Last month, the US passed through a politically created fiscal crisis; commentators were suggesting that for the third time Congress would cause the Federal Government to run out of cash and default on bond and salary payments, and 3rd party bills for goods and services. This is a tactic pursued by those who don’t like government expenditure unless its on arms. I argue that there were three ways that the Government could have sidestepped this piece of legislative extortion. The most amusing route would be to mint a $1Tn coin. I conclude, overleaf, by arguing that, progressives should be wary, this idea of legislating, or embedding fiscal policy in treaties or constitutions is designed by people who support the founding fathers, who while they opposed taxation without representation, were almost equally opposed to taxation with representation. NB The EU’s stability and growth treaty commits its signatories to a level of national debt and a level of national deficit. They need to change this, these decisions need to be under democratic control. There's [much] more overleaf ... ...
Fiscal credibility, ptui!
Yesterday, I went to a meeting on Brexit, Free-movement and immigration; conversation in the bar afterwards segued from, “why did a Corbyn led PLP argue to abstain on the Tories Immigration Act?” via a post match analysis of Lewisham Deptford’s Brexit/Anti-Brexit meeting to consider the radicalism of Labour’s 2017 Manifesto and the development of macro economic policy since then; it doesn’t do so well when compared with the Corbynomics of 2015. One of the key developments since then has been the development of Labour’s Fiscal Credibility Rule, which promises to only borrow to invest.
To those who think this is smart, I ask why so-called current account spending on education is not seen as “investing” in Human Capital, but this is not it’s main problem. …
Beyond People’s QE
A day or two ago, Alex Little, published a blog post called ‘Lessons for Corbyn in “Lerner’s Law”’. Lerner’s law suggests that using your opponents language limits your ability to make the argument. Little quotes Bill Mitchell, the inventor of Modern Monetary Theory (MMT) as to how Labour’s leadership in articulating the Darling Plan and its successors talk about balancing the budget and fixing the deficit concede the argument to the Tories. Little’s article also points at Lerner’s economic theories, described as “functional finance” and points at the wikipedia article on it. He argues that by describing the proposed pump priming as PQE, and accepting that when growth takes off, the government may transition to bond financing, by even accepting that we need to live within our means, the theory and benefits from the a more overt radical financing will be lost. …