US Federal deficits
Mark Thoma posted yesterday Is Galbraith Right that Deficits are Never a Problem? on Paul Krugman’s NYT piece I Would Do Anything For Stimulus, But I Won’t Do That (Wonkish) on MMT and soveriegn debt (using Angry Bear’s posting of Jamie Galbraith’s testimony to Congress as a link), and has included Jamie Galbraith’s response. It is worth reading.
Ed Harrison at Creditwritedowns weighed in here.
Calculated Risk has posted a 5 series on Sovereign Debt both historical and comparative internationally.
More to come from other economists.
No one jumping in! Where are the deficit naysayers when you need them?
dan, for whatever its worth, im with krugman on this one..
Krugman is guilty of the same thing that many of the MMT critics are guilty of, he overstates Galbraiths contention. Galbraith or Mosler or Mitchell,Auerback, Wray etc etc NEVER say deficits dont matter they simply say the nominal level of the deficit nor the ratio of it to GDP can be analyzed by itself. There is no absolute number which the deficit can reach and become dangerous. It MUST be evaluated in relation to the real economic variables of unemployment, resource utilization, productive capacity and others. No matter what the deficit level is, if unemployment is 20% it can (and SHOULD) be higher. How the deficit goes up (by tax cuts or spending increases or both) is a matter of debate but the deficit must rise in order to reverse unemployment of 20%.
That is a fundamentally different argument and I’m surprised Krugman has not appreciated the difference.
This is the 3rd site (that I know of) to tackle this article. I’ve been at Econ View and Credit Writedowns discussing this all day.
I liken this to trying to determine how well off someone is by simply knowing what their salary is.
If I tell you someone makes 50,000 dollars will you know anything about their standard of living? If they live in a place where rent is 2500/mo vs a place where its 800/mo the standard will change.
Aside from dumping the Nazis and Racists the tea party figured it out and corporate welfare and the war machine need to be cut. Galbraith is trying to run the tea Party off their newly realized cutting corporate welfare themes. Field Marshal Palin is selling the war machine to the Tea Partiers.
Ripping off Grandpa to make believe you are serious about deficits will not assuage the defict hawks. That will do nothing for productivity, and the hawks know it.
Deficit reduction needs to be done on the discretionary outlay side, if you do not want to touch military outlays or the other major part, the deficit hawks will recognize you are going Pete Petersen/Dick Cheney/Karl Rove, ignoring the socialized industries whose welfare jobs and PAC guaranteed profits will mean all you are doing is impoverishing your poor going toward third world status with nukes and the deficit hawks will reap revenge.
The US needs to desocialize about 13% of the economy, the part using mononsony over payments to buy their futre pillaging the US productive sector.
If you gotta cut corporate welfare to fix the debt then deficits are just fine!!