contra MMT Anopinion III
Noah Smith (and many others) is irritated by a puff piece about Stephanie Kelton and modern monetery theory MMT by Jeanna Smialak in the New York Times. I am not interested in Smialak’s article. I think that Noah sums up his critique here very well
“The article then demonstrates that it has little notion of what separates MMT from mainstream thinking: ‘M.M.T. theorists argue that society should feel capable of spending to achieve its goals to the extent that there are resources available to fulfill them. Deficit spending need not be constrained to recessions, even theoretically.'” In Smialak’s defence, Kelton et al have no ability to explain how MMT differs from mainstream thinking either. I agree entirely with Noah that MMT is not theory and is debating policy with non-economists — it is the combination of a policy recommendation and dismissal of everyone else.
The policy recommendation is, roughly, that the national debt should be higher, that deficit spending isn’t as bad as some say. One problem is that those “some” are assumed to include mainstream Keynesian Macroeconomists. Now there isn’t anything closer to established mainstream opinion than an American Economic Association Presidential Address. In 2019 OJ Blanchard presented data suggesting that much higher debt was sustainable and might be desirable even if it is assumed that there is always full employment and there is no useful role for public spending. Brad DeLong and Martin Hellwig (neither of whom is a fringe figure especially not Hellwig) (and I who am a fringe figure) argue that Blanchard understated his case.
There are extremely important and powerful people who argue that deficits are terrible and unsustainable. But they are not academic economists. The case against them is strengthened (a bit) if one notes this (only a bit because most people have little respect for academic economists [I am both an academic economist and one of those people]). One is named Joe Manchin, there are a lot of them in Germany and in Brussels. They matter, but a new macroeconomic theory is not needed by those who disagree with them.
I am now going to dump on MMT. First, I agree with Noah that it is a policy proposal not a theory at all. The proposal seems to be “deficits should be increased”. In particular, MMTers insist that MMT is not functional finance and they do not agree with Abba Lerner, who argued that deficits should be increased unless and until inflation is undesirably high. Now the proposal “deficits should be increased” does not imply an optimal policy. If no matter how high the debt is, it should be higher, then there is no best policy. To be rude, this reminds me of supply siders who argue that taxes should be cut, evidently to zero. To be ruder, I don’t see any substantive point of disagreement between Kelton and Laffer. I am sure Kelton approves of taxation, but I don’t see how she gets there. As policy analysis MMT seems to me to be tugging on the Overton window, advocacy not analysis.
On the other hand, such tugging is needed right now, especially here in Europe. There is a powerful anti deficit orthodoxy (the ordo liberal ordodoxy). But it is not related to economic theory of any sort and it has been thoroughly rejected by mainstream new Keynsians and somewhat heterodox paleo Keynsians. The case against is weakened (somewhat) by pretending that it is the orthodoxy of academic economists.
I guess I ask Kelton how she disagrees with Krugman — her effort to explain this was spectacularly unsuccessful.
over at Naked Capitalism:
New Report: Monetary Policy Without Interest Rate Hikes
Yves here. Nathan Tankus has announced the release of a new report (of which he is the lead author) by the Modern Money Network, Our Money, and Public Money Action, on how to manage demand in a fiat currency economy. Among many other things, it debunks the backwards views that has become nearly pervasive in economics, thanks to successful capture of mind-share by the Chicago School of Economics, and the heavy presence of monetarists at central banks. The biggie is that central banks should manage the economy, while fiscal spending is to promote pet projects like the military and (*gasp*) enough redistribution so as not to promote pitchfork sales.
Tankus points out that this document addresses broad policy issues, and not immediate inflation concerns. But it is clear that the Covid crisis and the economic response has vindicated MMT. This inflation is the result of supply chain bottlenecks and/or supply constraints, particularly in categories that consumers buy all the time: energy and food, as well as cars and many building products, thanks to Covid home buying and a drop in services spending (travel, restaurants, even lavish weddings) being redirected to home fixup. Admittedly, energy inflation winds up propagating through goods and services. But the Fed is delusional if it thinks it can do anything about that, short of shooting the US economy in the head, and even that might not create enough of a dent in global demand (people will still heat homes and drive cars).
Tankus also points out how orthodox economists are trying to make MMT conform with pet ideas about the dangers of debts and deficits. Recall that “American Keynesianism,” brought to you by Paul Samuelson, who codified it by writing the most widely used introductory economics textbook, treated Keynes as a special case of neoclassical economics. British economist John Hicks, who first formalized that view, later recanted his work but the damage was done.
Hopefully Larry Summers exploding on Twitter about the prospect of an MMT adherent joining the Fed’s board is the last gasp of misguided American Keynesianism. But bad ideas have a nasty way of sticking around well past their sell-by date.
NB: i don’t know how that “St” got in front of my initials on my comment blank auto-fill…posting this to hopefully correct it..
RJS
Your alter ego?
Yeah, debt payments as a % of GDP “vindicates” MMT. These people need to crawl back under a rock.
And Greece?
Is there spare capacity in the US or are there private actors constraining capacity to rent take? Have you looked at the supply chain? Free actors controlling supply and delivery. Second time it has happened this century in the US. Businesses have learned.
The matter of Social Security as it is, granting ownership to those putting their funds in it, gives it an independence beyond that of the government and economic policy. To bastardize it with government funding as some suggest only grants political influence.
We are prone to funding through political interests driven by coporate America.
Run
thank you for observation about Social Security and the importance of ownership [which I take to mean “we paid for it ourselves.”]
I am in the middle of Kelton’s book. to be honest I did not find much to object to at first. Only noted that she is more sane than the people who champion MMT on blogs.
But her chapter on Social Security scared me. She starts by saying “FDR made a mistake.” ….apparently by not anticipating the wonders of MMT. She then proposes the government just print the money SS needs. She completely ignores the fact that people do and can pay for it themselves.
not ready to go into the weeds about Kelton and MMT yet, but it is looking something like this:
She does not seem to understand that MMT still has the same problem it proposes to fix: all “printing the money” would be subject to the same political jockeying that we get in the Congress today over what to spend money on.
I suspect that despite her disclaimers “just print the money” would lead to catastrophic inflation and mis-spending, I agree with her that we need not fear deficits up to a point…but there is no evidence that Congress does fear deficits. The deficit hysteria that comes from Congress is only a way to beat back any spending that would actually help people. It never stops tax cuts or “defense” spending.
Some deficit spending can indeed “pay for itself”…just like tax cuts. Kelton is aware of coming up against the limits of what the economy can produce (at any given time) and the need to tax away money from people to prevent inflation.
The issue with MMT would be, as it always has been: what do we spend it on, and who do we tax to pay for it.
Coberly,
IF we just printed money, then that would probably quickly end in disaster as the trade balanced foreign exchange value of the USD would fall like a rock bringing the exorbitant privilege of the post-Bretton Woods USD to an end. But that is not what Uncle Sam’s central bank does. It does the same as private banks, but backwards. Banks hold notes against money that they have lent, kinda/sorta. What banks really do is slice up those notes into mortgage backed and asset-backed securities that are sold to securities investors. Uncle’s Treasury does the same thing backwards by selling securities to raise cash and then leveraging its credit rating to just keep rolling those debt securities over as they mature. This is only possible because financial institutions and our surplus trading partners keep buying as many of those securities as Uncle’s Treasury will sell. When demand from buyers exceeds the supply of Treasuries then the price rises, which is to say that Uncle’s interest rate for borrowing falls. This happens a lot when accumulated money needs a safe haven in uncertain times, but only as long as Treasuries are considered safe. A default on US Treasuries might have a profound effect on the assumption of safe assets and thereby price and interest rates. When demand from buyers sinks below the amount of Treasuries that Uncle is trying to sell then the price falls, which is to say that Uncle’s interest rate for borrowing increases. If one can imagine a competitor to Uncle’s dollar, then one can see how tedious the balance is that sustains the foreign exchange rate of our fiat and its related low borrowing cost for Uncle Sam. I would expect that the risk of competition from the Euro or Yuan could only eat away at the USD exchange rate slowly, which would be married to inflation rate on imports. OTOH, a Treasury default by failing to increase the debt limit would be instant dollar Apocalypse, the likes of which has not been seen since the Weimar Republic.
Maybe we need to convene a Council of Nicaea to definitively determine these issues and burn all the heretics?
Quite seriously reading this makes economics seems to be more of a priesthood than a science with a huge emphasis on what denomination you are a part of. (I apologize as I recognize that this is just a blog post and that you are using these as shorthand and that this is way more complicated. But then so were the arguments as to why the Arian heresy was incorrect….)
To be blunt it also appears to me that one could also complain that “traditional” economics is based on certain assumptions that allow for these mathematical models to supposedly guide policy. To claim that the math, therefore, makes this a science is ignoring the fact that those assumptions may not quite be based upon reality. (recognizing that a lot of advanced economics deals with situations where those assumptions do not fit).
In all seriousness, I feel that a few hundred years from now we will be looking at Keynsianism or Monetarism the way we look at the Arian heresy.
I do not agree with the comparison with the Council of Nicea for a large number of reasons, but, first of all, it is completely ahistorical to suggest that heretics were burned during or soon after the council of Nicea. This simply did not happen.
On slightly more recent history, we are already looking back on monetarism. It has been a fringe sect since the 1990s. The current division is called fresh water vs salt water.
MMT is another small group. My criticism is that I do not believe that there is any substantive difference between MMT and paleo Keynesianism.
This does, in fact, bring us back to Nicea or perhaps the decades after the council. There was violent conflict between those who asserted that the Father and the Son are homoosian and those who asserted that they are homoiosian (the fight literally over an iota). This dispute reminds me of Prof Kelton. As far as I can tell, she insists on the crucial importance of distinctions which do not correspond to differences and relies on the magic power of words.
To return to Nicea, one crucial aspect of the council was the alliance of Sabelians and Trinitarians contra Arius et al. Nothing similar is happening on Twitter right now.
The key difference is that Arius was the leader of a substantial faction which might become dominant (as of course it did fairly soon after his death during the reign of Constantine’s).
In contrast Kelton et al are so few and weak that the amazing thing is the huge amount of attention, hostility, and vitriol that she has obtained from me and many far more prominent economists.
If I may pretend to be a Sabelian, we are nowhere close to feeling a need to make common cause with freshwater Trinitarians to outnumber Kelton and the dozens of people who both know who she is and think she has something useful to say.
Also I am not a total dick like Saint Nick, so you don’t have to worry about the risk that I punch her in the nose.
Robert:
Not sure why you ended up in trash. Maybe the change in email addy.
Waldmann
“Prof Kelton. As far as I can tell, she insists on the crucial importance of distinctions which do not correspond to differences and relies on the magic power of words. “
Thats funny for me. I got beat up over at naked capital because I used the wrong words. some words are taboo.
but Kelton does not appear to be insane… perhaps as you say just a paleoKeynesian, though i wouldn’t know about that. Thing is, she is right about enough, and has generated something like a dialogue that could do, some good. So I don’t like to complain about her too much.
I think you could do us some good if you expanded your comments to include actual arguments the non-cognoscenti, i could follow.
Coberly
You got beat up because you used the right words which one person used to batter you. Public burning of a heretic. There was nothing wrong with what you said. Recognize the environment.
oh, i wa pretty sure i was using the right words. since i’d been using them that way in public for fifteen years and no one ever objected.
but i felt like a missionary in the jungle telling the natives that their Father loves them, but because of language difficulties they heard me say “your father f’s you.” then they beat me with sticks.
Kelton uses the same words I do in the same way. but I get a little nervous when she says we can print all the money we need, then calls for a payroll tax holiday to pay for new spending on some other worthy cause. Maybe Yves should send some of the boys over to talk to her.
GeorgeNYC,
“…economics seems to be more of a priesthood than a science…”
[Exactly, but it is useful as a cover for sociopolitical biases. Keynes was as close as we have gotten yet to economics as a science, which has made burying what he actually wrote and said underneath a mountain of misrepresentation the most urgent goal of modern macroeconomics.]
Well Noah Smith is annoyed and so are you apparently. So what. Jealous that Kelton is getting attention from the New York Times? Seems rather petty to me.
I don’t understand why so many economists cannot seem to be able to read MMT and understand what it says without insisting on trying to fit it into their own preconceptions of economics. I think that is the main issue that causes more mainstream economists difficulties in understanding what is pretty much a fairly simple , logical description of a fiat monetary system and how the currency issuing government interacts and influences the economy. If you want to pan MMT it should be very simple to do- just show how their descriptions of monetary operations and banking and government spending are inaccurate. But you can’t do it- because they are accurate.
” that deficit spending isn’t as bad as some say. One problem is that those “some” are assumed to include mainstream Keynesian Macroeconomists.” Ever heard of Rogoff and Reinhart among many others? Wasn’t that long ago you know. I’ll give you that mainstream economics seems to have moved considerably towards what MMT was saying 12 or more years ago. I’m glad you guys are capable of learning when reality hits you in the face repeatedly. Sad that it takes so long and that most seem to have been dragged while kicking and screaming even while saying we understood this all along.
Nothing about the current inflation contradicts what MMT says would happen when spending meets up with reduced production capacity. While I disagreed with Larry Summers position on government assistance last year, it was striking that he framed his objections in terms that any MMTer would understand- that excess demand from government spending could cause inflation. Rather than claiming that the increase in the Federal Debt would be the cause of the problem. That is real progress.
MMT’s greatest flaw is its dependence on the dollar always being the world’s reserve currency.
MMT argues that it is the ability to issue debt in one’s own currency that matters. That’s why Japan can run a big deficit in yen which is not a reserve currency. If the US government were forced to borrow in rubles or euros, it would be another matter.
all that is required is that people have faith that the currency will buy what they want eqyivalent in “value” to what they gave to get the currency.
i think Britain has been running a deficit for 300 years, though for some reason they thought they had to back it with gold.
the problem with MMT is can you imagine what our Congress would do if it thought it could just print money for “the nation’s needs,” or how they would decide which needs they would pay for, or who they would tax to “avoid inflation”?
yep. just what they do now.
EMike,
Exactly. OTOH, Kaleberg is also totally correct. Where Japan differs from the US is that Japan’s FOREX rate is not subject to the fixation of the global reserve currency. The EURO may have a bit of the USD curse as well, but their own internal problems do not allow them to go crazy. The problem for the USD is that it could get trashed badly in FOREX by some single unforeseen event, not likely in the short run while still inevitable in the long run unless climate change kills us all first.
mass market manipulation is not a normal cause of inflation. We saw similar in 2008.
I think MMT hits a nerve given the nature of economic discourse until fairly recently. All the conventional wisdom about the need to crash the economy as soon as wages start to rise, official policy since the late 1970s, needed an antidote. The excuse was usually something something the government, unlike businesses and individuals, cannot borrow for the future or we’ll all, or at least those of you working for a living, will starve in the dark.
MMT pointed out that such restrictions on debt were ridiculous, especially since the party most censorious about debt reliably racked up debt when in power. Somehow or another, borrowing to pay for tax cuts was fine. It was borrowing that might help the typical American or to build for America’s future that was bad.
It’s no surprise that so many economists are upset by this, but economists either became shills for wide-spread economic stagnation or seemed silenced in their academic towers. Most people don’t read economics blogs let alone the economics research literature, so MMT has been a breathe of fresh air. Again, it’s no surprise to see attacks on MMT. It may have its flaws, but compared to the policies that have kept wages stagnant for decades, prevented the nation from addressing its challenges and lauded a worthless and ineffective policy, MMT has finally offered countervailing opinion and, more importantly, gotten some traction outside of academia.
Kaleberg
definitely hit a nerve. the problem is actually doing something about it. maybe “convincing” people will do the trick. but i’m not sure it is so different from “we’re all Keynesians now” to convince the people who like things just the way they are.
in her book she has called for a payroll tax holiday..to use the money to fund other desrving projects. she does not seem to know that a payroll tax holiday does nothing for the poor (they don’t pay enough to make a difference either to themseves or to the economy), and it does not do much for the rich… they make so much money their payroll tax does not make an important difference to them.
I think she is just flailing..hauling down a list of goodies MMT could do (and what does the payroll tax holiday do that MMT coudn’t do by just printing the money?)
It’s this kind of wild rhetoric that makes me shudder whenever the Left comes up with another outstanding suggestion. I approve of what the Left says it wants to accomplish, but they don’t sound like deep thinkers. And if that sounds like “some of my best friends are..” I guess I’ll have to live with it.
But yes, I’m a little worried about that ol’ raise interest rates trick. It worked so well for Reagan.
Coberly:
Some Cato reading for you. Not my cup of tea. It does have a basis. Modern Monetary Theory Meets Greece and Chicago
It is not terrible.
Kaleberg,
ALthough I can mostly agree with what you wrote herein, my context is probably a lot different than yours. The substance of my agreement is that I see very little distinction between MMT and mainstream economics of all flavors. What mystifies me still though is whether, like politicians, economists are just liars and damned liars or whether economists should be more readily divided between dumb and dumber.
John Maynard Keynes was literally a giant among men and figuratively a giant among economists, but the rest do not measure up.
To be fair, Stiglitz is not as bad as most and I do respect his protege Ha-Joon Chang.
I personally am not jealous that Kelton I’d getting attention at The NY Times. I don’t expect them to pay any attention to me. My current interaction is trying to find out how many NY Times reporters will block me on Twitter (current list: Eric Lipton).
I would honestly tend to suspect that sone are irritated that Kelton is getting attention which they want and expect.
I do not really know why Kelton enrages me. It certainly does have something to do with her tweet which I cut and pasted into my post MMT II
https://angrybearblog.com/2019/03/mmt-ii
It is actually mildly interesting that she has managed to get so many people (others incomparably more prominent than I am) so angry with her. I don’t really understand why, and I will try to figure it out.
Robert
I could not read the tweet (blurry picture).
as for the anger: economics is comples enough that no one can see the whole picture, but it is important enough that everyone thinks that anyone who disagrees with them is a real-world threat to their well being. And since a lot of the public discourse is managed by paid liars it’s pretty easy to get angry about it.
I think I agree with you about MMT but can’t be sure. The commenters on the post you linked all seemed “right” to me, but I don’t know enough to be sure about them either.
so far, i think Kelton’s current moment of fame has a chance of bringing a non-deficit centered politics to where it has a chance of being heard by the people. i also agree that MMT-ers themselves are their own worst enemies. They either don’t understand or don’t know how to explain MMT itself, and in the case of some of them so intolerant of people who don’t agree with them, or even use words in ways not approved by them, that they don’t give people any reason to take them seriously.
I am at least interested enough in MMT as a political-language wedge against the deficit fraud we get from R’s (and the D’s) that I hesitate to disagree with it in public. Give it a chance. watch out for that inflation thing or wildly irresponsible spending, or just normal political supidity in directing “resources-not-money.”
George
I can’t remember what Arianism was all about. I suspect neither could most Christians at the time. But most (?) of them seem to have understood Jesus well enough. Even today, both those people who twist Jesus words to mean the opposite, the people who never understand much of anything, and those people who are mostly pretty good Christians while stating firmly that they don’t believe in Christ… understand what he was saying. Actually, I think people who never heard of him understand the Truth..no reason that God [whatever we mean by that] would leave them in the dark.
Similarly, I think most people understand “economics,” even if the professional (public) economists don’t understand it as well as they think they do. Meanwhile politics…it’s all about the money and the power (not quite the same thing: some people like power because it gets them money; others like money because it gets them power)…will always be with us.
Other parallels may apply.
As you said, two mints in one.
Robert Walsmann
I think I agree with you entirely…not that I know anything about maintream Keynesian economics.
But, having said what I said about Kelton above, I need to say that I agree with her entirely about her political aims. I just don’t see how she gets there from here. I am not at all sure “MMT” helps.
And she is dead wrong about Social Security: “ownership” is what counts. If we need welfare or better jobs, or deficit spending to get there (better outcomes for workers and other poor people), fine. But if we lose “ownership” we have lost the game entirely.
coberly
Not sure why they disappear. Put this one out and deleted your questions on disappearance.
thanks
my comments are not appearing.
not the real JERRY BROWN:
Jerry, you assign a motive to people you don’t know, then you complain that the motive is rather petty.
So it’s not surprisng that you go from there into a solipsist argument that brilliantly knocks down the straw men you erect. I am afraid it is MMT enthsiasts like you who have made me think MMT was too ridiculous to be worth my time. Kelton avoids the insanity, so I have enough respect for her argument to take it seriously. I point out her failure to understand the first point about Social Security (worker paid insurance..so they own it…in spite of efforts by both the Right and the Left to make us forget that fact). And I point out that I can’t see where MMT solves the political problem.
Otherwise, she is saying many of the same things I have been saying for years to people who think the SS Trust Fund is “only phoney iou’s.”
Oh I am a real enough Jerry Brown. Been called that for more than 50 years. But if you would rather call me Jerome Brown, like it says on my birth certificate, you have my permission.
It would probably be a mistake to write off an economic theory because of one admittedly less than nice comment from an angry reader of a not so nice original opinion piece. You won’t be wasting your time no matter what you think of me personally.
I am sorry that my frustration was so evident in my previous comment- I generally try to be nicer than that. I don’t know about strawmen or solipsist arguments- I thought my comment was fairly well directed towards Mr. Waldman and Mr. Smith. Even if it was more rude than I would rather it have been. They pretty clearly took issue with the NY Times article about Stephanie Kelton and that it was rather complementary of her and her ideas. I am sorry I asked if they were jealous though.
Jerry,
I was thinking of a former governor of California.
I don’t think badly of you, but I thought your comment didn’t actually say anything because you seemed to be mostly talking to yourself, This is a special hangup of mine. I am sure I am guilty of it myself, and I keep hoping to do better.
as for content: i don’t think anyone here was jealous of Kelton. I had to read Waldmann twice to make sure I understood him. Turns out I did, and agree with him on all points. Specifics on request.
As for Kelton, I never took MMT seriously because, as I said, the people who talk about it on blogs don’t make very good cases for it. Kelton did better than that.
But I think she is very wrong about Social Security, and I still don’t see how MMT solves the political problem. I’d be glad to give it a try because I agree with her motives, but I’d feel like I was giving the keys to the family car to a fourteen year old. Specifics on request.
as an example: she writes she would be happy enough to write phony iou’s for Social Security. She does not seem to realize we have been fighting the “phony iou” war since 1990 that I am personally aware of, and since 1936 that I know about only from history. Like ALL of SS critics, including those on the Left, she seems to think of SS as being paid for by the government. It is not, and it is critical that we understand that. People like to be able to say “I paid for it myself.”
Or at least they used to be. some modern liberals sound like they’d be happy on the dole, and they’d be happy if everyone was on the dole. MMT bloggers seem to feel the same way. They wouldn’t, but they don’t know that yet. Kelton understand there are limits to “printing money” but she is very vague about how those limits would be addressed…by a Congress paid for by people who want it to buy guns for the army, elected by people who hate “the dole.”
There are human limits (psychology) as well as “resource limits” (which K acknowledges). I am not so sure we can pay for everything we want, even with the MMT engineers taxing the rich to “control inflation” in a world already suffering from our waste.
I have tried to start some recognizable issues here. No way for me to know if I am just talking to myself.
typo watch:
iou’s, not you’s.
being paid for, not peing paid for. though…
Jerry
re Feb 10; i:52
don’t be so humble. it unnerves me. your contribution is welcome. i don’t want to be treated as an “expert” because I don’t think much of experts in general. If I can’t convince you by argument, i don’t want to convince you by claiming to be an expert.
Thanks Coberly. That is nicer than I deserve considering how angry my first comment was.
Jerry (or Jerome) 🙂
Coberly, you make a sound political argument about Social Security that I think history and practical experience shows is correct. Politicians won’t touch Social Security because everyone thinks they have paid into some fund for their entire working lives and won’t stand to have changes made to it for that reason. Well big changes at least- I don’t think I qualify for full benefits till I’m 67 rather than 65 now. FDR clearly understood this when he set up the system to begin with- even though it was clear that the initial recipients of Social Security had not in fact been paying for most of their working lives. The seemingly dedicated payroll taxes have kept politicians from interfering with the system for the most part.
But MMT describes how the actual checks are paid for by the government in an economic sense- which is somewhat different from the political realities that safeguard the system. You can be like me and say both that you are correct and that MMT is correct when looked at in a different way without being contradictory. And I know that nuanced view drives some people crazy.
MMT is not a big fan of ‘dole’ like systems, or UBI type proposals either. They do propose a Job Guarantee where anyone who wanted a job would be eligible for some job serving some public purpose paid for at some minimum wage by the federal government. They propose this would function as an automatic stabilizer for the economy as well as being more humane than our current system. I happen to think it is a great idea.
i like the idea too.
But the government does not pay for Social Security. Workers do. That is important.
If MMT has anything important to contribute to SS it would be to help people make more money from work so their SS contribution would be enough to pay for a decent retirement.
I have nothing against welfare, but it is not the right way for people to pay for their retirement. And I don’t think it is good for them if they can find work. I don’t mind pensions for the disabled…but even that should be paid for by “insurance” that they paid for.
And the fact that early retirees did not pay into SS for their whole careers falls under the category of “insurance.” Those workers had their savings wiped out by the Depression. It would not offend me at all if you collected fire insurance on a fire that happened the day after your first insurance payment. Those early payments were not paid for by later retirees….in the sense that those later retirees got the full value of their payments when they retired themselves.
SS is “backward looking” in a sense, but only if the people who pay for it are “forward looking.” You pay in advance for your own retirement “insurance” because you may know that your retirement is (almost) inevitable, but you don’t know you will have been able to save enough for it by the time you get there. SS pays everyone “back” more than they paid in. About 2% real, compounded, “on average.” But “average” isn’t what counts. What counts is that you get “more than average” if your lifetime income turns out to have been too low for adequate savings. Even rich people get back a “fair” return if you count the insurance value. And no, it is not reasonable if you don’t have a fire to feel cheated because you paid for insurance you didn’t “need” as it turned out.
Enough of me for now. But Kelton, like everyone else, doesn’t know a damn thing about Social Security but is happy to weave solutions based on about ten words she may have read somewhere.
It is completely correct to say that current workers and their production ‘pays’ for the consumption that retired workers get out of Social Security. There is no argument there. But sometimes people imagine that the money from the payroll taxes got dumped into some giant hole and that all we have to do to guarantee people a decent retirement is pull those dollars back out of the hole and everything will be just fine. And it just doesn’t work that way.
Even if there was some giant hole filled with past tax dollars, pulling those dollars out does not ensure that farmers are growing food, or workers will be there to care for the elderly, or that someone will come to fix your house when the roof leaks. Current consumption pretty much needs to be matched by current production ability-no matter how you finance it.
Jerry:
What Dale Coberly proposed as a solution to SS was accepted by SS as a way to resolve the upcoming SS shortfall. Congress has yet to act upon an ~2% increase consisting of 1% for Labor and 1% for companies over a ten-year period at 1 tenth of % per year. There is a whole slug of SS articles here written by Dale and Bruce.
You are preaching to the ministers. We already know this.
Yeah, I know Run. Sorry for that too. I was a little excitable today for some reason. Doesn’t happen often though. Certainly don’t want to tell people things they may already understand better than I. I’ll shut up for a while.
Jerry:
No, wrong answer. Coberly is right with his answer to you. Always welcome a good conversation. Just trying to save you some time and explaining. Dan owns the blog and I help him.
If you get the urge to write, we can accommodate you. I will help you with it. The site has been around for a while. Dan says it is one of the first Econ blogs on the internet.
Bill
Thanks Bill. I have enjoyed this blog for years now, but don’t comment all that often. You guys do great work here. I may take you up on your offer if I can think of anything to say that your readers might find interesting rather than objectionable 🙂
jerry
someone finds everything i say objectionable. don’t worry about that. we are all–most of us–big enough to take being objectionable.
i am not very diplomatic myself. and not even always right.
the zen people like to tell stories about zen masters asking their students hard questions, then whacking them over the head when they give wrong answers. our bamboo sticks are almost painless.
cuando vea tantos comentarios sobre un tema sin sentido como MMT, la teoría monetaria moderna, sabrá que cada comentario ha sido leído solo 4 veces, ¡tres veces por el escritor y una vez por la policía!
Nice . . .
Justin
i don’t read Spanish so I don’t know if it’s nice or not.
It’s nice. I read German
Veo que el traductor de Google sigue siendo popular.
Pero si quieres hacer los arguementos real, continua por fa.
Keynes gets abused by both sides of discussions/arguments like these. Keynes believed that sovereigns should borrow in their own currency to spend when needed, but during the good times run fiscal surpluses to save for a rainy day and pay down debt. Of course, Keynes was also opposed to the US dollar global reserve currency established by the Bretton Woods agreement instead of his proposed Bancor international reserve currency system, which would have been perpetuated by trade balanced exchange rates and fees.
Damn autocorrect changed Constantius (Arian son of Constantine who persecuted Athanasius when he was Eastern Roman emperor AKA autocrator) to “Constantine’s” which is off by a generation, an apostrophe, and an s (making it grammatically as well as historically nonsense). Just now autocorrect tried to replace the autocrator Constantius with his dad.
I think it safe to say that, in spite of their disagreements regarding “homoosian” Arius, Athanasius, and Nikolas would all agree that autocorrect must be damned to hell.
hear! hear!
i have enough trouble dealing with my own spelling. autocorrect drives me crazy. fixes what doesn’t need to be fixed. doesn’t fix what does. can’t wait for computer driven cars.
Umm, proof – read?
Run
I try to proof read. My eyes are not good enough to pick out a typo unless it is fairly egregious…usually a spell check substitution of a completely wrong word for the one I thought I wrote. Meanwhile, spell check doesn’t keep up with my writing, so unless I look back at every word as I type it, I often miss what they have done to me. And very often when I do type a non word that I did not intend to type spell check is perfectly happy with it.
So no. I fully agree with Walmann that auto check is an invention of the devil. And when we get computer driven cars, there may not be time to proofread.
On the other hand, poor Waldmann: I can’t seem to get his name right no matter how hard I try.
Coberly,
“…when we get computer driven cars, there may not be time to proofread…”
[Cracked me up. So funny – yet, so true. Also, so obvious to anyone with experience in software development. Unfortunately, the cool factor has clouded our judgement.]
“it is important enough that everyone thinks that anyone who disagrees with them is a real-world threat to their well being”
nice
“MMT is not a big fan of ‘dole’ like systems, or UBI type proposals either.”
What I thought I understood about MMT was that it says you can fund programs without worrying about deficit spending. Such an observation should lead to being agnostic towards how the program spends the money.
Arne,
“…MMT was that it says you can fund programs without worrying about deficit spending. Such an observation should lead to being agnostic towards how the program spends the money…”
[Although that is presently correct in theory and theory is all that we have of MMT, then if it ever evolves into practice and survives its own flaws – not likely. MMT that covered government investment in infrastructure whether physical plant and transportation or even human resources such as higher ed would be survivable. If money is created backed by an asset, not necessarily a market instrument which nowadays are only dubiously assets (e.g., speculative futures trades with no relationship to hedging production risks), then crazy inflation would not be stoked. The economy needs to grow with the money supply to remain on stable money that would not crush finance and trade, which are the cornerstones of the US economy. Other possibilities would exist for an economy built on different cornerstones, but just assuming stuff that is not true might make our cornerstones into gravestones.]
Arne
I don’t think that is correct. The deficits might be okay, but the programs might not be. And the programs would still be determined by politics, just like they are today.
I like the idea of MMT taking “oh, the deficit!” off the table. But I remember when we were “all Keynesians now,” and whatever happened to that?
Arne
it occurs to me i may have missed your point. but as for MMT not liking the dole or UBI, I was brought up short when she turned around and suggested in so may words a “phony Trust Fund” accounting, and payroll tax holidays.
MMT could have been handed down from Sinai on tablets of stone, but with human beings interpreting what it means we are no closer to “an economy for peace” much less sanity.
When Nixon suspended dollar convertibility, then rather than end the Bretton Woods System he just armed it with nukes and made it so dangerous to itself that inevitably it would come crashing to a terrible end.
Ron
what you say sounds likely, but I don’t know enough to connect the knee bone to the thigh bone. Kelton does not have an answer either; at least not in her book.
But politics is the art of plausible sounding words, and maybe MMT is just plausible enough to weaken the “but the deficit” lie. And then, maybe, what they do with it won’t be any worse than what they have done ignoring and worshipping the deficit plausible-sounding-words as it suited their purposes for the last hundred (or three hundred?) years.
Coberly,
You are most likely correct. Problem with the deficit lie is that it circumvents the deficit truth relating to the twin (fiscal and trade) deficits as it relates to the sovereign that controls the dominant international trade reserve currency (i.e., Triffin Dilemma).