of GMO-filled products, has a disturbing health and ethics record for its infant formula, and has deployed a cyber army to monitor Internet criticism and shape discussions in social media.
This is apparently the company we should trust to manage our water, despite the record of large bottling companies like Nestlé having a track record of creating shortages:
Large multinational beverage companies are usually given water-well privileges (and even tax breaks) over citizens because they create jobs, which is apparently more important to the local governments than water rights to other taxpaying citizens. These companies such as Coca Cola and Nestlé (which bottles suburban Michigan well-water and calls it Poland Spring) suck up millions of gallons of water, leaving the public to suffer with any shortages. (source)
But Chairman, Peter Brabeck-Letmathe, believes that “access to water is not a public right.” Nor is it a human right. So if privatization is the answer, is this the company in which the public should place its trust?
Here is just one example, among many, of his company’s concern for the public thus far:
In the small Pakistani community of Bhati Dilwan, a former village councilor says children are being sickened by filthy water. Who’s to blame? He says it’s bottled water-maker Nestlé, which dug a deep well that is depriving locals of potable water. “The water is not only very dirty, but the water level sank from 100 to 300 to 400 feet,” Dilwan says. (source)
Why? Because if the community had fresh water piped in, it would deprive Nestlé of its lucrative market in water bottled under the Pure Life brand.
In the subtitled video below, from several years back, Brabeck discusses his views on water, as well as some interesting comments concerning his view of Nature — that it is “pitiless” — and, of course, the obligatory statement that organic food is bad and GM is great. In fact, according to Brabeck, you are essentially an extremist to hold views opposite to his own. His statements are important to review as we continue to see the world around us become reshaped into a more mechanized environment in order to stave off that pitiless Nature to which he refers.
The conclusion to this segment is perhaps the most revealing about Brabeck’s worldview, as he highlights a clip of one of his factory operations. Evidently, the savior-like role of the Nestlé Group in ensuring the health of the global population should be graciously welcomed. Are you convinced?”
ive been deeply concerned with this over the last few years. infants and elderly dehydrate RAPIDLY!
‘Blue Gold’…the new Consumer Genocide.
The first question/comment should be “We need to ask where do we want to get to?”
A question rarely asked by economist and when they do they just skip to the assumed mindless answer of MOAR GROWTH!
If we keep beating that lame horse while;
All inputs for production are going sky high and it is from depletion not monetary inflation, Purchasing power of the masses dropping precipitously.
A waste stream that is killing us and would simply make everything more expensive if we atempt to address it.
Then we will never get anywhere.
Currently the process is design policy that will get us back to steady growth THEN we will see where we need to go. Crazy!!!!
No policy can be made without first designing where we want the economy to take us.
We need to purchase more wisely (i.e., greater quality, sustainability, and truly necessary), not more (quantity).
The government debt is a problem one should be fairly simple to shoot down considering Congress has no problems putting the US in debt to pay for crap like surveillance or war. Feel free to let them know that many of them notice the only time they pull out the ol’ deficit canard is when they plan on putting the screws to the working class, elderly, children or poor. When it comes to spending on military CRAP that may or may not work like F35 or Ospreys or even tanks the army doesn’t want they’ve got plenty of money to waste.
Yeah, given the panel, I would probably try to change the framework, for the benefit of the public if not the neoliberals on the panel and in the audience, who are an ideological sect and can’t be convinced by facts and data in any case because it’s not about the data, it’s about putting over an agenda no matter what the cost.
Thus I would I probably frame a short history of corruption and bad incentives by referencing Simon Johnson’s (much read at the time) 2009 Atlantic essay, “The Quiet Coup” and tell them that we know we’re being “shock doctrinized” and made to pay a price for elite corruption under deregulation by the Clinton Administration and for military adventurism and domestic surveillance contracts under Bush.
All of which Democratic and centrist swing voters expected Obama to remedy. None of this has gone away. It’s all still in every recent news cycle, from Ukraine to Snowden. They do the same trick over and over and over again. It’s old.
This is the proper historical framework through which to view deficit mongering and the actions that follow therefrom, both here and in Europe, and that is the framework through which the informed public views it.
Because the informed public views it this way– no matter who yells loudest for the cameras in the short term– eventually the rest of the public will view it the same way, and this is how the Obama Administration (which includes Bernstein, if not Boushey) will find their place in history: as government enablers who looted the American public “to pay” for elite corruption, while doing all they can to suspend our civil rights and liberties under the Constitution, with everything from mass surveillance to the coordinated crackdown on Occupy Wall Street.
On some level Bernstein knows this, as will others in the audience, just as he knows deficit mongering and misplaced spending priorities don’t do anything to stimulate the economy. But inside the beltway apparently no one can tell the emperor(s) when they’re naked.
Yes, re-framing the issue may be crucial.
Consider quoting from The Real News recent interview 5/7 with Michael Ratner at http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=11576
He makes contrasts between the “basic rights” in some countries (e.g., Cuba and others) that mean right to food, right to water, right to health care, and right to education as trumping the US approach to “right to speech”, “right to form unions”, etc. He came to view the former rights (which are non-existent in the neoliberal framework) as the first things that public policy should address. He sees the Bill of Rights considerations are indeed important but that basic economic / human rights should come first.
I had never heard this articulated with such clarity. Maybe it would be relevant.
Or BushCoBama Tax Cuts to be paid for by NOT paying earned benefits to the SS FICA payers who prepayed into the Trust Fund with the understanding that they would be paid back from it.
Probably not much help, but…I can’t see how any discussion of the economy can not include the growing inequality…
and there’s always dean baker for the quick and lucid facts.
(and Yves, you’re no damsel in distress, you’re a f—king knight! Of course, the neolibs won”t budge off their propaganda platform no matter how easy it is to sever their arguments with facts…good luck)
No, trish, Yves is no damsel in distress. She is just a normal human who wants to make sure she does the best job she can. She doesn’t assume she is invincible so humbly asks for help. We know she will do well but she doesn’t want to miss any easy argument she could have included.
I am probably not in the right league to help you. But in regards to blaming the Detroit bankruptcy on pension obligations, I like to think of this scenario as a “cost” of QE that never gets mentioned and is very real.
1) Cite reasons given for Detroit’s financial woes given here by Lynn Stuart Parramore:
(i.e., Detroit’s financial woes are due to cuts in state funding–NOT due to pension fund underfunding or excessive pay to public workers)
2) AND (separate issue) mention that Contracts for Difference were another source for woes in municipal and education funding. Investment funds talked funds managers into risky investments that led to high losses by some pension funds. I believe I read about this on NC but the “Search” box isn’t showing up at the moment.
Since these Alternet articles on the Detroit crisis completely ignore the billions of dollars lost due to fraudulent “13th Check” payouts, they would leave Yves woefully unprepared for any serious discussion of Detroit’s fiscal crisis. This “13th-check” issue has been widely reported, and it is somewhat hilarious (not in a good way) that Alternet’s standard-issue Left-wing talking points completely ignores it. See:
The fundamental issue is that Detroit’s pension trustees seem to have had trouble understanding basic pension accounting. (They are not alone in this, as San Diego had a similar scandal involving “13th check” payouts in the early 2000s.)
It really bugs me when people blame pension obligations. These are known. It’s not the known obligations that are the problem. It’s the unknowns… tax revenue based on economic conditions and market based returns in the pension funds that are the problem.
It’s clear that in the pension funds that have the problems, municipalities have been underfunding the pension funds and relying on above market returns.
Detroit’s problem is that their tax base [and income] has declined while their operating expense hasn’t.
BTW, the other side of the pension crisis is the 401K Crisis:
Almost 30 year into the IRA / 401K experiment, almost no one has adequate savings. As more people move from pensions to self funded retirements, I suspect we’ll see a backfire of neoliberalism as more and more people are dependent on the state.
If I had put my retirement money in a coffee can and buried it, I would have come out ahead of the 410K – it lost a fairly large percentage.
Just because defined benefit pension obligations are “known” doesn’t mean they are based on realistic projections!
I’m sure you’ll find plenty of material to choose from. Just end your presentation with Carey Wedler’s wonderful video. You can watch the neoliberals squirm in their chairs….
Speaking of “corruption and bad incentives”, you might even want to include the London Gold “Fix” in your discussion. Class-Action suit brought by AIS Capital is certainly interesting.
Pensions, and pensioners, have been savaged by the Insanely low interest rates, which are *not* a result of ‘market forces’ but have been deliberately set as policy.
Break a leg.
This is an old one, but it is always helpful to remember how the elites reacted when they thought there was a chance of paying the debt off. Greenspan became fearful and joined the call for tax cuts.
I don’t believe Greenspan was fearful. He only preTENded to be fearful in order to achieve step two of his long-planned straight-up two-step con against Social Security. Step one, build up a Trust Fund by pre-taxing FICA payers. Step two, pretend to fear lack of a debt in order to rebuild a huge debt and deficit in order to pre-shape the brainwar battlespace in favor of cutting future SS payouts to future beneficiaries who PREpayed and are PREpaying for those benefits. It might be well to highlight Greenspan’s deliberate sinister deceit in this matter and note Congress’s worshipful duhmness in believing Greenspan’s lies.
The budget cuts to basic science are coming home to roost. Researchers (not tenure-track faculty – yet) are being given their walking papers and labs are closing.The multiplier effect of this kind of spending must be pretty high: other than salary for relatively highly paid faculty, grant funds either go to low paid graduate students or postdocs, who spend it to live, or for conference travel, lab supplies, etc. So, the hit to the economy is going to be real. In the long run, of course, cutting basic science is insane.
A few links:
Only if you are not conspiring to turn America into a Third World resource colony.
Our Cdn monetary policy has been forced by the Fed… CMHC was used to prop up our real estate during the crisis. Houses are grossly overpriced and many Canadians have been using their home equity to buy retirement homes in Florida and Arizona. Imagine the pain if out dollar goes back to 65 cents and home prices drop by 10-30%.
The twist is that these Canadians in the top 10-20%, collect their CPP/QPP/OAS pension, which is not fully funded, and spend it in the US. That is a sure recipe for impoverishment.
It will be interesting to see the impact on Fla and Az when PE chokes and Cdn real estate corrects. And I am not even counting the Canadians who use their home equity to travel to these hot spots.
Why don’t you contact Warren Mosler? Public: warren dot mosler [at] gmail.com. His outlook last August here has borne out, and you can use his charts on his website.
“This audience will go glassy-eyed if I use MMT based arguments, so don’t go there.” Why? Know you have no time to answer, but maybe after it’s over.
Yves, this chart says it all about “energy independence” and the oil extraction technology “boom”:
The idea that new sources of domestic production will save the economy are a chimera. No prognostication, based on the most rosy industry scenarios, gets us back to producing as much oil as we did in 1970-2, and that was with 220 million Americans, not 310 million.
That chart does not explain the history. Before the Oct 1973 Yom Kippur War, oil was 3 bucks/barrel. The OPEC sanctions starting that month blew the price upward X10 until 1978 when Carter deregulated natural gas (went from around $0.30 to $2.78, but still waaay cheaper than oil). The power plants, which were using oil instead of natural gas, retooled over the next three years, and it slowly broke the back of OPEC. Oil was $10/barrel by 1990. Reagan got the credit, not Carter.
Here are the latest figures: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?f=M&n=PET&s=MCRFPUS2
Reagan deserves some credit for convincing the KSA to raise its oil production enough to drop the price USSR was getting selling its oil.
And there’s also a lot more to those times as well. When Nixon took us off the gold standard in August 1971, international payments were no longer in gold. If you consider it from the actual price of printing a US dollar–$0.07–and you believed that the US would actually haul physical dollars to Saudi Arabia to buy oil (which we didn’t, we used spreadsheets) then it cost the US $0.07 per $100/oil to buy up their stuff. Why use up our domestic supply?
The Oil Crisis did alter US national security policy because the 1973 fuel shortage globally threatened US ships, submarines, planes, and troops. They were left with two to three day supplies of fuel. It was a huge shock and wake-up call to the US military. Oil then became National Security #1, not a domestic issue; and it still is. Kissinger made the 1975 deal with the Saudis that he would keep the price high enough to make them all rich provided they bought US treasury securities (called ‘buying our debt’) and parked their new money in securities accounts at the Federal Reserve. It was also a way to lock up supply. It then became in our interest and a matter of foreign policy to drain other countries first. Prudhoe Bay in Alaska, however, was specifically opened up to prevent the Russians from slant-drilling into those massive fields, a Cold War concern at the time.
You’re missing a key point. These are domestic production figures. As you say, the price of oil went way up, but only AFTER the peak of US oil production. That’s a significant factor in this process because the US could not open the spigot to replace Arab oil on the market because it no longer had any excess capacity to tap. Also, with oil prices skyrocketing, the oil companies had a huge incentive to exploit internal sources to make windfall profits, but they couldn’t because again the surge capacity was no longer there.
Those who think that the “drill baby drill” crap and fracking are going to cause an American “industrial renaissance” and lead to “energy independence” are lying, as the chart clearly shows. That is why it is of such value, as a cudgel to beat those bastards over the head with.
But James, at the time of the embargo we didn’t have strategic reserves. So even 5 million people topping off one gallon a day used up available refined fuel. It had nothing to do with the reserves or what was in the ground. We didn’t have the refinery capacity, and the power plants got first dibs in terms of domestic production.
In terms of our military needs, it became cheaper to buy on the foreign markets with our new international dollars. We locked in Saudi Arabia by forcing them to bank the profits here by purchasing treasury securities. If they didn’t play ball, or sold to the Russians our sworn enemies then, we could lock up their bank accounts.
And I don’t remember this as necessarily true: ‘with oil prices skyrocketing, the oil companies had a huge incentive to exploit internal sources to make windfall profits.” Carter instituted the 55-mph rule, we had horrible inflation from the cost shock, people weren’t dancing in the streets to pay the higher gas prices, and the cost of food and travel shot up.
But look at the reserves now: http://www.eia.gov/dnav/pet/pet_crd_pres_dcu_nus_a.htm They keep increasing? Look at our production vis-a-vis reserves. And also click on the history tab. The reserves were there; production wasn’t.
Actually it was Nixon who signed the National Speed Limit ( 55mph) into law.
I stand corrected.
“the price of oil went way up” BECAUSE of the Yom Kippur War.
I wish you luck and shower blessings on you! Be in the moment–I know that these things often become huge pissing contests and so on but to be completely in the moment evaluating, rather than judging your peers with compassion. Drop preconceptions and just be there trusting that you have all the ideas and arguments at your beck and call and trust your instincts in the moment. This is something that some of us who have played competitive sports have experienced, i.e., being in the flow, finding yourself with the right move at the right time.
Yves, you are completely prepared, take your notes as a security blanket. Most of the people there are tied to very specific agendas–your’s thank God, is the agenda of truth—not a bad one to have.
Just one comment on the economy–personally, I think we are headed for exactly what I predicted some years ago which is slow growth, weak employment numbers but no major downturn for at least a couple more years. The system is very robust–the only “if” is if the current political alignments continue–the resurrection of the neoconservatives worries me.
Good Lord Banger, you’ll have me back on the pitch next week with this kind of inspirational talk. I’ll be killed in the first tackle, though even this assumes I survive the warm-up. We used to use the pub for after-match bruise and pain control. Half-time pep talks came with a schooner of sherry to mask the pain of wound stapling and cortisone injections. These days the employers grant an after match ice-bath. These days I can be motivated to the pub without these preliminaries.
here’s a fed buffoon at the local rotary club…
“Forecasting is not a very certain exercise. It breeds humility. Things can go wrong. I mentioned at the beginning that disappointment followed earlier forecasts. Things have gone wrong in past years that slowed the recovery. To name two, there have been global financial problems, particularly coming from Europe. More recently, fiscal policy uncertainty and some amount of fiscal drag have disrupted the pace of improvement. A replay of these factors is not in my baseline outlook.
In fact, if I gauge the risks around the outlook I’ve laid out here, I conclude that the risks (the downside risks, to be more precise) have lessened. The restraining effects of federal fiscal measures should diminish this year. That’s one of the key reasons my growth outlook is more optimistic.” http://www.frbatlanta.org/news/speeches/140113_speech_lockhart.cfm
another words…You’ll do Great Yves!
YOUR BOOTS ON THE GROUND…TORCH’EM
side note: remember Citi’s Global Calls by Country: http://www.globalpost.com/dispatch/news/business/120710/global-economy-outlook
I’d throw Marriner Eccles in their faces. Enlightened individuals in Eccles’ mold understand that social welfare and economic stimulus put a floor underneath demand. While building a ceiling over unemployment. Neoliberals are only interested in burning the house down for the insurance money.
“As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth … to provide men with buying power. … Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. … The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”
This should enable more leeway in talking about the massive disparity in wealth without being accused of class warfare. If the rest of the people on the panel suspect they are losing the debate they’ll go into attack mode and they’re practically guaranteed to accuse you of that anyway. Since the austerity crowd intellectually favors a inflationary bias, particularly when it comes to wage matters, taunting them a little over the relentless deflation Bernanke and now Yellen are fighting is just good fun.
I think asking policy experts to predict the economic outlook is senseless without establishing scenarios (GOP gridlock and status quo tax code is a tad different than if Congress starts legislating (min wage, stimulus and investment for full and future employment, tax reform).
Since the Maya McGuineas types just ignore urgent and actual economics, to the point of saying 20 year projected spending is more urgent than employment, wages, and revenue, try to get the others with you on what’s priority, and knock down anything distracting or destructive to priorities.
One of the best tactics is repetition, so choose a few points (getting employment, wages, and revenues up, while reducing distorting expenditures).
With Jared (and Heather Bousley if she’s a Brad DeLong type) you have to push back on any sunny, agent-ignoring hopes, like “we’d just have to see xyz improve to start a virtuous cycle” and instead keep them talking about priorities and realistic scenarios.
You can always go down Dean Baker style lists:
higher wealth taxes
more progressive income taxes
more reasonable tech and drug patents
regulating monopolies like cable and telecommunications and insider trading
Another tack would be to ask what’s better for most people than the House Progressive Caucus’s “Better Off Budget”.
Good luck indeed Yves. Wish I could come and heckle the opposition! The impact of corruption literature across a number of fields tends to boil down to Bill Black’s model that we need prevention through transparent accounting and the threat of proper investigation and prosecution. This on World Bank projects is typical: http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=1103&context=yhrdlj&sei-redir=1&referer=http%3A%2F%2Fscholar.google.co.uk%2Fscholar%3Fstart%3D10%26q%3D%2522financial%2Bcorruption%2522%26hl%3Den%26as_sdt%3D0%2C5%26as_ylo%3D2014#search=%22financial%20corruption%22
Add in some some typical definition wrangling like this: http://cadmus.eui.eu/bitstream/handle/1814/29872/RSCAS_2014_13.pdf?sequence=1
and one’s will to live quotient slides. The qualitative model is easy enough to extract. Bribes lead to the wrong firms getting contracts, shoddy work being done, projects not becoming self-sustaining and ordinary people left servicing debt.
My tenuous connection is that all our business systems are prone to the same looting and we don’t seem to have a chain of consequences model and valid-reliable data to evidence it.
In short we don’t have the data because ordinary people don’t matter and yet what is happening to them should be the data. In much the same way we could follow a World Bank dam project to displaced ordinary people and with no functional electricity and identify the rich looters, we could follow financialisation and other offshoring to our no-job-lousy-paid-job part-time-tax-credit economy. You do the latter in superb fashion.
Too long-winded. I think you might ask your opponents why they are modelling without data on what is actually happening to people. In essence, they have nothing to say when their lips move and exclude all the real evidence. Sorry I could only manage a pep-talk. Data will only be expunged as it impinges on the world-view network in these people’s heads. They are the corruption. Ask them to visit the world’s poor and be the best voice of resistance you can. As we say here, they ain’t in your league mate.
So, just curious. Who’s the AUDIENCE for this discussion?
The topic is “Outlooks on the Domestic Economy.” The panelists, Bernstein as apologist for the administration and “It’s always about government debt” MacGuineas, come preloaded with well-worn stats, zingers and points of view. Anyone familiar with these two has already heard what they have to say. Too many times.
But what about the audience? Do they REALLY want to hear about “outlooks,” or are they just coming to cheer when their already chosen side scores predetermined points? The key to a successful “performance” is the audience.
Anyway, as far as “outlooks” go, you could talk about the implications of NON-DISCHARGEABLE student loan debt and greater-than-100% LTV auto loans. WRT pensions, and I assume you mean PUBLIC employee pensions, here’s a recent link from Mish:
As for the “budget,” I’d have to agree with MacGuineas that it’s out of control, but not in the way she claims. Here’s Winslow Wheeler on defense budget games:
If she thinks the budget is out of control, start by doing some honest AUDITS.
Just what I would want to hear.
You know the amount of money your spending on something is absurd when independent audits are not possible because of the scope of your budget.
As it stands right now the DoD has until 2017 before it has to be ready for 3rd party audits. In the interim it can waste money at its leisure.
Who is the audience? Interesting question. The panel is probably impervious to reason, but the audience may not be. Are there questions?
Hopefully a greater bigger audience than just the people in the room. Hopefully all the people out here in digi-land who will read the transcript and/or watch the video and recommend them to others.
Re debt. If anyone says something to the effect of government should be run like a family (i.e. no debt), you might point out that many families invest in education, transportation, and housing by going into debt.
Further, if we are to “run government like a business,” then we ought to be heavily investing in R&D and infrastructure capacity and innovations, and have no qualms about issuing debt to do so.
Then finally ask if debt is our so bad, why is our interest rate so low?
Dean Baker http://www.truth-out.org/opinion/item/18395-pinching-pensions-to-keep-wall-street-fat-and-happy
“If anyone says something to the effect of government should be run like a family (i.e. no debt), you might point out that many families invest”
No one at this event is going to say that because none of these people are as dumb as some people like to go around insisting they are.
Oh indeed. they employ much more doublespeak and faux-academic code.
For that matter if you want to compare it to business, the adage you need to spend money to make money ought to be relevant too. However, we both know that the conservatives are only interested cherry picking talking points that suit their frame of cutting anything that benefits the majority and diminishes the responsibility of the 1% to pay into a system that has benefitted them. They don’t want to acknowledge that businesses pour money into things that may cost them short term but benefits them long term.
It’s sort of a long read but “The Rise and Fall of the Roman Empire” or the history of any other empires, and China alone offers a few, would tell one that this is where we are heading. Denial is rife especially amoung the administrative level neo-liberals, but, “…ignore history…”
Of course the environment could trump this, but Occupy, the Arab Spring, etc. may be harbingers of (and this word may get some to pull their heads out ot their pants) Revolution, if they keep taking and pushing.
Sorry, this is more of an overview/tone thing than specifics.
Ah, c’mon, Yves can whip through “The Rise and Fall of the Roman Empire” in an hour.
You could point out that we’ve tried it their way….deficits are down, yet the economy still sucks – because, as Charlie Pierce says, “EFF the deficit. People got no jobs, people got no money.” As long as the wealthy keep hoarding every penny and influencing the political system to stop investing in the country, the economy will continue to be slow.
We can’t have a “Walmart” economy with low wage jobs and public money going to subsidize corporate profits through social programs that barely keep people afloat. Again, we’ve tried it THEIR way….how about we go back to what we KNOW works – i.e., the 1950s and ’60s, economically speaking?
And what JT Faraday said….change the dynamic of the conversation. It’ll put them on their heels and/or force their condescending ideology to come out.
And, Yves, You are both Excalibur and King Arthur at the same time!
“change the dynamic of the conversation”
None of this talk about “economic outlooks” is worth five cents until the government mans up and breaks the destructive looting model. Any dolt can see that working to fund a pension or retirement account so it can be looted by private sector financial sharpies aided by government bureaucrats is an exercise in futility.
That’s just one point, but it is one that is important to the middle and working classes and a sign of how malignantly useless the Obama Administration has been and how little legitimacy this government has in the eyes of its own people.
There are literally thousands more.
The current pension funding strategy is flawed… company valuations are based on profitability. If everyone just saves more and increases their weight in equities without any earnings increases, all you do is blow up bubbles.
What we also see happening now is a deluge of corporate bonds… many will probably default and then just get converted into equity… which will dilute equity shareholders.
If pensions were based on pay-as-you-go, we’d clearly see how affordable the pensions are… money would automatically be taken off the 35-55 workers’ paychecks to pay for the retirees. Instead what we have is market bubbles and deficits which hide the true situation.
I don’t believe in any of that. I think retirement should be funded through universal old age pensions, provided by the state, end of story.
But I do understand that other people believe in that I try to tolerate you.
I also think that if the government fails to protect the property rights of the unconnected, and pension accounts are one part of that, then you have a very serious problem of social dissolution on your hands.
But I do understand that other people believe in that I try to tolerate you.
I read Econned and I loved it. I think Yves is amazing. So I find it intriguing that I ruffle so many feathers.
I noticed that I seemed to bug many on this blog so I read the book to see if my understanding of what was going on in the world was so different from hers. Alas, her book only confirmed my research and experience in finance here in Canada for the last 20 years.
So I guess the issue is the solutions. I think printing and deficits are better than write-offs and austerity but they will not easily solve our problems, they will just stop the snow-ball effect.
Well, I think it’s because you think employment contracts are retroactively negotiable due to elite mismanagement.
And when employers do write down employment compensation for younger generations you complain that the older generations got a better deal.
When one puts those two ideas together, one gets a rationalization for ripping off old geezers.
And when I say “I tolerate people who believe in the earn your pension or starve” model, I mean everyone who believes this, who thinks its fair, and who thinks its sustainable indefinitely.
And that’s most people.
I believe contracts are ALWAYS negotiable. Of course, one party can refuse to renegotiate but that is usually the one with the better deal.
And this brings us to the party with the short end of the stick… the young ones who did not sign the social contract, it was imposed on them. So by contract law, one could argue that such a contract can be voided, no?
The thing is that a contract is worthless if nothing stands behind it. If the goodies were pillaged and depreciated, what good does the contract serve?
I just happen to believe that malinvestment has been so rampant that if all promises were paid out, inflation would just deflate the purchasing value of the pensions. And even if the 1% loot was redistributed, I’m not sure, there would be enough for everyone because of limited resources.
Nothing has been managed to deal with the boomer bulge and the ensuing bust. It was all managed as if revenues would go up 5% annually and earnings 10-15% with no glitches.
Universal old age = pay-as-you-go.
The Obama Administration is malignantly useFUL to the people it actually works for.
“We’ve tried it their way…deficits are down, yet the economy still sucks –” is a very good hook to change the dynamic of the discussion. It’s so intuitively and visibly obvious. The rich looting the middle class and poor by means of lobbying and corrupting government to privatize everything is a good theme for where our domestic economy is headed with taxpayers on the hoof for bailouts when the private companies fail. Examples of privatization/looting should be available to pluck out from the other guests discussion.
As long as the wealthy keep hoarding every penny…..
And THAT is why our economy IS stagnant. Money parked somewhere in a bank does very little economically. The money needs to flow through people’s hands to allow growth.
I also wish that someone would strike down the talking point of “redistribution.” Any economy redistributes money, including capitalism. Walmart does not have some huge safe where it keeps all the money it makes. It REDISTRIBUTES it to vendors, shareholder, employees, government, etc, etc. The argument needs to be made that private redistribution is failing and is clearly not any more equitable than the “socialism” that the private hacks like to decry as “unfair.”
I hope you can talk about shifting the focus from the size (size is everything?) of the economy to the quality of the economy (we only produce 5 million pairs of shoes that last 10 years, instead of 10 million pairs of shoes that will last 10 months).
And if the outlook is a smaller economy, with better wealth distribution, that’s better than a bigger economy but with insane wealth inequality.
I was going to use distribution as the main point too. The government could be an effective means for wealth distribution, should be. And should be asap because the situation is about as bad as it gets. So before we can have an honest distribution of wealth we have to turn this new gilded age around and redistribute an equal share to everyone. That will take time so starting yesterday would be a very good thing. This is probably off the wall but today my doc told me that the system here (Intermt. Health Care in Utah) is participating with the government by taking its subsidy from the federal government and agreeing to the terms of the agreement that if they come in cheaper they pocket the balance, if more expensive they pay out of pocket. Right now the health care system money is going to maintain the status quo where all the money goes to the insurance companies (who won’t give it up willingly) and the hospitals, and the plan is to cut back on hospital and emergency care to save money. But the interesting thing was that he said they have planned a system whereby the doctors make less on their contract but are redistributed a share of the savings. This is big government on a federal and a state level. If it were single payer it would make better sense, as would almost any social service you can imagine, but Obama’s leaving the insurance companies right in the middle of it all bodes ill for anybody but them. And it could be the test model for much of the future economy. This looks like a well-intended redistribution system which would eventually benefit everyone in the industry – but not the patient. Government could do a lot better. Should. And should do it fast.
Yves: Bill Black’s comments about the Libor suits are huge. Without mentioning his name if you hammer on the endemic mega-bank front running trades problem, rigging world commodity pricing, using Libor as their ace in the hole profit-making playground fraud, it should be enough to slap them in face and wake them up to the the three D’s.
“Catch-22 says they can do anything we can’t stop them from doing.” Heller
No need to avoid Bill’s name. He has a very large following and lots of cred.
Here is the outlook for the economy: http://mythfighter.com/2014/03/17/do-you-want-to-see-a-reliable-recession-predictor/
It has not failed for the past 65 years.
Rodger, your charts are truncated on the right on your site.
Just ran across this, a little bit of a different angle on the privatization of our criminal justice system, not prisons time, but parole services. It seems the south, as always, leads the way in these matters.
prisons this time. Learn to proofread, Larry.
Mark Blythe, Bill Black, Corey Robin, Joseph Tainter all have some great nuggets of scholarly wisdom that I’d love to lay on a panel of neoliberal true believers.
I can’t wait for the transcript.
Yes, post a transcript if it becomes available. And a link to a video as well if there is one.
Ask this simple question:
“Show me the economic studies that demonstrate how banana republics are a successful economic model.”
You can do it with a few banana studies.
They can understand this eventually, but not in One Hour:
Yiou can blow the doors off their minds by asking ’em why the world isn’t any bigger than it was 2000 year ago if the economy has been growing all that time.
Eventually you’d need so many coins to keep an every expanding big economy going the radius of the earth would go to the moon. If you use paper, you’d need so much paper the same thing would happen. Unless you used little bits of paper, after a while they get so small nobody know what they are anymore. You can’t put a picture of a Queen or President on a paper the size of one-tenth a postage stamp. What about ATMs and credit cards? Good question. Here’s the answer: If you use magnetic fields for your money then what the heck do you have?
If debt is a form of money, then debt is a magnetic field. See if they get that. If money/debt is a magnetic field, how can there be too little or too much of it? How can it grow? A magnetic field doesn’t grow. It perhaps gets stronger and weaker and wider and narrower, but it doesn’t grow like adding rocks into a hole.
the nature of the field is not the summation of any discrete particle pile, but it’s a phenomenon of the incentive structure by which the field is generated. QED
That’s all you need to say. Economics is a mental disorder and they can’t be cured by one counseling session. It takes months of deprogramming and therapy.
Craazyman, this makes sense to me!
Good point Craazy. They could relate to this and not even realize it is a metaphor for MMT.
The point I would drive is that neoliberalism has had its experiments, and the evidence is in: widespread suffering, economic disparity, fiscal crisises, rampant fraud, dying middle class…. four decades into the neoliberal ascendency and conditions have deteriorated correspondingly.
Taxes are already at modern historic lows for the rich and corporations. Unionization and labor power are at Gilded age levels. Capital is mobile and unrestrained. Financial regulation nonexistent. Corporations operate with impunity. The government is at the beck and call of business.
The experiment has been going on for two generations. How’s it working out?
You could tell the story in charts. Just about any measure one can think of heads off a cliff around the time of Reagan’s Presidency.
There’s some dead links, but here’s a few charts showing the trend: http://finaw.blogspot.com/2011/02/reagan-revolution-in-charts-everything.html
Nice find, thanks.
And one might note that the targets of this experiment have lots of guns and lots of ammo. Tempt your enemies on that panel into saying something like . . . ” oh yeah? Well the rich have lots of electrified razor wire and lots of private security armies.” How might they look on video if one could lure them into saying that in whatever kinder and gentler language?
I think a very good argument is the one made by Yi Wen and Jing Wu about comparing China and the US stimulus. See Withstanding Great Recession like China
The abstract below:
Further, they say:
A comparison with China would get their attention. Don’t you think?
Ha, I apparently made a post that was too link happy.
So really, keep things short and sweet. Good luck, and have fun. With these kinds of events, being able to tell it like it is, rather than having to stick to an agenda, can be remarkably liberating.
Market-based economics depends upon rule of law. The economy cannot heal until the financial fraudsters and war criminals are arrested and prosecuted. All the rest is purposeful misdirection by those defending the law breakers.
The major theme of Gretchen Morgensen’s column “A Loan Fraud War That’s Short on Combat” might be applicable, particularly the closing paragraphs:
“Then I called Edward E. Kaufman, the former senator from Delaware who had tried unsuccessfully to get the Justice Department to move aggressively on financial-crisis cases. He convened two sets of congressional hearings on financial fraud cases in 2009 and 2010 and repeatedly questioned department officials about their efforts.
Mr. Kaufman…said he was discouraged but not surprised by the report. “There was a lot of talk at the time, but fraud enforcement was never a priority in the Justice Department,” Mr. Kaufman said. “Not only was this not their top priority, it was their last priority.”
Oddly, the report gives the Justice Department a pass on its failure to prosecute Wall Street banks and other entities for securities fraud related to the mortgage debacle. “The F.B.I. considers this type of misconduct to be a form of securities fraud and not mortgage fraud; therefore, we did not include as part of the scope of this audit,” it said.
This is a strange exclusion, given that the executive order creating the Financial Fraud Enforcement Task Force specifically identifies the prosecution of securities fraud as one of its missions.
Then again, the American people probably don’t need an inspector general’s audit to tell them how ineffectual the Justice Department was when it came to criminal prosecutions of the large, complex financial crimes that led to the crisis.
As Mr. Kaufman said: “The report fits a pattern that is scary for a democracy, that there really are two levels of justice in this country, one for the people with power and money and one for everyone else. And that eats at the heart of what I think makes this country great.”
Outlook: The employment situation is still terrible; income growth for middle class households is still terrible; economic inequality continues to widen; financial sector reform is still not complete; energy sector transformation has been sacrificed in favor of dangerous fracking and fossil fuel exploitation schemes. Continued weakness in Europe and emerging market problems are an ongoing drag on global growth, which obviously hurts the US. Recent wholesale sales numbers for commodities are down, although there is debate about the impact of the weather on the sluggishness. Oh … and the political system is broken, and so the tools for fixing things can’t be used.
Offhand, it looks to me like they have set up the panel to have Hoagland and MacGuineas taking the bipartisan/centrist budget hawk side, and Bernstein and Boushey to take the mainstream liberal Democratic side as represented by Krugman, DeLong and Bernstein. You are potentially the gadfly/third wheel, but the Democrats have grown increasingly sensitive about their weakness on the left, and are likely to try to reach out to you rather than hippie-punch you. Note that the liberals are in the process of a makeover, and Boushey’s WCEG is part of it. They are trying to move gingerly toward the left, with more concern about inequality and other populist complaints. Based on the kinds of discussion the leading economics blogs have been having lately, Boushey and Bernstein are likely to argue that the federal deficit and debt are not a big problem, that inflation is also not a problem right now, that the Fed should focus on unemployment and not inflation, that job markets are not “tight” contra the recent arguments of undergraduate blogger-twit Evan Soltas.
But they are going to continue to try to shift the onus to the Fed, and go to the ramparts defending ObamaCare. There will be a lot of emphasis on lining up the partisan talking points for the fall election.
I would appreciate it you make the case that the Fed cannot provide full employment – or even “maximum” employment in the mealy-mouthed terms of the Federal Reserve Act and its fantasy-based “mandate”. The emphasis needs to be on government spending and investment.
Bill McBride at Calculated Risk recently posted on the Obama era collapse in public sector employment.
This is a subject near and dear to my heart, and I wrote about it over a year ago:
I believe you picked up that piece here at Naked Capitalism.
If the debt hawks start arguing for spending reductions and entitlement reform, and plead poor, then use the Gabriel Zucman paper you linked to last week on the vast hidden external wealth of wealthy households in wealthy nations – including the United States. Echo Zucman’s call for a global financial asset registry. (You might also ask MacGuineas how much money Pete Peterson has stashed in offshore shelters. It’s an ad hominem tactic, but the effrontery of these plutocratic toadies telling American middle class to make do with less while their bosses place their fortunes out of reach of the federal revenue taps needs to be called out.)
But don’t be afraid of calling for healthy deficits, whether you portray it as MMT or not. Countries grow by investing; there are certain kinds of investments that only governments can carry out; there has been a long-term decline in federal government gross investment during recent decades coinciding with lower average GDP growth rates. And the deficit hawks are calling for the US to import the sorry failed austerity experiments of Europe to the US. Meanwhile, Federal borrowing costs are extremely low and the fed can keep them low as long as it likes. So even within the mainstream public financing paradigm, it makes abundant sense to run deficits.
Try to resist the liberals’ attempt to emphasize the Fed and monetary policy. Central bank asset purchases mainly work through the interest rate channel, but some of the Fed’s own research shows interest rate policy is not very effective:
The liberals might try to defend more Fed activism in the form of some kind of higher inflation targeting to reduce the real interest rate down to the “natural rate” which, according to the IS-LM version of the secular stagnation hypothesis is below zero. But the whole idea that there is a market-clearing, full employment natural rate is sheer speculation. More importantly, corporate profits are through the roof and corporations are already sitting on tons of liquid assets. The problem isn’t that corporate financing costs are too high. The problem is that perceived demand and perceived economic prospects are so low that corporations are preferring to amass and extract wealth from a choking economy rather than invest the liquid assets the already have in building a better one.
If QE has any other impact at all, it is due to a trickle down wealth effect from asset price inflation, and this is a good place to mention what a colossal proportion of income growth has gone to the top 1%, and unequally distributed are financial assets in the economy. The Democrats need to be shamed for their embrace of these kinds of trickle down policies. However, positive trends should be encouraged, and the Democrats have recently started to show some signs of progressive life, empowered by Piketty, Stiglitz, Saez and the other inequality researchers.
Finally, point out what a massive drain on our economy is represented by our staggeringly excessive and inefficient health care costs, and call for single payer as the only serious solution. You might get the hippie-punching there.
Great work, quick question.
Is there any merit in asking how long it took the deficit to get at present levels, while also discussing the most significant factors like 2008 Financial Crisis, Wars, Tax cuts for the wealthy, and Prescription drug giveaways? Isn’t there a deadbeat dad externality being perpetrated?
P.S. btw, love the Pete Petersen ad hom jabs. Needs to be done.
Well, personally, I have always thought that when liberals get sucked into debating, “Whose fault is the deficit?” they are implicitly accepting the framing that the deficit is a very bad thing and that it is therefore important that blame be assigned properly.
But that’s the game the Obama admin played for four years while they were losing the battle for the economy. They said the cause of the financial crisis was George Bush, “putting two wars on a credit card” and accepted the Rubinite line that government spending drives up interest rates and crowds out private investment.
I think Yves should focus on the economic outlook and how to deal with it, and leave the rehashing of history to the partisans. Just my two cents.
Appreciate the insight.
Just this: +300 million.
Dan, I notice you mention healthcare costs as a factor dragging down the economy, but not the costs of the criminal justice system or the national security state or higher education or the embrace of tax cuts as the solution to everything. Is that a matter of conscious prioritization for you, or just so many terrible things going on it’s impossible to list them all in a summary?
This seems to me the ongoing blind spot in public talks about the federal budget from the ‘healthy deficits’ angle. It’s not just that there is lack of investment in public projects. There is, and we need to invest massively in a variety of areas. But also, there is massive over investment in areas that are wasteful. They can’t just be ignored, because they are making things worse, from the myriad of absurd overseas entanglements to locking up dads in prison to weakening public school districts to blatantly violating Constitutional rights to massively undertaxing the wealthy to the various corporate welfare schemes ruining our environment and our communities.
It seems to me that offering to cut these expenses is the most direct route of calling the bluff of anyone whining about deficits, because no one in DC actually cares about deficits. Everybody knows the government can hand out whatever dollars it wants to print. The only (real) debate is whether those dollars should go to connected insiders or the public commons. To accept the former as a compromise to obtain the latter is to condone the looting, not oppose it.
Yves, “See I told you so” is pretty good for a panel discussion. So I went to your archives, and didn’t read longer than a few minutes to find predictions you made that have come true. For example, Feb.23, 2007, when the blog was new, in “Alan Blinder: 29% of US Jobs are “Offshorable”,” you wrote in the last sentence: “commonly-invoked remedies of re-training displaced workers may not be helpful.” Yes, and now seven years later we have a trillion in student loan debt to prove it, and no new jobs to speak of. You were an early skeptic, talking about the dangers and risks of outsourcing and off-shoring, and to put it in perspective, we have lost 40 percent of our manufacturing jobs since the 1980s, leading to an unbalanced economy which is crushing the middle class. And now we see that those global supply chains may be in trouble, and some are asking the question: “Will China have a hard landing?” The answer to that question should concern everyone, because it is big and it is happening, and I think you are in a unique position to talk about how the concerns you have written about here have proven both prescient and valid.
Keep it simple with three attacks on the Washington concensus:
Increasing Foreign trade is not always good.
Increasing Federal debt is not always bad.
Increasing GDP is not always good.
You know the arguments to make better than anyone, just keep hammering away at these three.
Absolutely – please point out that TAFTA & TPP will not be good for our economy – or anybody else’s. As Stiglitz in yesterday’s links via the TIMES pointed out, belatedly. Ask the panel just what they think about these “free trade” agreements and then pin them down.
Thanks, ftm and sot, for these points re: so-called trade, the TPP and TAFTA.
CORRUPTION by the very elites likely to populate the panel is what is killing our economy. We have discovery after discovery of systemic sanctioned criminality – like the recent proof that Wells Fargo is fabricating standing to foreclose. And yet no action is taken by law enforcement. In fact, we instead get the DOJ falsifying the number of prosecutions of these criminals, and when caught, THEY CONTINUE TO USE THE SAME PHONY NUMBERS.
Yeah, the regulators are weakly rattling their plastic sabres, looking for another fine that will go in THEIR pockets, not those harmed, and American Banker comes out with obligatory coverage – that includes an assertion by a WF attorney that assignments after foreclosures are permitted by the UCC – without ever mentioning that the UCC does not allow the ASSIGNEE to do the ASSIGNING, and the entity assigning must have an actual interest in the instrument being assigned! Further, an instrument acquired after “dishonor” is unsecured. But it will be enough to placate the pres into ceasing coverage – it is in American Banker after all.
EVERYTHING IS RIGGED.
Ya’ll can parse data and discuss economics all you want in your ivory tower panels, but for us little folks on the ground, it is the absolute corruption of every single (formerly trusted) institution in our society – business, journalism, government, the courts, education – and the attendant corruption of the rule of law that props up these corrupt institutions, that is killing the middle class and with it, the economy.
Ya’ll think you don’t need us rubes in flyover country…that your superior education can overcome the need for 90% of the population to participate their own destiny – you guys can create your own little world, and we can just do as we are told – like an ant farm. But without a middle class all of your machinations are doomed to fail, and are in fact failing…
Middle class folks in their 40s and 50s are the last generation who will be financially or psychologically “middle class” – our children will likely never join or power the middle class engine – partly by choice. How can young people ever be expected to join the middle class occupations that drive our consumer economy when education is unaffordable without a lifetime of crippling debt? Why would they marry and procreate when health “insurance” costs 40% of your take home pay and pays for ZERO actual health care for those children? Why would they buy a home or invest in the stock market when contracts and land records are not sacrosanct and can be manipulated by banks – and supported by the courts! Without the rule of law, without corruption free business and governmental entities, the middle class is doomed, and with it, our economy.
Dolley, I’m with ya.
You might be interested in this video of a conference held last week at the Cleveland Federal Reserve Bank on the topic of zombie foreclosures, entitled “Getting Back In Gear–Better Ways to Move Stalled and Vacant Foreclosures Forward.”
The segment presented by Tyler Smith, VP of REO Community Development
for Wells Fargo, may be of particular interest, considering Yves’ recent post about the suit against Wells. It starts at about 1:01.
Video of the afternoon session hasn’t been posted yet. Here’s an article about the conference:
sorry to be one of those overly-long posters…just so damned discouraged!
I know what you mean.
After Steve Keen and I were on the Atlantic panel last year, Richard Vague invited Steve down to join his commitment to write down debts. the way Steve told it, I naturally imagined that this was an overall debt write-down, not just focusing on government debt.
So your tactic, I believe, should be to WRAP their public debt handwringing in the larger picture. Point out that in Ireland, most notoriously, government debt has simply transferred PRIVATE bad bank debt onto the public balance sheet. Likewise the US $4 trillion Fed QE and taking Fannie Mae and Freddie onto the US balance sheet. So “public debt” is really just a euphemism for private debt that’s been subsidized by making interest tax-deductible, not taxing capital gains as normal income (as was done in 1913) and committing governments to feed “recovery” by getting the banks “lending again” to indebt the economy yet more.
Perhaps simply reminding them of how much more was said at last year’s Atlantic meeting.
Professor, that’s a great comment.
Can you clarify one point. Are you disagreeing with the MMT proponents who say that increasing public debt is so important that it doesn’t matter who gets the money?
My impression is that there are a lot of MMT/SFB proponents who ultimately accept the bankster bailouts and the national security state as a necessary evil to prevent the greater evil of austerity.
You make a good point. The “simple” MMT logic simply assumes that the public sector deficit is spent in the private sector — AS IF this were for production and consumption.
In my Bubble book (and in the Boeckler Foundation volume for last October’s Berlin conference, in press from Elgar) I divide the private sector into two halves: the FIRE sector vs. the production and consumption sector.
Nearly all the public sector deficit since 2008 — the Fed’s QE, the TARP, etc. — has gone to Wall Street in an attempt to re-inflate asset prices, NOT into the production and consumption economy to employ labor or increase tangible capital investment.
I know that Stephanie Kelton and Randy Wray agree with my bifurcation of the private sector. But it would take a year’s work to set up a model to do this. Steve Keen and I are slowly writing a book that will include this, but we have no backing for our model, and without help from someone to do the very tedious Excel spreadsheets to rework the NIPA and Fed Flow of funds data, it just won’t get done.
Neoliberal economic philosophy is based on the false assumption that all money creation is to increase PRODUCT prices — yet by far most endogenous bank credit is to inflate real estate, bond and stock prices. That is the aim of a bubble economy, and is how the 1% have made most of their money: by debt-leveraged asset price inflation.
Distinguishing this from commodity price inflation and wage inflation obviously is the next stage needed by MMT.
Probably too late to butt-in now. The split of FIRE from productive-consumption is old. Indeed the UK’s failure to do so was long held to be a reason for our lack of competitiveness with Sweden and Germany. All very 70s. Hundreds of papers on ‘housing versus factories’.
My view is we over-intellectualise this stuff and most of higher education. The economics Michael is one of the best explainers of has been around a long time and is re-badging, rather like British cars in the 70s. How old is ‘first use of money theory’ (Cantillon died in 1734)? In short, I doubt economics has anything to tell us and is primarily obfuscation. Most disciplines use obfuscation. Maths is the prime form of this in science and its unwarranted abstraction to economics is even worse. When people ask for data they too often mean ‘figures, graphs and spreadsheets’. By now insisting kids “do maths” (which really means very limited arithmetic and geometry) instead of using calculators and software should be a crime. It’s a crude ranking device that we continue with in HE. We also ‘bifurcate’ instead of split. Indeed, my sub-discipline of organisation theory strives to be unintelligible.
Around the world we are able to raise food prices and starve the poor. This is now happening across the UK and US (USUK sounds a good combination). I do my turn on soup kitchen runs. Yet we have real problems just taking obscene wealth from the rich (who won’t feel hungry). Economics runs scared of a cautionary tale. The sky will fall if we rid ourselves of the Jabberwock. Inflation runs at 4%, never in sufficiently ‘furcated’ definition to explain some kids are going hungry, old people dying of cold because of it.
Michael is clearly a decent, witty guy. I still suspect he and others I’d side with are not telling the truth (though aren’t just self-deceiving establishment sycophants like the neos). The neos are somehow suckering us to war on ground they have prepared. Think of the biggest banking turd you can telling us he is doing god’s work, loves Barclays/JPM/Goldmug-and-Prat and just has to start paying himself in billions because he’s so damned smart, talented and so on. What evidence does such ever offer that his job could not be done better by an honest girl with an adding machine? This is how we should look at the terrain they want to sucker us into. It has no data only noise. It’s meadows are mined. And to be honest we don’t want better economics, we want decent democracy.
USUK. I love it!
Of course, you’re right. What we want is decent democracy.
Thanks for going into your thinking here. Good luck diving into a more detailed effort.
That seems to me the hesitancy Yves touches upon about explaining MMT openly, away from the carefully defined semantics of academic literature. It’s like matters such as inequality, fraud, mismanagement, abuse of power, and even the role of national Constitutions are simply assumed away. If MMT can’t model these real-world variables yet, then it makes the pronouncements by some proponents of having policy solutions to offer to the general public seem premature at best.
For example, Stiglitz and Bilmes wrote a book years ago now about the cost of the Iraq war. Pointing out the waste of that currency allocation isn’t austerity or neoliberaliasm; it is common sense policy advocacy supported by both philosophical principles and economic evidence. Even their summary talks repeatedly about the costs to the US taxpayer and how money spent in other ways would make us better off.
Brilliant points you’ve made quite well on The Real News Network and in Rimini. I listen to these arguments on my iPod at least once a week. Why don’t you do a video.
One thing I always wonder about when the usual suspects are allowed to run roughshod over the conversation is the fact that no one ever brings up the only deficit that really matters – the trade deficit. That by focusing on the profits of a few while destroying the incomes of many, this country has increased our trade deficit and eliminated the very things that actually could lower that. Shifting manufacturing to other countries is good for the bottom line of multinationals, but not that of the US. Trade agreements that include protectionism for a couple of businesses that donate huge amounts to politicians while essentially selling out others in the name of ‘globalization’ is not the answer to this. Much of what the readers have commented here are good points, but don’t dismiss attacking our trade policy with its very clear and measurable failure. It is another way to chip away at conventional wisdom. (BTW, one thing to be very clear about is that so-called “Trade Agreements” are not about trade, but about globalization, and we would be better if they were about trade, and not about the protection of multinational industries).
In short, if you want free trade, forget about nations.
Free trade goes with world peace and one big happy family = utopia.
The problem with avoiding the MMT arguments about why government debt is (usually) not an issues is that those arguments really are the reason, more or less, why it isn’t. I understand that you have a problem with people’s eyes glazing over but what really matters is the fact that money is a social construction the government can create and not some external resource it must earn. There’s some deep psychology going on which makes it hard to understand that even though as individuals we have to be submissive betas, the polity we are part of is sovereign – the ultimate alpha.
But, a handy demonstration is that Great Britain carried a debt exceeding 100% of GNP for a *hundred* years – a full century from 1762 to 1862 – and those were roughly the years that Great Britain was at the height of its power and influence. The mightiest nation the world has ever seen, in relative terms, became so and stayed so with a supposedly “unbearable” debt burden.
Whoever said the debts had to be paid off at all? Check out British consols:
I once participated in an IARPA experiment on prediction. Lots of different questions were asked, from “Will Moammar Gadhafi be overthrown in the next month?” to “Where will the S&P be in a fortnight?” We did pretty well with the questions with binary answers, but predicting the state of complex, dynamic systems? May as well hand a blindfolded monkey a dart.
Having said that, I’ll bet that practically all panelists will parrot the Fed: “We expect that the economy will continue to grow at a moderate rate.” (Barring the weather, earthquakes, the California drought, events in the Gulf, in Europe, China, the volume of natural gas exports, lifting of the oil export ban, etc, etc, etc.)
I’d bring a book if i were you. However, if you want to make a point, then talk about demand.
I can help you with demand arguments.
Let’s begin with this:
[GRAPH] Non-supervisory wage share of GDP
Obvious here is the trend, but the thing to point out here is how wages seemingly never recover from economic shocks. The result of this is shown by comparing the entire pool of wages shared among the entire civilian labor force – whether they’re employed or not (they still have to survive somehow, and this is an essential and under-discussed part of the demand picture):
[GRAPH] It can’t get much worse
Prices, of course, are the other half of the coin, and for all the hoopla about raising the minimum wage, I am certain this won’t do any good, because wages and inflation track almost identically:
[GRAPH] CPI vs Average Hourly Wage
In this regard, it’s also helpful to point out that competition helps consumers only in trivial ways. There exists a huge dichotomy between the markets for non-essential and essential goods, and this is also reflected in the data. I plotted the wage share of GDP against prices of some essential goods, like food, housing, transportation, healthcare, education, etc., and collected all these in a Storify:
Rentier Symphony, Workingman Blues
I know none of this is news to you, but it remains the central truth about the US economy of the last half century. That being the case, nobody should give a rat’s ass about what its outlook is, as presently constituted.
NB: A note about the time series. I went with 1 January 1960 as a starting point solely because many of the data series I had to work with don’t go back much farther and I wanted a consistent period to view, compare and contrast.
On the supply side, you could always talk about looting. From Salon: New report: Bankers’ bonuses more than double full-time minimum wage workers’ pay
“Workers” are full time minimum wage (35 hours) plus those working part time thru not being able to secure full time work, 2012 data. There are 1,085,000 of these people.
MMT all the way in your own words Yves!! Keep it Simple, Silly!! For example, start out with a quote from MRW, from your blog, “the US government is not revenue-constrained and doesn’t use the taxes for anything. When people pay their taxes, that money is eliminated from the system” Blow them away!! Make them think!! Challenge their narrow worlds!! and have a great get together afterwards…..
on a lighter note, from Bullwinkle and Rocky…
Rocky: “Bullwinkle, we need to find a damsel in distress.”
Bullwinkle (running up to Natasha Fatale, dressed in sweater and skirt) “Ma’am, are you a damsel in distress?”
Natasha: “Dis dress, dat dress, I’m distraught!”
Bullwinkle (running back to Rocky) “Rock, will a damsel in distraught do?”
(from the great series where Bullwinkle is recruited by Whatsamatta U. to play for their football team despite being an illiterate moose. plus ca change….)
Oh, and here’s a favorite argument I like to make – pent-up demand. We can have a new golden age of capitalism if we could just summon the political will to cut Wall Street down to size.
“Today’s good news is that, just like after World War II, we are sitting on top of
a powder keg of pent-up economic demand—but this time, instead of consumer
goods, the pent-up demand is for a green economy and infrastructure. Just think
of what needs to be done. First, since the Reagan regime began over three decades
ago, we have accumulated a backlog of basic infrastructure maintenance that the
American Society of Civil Engineers estimates at over $2 trillion, now nearing
$3 trillion,29 just to get everything back in good working order. Then there’s the
future we need to build: …”
“Wird’s besser? Wird’s schlimmer?”
Fragt man alljaehrlich.
Seien wir ehrlich!
Leben ist immmer
That should have been “lebensgefaehrlich”
“In sum, and to put the matter bluntly, balancing the budget is a mission
impossible and a fool’s errand. For practical purposes, the realized
budget deficit no longer depends on federal budget policy decisions,’
but rather on international trade and the financial position of the private
sector. So long as American foreign trade remains in a permanent
state of deficit-which it has to do, so long as a growing and unstable
world economy requires dollar reserves-the federal budget deficit is
basically permanent. Policymakers and pundits can say what they like
about budget deficits. Nothing sustainable can or will or even should
be done about them, except through a change in the world’s financial
system. That may come eventually. It may, for that matter, be in its
early stages at this writing. But whatever the future holds, it is in the
global financial system, and not in the halls of Congress, that the
future fiscal balance of the U.S. government-and whether it really
matters to the well-being of Americans-will be decided.”
-The Predator State, p.61 (Chapter 10 – The Impossible Dream of Budget Balance) by James Galbraith, 2009.
A second area is help in rebutting the “government debt is a problem” theme, particularly as relates to pensions.
I’m still ambling my way through Eric Beinhocker’s “The Origin of Wealth”, which I like quite a lot, and he makes some points relevant to this topic.
In his review of the history of econ theory, he points out — as you do in ECONned — that a lot of econ theory is co-opted from late 19th and early 20th c thermodynamics. It analyzed closed systems: inputs = outputs; you seek equilibrium.
However, in the real world, economies are OPEN, dynamic systems. The concept of an economy as a closed system is a misclassified metaphor; an intellectual mis-categorization.
(p. 70, pbk edition) “The economy is not a closed equilibrium system; it is an open disequilibrium system and, more specifically, a complex adaptive system.”
IOW, if the economy were one discrete limited entity, then the notion that government spending ‘takes away’ resources from ‘investment’ might be logical. Following from that notion of the economy as a closed system, the notion of debt raises the specter of scarcity (“Golly jeepers, we can’t ever pay it back.”)
An economy is actually an open, dynamic system. It allows for innovations like Amazon, eBay, tax havens, and smartphones) to expand economies in novel and unforeseen ways.
The people who obsess on debt fail to recognize that the necessary infrastructure for economic development requires a great deal of government investment – no other entity is well positioned to create a Human Genome Project, or a Bonneville Power Administration (dams along the Columbia River), or NASA or public health systems.
What if the US had not invested in electrical grids back in the 30s? What if the US had not overseen telecom development? None of our Cuisinarts, smartphones, computers, electric toothbrushes, MP3 players, etc, would ever have been able to be developed nor brought to market. Private enterprise could not have moved America into the electric age without huge government investment.
Good luck with that panel.
Jared Bernstein seems to be an extremely civil man (his is one of the other 5 blogs that I check each day, along with NC). As for the rest of the panel… well, what an opportunity you have to engage with neoliberal True Believers!
Yves, there have been some really good suggestions above; I myself would stress the growing wealth gap, over and over again. The world’s richest 85 people own half its wealth currently; the five richest families/individuals in England own as much as the lowest quintile. The Gini coefficient’s rise = poorer outcomes on every economic (and non-economic) front.
For this particular audience (upper-middle-class, professional, still feeling secure, at a guess), I’d highlight the systemic movement under way to pauperize one professional class after another – university faculty, teachers, lawyers, the civil service class; no one from the non-ownership professional classes will be exempt, no one. As the three middle quintiles are shoved downward into the lowest quintile – a natural, inevitable outcome of neo-liberalism – there will be a snowball effect until, logically, 1% of the world’s population owns 99% of all wealth – and vice-versa.
To those bemoaning the debt level: reinvest, reinvest, reinvest – the only proven method of reducing the debt level long-term. R & D/ alternative energies / a new country-wide 21st-century transportation and energy infrastructure to free the U.S. of petroleum dependency (a major source of debt).
W/r/t finance, I just don’t know – the fact that the financial system is now global means that realistically, any measures – capital gains taxes / financial transaction taxes / tax-havens – all seem to be to be international issues rather than national ones now. Any movement towards stricter oversight at the national level would in all likelihood result in massive capital flight – capital being free, unlike labor, to roam where it will in search of maximum profits.
I wish to all my fellow-followers of this terrific site a lovely, lively, and companionable Tuesday evening – if I lived in the States, I’d try to come to these get-togethers.
Here is what I would say:
In the midst of the Great Depression, President Roosevelt spoke to congress stating that individuals and families in this country essentially wanted three things: a decent home, a productive job, and some protection against misfortunes in an uncertain world (Kutza, 2006).
During his 1932 nomination speech, Roosevelt again challenged business leaders and their acolytes, to consider that taking credit for the prosperity of economic booms, also obligates industry to take responsibility for causing and fixing market collapses. In FDR’s words, “Claiming paternity for one event, means they cannot deny paternity for the latter.”
After the 2008 crisis, it is clear we have become a nation of financial dead-beats! Large debts are a pattern of this paternity to take easy short term profits at the expense of American families’ health in so many cases. Deadbeat dads of the financial world are gaming the system so they do not have to pay. Wall Street neoliberals know that by externalizing the cost onto someone else, some other family or an entire population of people with much less power, they avoid having to take responsibility for their actions.
Deadbeat financiers blame the government. They use game theory and financial innovation to extract more resources from the American family and are given a subsidy to do it. They pay exorbitant bonuses and extort political favors for themselves. They skip out of child support (TANF) or alimony (social safety net) as a central policy strategy. They reframe language and meaning (Who’s your Daddy, Death Tax & Free Markets) to represent a false entitlement and seized power. Financial deadbeats fund passage of new laws protecting their wealth. However, they cannot completely escape implicated by their paternity, like it was a Swiss Bank account. Knowledge is power. We know they are deadbeats, and this changes how view and trust the system they attempt to control.
They do not get to brand themselves (financial deadbeats) as benevolent job creators. No more claims of honoring rights for the greater good of shareholders. No more victim blaming or racist deflections. Paternity means taking responsibility for ones actions whether they suit you or not. As FDR reminds us, the American people know that you are no longer someone who cares about us. This is clear.
If deadbeats cared, Americans would not have their homes foreclosed. There would be meaningful work for most of citizens, and multiple populations would be much better protected against dangers of the economic world (payday lending, drained pensions, rate-rigging, and so many of the corrupt practices we have seen since deregulation). If only you cared? Income inequality is conversation delay tactic. We all know it runs much deeper than income. If financial deadbeats cared, they would actually start talking about corruption and fraud they have caused so many families across the country.
Step one in any intervention is being able to name the problem and commit to not doing it again.
Future Financial Step-Families of America
P.S. To my Irish-American father whom I love a lot and may read this, I want to make it clear this is a metaphor for our financial community not a personal post. Pop, happy St. Patrick’s day! Thanks for making read as a child!
Good luck Yves!
Sorry about the typos and poor edits:
making “me” read
Transparency, transparency, transparency.
A possible theme?
Without it, regardless of the policies we will have nothing but continued corruption.
You could show how lack of transparency was directly or indirectly a cause for failings in any number of things the other panellists might bring up.
Knock their socks off, keep it simple, practice out loud making a few key points with few words and maximum clarity.
Criminal justice, criminal justice, criminal justice.
“Without it, regardless of the policies we will have nothing but continued corruption.”
Well written historical analysis of Detroit’s fall into financial mess of today. Interactive with nice charts. From Detriot Free Press.
I always like op eds by David Cay Johnston
Progressives of all stripes and flavors face a core problem presented by neoliberalism – of the Right or Center: federal authority and the state have lost standing since the golden era, 1945-1975, and this is reflected in the crisis of funding an adequate federal or state response to – well pick your policy area: an adequate “stimulus,” fully funding state pensions, a public jobs full employment policy and so on.
As Bruce Bartlett has written on the Right, this is a conscious “Starve the Beast” policy, meant to invoke a crisis of government for the center-left. So the Center survives by moving right on fiscal matters. How long will the Center’s slight stiffening of the backbone last?
This is no small matter at the heart of current political economy. The French state of 1787-1789 faced the same question and to try to answer it the Estates General were summoned. We all know the grand-tragic dynamics which followed.
But you wanted something practical. Well here are the numbers on how one state could address its revenue problems, and they still hold today, as a matter of fact, I invoked them in the crisis being triggered by pursuing a minimum wage bill in Maryland, a $10.10, which prompted anther bill the bring the state’s estate tax in line with the Republican Right’s “reforms” in DC of a few years ago.
Why couldn’t something as simple as making a state’s 6% sales tax more progressive pass a supposedly progressive state legislature? Because it is caught in the same dynamics as the national one in DC, and its very composition precludes progressive tax solutions to the ongoing starve the beast dynamics:
Here are the numbers from something I just wrote on Feb. 27th:
“Because cutting estate taxes implies a loss of revenue, as certified by the official analysis of the fiscal impact of this bill, I thought I would include a little exercise in fiscal fact finding which I did back in 2008. It shows how much could be gained annually – $1.6-2.2 billion dollars – yes billions, by including currently untaxed services, especially professional services.
MAKING MD’S SALES TAX MORE PROGRESSIVE
In the complex budget maneuvering of 2007-2008, the Maryland Legislature chose to raise the sales tax from 5% to 6% with the expected revenue increase to be $687 million in FY 2009. Based on 2007 numbers, the MD sales tax raised 3.62 billion dollars, 27% of the state’s general revenue, second compared to the 7.04 billion and 52.4% raised by the personal income tax (and just $598 million and 4.5% raised by corporate income taxes) Although Governor O’Malley extended the services taxed to four new categories, it was not a very bold effort and ended up targeting a “weak lobbying link” – computer services – which then rallied to repeal its inclusion. The significant thing here was the potential revenue raised by just this one category of service: $207 million. It is suggestive of Maryland’s deeper failure, to extend the sales tax base from its 1947 starting point of taxing only tangible goods, to capture the vast changes since then in an economy which has become more and more service oriented.
National tax studies indicate about 168 categories of services which might be included in a sales tax – and Maryland taxes only 39 of them. In the fall of 2007, the Center on Budget and Policy Priorities proposed taxing services such as cable and satellite TV, auto repairs, interior decorating, pet grooming, and country club memberships, which they say would have raised an additional $163 million. The list again hints at the unwillingness to take on the tough lobbies and therefore the big numbers: accounting, engineering, legal services, advertising. As a matter of fact, I have been unable to find even studies which would tell us what each of these services would generate if included in the sales tax. The closest we have, using broader categories which don’t highlight these services, comes from the Puddester Commission from November of 2002: Its list of revenue to be raised by “Taxation of Services” reads as follows:
“Business Services” – 600-700 million
“Information Services” – 325-385 million
“Professional Services” – 200-260
“Transportation” – 200-250
“Financial Services” – 150-230
“Personal” – 75-115
“Repair Services” – 50-80
Total Revenue from taxing “these” services: $1.6-2.2 Billion
House Bill 448 from 2007 started to head down this path. It proposed 30 new services to be included under MD’s existing 5% sales tax, and the revenue generated would have been an additional $657 million – without raising the rate to 6%. A sampling of the new services in the bill: auto repair and services, parking, barber and beauty salons, docking and boat services, engineering, storage, (shoe repair!), tax preparation and locker and storage facilities…..personnel and temp. Agencies….the numbers raised on certain services are impressive: engineering: $82.8 million; personnel and temp. $65.7 million.
This leads me to the conclusion that Progressives should keep the impressive categories from House Bill 448, drop the silly ones like shoe repair, and add advertising, accounting, legal, management and p.r.
The obstacle is political: to get a legislature full of lawyers and accountants and sensitive to the lobbying power of the other big services named above (real estate-advertising), to even consider producing a study showing what the excluded services would raise in revenue. (Personal note: I’ve heard a high ranking state leader say these categories would never even be brought up, never put on the table, in answer to me directly raising the question in January of 2008).
Who has pushed in the Past: Progressive Maryland listed the same list as I have above from the Puddester Commission in their “Fiscal Crisis Briefing Book” from 2008, but it was near the end of a long document and did not seem to be a high priority.
Another Approach: There has been some discussion in Annapolis of enacting a Gross Receipts Tax, which 7 states have some variation of: Del., Kent., Mich., New Mexico, Ohio, Texas and Wash. – which functions almost like a sales tax on the purchasers of services as well as goods. Economists don’t like the pyramiding effect: many of our “hollowed out” business entities purchase accounting, advertising, etc. services from outside firms and each time they bought them, they would be hit by this tax…so this is a big obstacle…and progressives don’t seem too high on this approach, nor many economists. In a phone conversation I had with Neil Bergsman of the Maryland Budget and Tax Policy Institute (July 10) he favors, if we want to head down this route of taxing services, that the legislature bring all services under its sales tax – a kind of grand House Bill 448, and then enumerate which categories and exemptions it feels would be necessary to make it function well. I might add that part of the political trade-off in Annapolis might well be to reduce other corporate taxes if either this grand inclusion of services or the Gross Receipts Tax is enacted. Illinois considered the GRT approach – 1-2% would raise 6-8 billion…but it was not enacted.
PS Although it’s very late in the current (March, 2011) budget negotiations in Maryland, another pathway which leads directly from the answer to the question “Where did the money go?” is that the maldistributions of the past 30 years can’t be reached by just taxing income, you have to look at the different forms and places where wealth is stored (and hidden). That leads to the consideration of a surcharge on wealth, broadly defined, not income. An obscure “redistributionist” named Donald Trump suggested that a few years ago, at the national level. His is not the greatest recommendation we can think of, but The Donald just might have some idea of where “it is stored.”
Is it more appropriate to say “good luck,” or “break a leg” for this type of event?
As to Detroit, there is a great interview with Wallace Tubreville on Democracy Now! Here is a link to Democracy Now! interview transcript, and then the report authored by Tubreville:
Tubreville calls the debt numbers that have been thrown out “fantasy.” I think he has a clear and concise explanation of why. Here is a quote from the interview:
[begin quote from DN!]
NERMEEN SHAIKH: So what is it, Wallace, about a municipal bankruptcy that people should understand? First of all, how often is it the case that cities in the U.S. run out of money? And what brought Detroit to this point? And why is it that debt is being talked about rather than annual revenue?
WALLACE TURBEVILLE: OK, let me do the last part first, why is debt being talked about, and let’s get that out of the way. $18 billion is a fantasy number. And I can explain—I can start the explanation by just saying one of the components of that is $5.8 billion of water and sewage revenue bonds. Those revenue bonds are for a system that’s not just Detroit; it serves 40 percent of the population of the state of Michigan. That’s three million people. Detroit is 700,000 people. The emergency manager added that into the list. It has Detroit on the cover sheet. I mean, that’s what it says: Detroit. But the—that’s not debt of the city, and it isn’t paid from the budget of the city, and it’s for this broader enterprise. So, just as an example, the $18 billion number is a fantasy. [end quote from DN!]
Yves, you have been given many great ideas. Good luck!
We look set to have little or no real growth, so no rise in employment. Where is the demand (total or aggregate, to use economist terms)? Short term interest rates remain negative, so we have a very dangerous stock market runup, if and when interest rates do start to climb. Government debt is not a problem yet and won’t be until the economy starts to roll-no sign of which is to be seen. As an 85 year old, faced with negative real interest rates short term, I am staying liquid. The Fed has been a failure for me personally. It won’t stop the hold on Fed credit expansion, tho it talks as if it has or still will.
Formatting not formatting for me, alors! Comment was supposed to start with a recap of the agenda, thebn finish with a Terminator sound clip. Oh well. http://www.hark.com/clips/bdmzrtjvnf-the-t1000-will-definitely-try-to-reacquire-you-there
Also, it’s very important to be up to speed on the Piketty discussion, since that is definitely the Big New Thing in the economics world. DeLong has a useful roundup of some of the recent reactions:
One of my friends that I turned on to your web site sent me an email suggesting I contribute to the comments of this posting. I wrote back and told him it was above my pay grade but was interested in what others thought. Now that I have read the above comments I have the following to say:
Mr Market will be whatever the global plutocrats want it to be, and for however long they want it that way….they have all the chips.
The lie that private industry can always do a better job than government is only true when global plutocrats own said government and arrange the actors/puppets to deliver the worse results. Otherwise, it is stupid to say that if you remove the profit wedge in any endeavor that government will always do a worse job than the private sector.
Ring around the debts
A pocket full of bets
We all fall down
Do good, avoid evil and smile through it all.
Yves, get up and tell them to stop f******* everybody over!
They all know what’s going on. These debates are simply methods of legitimizing [playing dumb] the lying, cheating, stealing, and fraud that it ubiquitous in this society. How pathetic.
Aside from the great suggestions above, a couple of broad themes that may be worth touching on…
1) The new “R&D” in the corporate sector is all about repurchases and dividends:
2) U.S. labor market still hasn’t fully healed and the quality of the jobs being added is not great at all if you dive deeper into the numbers …best analysis I’ve seen of this is Age of Oversupply by Dan Alpert. A condensed version of his arguments is here:
3) On USG debt…Galbraith IMHO, has the most succinct arguments on this subject:
4) And of course the failure of QE and bad calls of the inflationistas:
5) Global capital and trade imbalances that existed before the crisis still persist…in a fiat currency world it’s up for debate whether or not this actually matters:
The following quote applies to all “Great” “Schools of Economics”:
[The Chicago School of Economics is] a great center of contemporary scholasticism. The economists working there and produced by it are as important to the stagnation of useful thought as the Schoolmen of the University of Paris were at the height of the Middle Ages… Like that of the Paris scholastics, their mastery of highly complex rhetorical details obscures a great void at the centre of their argument… A large number of America’s economic problems could be solved by shutting down the Chicago School of Economics… The purpose of closure would be simply to disentangle a tendentious ideology from its unassailable position within contemporary power structures. The same sort of liberating shock treatment was applied to European civilization in 1723 when the Society of Jesus (Jesuits) was disbanded. The effect was to set free the ideas of the Enlightenment.”
–John Ralston Saul, 1994
The legalization of fraud will prove to be the undoing of the country, unless one of a number of other disasters destroys it first. No system can tolerate such an overwhelming corruption of its basic operating rules.
“The United States government is the worst criminal enterprise in the history of the world. Not a single member of the government has told the truth about anything in the entire 21st century.”
I’d rather stay in the peanut gallery thank you very much! But since you asked… here’s my two cents:
There should be virtual currencies, that is currencies backed in some fashion by dollars – bitcoin/berkshares – ones backed by local municipalities as well as others by the state governments. There have been a range of lessons learned that can be applied to prevent abuse as well as instruments that can more surgically inject or remove liquidity into markets based off of need or depreciate/appreciate the currency in circulation through temporary adjustments to a floating exchange rate.
– New businesses aimed at fulfilling a community need will soon be able to apply for loans on condition that 25% of the money is issued in BerkShares.
-BerkShares need to be backed by a local commodity, in our case, food produced in the Berkshire region.
As far as I can see, you are just pi**ing into the wind with that lot. Perhaps Ken Kesey said it best at the Vietnam demonstrations in the 60s/70s: When asked to address the ‘combatants’ he replied; “Why? The best thing to do is to just turn your back and walk away”. And he did. He knew it took two to tango.
So the topic: “Outlooks on the Domestic Economy ” ; what outlook is there to be had when Europe and Japan are flat on their ass, the emerging markets and the BRICS minus China are not splendidly shining last I heard, and as of China….well…let’s just say their central planners have a giant clusterfuck of a mess that will keep them busy for a while…
Since you’re going to be the black sheep anyway, mind as well go meta.
Yes, the working and middle class have been thoroughly screwed by the rent seeking economy; but there’s much more than that going on. The growth by asset price inflation model doesn’t explain all by itself the kind of precariousness you find at the bottom half of the median income wage level. The outsourcing, the technological change, and most of all, the resource&energy issues –stacked one over the other– are now inescapable.
Here’s a link with some data:
I think you would also be wise to remember the words spoken at INET’s last opening press conference: (I filtered and indicated the highlights at the time in the comment section. I think the first segment from 12:35 to 16:10 is still relevant…)
One word……..Toast !
I liked Kunstler’s comment: “Two simple words explain why more robust signs of an economic collapse have hung fire since the tremors of 2008: inertia and fraud.”
In fact the debt is a problem. Ilargi (who is pretty well respected around these parts if I’m not mistaken) has been pounding that table for a long time, and I think in the end he will be proven right MMT arguments notwithstanding. But with ZIRP+fraud+inertia the current situation can continue for a long time.
I like MMT for political reasons because I do not think the people should suffer through austerity for the benefit of the 0.001% for as long as this gets drawn out before TSHTF. But as an economic monetary theory is it voodoo that takes confidence in the currency as fixed and permanent, which I fear is a very very dangerous assumption.
The Next Tire To Drop On The US Economy
Hope I am not being too cynical, but that panel looks like a set-up for the carnival midway game of Dunk The Liberal. Or The Mad Hatter’s Econ Debate. Impossible to argue the merits of any proposition put forth by this crowd of ideologues and propagandists. That being said, it is a good bet that they will not succeed in dunking you. Let the games begin…
Ever more people + limited resources + no significant investment in infrastructure = steadily increasing poverty = ultimate social instability.
Any more is distraction.
OUTLOOKS ON THE ECONOMY
The outlook is as good as it gets without stimulus spending. And that “aint gonna happin” for as long as the T-Party controls the HofR. Period.
Which means that Demand will gradually increase at a snail’s pace and unemployment will be coming down … at the same snail’s pace.
Some people, for lack of other evidence, keep harping on New Technology as the key to job-creation – and they often mean the Internet. We must recognize that we are in a full transition of economic paradigms – from the Industrial to the Information Age. And the effect is going to be terrible, particularly on long-term unemployment, because the US has far too many un- and semi-skilled unemployed. They are fit for working at some retail outlet that requires very little skill and even less intelligence.
Seeing beyond a year is dangerous in any outlook, any sector, any time. But, if there is any salvation to our Unemployment Problem it is long-term. Which means we need to get more of our young-adults out of High School and into Tertiary Education. (Like in Europe, where nobody, but nobody graduates with a Tertiary Diploma and a debt-albatross of $25K hanging around their necks.)
Moreover, we have a burgeoning prison population (the highest per capita in the world). One must ask why are people so desperate that they become criminals? Eighty-percent of our incarcerated population has no High School diploma. Who would hire them? So, what do they do?
I submit, the solution is long-term and it is educational in nature. Let’s forget the hype from Silicon Valley over Power Start-ups. That is all pie in the sky and makes Internet-Millionaires – but it does not bring real employment possibilities generally for the American working-class..
Only Stimulus Spending that boosts general Demand can achieve that objective.
Our long-term unemployment rate is edging upwards towards 5%, from its historical ¾% range. And the labor-force employment rate has a long, long way to go to get back where it was pre-Great Recession. See this info-graphic here. (Note also that that graph takes into account those joining the labor-force, which adds to the job-creation challenge.)
Also of interest, from the BLS, this info-graphic entitled, “Earnings and Unemployment Rates by Educational Attainment” here
I hope you can keep what you say clear and understandable enough to reach the “greater audience” outside the panel and hall. If any of your fellow panelists or question-askers are pro-Overclass public enemies I hope you can treat and expose them as such without them sensing that is what you are doing. I hope you can find a smiley way to pour napalm on them and get them to light their own match.
The “greater audience” might contain many with simple minds such as my own to whom MMT still sounds like “Magical Monetary Thinking”. Learned disquisitions upon “MMT” might sound to the wider audience like so much brilliant intellectuating. I hope you still think it is not really necessary to “go there”. Be like Putin and if they are like Obama find a way to destroy their personal image and reputation in public before God AND Youtube. The Enemy is not to be reasoned with. It is to be crushed and destroyed. Speaking as a rank layman, of course.
Good luck on the battlefield.
in summary, the response to all the listed agenda items is that bondholders (capital) always has first position, both economic and political. Until that changes, they will continue to rule the world to their own advantage. A secondary factor is their belief that they are uniquely qualified and therefore justified (even ordained) to rule. This moral precept begs for some genuine ‘entitlement reform’
I watched segment. Just wanted to thank you for your truthful and passionate contribution. The moderator clearly did not want to expend extra time with you. Look at it as a positive when framed in the setting they provided. In spite of the limit imposed, your comments brought me here to the website. You are now in my bookmarks and, I suspect, in a few others who watched the program. Kudos.
Nice job , Yves , and thank you.
You were the only person on the panel truly representing the 99%.