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Here’s the issue. We don’t have any serious leaders on this issue. We don’t have scholarship divorced from politics about this issue. Maybe we never will. Th
by gortok 5mo ago
Here’s the issue.
We don’t have any serious leaders on this issue. We don’t have scholarship divorced from politics about this issue. Maybe we never will. The Austrian school basically thinks this is the end of the world. The MMT folks think this is business as usual. The Keynesians are somewhere in the middle, but being in the middle of the road politically is not the same as an apolitical view on this.
As a lay person who hasn’t studied economics enough to understand if this is an actual issue or a theoretical issue, I really need some politics-free scholarship on this.
It doesn’t help that our political leaders say it’s an issue, unless it’s their party that wants that spending, then it’s fine. The right says it’s fine as long as it goes to endless wars, and the left says it’s fine when we spend the money on social programs. Both say it’s bad when the other side spends it, but not when their own spends it.
This is exhausting and demonstrably not helping us resolve the fundamental issue of how do you manage a large society without it imploding.
- outside1234 5mo ago1/3 of the debt has come under Trump. This isn't political, it is just a fact. He passed tax cuts (which are the real debt driver) that are just not sustainable. Without those, we have a reasonable debt to GDP ratio.
- KK7NIL 5mo agoAnd the other side would say that if we cut welfare spending we'd have a reasonable debt to GDP ratio. It's very much political and it's a joke to pretend otherwise.
- bilbo0s 5mo agoThis is kind of the point though. Cutting welfare spending will get us no where. The majority components of the federal budget are Defense, SS/Medicare/Medicaid, and debt payments. Not the forestry service or what we commonly know as welfare. At this point, even cutting everything else to zero still lands us in deficit. (Unless taxes are raised.) To be serious, we need to talk about what cuts are to be made to SS/Medicare/Medicaid and the military. But no one wants to have that discussion. So we throw out meaningless issues like welfare and the forestry service. We quibble around at the extreme edges, never addressing the central problems. That's the essence of the politics being discussed. Those politics make the issue impossible to fix. I honestly don't know why it's so hard? I'd be totally willing to countenance the necessary cuts to the sacred cow programs at this point. Why is everyone so opposed to it?
- thwarted 5mo ago> To be serious, we need to talk about what cuts are to be made to SS/Medicare/Medicaid and the military. But no one wants to have that discussion The military-industrialist complex is a socialist jobs program.
- deleted 5mo ago[deleted]
- HumblyTossed 5mo ago> To be serious, we need to talk about what cuts are to be made to SS/Medicare/Medicaid... To be serious, we need to talk about the funding of it, not the cutting of it. If we raise the cap, it gets more funding. If we increase Medicare taxes and then go to a single payer system, it could be funded as well. There is zero reason to have for-profit health insurance.
- watwut 5mo agoThey can say that, but it will not be true. The tax cuts, plus new military spending and new ICE spending dwarf welfare they want to cut.
- bilbo0s 5mo agoThis. ICE is now larger and more expensive than the entire United States Marine Corps. Let that sink in. Not only that, we also seem to start a new war every 6 months. Demanding money for each one of them. SS/Pensions/Medicare seem to trend nowhere but up. And like Santa Claus the party in power keeps handing out tax cuts. We have to make a change guys. The old ways aren't working. We can't be distracting from the central problems by yelling "welfare!". That doesn't work anymore.
- solid_fuel 5mo agoPlus however many billions to bomb Iran and another 400 million for that stupid ballroom, the mad king's spending is out of control.
- alkonaut 5mo agoYes "If" spending is cut or "If" taxes are not cut then you might have a balance. But just implement balanced budget goals. Accept at most a deficit of 1% in the budget or whatever. Allow for a deviation from this to do QE but require a more qualified majority and limit to 1 year only. Want to cut taxes? Fine - but don't do it with deficit spending. Want to increase welfare spending? Fine - but remember to then cut somewhere else OR increase taxes. The fact that one side can implement large tax cuts funded by borrowing over and over (and still be elected again) is absolutely _crazy_ on a scale that is perhaps only rivaled by the healthcare system.
- solid_fuel 5mo agoAnd if I didn't quit my job, I'd still be able to pay rent. Oh no, whatever is there to do in this situation? You can play the twisty game but the fact is simple - if he didn't have the political capital to cut spending, then cutting taxes is irresponsible governance.
- outside1234 5mo agoThe only things that we can cut that will have any real effect on the deficit are Medicare/Medicaid, Social Security, and Defense. You can see this here: https://www.pgpf.org/article/chart-pack-the-us-budget/ https://www.pgpf.org/article/chart-pack-the-us-budget/
- goalieca 5mo agoCanada had very high taxes covering everything from income to sales and yet our debt is ballooning at the federal and provincial level. Its like saying that uncle bob has a ton of credit card debt because he doesn’t make enough money and not because he spends too much.
- monooso 5mo agoDisclaimer: lay person, not American or Canadian. Whilst I understand your point in isolation, I don't understand how it refutes GP. AFAIK, the current US administration has cut spending on most things (the military and ICE being notable exceptions). As such, the suggestion that the ballooning debt is due to tax cuts seems perfectly valid.
- impossiblefork 5mo agoWould have had, not have.
- dpkirchner 5mo ago> I really need some politics-free scholarship on this. It's impossible to discuss GDP without politics, could you describe exactly what it is about political discussion that you'd want to avoid?
- jccc 5mo agoGortok is very obviously talking about red/blue team bias, trying to get objective scholarship on the issue that is unbiased in that sense.
- gortok 5mo agoIf it’s impossible to discuss GDP without politics, then it’s impossible in our current political climate to discuss whether or not debt as a function of GDP is a valid measure of an issue, and the practical effects of that issue. It would seem that functionally the only real world impact would be spending more money to service that debt. Ok, what about just cancelling that debt? Some economists have said “it’s money we owe ourselves”, so why not just forgive ourselves of our own debt? What would be the real world impact? What would happen? We keep attaching political value judgments to this without reasonably discussing the practical implications free of our own political dogmas.
- stackskipton 5mo ago>Ok, what about just cancelling that debt? Some economists have said “it’s money we owe ourselves”, so why not just forgive ourselves of our own debt? What would be the real world impact? What would happen? It's tied to Treasury Bonds that people hold so they would become worthless.
- miltonlost 5mo agoAustrian school is less an academic discipline or study of economics and more a post-hoc justification for libertarian philosophy. So you can freely ignore them. Maybe decide if the right or left has better priorities. Do you think spending money on guns and war like the right is good? Do you think spending money on social programs to be good? Seems like an easy decision to me, but hey, i have empathy and don't like killing.
- mothballed 5mo agoI view it as a rational play of prisoners dilemma in a nation with central bank and fiat currency. You will ~always lose (well until things get hyperinflationary) to someone promising OPM without more taxes. The system since the 70s ensures that.
- danans 5mo ago> The right says it’s fine as long as it goes to endless wars, and the left says it’s fine when we spend the money on social programs. Both say it’s bad when the other side spends it, but not when their own spends it. Spending is only one part. The part that almost nobody wants to touch is raising taxes to support the spending.
- reactordev 5mo agoMoney is make believe if it’s not backed by something. Ever since 1970s, money has been a figment of imaginations. We only have a semblance of balancing (or attempting to) the budget but reality is they just print the paper or update a sql row. Done. More money.
- JumpCrisscross 5mo ago> Ever since 1970s, money has been a figment of imaginations Money has always been a social construct. There is no fundamental particle of currency.
- reactordev 5mo agoright, something we have assigned a value to. We disagree on. We find the common denominator and have a deal or we don't. could be a sticky note, could be a rock, but we decided it's 2.5"x6" paper with ink on it.
- mothballed 5mo agoThere was no deal, except maybe initially the promise to exchange for gold that the government defaulted on. The government said pay taxes in USD or go to jail. They pay their contractors and employees USD (some of which can essentially be "eased" out of thin air). After those people get it, they can say "jump bitch" and you or someone you want to trade with will do what they say, because without those USD you won't be able to settle your tax debts.
- ModernMech 5mo agoI dunno it seems to me that whenever the Democrats are in office the deficits start to go down; and whenever there is a Republican in office they tend to go up. That's been the pattern my whole life so far. Like, you say the two sides are the same because one wants to spend endless money on wars and the other wants to spend endless money on social programs, but we only ever spend endless money on wars. There's no spending comparable to war on poverty / illiteracy / sickness / homelessness.
- stfp 5mo agoSame observation. I’m beginning to think that it’s not about “spending” like if money was a finite resource. It’s really about the outcome of the policy: more power for elites and more access to energy and resources; vs more power and independence for regular people (and thus less for elites relatively speaking). From a “spending” perspective you could really do both and in the real economy they don’t even compete for the same resources.
- watwut 5mo agoThe parties were not symmetric on this issue. They were not symmetric in terms of actual behavior (as in how much debt each added when in government) nor in terms of rhetorics. For a start, Democratic party was acting mostly in centrist technocratic manner and rather then radical leftist manner you are implying. It is really not necessary to knee jerk bothside everything.
- gwbas1c 5mo agoThe Freakonomics podcast episode "Ten Myths About the U.S. Tax System (Update)" actually goes into a lot of depth about this issue: https://freakonomics.com/podcast/ten-myths-about-the-u-s-tax-system-update/ https://freakonomics.com/podcast/ten-myths-about-the-u-s-tax... (Includes transcript) To oversimplify, basically: With the exception of Social Security, we (the US) has a balanced budget. No politician will get re-elected if they cut social security. (Thus) the politicians are working on the problem very quietly. The general problem with Social Security is that it pays out way more then it takes in. Part of the issue is that everybody of retirement age collects social security, including multi-millionaires.
- nyc_pizzadev 5mo agoSocial security is self funded and is actually a buyer of US debt. So there is no direct connection between social security shortfalls and US gross federal debt.
- amluto 5mo agoTo be slightly fair to the parent comment, it seems at least a bit valid to choose whether to consider the social security tax to be revenue to the government and social security payments an expense or to treat them as an entirely separate account. And the social security tax structure at least appears to be quite regressive. As an analogy: do you think that Costco generates most of its profits from sales of goods or from membership fees? Both answers seem valid.
- dh2022 5mo agosocial security revenues / payments are not included in this metric (US Debt). Social Security is its own huge problem which is different than the US Debt problem.
- setr 5mo agoI’ll read that article later, but that doesn’t sound right — there can’t be so many multi-millionaires that them getting free money is stressing out the system. Quick random googling, I’m seeing the number 3.2% of retirees have more than $1m https://www.investopedia.com/how-many-people-really-achieve-usd1-million-in-retirement-savings-11947173 https://www.investopedia.com/how-many-people-really-achieve-... And I can’t imagine social security would become suddenly profitable by a <3% population delta
- Zigurd 5mo agoYou don't have to speculatively both sides the issue. There is a track record: https://amarkfoundation.org/reports/u-s-presidents-and-the-federal-deficit/#:~:text=%5B%24%20in%20Billions%5D-,Federal%20Deficits%20and%20Surpluses%20from%201981%20through%202021,-The%20chart%20below https://amarkfoundation.org/reports/u-s-presidents-and-the-f... Some of this is political, but Trump especially wildly makes a mockery of Republican supposed deficit hawkishness, not based on ideology, but by lack of a competent cabinet.
- goalieca 5mo agocurious question as a canadian. when our prime minister makes a budget, it really is his fault. He runs parliament and executive functions. The budget in the USA is supposed to be a congressional matter so why does the president get any blame?
- krapp 5mo agoThe Executive is the most visible branch of the US government and it lends itself to celebrity worship and cult of personality, being embodied in a single person. Most Americans can't name their representatives at any level but everyone knows who the President is. And like a CEO, the President tends to get credit for everything.
- spwa4 5mo agoHere's the real issue. Economic innovation only really happens when the government is spending big on some issue. That's at least half the reason war advances technology so fast. It's not like Ukrainians weren't able to figure out drones 5 years ago. Stopping spending kills the economy. Which kills tax income. Which puts far more stringent limits on spending. Which reinforces the need to stop even more spending.
- marcosdumay 5mo agoAs somebody already pointed, you should always ignore the Austrians. Now, keep in mind that "business as usual" is different from "not an issue". The MMT folks will be able to tell you exactly what the consequences are (a hint, they are not very different from when it was 95% of the GDP), while the Keynesians will rush to tell you that the stuff the MMT people are talking about isn't as important as other stuff the government could be doing. Notice that both can be correct at the same time. Empirically, at some level of inflation the Keynesians become just wrong. Most people usually stop being Keynesian at that level.
- nyeah 5mo agoKeynes was aware of the inflation problem.
- throw0101a 5mo agoAnd deflation (he published his General Theory in 1936).
- bryanlarsen 5mo agoWhat's the difference between MMT & Keynes? Keynes is the one who gave the "what you can do you can afford" speech. IMO (some) MMT folks are more Keynesian than many modern "Keynesians".
- marcosdumay 5mo ago"Keynesians" are not people that talk about the ideas Keynes had. It's quite common for most "ians" or "ists" to not push the ideas their name implies. Yes, MMT is largely based on Keynes ideas, so they will say a lot of the same that Keynes actually said. At the same time, "Keynesianism" is more of a political movement than a scientific school (although, it's a well informed one). That's why they can be right or wrong independently from MMT. "Monetarism" is also a political movement, that people often confuse or try to claim to be the same as MMT.
- throw0101a 5mo ago
- OGWhales 5mo ago> The MMT folks think this is business as usual MMT folks generally advocate that inflation is the way to measure if the spending is "too much" and argue that spending should generally aim to improve productivity (i.e. increase gdp) to minimize this issue (e.g. spending to build infrastructure so people can get to work is productive vs spending so people stay home is inflationary). There is this pervasive idea that MMT promotes limitless spending and I'm not sure where it comes from, what they actually preach feels like a reasonable way to evaluate government spending to me.
- shimman 5mo agoIt's also pretty funny when you realize that the GOP loves MMT when it comes granting tax cuts but when you use the same MMT principles they use for say social welfare suddenly MMT is nonsense!
- kemotep 5mo agoI think the major argument against MMT is that no one has the stomach to actually implement the level of taxation necessary to counteract inflation when it starts to rise too quickly. Or at least no major political party in the United States. Everything can be sound on paper about MMT but if no one is going to practice it properly then the theory isn’t really going to work out. As much as “eating your vegetables” in terms of government budget policy makes sense, if making people do that in practice gets you immediately voted out of office (or not even elected in the first place), then we won’t be eating our vegetables.
- schnitzelstoat 5mo agoKeynesianism has the same problem - the government is supposed to spend in the bad times (to keep the economy moving) and save in the good times. But in the good times there is an incredible pressure on the government to spend more as tax revenues increase.
- pragmatic 5mo agoThe US is All Keynes All The Time.
- JumpCrisscross 5mo ago> MMT folks Does this still have purchase? I thought following post-Covid inflation, the MMT folks took a backseat (in politics).
- derektank 5mo ago“Stephanie Kelton: Have you considered the possibility that raising rates might move inflation higher? Jason Furman: No” Covid really exposed who did and did not understand what they were doing.
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- JumpCrisscross 5mo ago> Covid really exposed who did and did not understand what they were doing Who, in your reading, is the dummy in that exchange? (And what does it have to do with MMT following post-Covid inflation.)
- derektank 5mo agoKelton is a leading proponent of MMT and while I wouldn’t call her a dummy, she and other MMT proponents work themselves into pretzels trying to pretend inflation isn’t a serious problem that needs to be addressed by policymakers.
- atwrk 5mo agoHaving an economic science without politics at all isn't really possible - you have to define a goal for economic development to evaluate different approaches. And defining that goal introduces politics into economics. "Development for what or whom or whether at all" simply can't answered in a neutral way, it will always be in the interests of some and against the interests of others.
- gortok 5mo agoIsn’t the whole point of a ‘scientific approach’ to reduce biases and to study the problem independently of how the problem affects us? Why do we call things sciences but we’re unwilling/unable to divorce our biases from the process of studying a thing?
- atwrk 5mo agoMy background is in educational science where we face similar dilemmas. In both fields I'd say there is no conflict between scientific rigor and political goals as long as you make your goals transparent. The fact that you want to study economic processes because you want to e.g. better the live of the poor half of society does not mean you can't apply scientific principles. But the results will not necessarily be applicable for those who think a rising tide lifts all boats and therefore want to develop the economy in the interest of the upper class. In fact I'd be suspicious if people claim to be unbiased in any field that even remotely has something to do with humans or society - it usually just means they either hide their interests, or aren't aware of their biases.
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- silenced_sage 5mo agoThe problem isn't politics, its been made to look that way but the issue is that the people who would know have been silenced in a way that the general public hasn't recognized. Its not in the benefit of the corporate overlords that you be properly educated on this. I'll give you a brief TL;DR on the issues. The wealth of a nation is based in its ability to produce primarily goods, and sometimes services. Pricing is a signaling mechanism that allows efficient resource allocation of both goods, and factor market labor. When misallocation results, you get things like busts and booms where the benefits are front-loaded and a resource exhaustion cycle takes place. There are constraints which cannot be breached for any length of time, such as wages being lower than the cost of living enough to support a wife and three children to 18, and other things. Legitimate business can't operate if it can't make a profit. There is silently nationalized industry that is unconstrained via a cycle of money-printing that has sieved assets into few hands, and risk concentrated in few hands. This is part of the danger of the ECP, and other fundamental failures related to centralized systems. The Austrian school lives in the future. The future under a breakdown of organized society is one of death and potentially extinction. We depend on food production in ecological overshoot which depends on technology and farming. The 1970s represented ecological overshoot. When that fails you get shortage, that then sustains, famine, slavery, death, and then extinction. Under socio-economic collapse everything fails. Currency is abandoned. Exchange cannot happen. The store of value and exchange of value fails. This happened during the Bronze Age (of which we have very little records that remain). If these happen for extended periods of time, capital dries up and you get something like the great depression, Nintendo, and other places where logistics refuses to deliver goods at any potential profit because they were burned too many times. There exist systems that will fail eventually and predictably (in general), but which you cannot predict specifically when those failures will happen, its unknowable, and the effects one would use to justify any decision lag behind the objective indicators of the actions that needed to be avoided. Money-printing extracts value from those that hold the currency through the cantillion effect. Its an extraction of unpaid slave labor. Eventually it exceeds the store of value, and the businesses that normally produce stop producing. Exchange stops, etc. AI presents a unique spin on this as well because it accelerates the corruption of signalling presenting false signals chaotically in both labor and good markets. In positive feedback systems, these type of systems commonly run-away and converge at a point of calamity. When they do the dynamics are unstoppable. The MMT folks are delusional, having rested quite a lot of their false justifications on unsound practice to justify extraction of value. The Keynesian's aren't so different from the MMT folks because they improperly look at certain things only in isolation with a seeming mental block to all other things, which is a form of false justification. The bankers (if you can call them that) have corrupted leadership, and enabled sieving through non-reserve debt issuance. The mechanism over the years is leveraged buyout. The business cycle today largely runs on the ponzi cycle with debt issued upfront providing benefits upfront, followed by enshittification as the resource exhaustion cycle runs its course. Chaos is fundamentally destructive. Large societies don't implode when they have stable stores of value, a rule of law (not by law), and manufacture goods their populace needs. Market dynamics fundamentally fail to operate as a market under slave labor as a function of the cost function for the majority of participants. It doesn't matter if that labor is provided by a foreign power with costs socialized, or stolen through the currency through deficit spending. When you cannot know correct prices, everything falls apart at fundamental levels but you don't see it until its too late after which point the only thing you can do is start over; but existing structures under such systems seek control to the point of extinction. No one gives power up willingly, and those that have it seek to destroy the ability for others to take it. You can't ever make a consensus when a good portion of the people part of that consensus have become delusional, often without them even realizing it.
- boringg 5mo agoMMT - it was a flash in the pan pre-COVID during the "capital is infinite / ZIRP" era. It was used as a political tool to justify increasing deficits/debt. The challenge with this problem set is the timeline is tricky. At some point the bridge can only handle so much weight before it buckles and collapses but we don't know how strong the bridge is and we have no way of measuring it. MMT is the equivalent of saying the bridge doesn't have to worry about physics because (a) we said so and that the (b) bridge hasn't broken yet so its fine. It is a bad economic philosophy.
- stfp 5mo agoI’m not economist but my impression when I learned about MMT is that it’s predicated on the idea that money isn’t like bridges at all. And is actually at this point of history a purely abstract model where “we said so” works. Meanwhile lots of people really believe a country can “run out of money” or whatever. You run out of trees, teachers and nurses, not money. Anyway what’s clear to me is that the metrics we picked like gdp or debt ratio or whatever aren’t helping us make good choices.
- boringg 5mo agoIt is the epitome of hand wavy economic philosophy. If you think about the uber simplistic version of a credit card payment - now extrapolate to nation states where you have a myriad of debt types, debtors, swaps, much larger payments, longer timelines you can keep running your debt/deficit for a long time. However if you grossly outstrip your ability to pay at some point those incredibly complicated structures do buckle and trip the system. That the timeline is further than we thought doesn't mean it won't happen. MMT essentially says don't worry about it because it hasn't happened yet. We can spend our way out while trying to say our obligations are of little weight. It's a garbage economic theory - strictly to justify greater spending from our politicians. In time it will be proven out to be a failure of human thinking - it is a siren call.
- bryanlarsen 5mo agoThe epitome of hand wavy economic philosphy is thinking about the debt like a credit card.
- dfxm12 5mo agothe left says it’s fine when we spend the money on social programs. FWIW, for every dollar given to people for social programs like the child tax credit, they spend $1.50-$2 locally. This seems fine to me & it was popular country-wide. Meanwhile, we've gained nothing from the Iran war. We've obviously lost money and probably weakened our global standing and strengthened some of our enemies. It is also unpopular with the people. You don't have to "both sides" every issue. You can assume republican leadership is generally bad and don't have to give them the benefit of the doubt on issues you're not studied on. https://www.ncsl.org/state-legislatures-news/details/tax-credits-are-powerful-weapon-in-fight-against-poverty https://www.ncsl.org/state-legislatures-news/details/tax-cre... https://economicsecurityproject.org/resource/public-opinion-on-the-child-tax-credit/ https://economicsecurityproject.org/resource/public-opinion-...
- rich_sasha 5mo agoThe practical framing would be as two follow-up questions: what do the lenders care about? And what happens empirically when debt spirals? If lenders do nothing, then nothing really matters - keep borrowing and let your debt grow exponentially. In practice though, lenders, in their wisdom or folly, get spooked when debt goes up. In the Greek debt crisis, it all started with debt in the region of 130% of GDP. Rolling the debt with more debt spiralled away as lenders wanted an ever higher interest. So US would either need to start really inflating its debt and test the investors patience, print the cash and let inflation run away, or tax and cut spending. In the first scenario it kind of doesn't matter where the limit is - people sometimes argue about magic levels. The issue is that eventually the debt grows exponentially, so once it's out of control, it will exceed any reasonable level pretty quickly. Can the US convince the world that their debt is special? I'm not sure. My reading is that investors are already twitchy about US debt, for other reasons for now, but higher debt levels surely won't calm them down. So really I think the US has no better choice than to keep its debt down.
- bombcar 5mo agoEverything I've ever seen shows that problems in these areas happen very slowly, and then all at once. Previous similar (but totally different) situations ended in wars.
- throw0101a 5mo ago> If lenders do nothing, then nothing really matters - keep borrowing and let your debt grow exponentially. Lenders are currently doing nothing: that does not necessarily mean they will do nothing forever. Because should the lender actually do something eventually, the lendee may be in a world of hurt. The borrower probably does not get to the point when lenders start doing something.
- ndsipa_pomu 5mo ago100% of GDP is a level of debt that seems unlikely to be paid back, so presumably most lenders aren't considering whether they'll eventually get their money back, but instead are focussed on getting their interest payments. I suppose the crunch is when alternatives become a better mix of risk/return.
- iamnothere 5mo agoThe problem is that our political leaders don’t really understand economics, and they think you can pick and choose the parts of an economic system that you like while leaving the “bad parts” (the parts that don’t benefit our benevolent rulers) on the table. So we get MMT inflationary printing with military Keynesianism and Austrian austerity. None of these systems work if you only take a part of the system! Any of them would probably be viable, implemented properly with a good understanding and fine adjustments to account for reality, but you can’t mix and match!
- Henchman21 5mo agoThat is an issue, I agree. I think a larger issue is that the people in Congress are for the most part spoiled children. They're "cliquey" the way schoolkids are. Their politics is essentially "yelling across the playground at each other". Their entire existence is simply begging people for money on social media or "winning points" on ... you guessed it ... social media. These aren't serious people. The institution itself is damaged beyond all belief by this nonsense. We capped the number of seats in the house because ... we ran out of room for seats? Again, not serious people, not leaders. Spoiled children who sit on top of a hill deciding the outcome of our lives like they're toys. We need to begin again.
- rawgabbit 5mo agoIf we look at the worst case, the French Revolution, it started with a deeply indebted Louis XVI. Jacques Necker tried to restore investor confidence by publishing the Compte rendu au roi in 1781, which hid key expenses. This allowed the king to continue borrowing but did not fix the fiscal crisis. Attempts at tax reform failed due to resistance from the nobility and the clergy who paid nothing, leading Louis XVI to convene the Estates-General of 1789. Which triggered a series of events leading to the revolution. Revolutionary leaders seized Church lands and issued assignats to fund the state, but overissuance caused inflation. More durable financial stabilization came later under Napoleon Bonaparte through institutional reforms and, in part, revenues from military campaigns. He looted much of the wealth of the Italians who he “freed” from the Austrians. The insight I get is that the debt is similar to NIMBY. Local interests benefit from an ever increasing debt, but collectively we are all hurt by it.
- rayiner 5mo ago> The MMT folks think this is business as usual. The MMT folks think that, when inflation gets high, you need to raise taxes to take money out of the economy. The fatal flaw in that is raising taxes is politically impossible.
- tptacek 5mo agoI don't think there are any MMT'ers in any position of influence on either side of the aisle (I mean, obviously, they'd be on the Democratic side of the aisle, but you get what I mean). Among serious actors there's a universal agreement that the Democratic party's fiscal policy was mismanaged --- it's not fair to blame the whole situation on them, the GOP did their part and so did the universe, but they had the controls when it mattered. Nobody's going to make the mistake of blowing off inflation as an abstract concern again.
- ethbr1 5mo agoEvery political system forgets its lessons (inflation, war, disease, food, housing, wealth inequality) until reality eventually slaps it in its face again.
- tptacek 5mo agoSure, but time scales matter. Both sides (there will always be 2 under our structure) will inevitably forget how much voters absolutely hate inflation; that's how we get inflation. But it won't happen within the lifespan of the "MMT" fad; I think that lifespan may have already elapsed.