All Life Is Problem Solving

Joe Firestone’s Blog on Knowledge and Knowledge Management

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Who’s Going Rogue?

November 24th, 2010 · Comments Off

I laughed when I saw the title of Sam Stein’s piece about Democratic donors “going
rogue” on the President.

Seems to me the President’s the one who’s been “going rogue” on us since he got into office.

(Cross-posted at FireDogLake and Correntewire).

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The Real Solution to the “Fiscal Sustainability Problem”

November 24th, 2010 · 1 Comment

As I’ve blogged many times before, I don’t think there is a “fiscal sustainability problem” as the people who are presently deluging us with exhortations to bring the national debt and the debt-to-GDP ratio define it. That’s because I define “fiscal sustainability” in a different way than they do, as I’ve explained in another post. In this one, however, for the sake of argument, I’ll accept the deficit hawk/dove notion of “fiscal sustainability” and offer a different and, I think, much better solution to that problem than any of the deficit-reduction Commissions, groups, and individual members of these bodies are proposing to us now.

Fiscal Sustainability according to the deficit hawk/doves refers to: the annual Federal Deficit (the gap between Federal Spending and Federal Tax Revenues), the public National Debt (the accumulated inflation adjusted sum of deficits and surpluses since the inception of the Republic), and the debt held by the public to GDP ratio. People who write about this see things this way: continuing and growing deficits are a sign that fiscal sustainability is going down; continuing and growing increases in the national debt are a sign that fiscal sustainability is going down; an increasing debt-to-GDP ratio is a sign that fiscal sustainability is going down, and the problem of fiscal sustainability must be solved by at least stabilizing, and eventually, decreasing the debt-to-GDP ratio over time. [Read more →]

→ 1 CommentTags: Politics

Co-ordinated Around the Wrong Thing

November 24th, 2010 · Comments Off

Yesterday, R. J. Eskow remarked:

We expected to see an all-out assault on Social Security and progressive taxation in November, and we expected it to come under the banner of “deficit reduction.” That was always the plan: Wait until after the election, when a lame-duck Congress could pass the preferred policies with the least political blowback. Then release a flurry of like-minded proposals and supportive editorials to create the illusion of consensus, capped by a coordinated media blitz to pressure the President and Congress into accepting them.

But even we, battle-hardened as we like to think we are, didn’t expect the assault to be so coordinated, so widespread, or so aggressive. The number of like-minded reports released this month is greater than we expected, the ad buys are larger, and the range of ideas is narrower. And more journalists are carrying water for this campaign than we expected. All of this is being done to serve an anti-government, anti-Social Security, anti-tax agenda whose ideas are both unpopular and impractical. Nevertheless, the media’s greeted then with a tidal wave of nearly-unanimous praise (some of of which can even be found on the editorial page.)

[Read more →]

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The Very Idea of A Long-term Deficit Reduction Plan

November 24th, 2010 · Comments Off

This week and last we’ve seen the appearance of four plans for “deficit and debt reduction.” Erskine Bowles and Alan Simpson started things off by releasing their Co-Chair’s plan. At about the same time, the Peterson-Pew Commission on Budget Reform issued a plan on reform of the budgetary process designed to ensure that fiscal rules organized around specific debt-to-GDP ratio targets would be implemented. These plans were quickly followed by releases from Jan Schakowsky, and Alice Rivlin and Pete Domenici, on behalf of the Bipartisan Policy Center’s Debt Reduction Task Force.

The Peterson-Pew Commission Report is distinct from the other three in the sense that it lays out debt-to-GDP ratio targets and procedures for meeting these targets regardless of economic conditions. It’s about constructing a disciplinary framework for budgeting and expenditures that would bind Federal spending come what may. It’s neutral about where cuts would come from however, preferring to advocate an institutional framework for discipline rather than substantive spending reductions in particular areas. [Read more →]

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Stephanie Kelton and the Catfood Commission: “I know which scenario benefits me. Do you?”

November 24th, 2010 · Comments Off

In a beautifully simple post that should crystallize everything for you, Professor Stephanie Kelton of the University of Missouri at Kansas City crystallizes the logic of the Sectoral Financial Balance Model for President, Obama, the Catfood Commission, the deficit hawks and doves and you and me. She says:

In a ‘closed economy’ (one without foreign trade), the government’s budget position is, by accounting logic — the negative of the private sector’s (firms and households combined) position. Thus, a public sector DEFICIT is equal to the private sector’s SURPLUS. To the penny.

So, in a closed economy, a Federal Government budget deficit adds to private sector financial assets, while a Government surplus represents a leakage and subtracts financial assets from the private sector. Or more briefly, Government deficits make private individuals richer; Government surpluses make private individuals poorer. [Read more →]

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The Catfood Counter-narrative: The Fiscal Sustainability Teach-In Program

November 24th, 2010 · Comments Off

Pretty soon I plan to start blogging about the presentations and discussions emerging from the Fiscal Sustainability Teach-In Counter-Conference. But, first, I want to discuss the program design and its logic.

That design was basically a reaction to the framing of the deficit hawk messaging developed from the beginning of the Obama Administration. The Peterson Foundation and its allies, the President himself and some in his Administration, various Republican and Blue Dog Senators and Congresspersons, and the appointees to what has become known as the Catfood Commission, all assume that fiscal sustainability is about the national debt, the budget deficit, and the public-debt-to-GDP ratio. They also assume that too high levels of these can trigger a sudden move towards insolvency due to rapid rises in the interest rates at which Treasury bonds can be sold. Of course, they also assume that the Federal Government could reach a state where it literally runs out of money due to an incapacity to acquire it, rather than to incompetent human decisions by the Congress or the Executive refusing to create it.

Other assumptions often made by deficit hawks include: the claim that the Government can only acquire money by taxing or borrowing, so that like any household, it must “fund” its spending; the claim that the Government must “stabilize” its debt, by stabilizing the size of the public debt-to-GDP ratio; the claim that the Federal Government is like any household it governs and is subject to similar rules of budgeting; the claim that if we leave “heavy” public debts to our children and grandchildren, it will hamstring their ability to produce and/or consume and will harm their opportunity for a good life; the claim that the US can run out of money to pay our entitlement obligations; and the claim that “excessive” deficit spending can cause demand-pull inflation before the productive capacity of the economy has reached its limits. [Read more →]

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The Counter-narrative To the Catfood Commisson: More on “Our Guiding Principles and Values”

November 24th, 2010 · Comments Off

A few days ago I began a critique of the Catfood Commission Co-Chair Proposals draft, by focusing on a single slide of their presentation stating “our guiding principles and values.” There was enough objectionable material on that slide to justify a post. But there’s much more worth commenting on in the succeeding slides on the same subject. Slide 2 says:

2. The Problem Is Real –the Solution Is Painful –There’s No Easy Way Out –Everything Must Be On the Table –and Washington Must Lead

  • We must stabilize then reduce the national debt, or we could spend $1 trillion a year in interest alone by 2020.
  • A sensible, real plan requires shared sacrifice –and Washington should lead the way and tighten its belt.

[Read more →]

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Fiscal Sustainability Conference Videos and Transcripts Now Available

November 24th, 2010 · 1 Comment

On April 28, 2010, The Fiscal Sustainability Teach-In Counter-Conference was held at The Marvin Center of The George Washington University In Washington, DC. The Conference was first proposed in a post I blogged on April 7th at a number of sites including this one. A group of bloggers responded and collectively, using primarily the Correntewire.com and fiscalsustainability.org sites, we built a team that, with the support of our fine speakers, Professors Bill Mitchell, Stephanie Kelton, Pavlina Tcherneva, and L. Randall Wray, and international financial consultants Warren Mosler and Marshall Auerback, and fund raising through Howie Klein, the whole Blue America team, and many small contributors successfully organized the Conference in a little more than three weeks time, so that we could hold it on the same day as the extremely well-funded, Peterson Foundation-supported Fiscal Summit, which delivered the deficit hawk narrative on fiscal sustainability and fiscal responsibility. The purpose of our Conference was to provide an explicit counter-narrative to the Fiscal Summit “story” of long-term deficit problems that the United States must act to counter; and also to the narrative of the National Commission On Fiscal Responsibility and Reform (the “Catfood Commission”) which had held one of its early meetings the day before. [Read more →]

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Bill Mitchell on the Co-Chairs’ Proposal

November 23rd, 2010 · Comments Off

I blogged on the opening slide of the Catfood Commission Co-Chairs’ Proposal just a couple of days ago, so when I checked out BillyBlog, as I do almost everyday, last night, I was particularly pleased that a part of his great post was devoted to the same slide I commented on. I’d like to dialogue with Bill’s treatment now, both for fun and also to introduce my readers to not just the substance, but the flavor of Bill’s views on austerianism, the increasingly serious threat to the well-being of both working Americans and the world’s working people.

In my estimation, Bill is one of the world’s leading economists practicing right now. And with Warren Mosler and L. Randall Wray he forms what I think of as the big three of the Modern Monetary Theory (MMT) movement in economics. In these times when so-called “progressives” talk about the “Catfood Commission” in grave tones, as if it is trying to deal with a serious and intractable problem employing great intellectual and moral courage, when what it is really doing is addressing a manufactured issue, employing old economic theories that were discredited in the 1930s, with monumental stupidity to boot, it’s very important to have a real humanist like Bill on the side of working people everywhere. [Read more →]

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Constitutional Crisis Over Debt Ceiling? Does the Government Have To Shut Down?

November 23rd, 2010 · 3 Comments

Recently, my friend Marshall Auerback posted an article at New Deal 2.0 about Obama’s coming “teachable moment” when the Republicans try to wring concessions out of the Democrats by refusing to raise the ceiling on the national debt. The post stimulated a lot of good discussion about alternatives Obama might have to shutting down the Government in response.

In this post, I want to raise the question again about what what might happen if the Republicans refuse to raise the debt ceiling, preventing the Federal Government from issuing any more debt, because I think we can get some interesting discussion started here, and perhaps might come up with something that would short-circuit the coming Congress. Here are some considerations from the discussion on Marshall’s post that may prompt that discussion. [Read more →]

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