Clinton, Sanders, and the “Progressive Give-Up” Formula (with Clinton’s Warning of a “Grand Bargain” to Come)

By Lambert Strether of Corrente.

This will be a short post, with the point essentially made in the headline. Let’s start by quoting Clinton from the last Democratic debate, the one that nobody saw because the DNC’s Debbie Wasserman Schultz scheduled it on the weekend before Christmas, when everybody was either partying, watching football, or both.[1] Not that, in this case, The Wasserman Schultz’s machinations matter all that much, as we shall see. Back to Clinton in debate; here’s how she frames her response to the Sanders single payer heatlh care proposal:

CLINTON: Your proposal is to go and send the health care system to the state. …. And my analysis is, that you are going to get more taxes out of middle class families. I’m the only person saying, no middle class tax raises. That’s off the table.

MUIR: Secretary Clinton, let me ask you about your tax plan because from the crushing cost of college education, the next question most families have; is will my taxes go up under the next president? You have said it’s your goal not to raise taxes on families making under $200,000 a year a goal. But can you say that’s a promise as you stand here tonight?

CLINTON: That is a pledge that I’m making. I made it when I ran in 2008.

MUIR: A promise?

CLINTON: Yes, and it was the same one that President Obama made. Because I don’t think we should be imposing new big programs that are going to raise middle class families’ taxes.

We just heard that most families haven’t had a wage increase since 2001. Since, you know, the end of the last Clinton administration when incomes did go up for everybody. And we’ve got to get back to where people can save money again, where they can invest in their families, and I don’t think a middle-class tax should be part of anybody’s plan right now.

Say, is there an echo in here? Maybe George H. W. Bush saying “Read my lips: No new taxes?” (Never mind that the OECD has recently found that “The paper also finds no evidence that redistributive policies, such as taxes and social benefits, harm economic growth, provided these policies are well designed, targeted and implemented,” and that “the United States, the cumulative growth rate would have been six to nine percentage points higher had income disparities not widened.”) It’s no wonder that some commentators have called out Clinton for using Republican talking points, not just in debate but on the trail generally[2]:

Instead of laying low and playing it cool, Clinton is running as though the race were very close, tax-baiting Sanders with Republican talking points… It’s a mystifying and risky way to run a campaign.

Not all that mystifying. The Democratic establishment hates the left. Which is fine; the trick is for the left to get the establishment to fear them. That has yet to be done.

Let’s run the tape. On policy, the Clinton campaign has been consistently tax-baiting Sanders over his support for single-payer healthcare and other moderate social-democratic programs. This not only plays into Republican narratives that taxes are always a simple decrease in income (rather than payment for valuable and desperately needed programs), but also boxes Clinton herself in on taxes. A promise of no tax increases means she cannot support Kirsten Gillibrand’s paid leave proposal.

Clinton’s stance also basically rules out badly needed increases in Social Security. At an Iowa townhall this month, Clinton spoke about the solvency of Social Security, and while she initially disavowed benefit cuts, she eventually ended up endorsing the possibility of raising the retirement age. Speaking about how it’s harder for some workers to keep working to age 70, she said: “If we could figure out how to do it, I would be open to hearing about it, I’ve just never heard anybody tell me how we could do it.”

In other words, Clinton is setting us up for a Grand Bargain fight again. Do we really want to go through that? But returning to the debate transcript, here is Sanders’ riposte to Clinton’s Republicans-style “tax baiting”:

SANDERS Now, when Secretary Clinton says, ‘I’m not going raise taxes on the middle class,’ let me tell you what she is saying. She is disagreeing [how, exactly?] with FDR on Social Security, LBJ on Medicare and with the vast majority of progressive Democrats in the House and the Senate, who today are fighting to end the disgrace of the United States being the only major country on Earth that doesn’t provide paid family and medical leave.

What the legislation is is $1.61 a week. Now, you can say that’s a tax on the middle class. It will provide three months paid family and medical leave for the working families of this country. I think, Secretary Clinton, $1.61 a week is a pretty good invest [sic].

Tactically, this is weak; picking a fight on “family leave” lets Clinton drag the argument onto her ground, as she responds: “I have been fighting for paid family leave for a very long time.”[3] And strategically, it’s weak, for two reasons. FIrst, Sanders assumes (“it will provide”) that Federal taxes pay for Federal spending; they don’t. Second, Sanders’ muddled invocation of FDR assumes (“pretty good invest”) the same “Can we afford it?” frame that Clinton uses. Unfortunately, this is the “Progressive Give-Up formula,” described by Joe Firestone as follows:

[A]ccepting the deficit hawk’s framing of the problem is to accept, for the indefinite future, the idea that every progressive Government spending initiative must be evaluated from the viewpoint of whether “we can afford it” or not, or whether it de-stabilizes the debt-to-GDP ratio, regardless of the benefit it will deliver to Americans.

Government fiscal policy and the ideas of fiscal sustainability and fiscal responsibility need to be viewed from the broad viewpoint of the employment of Government spending to fulfill America’s public purposes, and not from the narrow one of how Government fiscal activity will impact deficits, debts, and debt-to-GDP ratios. The reason for this is that for a nation like the United States with a fiat non-convertible currency, a floating exchange rate, and no debt denominated in any foreign currency, there is no risk of insolvency, however high the deficit, debt, or debt-to-GDP ratio may have grown in the past. Whatever the levels of these statistics are, the constitutional authority of the Government to spend on public purposes remains unimpaired and undiminished.

A concrete example of the “Progressive Give-Up” Formula in action was the 2009-2010 health care policy debacle, where progressives focused with laser-like precision on the CBO scoring for ObamaCare, proudly proclaiming that their bill would be “revenue neutral” (that is, cheerfully adopting George H.W. Bush’s talking point of “no new taxes”). This prevented any consideration of how health care policy would impact the country as a whole. So, even though single payer would have saved the country at least $400 billion a year (not to mention many lives), those savings didn’t show up in the Federal budget, and so single payer could not be shown to be revenue neutral. And so the “Progressive Give-Up Formula” produced a demonstrably worse — in fact, demonstrably lethal — policy outcome. As will any initiative undertaken by a President Sanders, if the Formula continues to be a part of Washington conventional wisdom.

It may well be that the Democratic Party retains a deep, tribal collective trauma from Reagan’s defeat of Mondale, back when the neo-liberal dispensation was tightening its death grip on the American body politic. Here the words that came back to haunt Mondale, from his acceptance speech at the Democratic National Convention in 1984:

Whoever is inaugurated in January, the American people will have to pay Mr. Reagan’s bills. The budget will be squeezed. Taxes will go up. And anyone who says they won’t is not telling the truth to the American people.

I mean business. By the end of my first term, I will reduce the Reagan budget deficit by two-thirds.

Let’s tell the truth. It must be done, it must be done. Mr. Reagan will raise taxes, and so will I. He won’t tell you. I just did.

It’s all there, isn’t it? Federal taxes fund Federal spending (they don’t). Fiscal policy should be driven by arbitrary ration (it shouldn’t). Here’s the lesson drawn from Mondale’s speech, according to Washington conventional wisdom, as restated by NPR:

Mondale was rewarded for his honesty with a landslide defeat in November, in which he carried only Minnesota and the District of Columbia. “Reagan was promising them ‘morning in America,’ and I was promising a root canal,” was his candid assessment of the election.

Actually, no. Mondale was not promising a “root canal.” He was promising to bleed and purge the patient, medieval remedies that serve no real medical purpose.

Clinton is trying to put Sanders in the same pine box that Reagan put Mondale in; that’s her formula for victory, and may explain why she’s become so confident; after, the formula’s worked for thirty years. Sanders should give consideration to the idea of not helping Clinton do that. He might start by ignoring small ball like family leave, and pointing out that FDR won World War II (not to mention an empire, but that’s another story) by ballooning debt to unheard-of levels. FDR — a very popular and successful Democrat, as I recall — used good judgment in doing so, and served the public purpose.

FDR, unlike Mondale, and Clinton, did not adopt the “Progressive Give Up” formula.


[1] Great work, Debs. Kick the left as hard as you can! It’s the only way to advance in today’s Democrat Party!

[2] Not to mention picking out the drapes for the Oval Office by shifting right in the primary, and not even waiting for the general to throw progressives under the bus.

[3] I would have thought that this is a terrible confession of failure. Only in the Bizarro World of the Democratic nomenklatura is “fighting for” considered a virtue in and of itself. As opposed to “having won.”

[4] Working on the assumption that the debt is even needed, of course.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. washunate

    It’s interesting how Clinton is following Obama with the not so veiled appeals to Reagan. If Democrats do nominate her, it will hopefully mean actual leftists abandon the party for good.

    But while I do have some concerns about Sanders, it doesn’t bother me at all when he uses language amounting to ‘can we afford it’. Firestone has gone way too far on his semantic crusade on that front. It doesn’t mean, can the US print dollars in a deficit hawk sense? Of course the US can print dollars. It means, is it worth it? The MMT/SFB irony on healthcare in the US context is that a properly constructed single payer system will reduce GDP, not increase it. Healthcare inflation is the problem, not deflation. The private sector spends too much money on healthcare, not too little.

    And more generally, the ‘is it worth it’ question is one we ought to be asking about a whole range of tax and spending policies.

    1. likbez

      Neocon is always a neoliberal. So for her like for Obama Reagan is a role model. As simple as that.

      === quote ===
      The policy agenda is totally dominated by the consensus of the political and economic elites that there is no alternative to neoliberal policies supporting globalization under U.S. military domination. The neoliberal hegemony over public policy warrants careful scrutiny, for it is central to American capitalism, and to the dilemmas confronting the left inside the United States and beyond.

      …The Reagan neoliberal program of small government, tax cuts, deregulation, free trade, and monetarist financial policies was more than just consolidated. In signing the Welfare Reform Bill of 1996 and the subsequent 1997 budget compromise, Clinton broke the back of the New Deal.

      …Reagan propounded that “the most important cause of our economic problems has been the government itself.” The cure prescribed combined tax cuts to increase market incentives and cuts in overall government spending (with the crucial exemption of the military). The Budget and Reconciliation Act of 1981 began a long series of program cuts, and expanded means testing of entitlements, while introducing across-the-board tax cuts that favored the redistribution of income to the rich. The key measure, whose legacy continues to this day in a process of competitive taxation pressures between jurisdictions, was the Recovery Tax Act of 1981. It cut personal income tax brackets, particularly in the highest brackets, and accelerated capital depreciation, substantively “shifting the burden away from capital income.” Meeropol details other measures of the neoliberal counter-revolution of Reagan’s first term: tax bracket indexation, deregulation of monopolistic industries, reversal of equal employment initiatives, reduction of welfare benefits, and cuts to food stamps and other welfare supports.

      …Clintonism made its peace with neoliberalism. When congressional wrangling blocked tax increases, the weight of deficit reduction had to fall on cuts to program spending.

      …The central policy disputes in Washington occur totally on the terrain of neoliberalism: the pace and degree of budgetary and tax cutting and debt reduction.

      1. washunate

        small government, tax cuts, deregulation, free trade

        That’s the rhetoric. That is not the actual policy implementation, though. The Reagan-Obama era of the past three plus decades has made government much bigger and trade much more restricted. And rather than balancing budgets via spending cuts, tax cuts were “paid for” by printing USD. That’s right, neoliberals are not deficit hawks. They’re MMTers.

        It is hard to believe I know, but we used to be able to get a job without an I-9 form and E-verify online database. And greet an arriving family member at the gate at the airport. And the creepily named Department of Homeland Security didn’t always exist (it does allow us to ponder fascinating questions like wondering whether Democratic politicians are more jealous of the Nazi Fatherland or the East German Ministry of State Security). Heck, at the height of the Cold War in the mid 1980s, the US defense budget was ‘only’ $300 billion. Oh, and IP law used to be for the purpose of encouraging the production of creative and inventive works rather than limiting them. And somehow we accidentally developed the largest prison system on the planet. Oops.

        On and on, “small government” is the anti-thesis of what contemporary neoliberals advocate.

        1. Left in Wisconsin

          But that is part of the whole bait-and-switch. Keep fighting for something that, despite control of the govt apparatus for decades, is never quite attainable – due to the socialists that really control things in DC don’t you know.

          1. FrenchToastPlease

            It’s called “fighting until you lose.” And often, to look good to his,/her constituents, a politician will vote against something (like going to war), when he/she knows it will pass. Generally the outcomes of Congressional votes on bills are pretty well known before the actual vote.

    2. Steven

      You make it so easy to comment! I could just say “Thumbs up!” but I do have a problem with

      Healthcare inflation is the problem, not deflation. The private sector spends too much money on healthcare, not too little.

      It isn’t “Healthcare inflation” or the private sector spending “too much money on health care” that is the problem. The problem is the public / government not getting what it pays for. The problem is the obscene profits of the pharmaceutical and private medical insurance industries, the compensation of their top executive personnel. Health care costs what it costs. The nation’s last real Democrat, FDR, would have called it a ‘basic human right’ if he was participating in the debate – a right transcending that of financial parasites to pile up more money by evading paying their fair share of the cost of maintaining the society from which they derived their wealth.

      1. washunate

        Absolutely, I wouldn’t disagree we are not getting what we pay for. But there’s an additional element, too, where we pay so much that it exceeds the actual cost of universal care. We spend far more per capita than Germany, France, the U.K., or Canada. I have no quibble with using a different word to describe that phenomenon than inflation, but whatever word employed, it’s important to note that healthcare does not cost what it costs. That is a unique creation of our system.

        1. Crazy Horse

          I agree, there is a problem when one uses the word “health care system” to describe how health care is delivered in the US. The proper term is “Medical Extortion Racket.”

          Obamacare is simply an extension of the racket. Rather than providing health care for people who were formerly unable to afford any care, It was designed as a way for the insurance companies to extract money from victims that they were formerly unable to reach. So now low income Obamacare subscribers are reportedly spending 10% of their disposable income to support the bureaucracy that administers it and receive high deductible insurance that will still bankrupt them if any serious illness occurs.

          And for all this we get a health care system that the World Health Organization ranks far below any other wealthy industrialized country and behind many third world countries. In fact Cuba, where incomes are measured in pennies, ranks the same as the home of free enterprise and Exceptionalism.

          1. Pespi

            I do wonder what a 100% private pay to play system would look like. I’ve googled around a bit and I can’t find an answer.

    3. JEHR

      “The private sector spends too much money on healthcare, not too little.” Isn’t it true that the private sector is making piles of profit from healthcare by selling insurance to people and by controlling the aspects of healthcare (e.g., items covered by insurance) that may cause the private sector to lose some of that profit? When single payer is instituted, that healthcare should ideally depend on the public sector for financing, not the private sector. That idea gives everyone a chance to participate in healthcare and in preventing disease.

      Am I missing something here?

      1. washunate

        Firestone uses SFB (distinguishing between public and private sectors, or more colloquially, the USFG and the rest of the domestic economy) in advocating GDP growth driven by deficit spending.

        A few of us critique the focus on growth (groaf). Healthcare is a particularly good example of where net payments to private sector actors would actually decrease with ‘better’ public policy. Instead of growth, you would actually get economic contraction (as measured by GDP). Of course it’s not actually contraction; instead, it’s a reflection of the limitations of GDP.

    4. Joe Firestone

      But while I do have some concerns about Sanders, it doesn’t bother me at all when he uses language amounting to ‘can we afford it’. Firestone has gone way too far on his semantic crusade on that front. It doesn’t mean, can the US print dollars in a deficit hawk sense? Of course the US can print dollars. It means, is it worth it?

      I didn’t interpret Sanders as asking “can we afford it”; as a nation, but instead as addressing the question of whether, assuming that Medicare for All spending would be matched by new tax revenues, would most people be financially better or financially worse off if it were passed. His answer to this question is yes, the vast majority of middle class people would gain thousands of dollars annually from the trade-off when one took account of all the benefits they would benefit. By answering this I believe he avoided the question of whether the Government has a solvency problem.

      As for whether he agrees that the Government can always spend/create what it needs to meet its obligations, I believe he does, because if he did not he would not have so many members of his economic dream team who do believe that. On the other hand, assuming he believes the Government (Congress + Executive + Federal Reserve) can create reserves at will, he clearly isn’t ready to say that and to argue the case for that against Hillary in a debate. I also think he will never say that in this campaign as along as he can make the easier case that the legislation he advocates will produce greater financial benefits than costs for most people.

      The MMT/SFB irony on healthcare in the US context is that a properly constructed single payer system will reduce GDP, not increase it. Healthcare inflation is the problem, not deflation. The private sector spends too much money on healthcare, not too little.

      I don’t think this is correct. A well-known econometric study sponsored by the NNU in 2008 IIRC, found that HR 676 would create a net of 2.4 million new jobs in the economy. Since these would be higher fiscal multiplier jobs than current jobs in the insurance end of the health care industry, I think we are looking at GDP expansion if we replace the ACA with MFA. In addition, the above assumes that the extra health care spending from the Federal Government is matched by tax revenues. However, if the Government deficit spends the extra $800 Billion it might spend on MFA compared to what it spends now on health care, then we are looking at even more GDP expansion that the NNU study predicts.

      And more generally, the ‘is it worth it’ question is one we ought to be asking about a whole range of tax and spending policies.

      I agree, but I also think that the “is it worth it” question must be answered through an assessment of both the financial and non-financial benefits and costs of each policy. For example, estimates of the number of people still not covered by health insurance in the US range up to 37 million, at roughly 1,000 unnecessary deaths per million, that puts the annual savings of lives realized from passing MFA at a likely 37,000 annually. How about the divorces that would not occur, the bankruptcies that would not, the insecurities that would be gone, the freedom to change jobs or start businesses once health care is a right no longer dependent on ability to pay. What’s Hillary got against these benefits? Oh, if we stick with Obamacare and sacrifice MFA you may not have to bear the burden of tax increases that you may not have to pay anyway if Sanders makes “the burden” fall on the rich or decides that the extra $800 Billion should be in deficit spending.

      1. washunate

        I don’t mean to get too far from Lambert’s original point on Sanders and Clinton, but I appreciate the response and so am happy to offer some additional thoughts unless you want to reign us in here Lambert.

        On government solvency, isn’t the simplest explanation that people don’t care? No one cares about accounting, even us nerds interested in political economy. Everyone knows the government can print dollars. So why would we expect a politician to address an issue that isn’t an issue? Cash flow (in nominal terms at current levels of spending and taxation) is not a problem. Sanders doesn’t need to make it one because it isn’t one.

        On healthcare and GDP, I am ecstatic you are coming around to my view. I want to make sure I understand what you are saying. You are saying spending less money can be good, correct? (We can disagree about whether jobs are actually good, but from your perspective, that’s a good outcome to create 2.4 million net new jobs.)

        Because that goes against everything you’ve been posting about deficit spending in aggregate. You’re agreeing now that how the money is spent must be taken into account? Simply running a 10% deficit is not sufficient; the money must be spent in ‘good’ ways (however exactly good is defined).

        In addition, the above assumes that the extra health care spending from the Federal Government is matched by tax revenues. However, if the Government deficit spends the extra $800 Billion it might spend on MFA compared to what it spends now on health care, then we are looking at even more GDP expansion that the NNU study predicts.

        This part I don’t follow. Properly constructed universal healthcare doesn’t increase spending. If it has any net budgetary impact, it decreases the deficit. It’s difficult to quantify the precise budgetary impact of the totality of healthcare policy on the USFG due to the huge complexity of the system and the inherent need for error bars, but it is easily over $1 trillion and perhaps approaching $2 trillion depending upon exactly how you count things like IP law and lax anti-trust enforcement of hospital chains and tax-exempt status of “nonprofit” healthcare organizations and so forth. That’s plenty of money to provide universal coverage with no net increase in deficit spending. If anything, net deficit spending would shrink (for example, high income wage earners currently receive health insurance premium payments from their employers in a form of compensation that is exempt from taxation. If that compensation shifts to wages, then the USFG coffers receive both the payroll taxes – OASI, DI, and HI trust funds – as well as the applicable income taxes).

        Let’s put some specific math on it. The cost of healthcare in Canada was roughly $4,429 last year in USD. Let’s round that to $4,500 to be conservative. All levels of government in Canada paid for roughly 70% of that total. So that’s about $3,150. If the USFG paid all of that (in other words, no state or local healthcare spending at all) that’s about $1.01 trillion. The cost of healthcare in Germany was roughly $5,002, so let’s call that $5,000 even. German government pays about 76%, so that’s about $3,800, which is about $1.22 trillion. France is $4,124, so let’s call that $4,200 and government pays about 77%. That is about $3,234 per capita for a US cost of about $1.035 trillion. Switzerland was the highest OECD nation total cost at $6,466. Let’s call that $6,500. But their government pays only about 62%. So those numbers come out to $4,030 and $1.30 trillion.

        So in even the most extreme case – the complete elimination of state and local spending on healthcare – the budgetary impact upon the USFG of universal care is neutral to net positive. The notion of running an extra $800 billion of net deficit spending is nonsensical.

        More to the broader point, this talk of GDP expansion is what is wrong with our analysis of political economy. GDP is a valuable metric in a limited role, but it is not a shorthand way of describing the economy. It only measures a subset of human activity, it biases the dialogue in favor of quantity over quality, it depends upon additional layers of human error and interpretation to compare real (rather than nominal) GDP over time, and it sets up the construct that growth is good rather than amoral.

        1. Joe Firestone

          I won’t have time to respond to day in the detail I’d like. Last night at about 1 AM or so, my computer case came apart, and since I’ve been writing volume II of my Real Fiscal Responsibility book series using Kindle, I’m off to get a new system and then set it up. I suspect that will take the rest of today.

          Anyway, I can say a few things. On “On government solvency, isn’t the simplest explanation that people don’t care?” This may be the simplest, but remember simplicity isn’t everything, validity is more important. I think there’s too much evidence showing that people carry very much about “teh debt,” to just leave the solvency issue alone, if one’s opponent constantly attacks you on that debt/solvency issue.

          At some point you may have to explain that it doesn’t matter because insolvency is impossible as both Bernanke and Greespan have said. Of course, you can leave it alone as long as you can in the middle of a campaign, if it’s not hurting you.

          On “You are saying spending less money can be good, correct?” I am saying that you ought to deficit spend as necessary to make sure that demand shortfalls due to savings and the current account deficit are erased, and you know that you have done that when you have full employment (meaning that those who want part or full-time jobs can find them at a living wage with good fringes) and not before. Saying that does not imply that more ought to be spent on health care as a percent of GDP, because I think such spending accounts for too high a percentage of our total economic activity. We need to be spending on a lot of other things two because health care is only one component of public purpose. In saying this I am not saying that we should in any way short change actual health care services and outcomes. I am saying that the example of Canada as well as other nation shows us that we can spend about 1/3 less as a percent of GDP and get much better outcomes, including major increases in average life expectancy

          On spending on the right things, as opposed to just spending, I’ve been saying that for a long time. You just haven’t been reading much of my stuff. I’ve also given attention to what the right things in a very explicit way. You’ll see that in all my fiscal policy and trade books, and in my Job Guarantee series at Correntewire, (See Parts 14 -16).

          “This part I don’t follow. Properly constructed universal healthcare doesn’t increase spending. If it has any net budgetary impact, it decreases the deficit.”

          HR 676 will increase annual Federal Spending on Health Care, probably by $700 to $900 Billion (off the top of my head). However, it will also decrease total spending on health care from roughly $3 Trillion to $2 Trillion (with huge savings going to people and State and local governments, provided we administer our system with the same efficiency as Canada. Current Medicare spending suggests we can accomplish that.) Since State and private spending on health care will be reduced by $1.8 Trillion annually, that will be spent on other areas of the economy, which according to the NNU study will have higher fiscal multipliers than their health care spending has now so GDP will increase. In addition, if the extra, federal spending of roughly $800 B annually is deficit spending (not matched by tax revenues) then that will add to the increase in the fiscal multiplier, also increasing GDP.

          Finally, I agree with your criticism of GDP. Everyone I know within MMT is well aware of the shortcomings in that measure. However, if one couples spending to increase GDP with spending to achieve public purpose, a multi-dimensional construct with some 33 dimensions in my latest specification, then I think one can get a lot closer to the idea of the economy creating greater value for most of the people it is supposed to serve.

          I hope that helps for the time being!

          1. washunate

            Our online persona is absolutely something we do in our spare time, so by all means don’t interrupt real life for our little chats at Yves’ place. However, are you familiar with a card game the kiddos play called BS? Because I’m calling it here. When you do have time, it would be interesting to have a post from you that answers the critique specifically rather than just restating full employment as panacea. Or don’t answer it; if you find this conversation worthless, why bother responding at all?

            There are at least four different specific places here where you dodge the issue:


            “teh debt”

            is a broadly substantive concern about wasteful spending and excessive government power. It is not primarily a concern about cash flow solvency. No matter how many times you say the debt ceiling is a problem, that doesn’t change the fact that those kinds of antics are kabuki theater, not actual cash flow problems.


            On spending on the right things, as opposed to just spending, I’ve been saying that for a long time.

            Hogwash. From calling high value platinum coins game changers to talking about deficit spending as a percentage of GDP in the context of Sector Financial Balances, you have described things in aggregate, both here at NC and back at the ‘ole FDL. This is the fundamental problem with focusing on increasing payments from the public sector to the private sector. The problem is not the aggregate size of the flow. The problem is the distribution within the private sector.


            Finally, I agree with your criticism of GDP.

            Yet you use deficit spending as a percentage of GDP in your posts. Interesting.

            4) You skip over my core observation: you focus on public opinion as if it’s the primary issue. My contention is that the issue is not that the public supports bad policy. Instead, it’s a collective action problem. The problem is not that our leadership class is implementing the public desire. Instead, the problem is that management doesn’t represent the budgetary priorities of a governable majority of Americans.

            So here’s an opportunity for you: Offer a specific federal budget you would propose as president, outlining both spending and revenue categories.

      2. Oregoncharles

        ” Since these would be higher fiscal multiplier jobs than current jobs in the insurance end of the health care industry, I think we are looking at GDP expansion if we replace the ACA with MFA.”

        What you’ve actually shown there is a TRANSFER of payments from profits to wages – ie, to people. Most of us would agree that’s a good thing, but it wouldn’t necessarily raise the GDP.

      3. washunate

        Just leaving this nugget here for future reference after comments close. As of today, when I do a google search for “nnu study medicare for all” I get this as one of the top links at PNHP:‘medicare-for-all’-would-cover-everyone-save-billions-in-first-year-new-study

        That particular 2013 study doesn’t say some variant of ‘Medicare for All’ would require $800 billion more in spending. Rather, it says single payer would be cheaper. I’m not holding that up as the specific model to implement (Friedman still sounds a little tame compared to my more ‘radical’ preferences, and I’m not sure why he muddies the water with a transactions tax on stocks and bonds); rather, I’m just pointing out that the main thrust of universal care in the US is eliminating wasteful spending rather than needing to tack on additional spending on top of what we already do.

        It seems what you are doing is proposing some combination of a regressive tax cut and/or continued subsidies to highly paid medical staff. $800 billion worth of tax cuts and subsidies are legitimate policy areas to debate, but I think it’s misleading to refer to that as healthcare spending. The undermining of progressive income taxation is one of the major ways public policy entrenches inequality (not just in predatory medicine but across our systems of law, finance, national security, agribusiness, and so forth) in a way that tries to hide the full cost of the wealth transfer from the public to connected insiders.

  2. sleepy

    I live in Iowa. The caucuses are 5 weeks from tonight. I have little enthusiasm for attending and voting for Sanders, a significant shift from my take last summer. And it’s not just this one article that has me feeling this way. It probably started, at least, with Sanders tanking on Hillary’s email scandal.

    I’ll probably go and vote anyway with the time comes. But it makes me feel thoroughly propagandized as a tool of DNC political rhetoric–“see how inclusive we are of the ‘left’. the dem voters rejected single payer and social security increases when they voted in the primaries”!

    It’s been said here many times, the old dem bait and switch–come for the bernie, stay for the hillary.

      1. nycTerrierist

        Same here. Will write in Sanders rather than voting for lesser evil.

        National write-in campaign for Sanders, anyone?

        1. tegnost

          I may do that, Donna Frye won in San Diego on write ins, but too many people misspelled her name, bernies is much easier, but it may not be necessary.

          1. FrenchToastPlease

            I know all about Donna Frye since I supported her. It was a shame that she wasn’t elected, because she won the vote. I am voting Dr. Jill Stein rather than write in anyone since she is a legitimate and excellent candidate for President and will be on the ballot. Donna didn’t win because of her miscounted write-ins. She really won, of course, because many of the ballots that were thrown out were obviously for her, but were not counted either because her name was slightly misspelled or even because people did not fill in the little circle by her name. People say that it’s throwing your vote away to vote third party, but I refuse to vote strategically, if you will. If Dr. Stein doesn’t win, she doesn’t win, but at least I will have voted for an anti-war candidate that is a true progressive and who isn’t afraid to try to make a real change, and will have voted honestly for the person I think is the best. If people would vote for her even after Bernie endorses Hillary, Dr. Stein has a real chance of getting the popular vote. Her supporters are increasing rapidly. There are not that many registered Democrat voters that will actually vote. We nearly voted in a third-party judge candidate in our state in the last election. It was very close and surprised everyone. Why write-in Bernie when you can vote for someone for whom your vote will really count? In the very least, it will support the third+ parties concept.

    1. Joe Firestone

      My book about the progressive give-up formula doesn’t focus much on Bernie. It’s mainly about progressives all over Washington who call themselves Democrats. Bernie is probably the least likely to give-up without at least an honorable fight. Also, I don’t include include the “progressives” who label themselves that way, but who are clearly within the Clinton wing of the Party, rather than the Warren/Sanders wing. I view the Clinton wing “progressives” such as John Podesta, Neera Tanden, Andy Stern, Larry Summers etc, as entirely “faux” progressives, and I am writing about them in the second volume of my book series on the Peterson Network and Inequality.

      1. kimsarah

        You mean Democrats all over Washington who call themselves progressives. Those Democrats are not progressive. They tarnish the word.

  3. Eureka Springs

    Sanders and Clinton have spent the last 25 to 30 years being half-a-crats.

    Sanders could also say something like: A single white male (much of that Ronnie demographic) earning 40k now pays x in taxes for medicare/caid., also pays x in insurance premiums, deductibles, co-pays, drugs, time etc… for a grand total of x.

    Now with single payer he will pay x in taxes. period. all stop.

    Compare the totals and contrast the simplicity.

      1. Eureka Springs

        Yes. Adding… Only one of those things is health care. And the Bern is not saying any of this. And I can’t understand why any small to mid size employer wouldn’t be demanding S.P. rather than dealing with the costs and complexities of ACA.

        It’s difficult not to chalk this up to stupidity rather than, at best, insincerity of intent. Even if his insincerity is based on understanding exactly who/what the D party is and will do to him/S.P. whether he wins or not… he’s helping them.

        It’s also difficult for me to believe he’s sincere about health care when he’s seems even more sincere about continuation of murderous and costly MIC empire on a global scale. Want to be war criminals do not give a rats arse about health care.

          1. Ulysses

            The comment, with a link to the transcript of the debate, shows that claiming “the Bern is not saying any of this” is factually incorrect.

        1. efschumacher

          And I can’t understand why any small to mid size employer wouldn’t be demanding S.P. rather than dealing with the costs and complexities of ACA.

          I think the success of the US Chamber of Commerce is in acting as an umbrella organization for all businesses, while promoting multinationals’ causes and neutering small business. I can only assume that small/medium businesses (mis-)leadership is so foozled by the KoolAid they can’t see the shaft the US C of C is perpetually delivering to them.

          A real Occupy/TeaParty revolution would set up a Small/Medium Business Chamber of Main Street Commerce for local business aligned with the people. Anything that can be locally sourced can be locally controlled. Single payer Health Care, local employment guarantees, and secure pensions are cost externalizers that will very much ease the costs and risks of new business start-up.

    1. Torsten

      +1. However, to harp on the benefits of single-payer is to expose the travesty that is ObamaCare. If I were Bernie, I would also tread carefully around all the Dem voters who have drunk the ObamaCare kool-aid. I think he needs to say, as I believe he has, “ObamaCare is good in that it has secured health insurance for people with pre-existing conditions.”

      But then Sanders has to go on to say, “Nevertheless, ObamaCare is still too expensive for the average family. Single-payer is the future. The insurance companies will try to fight it, but at the very least we should start by moving people age 50 and over onto Medicare. The insurance companies are too greedy to strenuously object: they want to collect ObamaCare from young, healthy workers while they refuse to pay the bills for older workers.”

      Make Hillary defend the insurance companies.

      1. marym

        Much of Medicare is already in the hands of the insurance companies – Medicare Advantage, Medicare supplement insurance, the prescription drug program, and moving dual eligibles from Medicare to Medicaid managed care.

        1. Joe Firestone

          Under Medicare for All. All of that would go away. HR 676 provides for enhanced Medicare for All, everything except cosmetic procedures, and maybe unproven food supplements, but including pharmaceuticals, mental health care, dental coverage, chiropractic, with no-co-pays and no deductibles. Everybody in; Nobody out! Except, of course, insurance companies!

      2. jonf

        Sounds like a good approach. No matter what you say though- eliminate it or change it – it is an attack at Obamacare and some will not like it- see insurance companies and their lobbyists. But any attack has to make Hillary defend it and point out that medicare for all is less expensive, for all of us and the nation. It is going to be tough to undo Obamacare.

    2. Ulysses

      Sanders did point out in the debate that characterizing single-payer as nothing but a tax increase was unfair– because it ignored the huge savings from not paying through the nose to the for-profit insurance/medical industry.

      “I can tell you that adding up the fact you’re not paying any private insurance, businesses are not paying any private insurance. The average middle-class family will be saving thousands of dollars a year.”

      (Bernie Sanders, I-VT)

      I don’t think the primary problem with the Sanders candidacy is that he himself is playing small-ball and doesn’t offer anything better than Mondale redux for U.S. voters. The real problem is that 1) those that directly benefit from the status quo, and 2) those who have monetized discontent with the status quo on the left, by setting up phony “progressive” institutions funded by wealthy people with guilty consciences, want him to fail.

      1. Vatch

        I like your point about people who want Sanders to fail. They aren’t just the ones with a financial stake in the status quo. There are also people with an emotional stake in the status quo, whose self image depends on their ability to feel as though they are standing up to those in power. If Sanders were to win the Democratic nomination or the general election, it would disrupt their whole raison d’être.

        I’m not saying that any of the commenters here at NC are in this category, but I strongly suspect that this is true of some of the leftist bloggers who habitually criticize Sanders.

        1. DJG

          Ulysses and Vatch: I agree with your point: The status quo is comforting to much of the declining middle class. The status quo has too many benefits for the so-called “progressives” in the upper-middle class to vote for real change. So the fear of change permeates much of the electorate, and the upper percentiles don’t want change. So Sanders must fail.

          I also think that we are in a period of cultural stagnation (Matthew Barney, Jeff Koons, still around, as symptoms). So the economics of wanting Sanders to fail are firmly tied to a culture that is mired in a kind of failure.

        2. jrs

          Well if we got Sanders and what else? A whole bunch of progressive congresspeople as well? Because Sanders by himself won’t be able to do that much. And then if they made significant changes, I guess it would prove the worldview that the current system is too corrupt to be changed by voting in different people wrong.

          Only I think the worldview that things are too corrupt to be changed that way is probably CORRECT (too much money in politics for one reason, but there are more really). I actually have no problem at all with anyone going to the polls, this is just how I see things.

          1. kimsarah

            Actually, I believe Yves said this previously that electing Sanders would be big step forward in shifting the political environment toward the progressive end, which would soon result in better candidates for Congress.

          2. willf

            Well if we got Sanders and what else? A whole bunch of progressive congresspeople as well? Because Sanders by himself won’t be able to do that much.

            True, but we’d have that problem no matter who is president. If you want to take back congress* you’re going to need a candidate that fires up the base and brings long coattails. Right now there’s only one candidate on the Democratic side doing that, and it’s not Clinton.

            Also, if we don’t take back the house and senate, and the next president is faced with gridlock and an oppositional congress, I’d still rather have Sanders as President. Sanders is far less likely to begin adopting GOP policies, either to please campaign sponsors, or to “take them off the table” for the next election in a triangulation style capitulation. Also, Sanders is less likely to pass GOP policies under the false metric of “getting things done”.

            *a tall order with Steve Israel’s sock puppet protege Ben Ray Lujan doing all the recruiting for the DCCC.

      2. JaaaaayCeeeee

        It’s not easy to expose the dishonesty in Hillary Clinton’s claim that people can’t afford the increase in taxes for single payer health care, certainly not in a tweet or bumper sticker short statement. Even if you can, TV news doesn’t want to report it anyways.

        I’ve tried pointing out that Hillary Clinton is making no sense, to claim that people can’t afford the increase in taxes that they would MORE than make up, in reduced costs.

        1. JaaaaayCeeeee

          Thank you Marym!

          To compare to Clinton’s claim that people can’t afford the additional taxes for single payer, how about these 139 characters:

          BernieCare: All covered, no premium, deductible, copay, and out-of-network charges. 95% of families pay less. A better deal than Clinton’s.

          1. Joe Firestone

            This is especially for Hillary:

            Thanks to marym and JaaaaayCeeeee

            #BernieCare #EnhancedMedicareforAll #Everybodyin NO premiums deductibles copays #100%paynomore #ifheusesdeficitspending making #3milljobs

            Twitter says 137 characters

      3. different clue

        Perhaps we need to coin a word like “privatax” for premiums to insurance companies and so forth.
        If CanadaCare lowers the privatax by more than it raises the govertax, the net result is “less tax”.

    3. tegnost

      ACA is a massive tax increase on your 25k-50k slice of the population, and the cadillac tax is gone with the wind, Those I know in the 200k bracket are literally rolling in dough. They’ve refinanced to 15 year mortgages and benefit mightily from cheap gas for the suv.
      That’s where I thought up my argument (uber very popular among them) of ubering around patents…for some reason they become speechless….

    4. jonf

      That sounds like an excellent approach. If he (we) leave it as more taxes, we lose. But if it can be said we will save money for insurance premiums and deductibles to more than pay for an increase in taxes we can win it. Sanders did mention the cost of health care here and the outcomes versus the rest of the world but he has to go further and tell us what single payer saves us. Plus taxes on the top 1% can be increased to help reduce inequality.

      The Joe Firestone approach is a loser IMO as most people have no idea what he is talking about. The argument has to be made real for the average person. How much will I save if I pay more in taxes for single payer and how much will I save in taxes if we end the wars and defense waste. Taxes, after all, is an expense for all of us like insurance.

      The same argument can be used for education, but it may be more difficult.

      1. jonf

        I would really like to hear Sanders come back at Hillary with Joe’s argument if she says anything about debt being unsustainable. In the end we will always be fighting this battle unless we fully address it.

      2. Joe Firestone

        Sorry, but that’s not my approach, or at least not for this campaign at this juncture. I’m happy with Bernie’s approach as long as he doesn’t lapse back into “pay for” and “we have a huge debt problem” vocabulary. Outside of that I won’t complain about waiting until he thinks it’s necessary to address solvency/debt/deficit myths. Meanwhile, I’m happy to be the one to spread the good news about the Myths of Campaign 2016.

    5. Banana Breakfast

      And, provided the public system used to manage health care provision is not insanely overbuilt and inefficient, that second x will necessarily be less than the first total simply because it will cut out the rental extraction of profit and excessive upper management. That’s within the dishonest framework of whether total expenditure matters per se, and apart from any (probable) increase in efficiency from a single negotiator for drug and service prices, the elimination of free rider uninsured or underinsured persons who simply pay “nothing” for their treatement (apart from their livelihoods and lives, as often as not), and the increased productivity of a healthier population.

      The single biggest problem with a single payer system in the US right now is the sudden unemployment of the enormous number of persons in the health insurance industry. The time lag between the institution of single payer and the market-driven increase in employment from greater spending out of the now fatter wallet of the general public would be too great. Single payer HAS to be accompanied by an extensive jobs program to bridge that gap – no obstacle in theory, since there’s more than enough productive work going undone as it stands, but an important consideration in terms of legislative timing.

      1. Paul P

        HR 676, the single payer bill, when I read it a number of years ago included extended unemployment and retraining for those displaced by single payer.

      2. Joe Firestone

        Many now employed in the insurance industry would find jobs in the expanded, enhanced Medicare program. In any event, Bernie is committed to greatly increased spending to create jobs, not to mention a likely emphasis on a Federal Job Guarantee at a living wage, which would be recommended by many of his advisers.

  4. allan

    Scanning the issue pages of DCCC approved candidates in House races and DSCC backed candidates for the Senate shows how far down the ticket the “budgetary responsibility” rhetoric has permeated. Who do they think is going to vote for GOP-lite? Are the Dems counting on Third Way’s GOTV operation? 2016 is going to be a disaster for the Dems, regardless of what happens in the presidential race.

    1. sleepy

      I doubt if the demrepub hierarchy much cares. It’s always a win-win for them, no matter who loses or wins.

    2. Uahsenaa

      This worries me as well. I know most NC readers are already aware of this, but when it comes to things like the Obamacare kerfuffle, there were many bad actors, not just the President. Max Baucus comes to mind as an especial evildoer, but there were others as well. I’m not sure how much a President Sanders could do legislatively (although much could be accomplished simply through executive order) with down ticket choices more at home on K Street than in their own constituencies.

      That said, I’m optimistic for the caucuses this go around. I may even sign up to speak this time.

      1. Steven D.

        Who made the decision to entrust healthcare to the tender ministrations of Max Baucus? Why, that would be Barack Obama. Who better to fuck it up but good?

        It’s not the progressive give up formula. Obama, Clinton and the Democrats are not progressives.

        1. Brooklin Bridge

          Perhaps, but Sanders is a progressive and Lambert is lamenting that Sanders falls into the same trap, Second, Sanders’ muddled invocation of FDR assumes (“pretty good invest”) the same “Can we afford it?” frame that Clinton uses. Unfortunately, this is the “Progressive Give-Up formula,”[…] Also, one doesn’t have to actually be progressive to use the progressive give up formula. Au contraire, for people who specialize in wearing false colors, like Hillary, the give up formula is one of the most useful stock in trade fauxtruthturds. Yes we can’t!

      2. cwaltz

        Sanders is a bit of a pragmatist. He knows if he wins he’d need to work with the D party. I suspect that’s why he’s playing nice instead of pursuing a scorched earth policy.

        1. Brooklin Bridge

          The standard pattern is to go into the primaries playing to one’s base and then tone things down a little for the general. Perhaps Bernie is thinking about having to work with the Dems if he looses as well as if he wins, but at a certain point of playing nice, people start to wonder what’s the point? It’s difficult to ask the public to be sophisticated enough about inside politics to realize he isn’t simply showing what a gentleman he can be. The question legitimately arises, Is this what he would do, or have to do, if elected?, and he is not clearly making the case that it isn’t.

      3. Banana Breakfast

        In the long game, the bully pulpit would win out. If Sanders were elected on progressive promises, and then a Democratic controlled legislature blocked its passage, he has vastly more public exposure as President and the opportunity to throw them under the bus en masse. It seems unlikely that Sanders himself has the will for that kind of realpolitik though.

        1. Joe Firestone

          Who, in the Congress, has shown more “will” to work for progressive legislation over the past 20 years than Bernie Sanders? I’d place a bigger bet on Bernie for having the “will” than on any other legislator in Congress! There are others outside who have a stronger will undoubtedly; but Bernie is the best bet at this point, isn’t he?

  5. Brooklin Bridge

    Oddly, this was the one debate I did watch so far and I think the analysis is spot on. Bernie was not compelling and that was not due to lack of opportunity. Lambert zoomed in on the exact exchange where (I think) the most damage was done – where Sanders invoked FDR. I thought, “here it comes”, but no; a fizzle.

    The other technique that Hillary used several times was to group all three of the speakers together on a topic as if thier differences were small, they were all in a common cause against the Republicans with the implicit assumption that Hillary was the one confident enough, magnanimous enough and with enough leadership to rise above the Frey of the debate and join everyone together. Clinton did this at least three or four times during the debate and Sanders had zero response for it; it just went zing over his head though it did look a couple of times as if he had heard the whisshing sound. Personally, I find this technique manipulating and odious, probably because I find Hillary odious, but it may be appealing to others; a sort of “adult in the room” stance.

    1. TedWa

      I found it peculiar also that whenever she went into the “we 3 are all together” spiel, that the cameras seemed, on cue, to draw back and show them all in the picture – with HRC in the center of course.

      1. kimsarah

        She’s tactically acting like the presumptive winner in waiting. Trump is using that tactic too. I think it’s a bit risky.

    2. Crazy Horse

      I always find it depressing to watch otherwise intelligent people argue about “positions” that candidates use in their election campaigns and discuss the political parties in Amerika as if they actually stood for some principle rather than just being organizations for the accumulation of positions of higher servitude.

      Come on People! There is only one political party in the USA— the Property Party. The Repugnant and Demothug teams hold circuses for your entertainment and to provide a break from football. What they say has absolutely no relationship to what they will do while in office. * As is only right, because the people who cast their votes don’t own the politicians — that investment was made by your Overlords long before the election circus began.

      * People who label Obama a weak and indecisive president are the greatest fools of all. Rather he has been a master politician, managing to overcome the Hildabeast and get elected to the office of the President twice while failing to act on a single campaign promise, meanwhile delivering the biggest transfer of wealth in history for his Bankster masters.

      1. sharonsj

        Isn’t this why the Democratic base is now for Bernie? I will do everything I can to see Bernie elected, but if he fails and it’s business as usual, the U.S. is doomed. The middle and lower classes already pay for everything and send their kids to die in pointless wars. Unless there is an actual revolution, nothing will change.

    3. Joe Firestone

      I agree on all points. Bernie should have been waiting for that Clinton attack and been ready to lower the boom. Instead he seemed tentative and ill-confident about his ability to explain in a sound bite why the “regular” citizen would make money on his deal as well as safeguard her/his future.

  6. SRW

    One of the most frustrating thing for me is hearing how under a single payer would raise taxes.
    Not so New York State were over 30% of the budget is spent on some form health care. That’s not counting what municipalities pay in health care. Now I’m pretty sure that all the states in the union have similar budget percentage that is being spent on health care.
    A single payer health care system would reduce the tax burden that citizens of the various states and counties pay.
    Now under my way of thinking under a single payer system we would eliminate the Medicaid part of FICA saving working tax payers and employers money.
    Having a single payer system could very much be a wash or even save the tax payer money.

    1. neo-realist

      Sanders needs to make this kind of an intellectual argument in the debates insofar as how it would save working taxpayers money or consist of a minimal increase when he is confronted w/ Hillary’s framing that it puts a greater tax burden on the middle class.

    2. Joe Firestone

      Bernie needs to have a list he can quickly step through to show the taxes and other payments that would be saved by Medicare for All, and what they total for a typical family.

  7. inode_buddha

    Perhaps the Establishment *already* fears the Left, and the hatred is a sign of this? Either way, I agree: Sanders needs to corner Clinton, hard and repeatedly for the remainder of the race.

      1. inode_buddha

        This is what I hope for, but I’m not willing to rely on it until the day after the votes are counted. I’m not going to stand easy till then.

  8. Aaron

    Seems to me that, as long as the dollar is the reserve currency, there will always be plenty of demand for dollar debt, so the US can ‘afford’ to go deeper into it than other nations.

    What I don’t understand is why does a ‘debt’ have to be generated? Why can’t the Fed just create money, give it to the government to spend and not require it to be paid back? Can anyone help me here?


    1. Vatch

      If the Fed or the government simply created money instead of borrowing it, there wouldn’t be any profits for the giant banks and wealthy individuals who loan the money to the government. Oligarchs like to increase their wealth. This policy is bad for the country, but good for the people who own most of the country.

    2. paulmeli

      “Why can’t the Fed just create money, give it to the government to spend and not require it to be paid back?”

      The Fed doesn’t create money, it only does the accounting, after the fact, when Congress spends. Congress appropriates spending, then the Fed does the accounting (adds numbers to it’s balance sheet and moves them around…ending with a credit to Treasury…all from thin air. Same goes for private debt. The accounting doesn’t happen unless someone takes out a loan.

      Where did the idea come from that it has to be paid back? It will never have to be paid back, trying to do so would destroy (in the literal sense) the economy…the World economy.

      ‘Debt’ is a consequence of double-entry accounting rules, period. One side of every transaction is by definition a debit (debt or liability). The other side is a credit (deposit or asset). Government debt is non-government income.

      Whether we call it ‘debt’ or not it is still debt by definition, so the idea of ‘debt-free’ money is a non-sequitur. In order to make it happen we would have to ignore accounting, but that would be like ignoring gravity. Just because you pretend it isn’t there doesn’t make it so.

      This does not necessarily make it a loan or a burden, depending on the circumstances. US government debt is not a burden, because there are no mathematical constraints on how much ‘debt’ the government can hold…there is no limit to how many debits the government can add to it’s balance sheet (other than political).

        1. paulmeli

          No losses will be erased, or at least they shouldn’t be under the law. At maturity the banks would have to take their losses as far as the Fed’s mandate is concerned. Those securities are redeemed by the issuer at maturity, not the holder. The Fed does not have a mandate to underwrite private losses.

          Holding the worthless MBS’s temporarily was a can-kicking strategy in hopes the economy would rebound, they would regain their value, leaving those banks solvent again, but the strategy hasn’t worked so in the end the banks will have to take whatever losses remain, which will be substantial.

          That doesn’t mean the Fed won’t stray outside of it’s mandate once again and do some more can-kicking with the excuse that the financial system will collapse if they don’t. It just isn’t the Fed’s job to be maintaining liquidity for gambling operations.

          Just an example of how all of this boils down to accounting, the accounting can always be made to work. The problem is political.

          1. Aaron

            Thanks Paul. I think I need to sit down and read a book explaining all this stuff in full.

            Here in the UK the government talks about little else beyond deficit reduction and the need to ‘pay down the debt’. I guess, even when you realise they are liars, the constant mantra of deficit reduction can invade ones thinking.

            1. Ed S.


              Start with a paper by the Bank of England called “Money creation in the modern
              economy”. It’s an excellent overview

              Also google “randall wray modern money theory” – Prof. Wray has an extensive series of posts (also available as a book) that will get you started.

              But to paulmeli’s point — it’s ALL political.

              1. Aaron

                Ed S,

                Thanks for the tips. I see there are plenty of Randall Wray vids on youtube. I will educate myself forthwith.
                The main things I don’t understand are why the emphasis on deficit reduction and paying down the debt when it isn’t actually required? and why do governments issue debt as interest bearing bonds, thus burdening themselves with interest payments?

                Bear with me.

                I will get to the bottom of this.

            2. paulmeli

              ‘pay down the debt’

              Whenever anyone says something like this, they are either twisting the truth or are misinformed.

              It may have some meaning when used in terms of a country like Greece, which is more akin to a private borrower than a government. Even then there is no real constraint on it’s borrowing other than some technocratic rules that will cut off it’s liquidity if it doesn’t knuckle under to their demands.

              So for countries like those in the Eurozone it’s like checking into the Hotel California.

              Either way, if you understand the basics of accounting, which is as simple as it gets, there is little reason for doubt wrt monetary economics. We fall for this stuff through lack of confidence in our own thinking, and economists hide their rhetoric in a fog of complex mathematics to confuse the reader, when the only skills needed are basic arithmetic and algebra and the ability to apply it to real-world systems (which by the way I don’t think most economists can do, i.e. systems analysis).

              There’s a reason they assigned us word problems in school, and every curriculum should include the fundamentals of systems theory, which is not particularly complicated.

              For my money, the best source available for understanding how all this works is to read Billy Blog, the blog of Professor Bill Mitchell. He writes in terms any layman can understand.

            3. MyLessThanPrimeBeef

              Aaron, maybe in another world, where the people can get monetary help directly, without waiting for the government to spend and trickle down, it will be OK to talk about starving the military beast and deficit reduction.

              With money creation solely for the people to spend, it’s possible.

  9. david lamy

    Did not the Supreme Court rule that The Affordable Care Act (Obamacare) was a tax so to ensure it was in compliance with the Constitution of the United States?
    Does this mean that President Hillary Clinton will deny any premium increases during her administration to comport with her “no new taxes” pledge?
    To rephrase a current bumper sticker: “I’m ready for the Democratic Party collapse!”.

    1. voxhumana


      the public mandate was justified as a “tax” by the SCOTUS ruling in its favor.

      Obama and the Democrats spent a lot of time saying it was NOT a tax previous to its passage (with only Democrat votes) but when the issue looked to possibly upend their flagrant give-away to the insurers they quickly changed track and argued, in front of SCOTUS, that it was indeed a tax

  10. bdy

    Is Stephanie Kelton still advising Bernie?

    Kinda tiptoeing around Sovereign Insolvency like there’s actually a monster in the closet. Does this help him?

  11. Bill Frank

    Relax and take a deep breath. It’s all just grand theater, illusion for mass consumption. Who you vote for will not change anything. The time spent analyzing the political show is mostly time wasted. Actually, haggling over what the “candidates” are saying or implying is exactly what TPTB want the masses to do. We are merely playing a game for which the rules have been written and enforced to guarantee an outcome favorable to the elites. Playing the game perpetuates the perception that we have a free democratic choice.

  12. Jim

    “Government fiscal policy and the ideas of fiscal accountability and fiscal responsibility need to be viewed from the broad perspective of the employment of Government spending to fulfill American public purposes…”

    But what if the Government, in its present political form, is incapable of employing Government spending to fulfill public purposes?

    And what if individuals like Adair Turner in “Between Debt and the Devil” are now largely advocating, if circumstances dictate, the MMT perspective, of money creation by government fiat, in an overall political situation where both private and public sector policy-makers are largely unaccountable to the average citizen?

    Does money creation by government fiat then became a technique for strengthening the unaccountable status quo?

    1. Joe Firestone

      Still depends on whether enough of us vote for the right people to represent us. I know it’s tough, but bottom line this is still true. If we can bring 60% of all voters along, then we can beat all the manipulation, gerrymandering, and voter suppression we have. So, it is up to us to get that, throw the bloodsuckers out, and change the rules to make them truly fair. Then we can change things.

      1. Jim

        “Still depends on whether enough of us vote for the right people to represent us. I know its tough, but bottom line this is still true.”

        But what if your bedrock assumption, immediately above, is no longer true?

        What if the creation of defense policy, national security policy, domestic economic policy and foreign policy is now largely created by self-governing networked elites(operating in both the public and private sectors) with little accountability, transparency or constraint through traditional constitutional checks and balances.

        1. Joe Firestone

          There is little accountability right now. But that’s because there hasn’t been a Congressional election that replaces enough of the old officeholders with those dedicated to large-scale change in the system. I think a Party that really wants out of the current regime needs to win at least 60% of the vote nationally to get enough Representatives and Senators to legislate the changes needed, given all the electoral gimmicks protecting the champions of the status quo.

          1. Skippy

            Problem is the electorate has been marginalized and electoral shenanigans gotten so bad that numbers are increasing irrelevant, not that one should host the write flag neither…

          2. Lambert Strether Post author

            The “Liberty Caucus” is doing pretty well on the, er, wrong-model minority front, and they’re nowhere near 60%. If the Progressive Caucus started acting as they do, we’d all be better off. Ulimately.

  13. paulmeli

    “Does money creation by government fiat then became a technique for strengthening the unaccountable status quo?”

    This is always in the realm of possibilities regardless of existing rules or laws. Laws are self-constraining and can always be broken, especially by the powerful, and especially when the citizens are uninformed and/or unaware of what is happening.

    This is not a legitimate argument against spending for public purpose. Starving the parasite in this case also starves the host.

  14. TedWa

    One thing I do know for about 99% certain is that Bernie is no neocon or neo-liberal and I’ll continue to work for and contribute to his campaign. He does need to get tougher on HRC since there’s sooo many things he can knock her down a peg or 5 on. Continuing to play nice-nice with this shark isn’t going to get him the nomination.

  15. sd

    Observation…I think Sanders concentration is on courting independent or lapsed Democratic/liberal voters and not the voters who make up Clintons base. Clinton’s appeal is to conservatives – her base will never vote for Sanders.

  16. 3.14e-9

    Thank you for this thought-provoking article, Lambert. I agree that Bernie isn’t hitting debate points very well, and it’s making Clinton look stronger. For crying out loud, he’s the ranking member on the Senate Budget Committee. He knows very well where the money comes from and how it gets allocated.

    A few days ago I dug up his opening speech for the mark-up session of the 2016 budget. He talked about the importance of clarifying national priorities before deciding how the money should be spent. That seems like kind of a “duh” statement, but I’d wager that the general public doesn’t think of it in those terms.

    I also just found a long interview he did a few months back with Iowa Press. He was much better in that format. One of the interviewers pretty much accused him of inciting class warfare, and he had a great answer. (The interview is 25 minutes long; class warfare starts around 15:00).

    I wish he would use some of this material in his debates with Clinton.

  17. kimsarah

    Thank you for this column. The Democrats have long mastered the give-up formula (negotiating against one’s self before negotiating begins) and have been trying to drag progressives down with them.

    1. likbez

      Clinton democrats are actually “Third Way” neoliberals and as such a faction of Republican Party for all practical purposes.

      The key attribute of this faction is the systematic use of deception (see Leo Strauss’ Philosophy of Deception). Their main task is no so much to win the election as to neutralize and possibly coopt any significant left movement. So the disconnect between their election rhetoric and actual behavior when in office can’t be wider. Hillary can promise anything she things will help her to win and then betray all those promised without minor doubt.
      Classic example is Obama, the man without past who managed to win selling the color of his skin and posh but meaningless slogans like “change we can believe in”; and then betray his electorate on any significant matter during his office. There is such huge disconnect between campaign rhetoric and actual governance that it’s naïve to believe any Hillary statement other then the statement about her gender. She is just another Obama in skirt. A warmongering neocon under the mask of a Democrat.

      In reality any politician who voted for Iraq war should be disqualified from seeking any elected office.

      That does not mean that Bernie has any chance against her despite all the background support he receives. He is a one man show, a man without a party at the time when party functionaries often exert the decisive power or at least can influence the selection of the candidate from the Party, no matter what is the will of the people. They clearly do not want Bernie and would prefer almost any Republican to him.
      The key problem for them now is the same that faces Republican party establishment with Trump: most people who are ready to vote for Bernie will never vote for Hillary. They probably will not vote at all. And Bernie personal position will not change that. So much depends on how they plan to resolve this problem.

      My guess that they will try to play the fact that people themselves are still pretty confused about what they actually want and do not understand what is the real source of their impoverishment and economic difficulties or too preoccupied with just struggle to survive. Add to this the constant brainwashing of MSM and it is clear that a considerable part of middle class wants and will vote for the continuation of the status quo. In no way there is something like mass “Restore the New Deal” movement in the USA now. Only “Restore the power of financial oligarchy” party.

  18. jfleni

    Hillary and Debbie are already in the “lawyer-gobble” mode: SS will be converted to a charity at best; the grand bargain will be essential because the “producers” (the dimwit Dems buddies) don’t want it at all, they just want it all! If Hillary wins, kiss SS, jobs, and progress goodbye.

    1. hidflect

      Not to mention “getting tough” on Iran/Russia/South America/Everyone as soon as she plonks herself behind the War Desk.

  19. Plenue

    >Speaking about how it’s harder for some workers to keep working to age 70, she said: “If we could figure out how to do it, I would be open to hearing about it, I’ve just never heard anybody tell me how we could do it.”

    Do you suppose she has sufficient scruples and moral fiber left to even occasionally look in the mirror and go “Wow, I’m a horrible, lying human being, aren’t I?” Old people working to 70? *shrug* What can ya do? It’s not like money is an artificial human creation manufactured with a printing press and a keystroke. Wouldn’t that be something, if magic like that was real? Eeeeyup…sure would be something…

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