[Marxism] 2020 - Sanders Takes Top Spot In Dem Quinnipiac University Connecticut

John Reimann 1999wildcat at gmail.com
Tue Feb 11 16:40:40 MST 2020


Michael Roberts, author of the website thenextrecession.wordpress.com is
probably one of the most serious Marxist economists around. Here is his
critique of Modern Monetary Theory (MMT).
https://thenextrecession.wordpress.com/2019/01/28/modern-monetary-theory-part-1-chartalism-and-marx/
If MMT is the basis for Sanders' claim that his health care program (plus
paying for student debt and a host of other programs) can all be paid for,
then I don't find his claim credible. Since there evidently are no other
more concrete plans to pay for these programs, then I think a large dose of
skepticism is justified.

John Reimann

On Tue, Feb 11, 2020 at 2:15 PM MM <marxmail00 at gmail.com> wrote:

>
> On Feb 11, 2020, at 2:22 PM, MM <marxmail00 at gmail.com> wrote:
>
> No, it isn’t a defense of Keynesianism. Here’s a response on concerns over
> inflation (and there is an extensive body of writing on this):
>
>
> https://ftalphaville.ft.com/2019/03/01/1551434402000/An-MMT-response-on-what-causes-inflation/
>
>
> Apparently that may be paywalled for some people. Here is the text (the
> first three paragraphs are introductory commentary from FT):
>
> An MMT response on what causes inflation
>
> *This week in testimony to the Senate Banking Committee, Jay Powell,
> Chairman of the Federal Reserve, **offered a verdict*
> <https://www.cnbc.com/2019/02/26/fed-chief-says-economic-theory-of-unlimited-borrowing-supported-by-ocasio-cortez-is-just-wrong.html>*
> on modern monetary theory. "The idea that deficits don't matter for
> countries that can borrow in their own currency I think is just wrong," he
> said. It was a victory for the movement, of sorts: modern monetary theory
> is now unavoidable. It now must be addressed in a committee hearing of the
> US Senate. *
>
> *It's an idea being contested right now on finance and economics Twitter,
> which sounds like a silly thing to say but is not, because the people who
> read and write econ Twitter are the people who explain economics in
> newspaper articles and academic papers for the rest of the world. *
>
> *Which is how yesterday we got an emai from three MMTers: Scott Fullwiler,
> Professor of Economics at the University of Missouri, Kansas City; Rohan
> Grey, a Doctoral Fellow at Cornell Law School; and Nathan Tankus, Research
> Director of the Modern Money Network. They wanted a chance to respond to
> several recent articles, our **piece on how the US financed the second
> world war*
> <https://ftalphaville.ft.com/2019/02/13/1550057130000/How-the-US-actually-financed-the-second-world-war/>*
> among them. Here, in their own words:*
>
>
> For two decades we and our like-minded colleagues have been putting
> forward the idea that a monetarily sovereign country like the United States
> with debts denominated in its own currency and a floating exchange rate
> cannot “go broke”. We have been writing about this and all the myriad
> implications this has for macroeconomics under what has come to be known as
> Modern Monetary Theory.
>
> Excitingly, last month representative Alexandria Ocasio-Cortez brought
> attention to our views when she said that MMT should be “part of the
> conversation
> <https://www.businessinsider.com/alexandria-ocasio-cortez-ommt-modern-monetary-theory-how-pay-for-policies-2019-1>".
> This set the economics and finance media ablaze with renewed commentary. In
> a major step forward, the broad consensus of these pieces in a series of
> outlets has been to agree with my colleagues and I that the only limit on
> government spending is inflation. The acceptance of this crucial tenet of
> MMT is very welcome and new. It was not too many years ago that throughout
> the economics press it was commonplace to present MMT as a wild new theory
> and speak in worried uncertain terms about the possibility that bond
> markets would refuse to buy US treasury securities, causing a debt crisis.
> We are thrilled to move past this stage in the public macroeconomic debate.
>
> Unfortunately, while the press has been willing to agree with this major
> proposition, it has not been willing to follow its implications. Josh Barro writing
> in *New York Magazine*
> <http://nymag.com/intelligencer/2019/01/modern-monetary-theory-doesnt-make-single-payer-any-easier.html>
> particularly articulates what seems to be the emerging response to MMT in
> the press:
>
> ‘If the government prints and spends money when the economy is at or near
> full employment, MMT counsels (correctly) that this will lead to inflation,
> and prescribes deficit-reducing tax increases to reduce aggregate demand
> and thereby control inflation. See how we have ended up back where we
> started? Whether you take a Keynesian view or an MMT view, if the
> government spends more, it’s likely going to need to tax more, sooner or
> later. [...] Whatever the Federal Reserve’s demerits, the idea of depending
> on Congress to pass surplus-generating tax increases in order to keep the
> economy stable and prevent runaway inflation gives me hives.’
>
> Contrary to Barro’s assertions, we have not “ended up back where we
> started." MMT’s approach to budgeting and designing a macroeconomic policy
> framework for a Green New Deal with price stability is radically different
> from current Congressional practice and there are no other modern proposals
> like it.
>
> First, when we suggest that a budget constraint be replaced by an
> inflation constraint
> <http://neweconomicperspectives.org/2015/01/replacing-budget-constraint-inflation-constraint.html>,
> we are not suggesting that all inflation is caused by excess demand.
> Indeed, from our view, excess demand is rarely the cause of inflation.
> Whether it's businesses raising profit margins or passing on costs
> <https://www.sciencedirect.com/science/article/pii/B9780444532381000065>,
> or it’s Wall Street speculating on commodities
> <https://academic.oup.com/rfs/article/28/5/1285/1867225> or houses, there
> are a range of sources of inflation that aren’t caused by the general state
> of demand and aren’t best regulated by aggregate demand policies.
>
> Thus, if inflation is rising because large corporations have decided to
> use their pricing power to increase profit margins at the expense of the
> public, reducing demand may not be the most appropriate tool. The recent
> controversies over rising housing rents
> <http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.555.3043&rep=rep1&type=pdf>
> and drug prices demonstrate that we need alternative tools in place to
> manage the power of big business and ensure their pricing policies are
> consistent with public purpose. The experience of the last decade
> inadvertently reflects the potential strength of alternative
> inflation-fighting tools, as one of the reasons inflation has remained
> below target for the past ten years is legislated cuts to medicare and
> medicaid payments
> <https://www.frbsf.org/economic-research/publications/economic-letter/2017/november/contribution-to-low-pce-inflation-from-healthcare/>
> .
>
> Because of the pricing power of big companies, whichever administrative
> agency or agencies is responsible for managing aggregate demand should not
> be responsible for overall inflation on its own. It should either share
> joint responsibility for keeping inflation on target with other agencies
> responsible for regulating business pricing power
> <https://hdl.handle.net/2027/mdp.39015016798764?urlappend=%3Bseq=51> or
> new price indices should be constructed that exclude concentrated markets
> where prices are clearly acyclical
> <https://www.frbsf.org/economic-research/publications/economic-letter/2017/november/contribution-to-low-pce-inflation-from-healthcare/>
> .
>
> Second, we do not believe that any and all inflation that does result from
> excessive demand can and should be addressed by higher taxes. This is a
> distortion of our view, as years of publications can attest. When MMT says
> that a major role of taxes is to help offset demand rather than generate
> revenue, we are recognising that taxes are a critical part of a whole suite
> of potential demand offsets, which also includes things like tightening
> financial and credit regulations to reduce bank lending, market finance,
> speculation and fraud.
>
> Assessing the potential inflationary effect of new spending proposals also
> requires seriously assessing how underutilised our existing resources are.
> This requires detailed, expert analysis from a range of industry analysts;
> not just statistical regressions on aggregate economic data by
> macroeconomists.
>
> At the same time, we must also confront the fact that the fossil fuel,
> real estate, defense, and financial industries are too large, too dirty,
> and eat up too much of our national resources. They must be shrunk one way,
> or another. Thus, another way to offset excessive demand pressure is to
> tighten environmental and other forms of regulation, which would disemploy
> people and resources in those industries, and free them up to be redeployed
> in green production as part of the broader economic transformation of the
> Green New Deal. Our current political leaders tend to oppose such an
> approach on the grounds that demand is limited and jobs are a rare, scarce
> commodity, so each existing job must be preserved at all costs. MMT allows
> us to recognise that the government can commit to real full employment. We
> can instead focus on increasing the quality of jobs and ensuring our
> economy generates prosperity for everyone.
>
> In addition, we must recognise that the Green New Deal is about creating
> new resources over the medium term, which will in turn expand green output
> to further accelerate the decarbonisation process. This is not our current
> approach. Instead the Congressional Budget Office continually defines
> potential capacity down from what it actually is
> <http://jwmason.org/slackwire/the-big-question-for-macroeconomic-policy-is-this-really-full-employment/>,
> creating a vicious self-fullfiling cycle defined by low productivity and
> lost output. To address this failure, the Congressional Research Service
> (as well as other budget advisory organizations) will need to be enlarged
> to do the analysis necessary to find the right mix of inflation offsets
> that best move forward the task of decarbonizing our economy. There is no
> alternative if we are going to succeed at averting climate change.
>
> Regardless of which policy tool is used in a particular context, demand
> management in general needs to lean much more heavily on the appearance of
> bottlenecks in specific industries instead of simply tracking changes in a
> general price index. The immediate signs of bottlenecks are large and
> sustained rises in unfilled orders for specific goods and services.
> Preventing shortages is after all what demand management is first and
> foremost about and price indices are misleading policy targets when they
> include factors that are insensitive to demand and would be
> counterproductive to manage with demand. The more actively we regulate big
> business for public purpose, the tighter the full employment we can achieve
> and the more resources we can devote to the Green New Deal while preserving
> price stability.
>
> Third, when we *do *advocate using tax increases to address inflationary
> pressure, we are not suggesting that Congress attempt to raise taxes in
> real time *after* inflation has already emerged. Indeed, our approach is
> precisely intended to *avoid* a situation in which Congress merely spends
> without paying attention to inflation dynamics until it is too late. Thus,
> we argue varying tax rates and other inflation offsets should be included
> in the budgeting process *from the outset*. In our approach, an
> MMT-informed Congressional Budget Office would produce detailed reports of
> how specific spending or lending proposals would increase demand and which
> sectors and regions would be most affected, and would monitor inflationary
> pressures closely to determine the appropriate policy response based on
> specific conditions. This would be a radical improvement over the current
> CBO scoring process, which looks only at dollar values in aggregate, and
> treats all sources of revenue as equal. This crude approach can easily lead
> to mistaken conclusions, like that Elizabeth Warren’s wealth tax could
> adequately “pay for” large spending proposals, when in reality, such a tax
> would not be likely to reduce overall demand by very much in the areas that
> the new government spending would be directed towards (even if it was still
> desirable from an equity standpoint).
>
> Beyond an improved Congressional budgetary process, there are
> well-established approaches to policymaking that can assist us in managing
> inflationary risks. For example, we have long recommended strengthening
> automatic fiscal stabilisers. Indeed, our principal policy recommendation
> is a Job Guarantee (which is part of a Green New Deal) which automatically
> creates more jobs as people need them, but does not continue to spend
> greater and greater amounts once the economy reaches full employment. Other
> ways we can strengthen automatic stabilisers include savings policies
> <https://www.unz.com/print/Colliers-1949apr30-00082/> and no longer
> indexing tax brackets or indexing them to an inflation target instead and
> introducing more tax brackets so that as incomes rise faster than the
> inflation target a higher percentage of income is progressively taxed. With
> these tools there is much less need to rely on day-to-day discretionary
> decision making like is currently the case with the Federal Reserve’s
> management of interest rates.
>
> That said, we are not against one or more agencies being given additional
> tools to collectively manage demand on a discretionary basis. It is unclear
> where this myth came from but it doesn’t come from our extensive
> publication record- in academic journals or in the blogosphere. One of us
> long ago suggested in the Financial Times
> <https://ftalphaville.ft.com/2013/08/06/1593422/guest-post-dual-mandate-right-goals-wrong-agency/>
> the goal of delegating responsibility for day-to-day demand management to
> an independent agency was a good one but that the Federal Reserve was the
> wrong agency. As we said then:
>
> ‘Whereas Bernanke only hinted at the need for a fiscal partner, former Fed
> Chairman Marriner Eccles openly advocated the use of fiscal policy as the
> most effective way to fight both unemployment and excessive inflation. In
> the depths of the Great Depression, Eccles pushed for a payroll tax cut,
> calling it ‘the most important single step that can be taken’ to stimulate
> consumer buying power. Years later, just prior to the near tripling of US
> war expenditures, Eccles urged lawmakers to raise the payroll tax in order
> to stave off an inflationary episode. Indeed, as his Special Assistant made
> clear in the following letter, Eccles considered adjustments in fiscal
> policy (in this case an increase in the payroll tax) to be ‘the most
> effective anti-inflationary means of reducing purchasing power.’
>
> Commenters are not wrong that some of these proposals and tools will be
> controversial. What is ignored by this criticism is the fact that our
> current approach of managing inflation on the backs of a very indebted and
> underemployed public is also controversial. Indeed, the Federal Reserve has
> historically been a conservative institution biased against full
> employment. To ensure the Green New Deal creates and maintains true full
> employment, we will need a new macroeconomic framework that brings in many
> currently excluded institutions and stakeholders, and abandons our reliance
> on interest rate adjustments as a primary tool for stabilising demand.
>
> Modern monetary theory has a range of policy implications that bring us to
> an entirely different policy world, rather than back where we started. A
> Green New Deal must include some mixture of the policy instruments we’ve
> laid out if it successfully plans a new green full employment economy with
> price stability. Budgeting the traditional CBO way will focus attention on
> the wrong issues and fail to offset the inflationary potential of this
> necessary new spending. As we’ve said, there are a number of taxes --
> especially on the rich -- which offset much less GND spending than their
> dollar amounts would imply. This does not mean that we shouldn’t tax the
> rich -- they are too rich. It just means Congress needs to look elsewhere
> if they’re going to fully offset the inflationary potential of this
> spending. We can afford a Green New Deal and we can accomplish it as well.
> We just need the right policy tools to make sure it's successful.
>
>

-- 
*“In politics, abstract terms conceal treachery.” *from "The Black
Jacobins" by C. L. R. James
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