4 ms·

>>Conceptually the answer in the theory is to suck up the excess money with taxes Govt spending is already 45% of GDP, so there's not much room to increase it

>>Conceptually the answer in the theory is to suck up the excess money with taxes Govt spending is already 45% of GDP, so there's not much room to increase it more. As for MMT, I think what the MMT crowd doesn't realize is that there's a lot of latent inflation coming. Asset prices and CPI do not go up in tandem. First Asset prices are inflated, then later for the next decade or so, as people slowly make withdrawals from those inflated asset prices, it begins to affect the CPI. And that's where we are right now, at the beginning of the CPI impact.

hn_throwaway_99 5y ago
> >>Conceptually the answer in the theory is to suck up the excess money with taxes > Govt spending is already 45% of GDP, so there's not much room to increase it more. Taxes (government income) is not all that related to government spending, as we've seen recently.
ummonk 5y ago
MMT doesn't prescribe spending to curb inflation; it prescribes taxes.
cjsplat 5y ago
I can't repro the 45% number. BEA says 2021 US GDP is nearly $23T, CBO says total 2021 budget is $6.8T.
- jmalicki 5y ago
  Federal budget is $6.8T, the 45% includes state and local government spending as well. https://fred.stlouisfed.org/graph/?g=8fX https://fred.stlouisfed.org/graph/?g=8fX https://en.wikipedia.org/wiki/Government_spending_in_the_United_States#:~:text=By%202019%2C%20federal%20spending%20was,45%25%20of%20total%20government%20expenditures https://en.wikipedia.org/wiki/Government_spending_in_the_Uni....
  - projektfu 5y ago
    OK, that says 20% federal + 17% state/local, and that state/local is about 45% of all government expenditures. In other words, it's 37% and not 45% of GDP.
tarsinge 5y ago
As I understand it taxes in MMT are just destruction of money, it's the essential counterpart of money creation used to balance supply. It's irrelevant to GDP and spending in that model, since in MMT the government doesn't need taxes to spend, it just print what it needs, that's the core idea.
- Scarblac 5y ago
  I seem to recall that France used to do this -- create money for government spending, taxed money ceases to exist, no need for government debt. But I can't find anything about it, and I don't know if I'm just not using the right search terms. Has this been put into practice in large countries before?
  - zer0tonin 5y ago
    Is France a small country now?
    - tatersolid 5y ago
      > Is France a small country now? Frances’s GDP is 15% smaller than the single US state of California, and its population is only about 1.67x that of California.
      - zzleeper 5y ago
        Well Cali has 1/7th of the entire US GDP, so it's an unfair comparison. By itself, it would be the 5th largest economy in the world.
    - Scarblac 5y ago
      It's not, I'm just doubting my own memory so was wondering in general if there was an example, France or elsewhere.
- nostrademons 5y ago
  Interestingly, the mechanics of this seem backward. A major problem with the Fed's operations is that operations on financial markets take 12-18 months to spread to the real economy, so they have to target interest rates now based on what they think the economy is going to look like in 12-18 months. Conversely, money going into or out of the average person's checking account now affects what they do in the real economy now, without a lag time. When we've recovered from significant economic crises (2008 and 2020), it's often been through direct fiscal stimulus. It seems that the logical thing to do would be to put money into the economy through directly giving it to citizens, and then take money out of the economy through interest rates, by making it more expensive to borrow and reducing business investment. Typically you want to put money into the economy in a hurry, in response to a crisis, but you want to take it out gradually, so that businesses can plan ahead. MMT's framing of this still seems backwards, even if they've realized that fiscal and monetary policy are two sides of the same coin. You'd also get a lot less political resistance to the fiscal policy side if it involved giving people money rather taking money away from them.
toyg 5y ago
> Govt spending is already 45% of GDP, so there's not much room to increase it more. Several European countries are well over 50%. There is plenty of room.
- landemva 5y ago
  This points to why the EU will likely disintegrate - member countries can't print to monetize country debt. Either EU members split out to regain currency autonomy, or EU officially federalizes member country debt.
  - toyg 5y ago
    Obviously the latter will happen - it is in fact already happening, between eurobonds and recovery fund. We just don't make a big song and dance about it - quiet work is how the EU is managing to do the unthinkable of federating this anarchic and unruly continent. The economic imbalances between EU states are nothing, compared to the ones between US states. Do you see the US "disintegrating" anytime soon?
    - landemva 5y ago
      USA federalized State debts a long time ago. I could see Illinois imploding due to retiree obligations and pieces of Illinois being absorbed by neighbor States. More likely for federal government to take over State pensions because federal government can emit unbacked money.
causalmodels 5y ago
I am by no means a fan of mmt, but I think looking at government spending as a share of GDP misses the point mmt proponents attempt and often fail to make; which is that financial constraints are should not be the limiting factor of the economy. A better indicator would be the price of labor and commodities since they better reflect the constraints of the real economy. Unfortunately for the mmt people, the prices are going nuts because we are actually dealing with real resource constraints now.
dillondoyle 5y ago
I can think of a few trillion in urgently needed money we could spend taxes on: renewable energy, batteries, retrofitting homes for chargers, resilience building (and paying people to move out of high risk areas), invest in carbon capture/moonshots.
- landemva 5y ago
  I would also pay for those items before we send another penny to NATO or WHO.

hn_throwaway_99 5y ago

> >>Conceptually the answer in the theory is to suck up the excess money with taxes > Govt spending is already 45% of GDP, so there's not much room to increase it more. Taxes (government income) is not all that related to government spending, as we've seen recently.

ummonk 5y ago

MMT doesn't prescribe spending to curb inflation; it prescribes taxes.

cjsplat 5y ago

I can't repro the 45% number. BEA says 2021 US GDP is nearly $23T, CBO says total 2021 budget is $6.8T.

jmalicki 5y ago
Federal budget is $6.8T, the 45% includes state and local government spending as well. https://fred.stlouisfed.org/graph/?g=8fX https://fred.stlouisfed.org/graph/?g=8fX https://en.wikipedia.org/wiki/Government_spending_in_the_United_States#:~:text=By%202019%2C%20federal%20spending%20was,45%25%20of%20total%20government%20expenditures https://en.wikipedia.org/wiki/Government_spending_in_the_Uni....
- projektfu 5y ago
  OK, that says 20% federal + 17% state/local, and that state/local is about 45% of all government expenditures. In other words, it's 37% and not 45% of GDP.

tarsinge 5y ago

As I understand it taxes in MMT are just destruction of money, it's the essential counterpart of money creation used to balance supply. It's irrelevant to GDP and spending in that model, since in MMT the government doesn't need taxes to spend, it just print what it needs, that's the core idea.

Scarblac 5y ago
I seem to recall that France used to do this -- create money for government spending, taxed money ceases to exist, no need for government debt. But I can't find anything about it, and I don't know if I'm just not using the right search terms. Has this been put into practice in large countries before?
- zer0tonin 5y ago
  Is France a small country now?
  - tatersolid 5y ago
    > Is France a small country now? Frances’s GDP is 15% smaller than the single US state of California, and its population is only about 1.67x that of California.
    - zzleeper 5y ago
      Well Cali has 1/7th of the entire US GDP, so it's an unfair comparison. By itself, it would be the 5th largest economy in the world.
  - Scarblac 5y ago
    It's not, I'm just doubting my own memory so was wondering in general if there was an example, France or elsewhere.
nostrademons 5y ago
Interestingly, the mechanics of this seem backward. A major problem with the Fed's operations is that operations on financial markets take 12-18 months to spread to the real economy, so they have to target interest rates now based on what they think the economy is going to look like in 12-18 months. Conversely, money going into or out of the average person's checking account now affects what they do in the real economy now, without a lag time. When we've recovered from significant economic crises (2008 and 2020), it's often been through direct fiscal stimulus. It seems that the logical thing to do would be to put money into the economy through directly giving it to citizens, and then take money out of the economy through interest rates, by making it more expensive to borrow and reducing business investment. Typically you want to put money into the economy in a hurry, in response to a crisis, but you want to take it out gradually, so that businesses can plan ahead. MMT's framing of this still seems backwards, even if they've realized that fiscal and monetary policy are two sides of the same coin. You'd also get a lot less political resistance to the fiscal policy side if it involved giving people money rather taking money away from them.

toyg 5y ago

> Govt spending is already 45% of GDP, so there's not much room to increase it more. Several European countries are well over 50%. There is plenty of room.

landemva 5y ago
This points to why the EU will likely disintegrate - member countries can't print to monetize country debt. Either EU members split out to regain currency autonomy, or EU officially federalizes member country debt.
- toyg 5y ago
  Obviously the latter will happen - it is in fact already happening, between eurobonds and recovery fund. We just don't make a big song and dance about it - quiet work is how the EU is managing to do the unthinkable of federating this anarchic and unruly continent. The economic imbalances between EU states are nothing, compared to the ones between US states. Do you see the US "disintegrating" anytime soon?
  - landemva 5y ago
    USA federalized State debts a long time ago. I could see Illinois imploding due to retiree obligations and pieces of Illinois being absorbed by neighbor States. More likely for federal government to take over State pensions because federal government can emit unbacked money.

causalmodels 5y ago

I am by no means a fan of mmt, but I think looking at government spending as a share of GDP misses the point mmt proponents attempt and often fail to make; which is that financial constraints are should not be the limiting factor of the economy. A better indicator would be the price of labor and commodities since they better reflect the constraints of the real economy. Unfortunately for the mmt people, the prices are going nuts because we are actually dealing with real resource constraints now.

dillondoyle 5y ago

I can think of a few trillion in urgently needed money we could spend taxes on: renewable energy, batteries, retrofitting homes for chargers, resilience building (and paying people to move out of high risk areas), invest in carbon capture/moonshots.

landemva 5y ago
I would also pay for those items before we send another penny to NATO or WHO.