5 ms·

> That's no true with deficits. Honestly, that's not much of a rebuttal. If you believe in Ricardian Equivalence, then sure, the future deficits are matched b

by rsj_hn 5y ago

> That's no true with deficits. Honestly, that's not much of a rebuttal. If you believe in Ricardian Equivalence, then sure, the future deficits are matched by private savings to offset future tax liabilities. Well, what do you think an increase in networth is other than an increase in private savings? But if you do not believe in Ricardian Equivalence, then the deficit spending is an increase in net-wealth, which again shows up disproportionately on the balance sheets of the wealthy. So there is really no way around it. Merely calling this "wrong" and "dangerous" is not an argument -- when a government wants to pay benefits but refuses to fund them with taxes, then given that taxes are disproportionately paid for by the wealthy, you are going to have distributional effects. This is just the flip-side of the old Keynesian saw about balanced budget multipliers. I really don't see how this is controversial except for the crowd that wants more spending but knows there is not the political will to fund it with taxes. Then this is an unpleasant side effect that they don't want to think about, but that doesn't make it "not true".

Ericson2314 5y ago
Well I certainly do not agree with Ricardian equivalence. For it to hold, one must assume lump sun taxes which one cannot avoid by being poor. That's a ridiculous assumption. > But if you do not believe in Ricardian Equivalence, then the deficit spending is an increase in net-wealth, which again shows up disproportionately on the balance sheets of the wealthy. My whole point was that this is not necessarily true, and depends on the form the spending takes place. Did you miss that? Even if a UBI eventually trickles up, we must not conflate solvency and liquidity. The boss has power because the worker's consumption is more time sensative than the production. A good UBI takes away that coercive power not (just) by increasing worker savings, but by making an income floor. (Stock vs flow). That's like giving people the ability to go longer without food and water so long as their nutritional needs are still met on a (longer term) average.
- rsj_hn 5y ago
  > My whole point was that this is not necessarily true, and depends on the form the spending takes place. Did you miss that? Nope, I didn't miss it, because it's not relevant. Giving money to poor tenants ends up in the pocket of landlords. Letting poorer people buy iPhones ends up in the money of shareholders and is realized as an increase in Apple stock price, etc. When you have a small group of the people disproportionately own the capital stock, then giving people more spending money absolutely ends up benefiting those people disproportionately. > Even if a UBI eventually trickles up, we must not conflate solvency and liquidity. Neither is being discussed here. I am saying that if you have an economy in which people earn unequal incomes which, you know, must happen given that people make unequal contributions to society, then things like supports for the poor have to be funded with taxes, otherwise this will drive more inequality. And given that the wealthy pay by far the most taxes, then deficit spending disproportionately benefits the wealthy.
  - Ericson2314 5y ago
    I don't think we can have conversation. To me, the numbers are secondary to their effects, that is kind of the thesis of the function finance paper too. Concretely stuff like UBI and a JG at least in the first order takes away a power of employers now amount of nominal inequality can give back. And if the limits to spending are real and not nominal, and rich people don't spend their wealth so much, taxing them hardly makes a difference w.r.t those constraints. Conversely, if they do spend it, easy to levy consumption taxes will be less recessive. If you want to continue to the debate, I think need to you get more precise about what exactly is bad about the nominal inequality you speak of. I think that is the only way to reconcile our analytical frames.
    - rsj_hn 5y ago
      So, consider for a moment that I've understood MMT for almost two decades now. Also consider that there is a lot that MMT does not address, in its maniacal focus on whether it's possible to fund government programs without paying for them with taxes. There are other problems, like assuming savings demands are inelastic, but let's just focus on the distributional aspects. One of the main drawbacks is that ZIRP or massive deficit spending is always and everywhere correlated to increasing wealth inequality vis-a-vis nations that have more balanced budgets. Then consider that none of the social democracies that have large safety nets use MMT principles and all of them run fairly balanced budgets for a reason, and that reason is not lack of knowledge about fiat currencies. Really there is a lot less here than meets the eye, and you pay a big price for adopting these kinds of policies. ZIRP is also a great way to privilege land over productive investment, because when you increase the duration of assets, then you want more stable assets whose value is guaranteed at the expense of more risky (productive) assets. And it's a great way to drive down the marginal product of capital -- a good example of all these effects playing out would be Japan. Rapidly increasing inequality, small businesses are starved for loans, but tons of free money for incumbent bureaucracies and housing, and hugely inefficient large corporate bureaucracies. By the way, it's no accident that Warren Mosler is a wealthy former hedge fund guy. It is literally the utopian economic policy of Finance, because MMT is clear that it does not want banks subject to discipline on the liability side of the balance sheet (Mosler owns his own bank and would like lower funding costs), and folks like Mosler even advocate eliminating income taxes entirely and funding the government -- oops, I forgot to say "anchoring the currency" -- based solely on a property tax. So this is a mix of forced savings, inefficient business, rising inequality, and credit allocated towards non-productive industries at the expense of productive industries. Anyways, if you want to create a feudal society, then this is a good way to do it. But don't worry, there will be a job guarantee in there for you.

by rsj_hn 5y ago

Ericson2314 5y ago

Well I certainly do not agree with Ricardian equivalence. For it to hold, one must assume lump sun taxes which one cannot avoid by being poor. That's a ridiculous assumption. > But if you do not believe in Ricardian Equivalence, then the deficit spending is an increase in net-wealth, which again shows up disproportionately on the balance sheets of the wealthy. My whole point was that this is not necessarily true, and depends on the form the spending takes place. Did you miss that? Even if a UBI eventually trickles up, we must not conflate solvency and liquidity. The boss has power because the worker's consumption is more time sensative than the production. A good UBI takes away that coercive power not (just) by increasing worker savings, but by making an income floor. (Stock vs flow). That's like giving people the ability to go longer without food and water so long as their nutritional needs are still met on a (longer term) average.

rsj_hn 5y ago
> My whole point was that this is not necessarily true, and depends on the form the spending takes place. Did you miss that? Nope, I didn't miss it, because it's not relevant. Giving money to poor tenants ends up in the pocket of landlords. Letting poorer people buy iPhones ends up in the money of shareholders and is realized as an increase in Apple stock price, etc. When you have a small group of the people disproportionately own the capital stock, then giving people more spending money absolutely ends up benefiting those people disproportionately. > Even if a UBI eventually trickles up, we must not conflate solvency and liquidity. Neither is being discussed here. I am saying that if you have an economy in which people earn unequal incomes which, you know, must happen given that people make unequal contributions to society, then things like supports for the poor have to be funded with taxes, otherwise this will drive more inequality. And given that the wealthy pay by far the most taxes, then deficit spending disproportionately benefits the wealthy.
- Ericson2314 5y ago
  I don't think we can have conversation. To me, the numbers are secondary to their effects, that is kind of the thesis of the function finance paper too. Concretely stuff like UBI and a JG at least in the first order takes away a power of employers now amount of nominal inequality can give back. And if the limits to spending are real and not nominal, and rich people don't spend their wealth so much, taxing them hardly makes a difference w.r.t those constraints. Conversely, if they do spend it, easy to levy consumption taxes will be less recessive. If you want to continue to the debate, I think need to you get more precise about what exactly is bad about the nominal inequality you speak of. I think that is the only way to reconcile our analytical frames.
  - rsj_hn 5y ago
    So, consider for a moment that I've understood MMT for almost two decades now. Also consider that there is a lot that MMT does not address, in its maniacal focus on whether it's possible to fund government programs without paying for them with taxes. There are other problems, like assuming savings demands are inelastic, but let's just focus on the distributional aspects. One of the main drawbacks is that ZIRP or massive deficit spending is always and everywhere correlated to increasing wealth inequality vis-a-vis nations that have more balanced budgets. Then consider that none of the social democracies that have large safety nets use MMT principles and all of them run fairly balanced budgets for a reason, and that reason is not lack of knowledge about fiat currencies. Really there is a lot less here than meets the eye, and you pay a big price for adopting these kinds of policies. ZIRP is also a great way to privilege land over productive investment, because when you increase the duration of assets, then you want more stable assets whose value is guaranteed at the expense of more risky (productive) assets. And it's a great way to drive down the marginal product of capital -- a good example of all these effects playing out would be Japan. Rapidly increasing inequality, small businesses are starved for loans, but tons of free money for incumbent bureaucracies and housing, and hugely inefficient large corporate bureaucracies. By the way, it's no accident that Warren Mosler is a wealthy former hedge fund guy. It is literally the utopian economic policy of Finance, because MMT is clear that it does not want banks subject to discipline on the liability side of the balance sheet (Mosler owns his own bank and would like lower funding costs), and folks like Mosler even advocate eliminating income taxes entirely and funding the government -- oops, I forgot to say "anchoring the currency" -- based solely on a property tax. So this is a mix of forced savings, inefficient business, rising inequality, and credit allocated towards non-productive industries at the expense of productive industries. Anyways, if you want to create a feudal society, then this is a good way to do it. But don't worry, there will be a job guarantee in there for you.