All Life Is Problem Solving

A little more than three weeks ago on April 7, I posted an idea here, here, and here, calling for a Teach-In Counter-Conference on April 28th to oppose the message of austerity in social programs being formulated by the President’s National Commission on Fiscal Responsibility and Reform, and The Peter G. Peterson Foundation, by bringing forward an alternative message based on a coherent economic approach. That approach has acquired the name Modern Monetary Theory (MMT) over the years. [Read more →]

The Fiscal Sustainability Teach-In Counter-Conference happened at The George Washington University’s Marvin Center on Wednesday. It was held in the amphitheater at The Marvin Center and was sponsored and given strong support by the University’s Department of Management and the wonderful Marvin Center Staff. Blogs on the Teach-In Counter-Conference have already appeared here, here, here, here, here, here, here, here, and here, and others will be coming very soon covering different aspects of the event. Also, audio, video, presentation, and other web artifacts will be forthcoming over the coming days.

We want to begin to get these to you as quickly as we can, so that the answer to the Administration/Peterson Foundation message will be widely available. So, selise, a blogger on the fs.org team who contributed mightily to the success of the Conference, has kindly posted the first of these on her netrootsmass.net blog. Later, they will also be available at fiscalsustainability.org, when our web master and blogger, Lambert returns from live blogging the Teach-In.

(Cross-posted at Fiscal Sustainability and correntewire.com).

Deficit hawks in the United States envision a day when the United States Government will go broke, unless we curb government spending on entitlements. Well, governments can go broke in the sense that they can run out of money they need to pay their debts. But not all governments. Only governments whose monetary systems are commodity-based, such as those on the gold standard; those using fiat money, whose official fiat currency is issued by supra-ordinate authorities, and those who owe debts in a fiat currency issued by another governmental authority, can go broke.

But governments issuing their own fiat currency, subordinate to no higher authority, and owing no debt to anyone else in a currency other than its own can never go broke, or put another way, become insolvent. Because all they need to do to spend money is to issue credits to non-governmental sector accounts in banks, and all they need to do to pay back other Governments who have lent them their own currency, is to credit the accounts of the lender Governments in that currency, an action which they have full authority to do, absent any political constraint they have placed on themselves. We call such Governments “sovereign” in their own currency. And because they have this kind of sovereignty, they also have flexibility to facilitate economic activity to accomplish public purposes that Governments without that kind of sovereignty don’t have. But with that fiscal flexibility also comes fiscal responsibility – the responsibility to use the operationally unlimited spending power of an economically sovereign government to use that spending power for public purpose and not for private gain.

One of the Governments that fit these criteria and so can never go broke is the US Federal Government. Other common examples are Japan, Australia, New Zealand, Canada, Brazil, Argentina (though it was not always so), and the UK. Governments that don’t fit these criteria and that can go broke include the nations of the EU, such as Greece, Portugal, Spain, and Italy. Even France and Germany can go broke, since they no longer issue their own currency. Other examples include all those developing nations with loans from the IMF, the World Bank, and other international authorities that must be paid back in US Dollars, a currency they cannot issue; as well as state, local, provincial, and other governments subordinate to a super-ordinate currency-issuing authority such as California.

Most governments that are sovereign in their own currency haven’t been fiscally responsible in a very long time. While some have performed better than others in seeking and achieving public purposes, most have continued to act as if they are constrained by the gold standard, and have attempted to either reduce spending at the expense of the less well off, or to fail to pursue programs for full employment, or to fail to make enough investments that will fulfill other public purposes. In most of these cases, deficit hawkism and specifically the desire to either reduce deficits, or to balance budgets, has trumped the desire to fulfill public purposes.

In short, governments sovereign in their own currencies have been acting like governments on the gold standard, or those who owe debts in currencies they don’t issue. They have been acting in a fiscally irresponsible way given their fiat monetary systems, while at the same time claiming to be fiscally responsible. They can get away with this, because very few people make the distinction between governments sovereign in their own currency and governments that are not. And even fewer go on to recognize that what may be fiscally responsible for gold standard governments, or governments that are not economically sovereign, is most certainly fiscally irresponsible for economically sovereign Governments.

In systems where governments are economically sovereign like the United States, it is a big mistake to measure how the nation is doing by using deficit, the national debt, or debt-to-GDP ratios. Those measures, in fact, are the wrong things to measure, since the government is a scorekeeper that can always credit accounts when it needs to spend or pay what it owes or even set interest rates by flooding the market with reserves and driving short-term interest rates down to zero. In such systems, the money is always there for the non-governmental sector, not in the sense that the government has accumulated some physical stock of it, but in the sense that the Government can always spend or pay back by crediting accounts, regardless of any physical stock it may have.

In such systems, fiscal responsibility is not about what the Government has accumulated either in debt or in surpluses, what it is about, however, is the Government’s success in spending on worthwhile things that produce actual value, rather than spending on worthless outcomes.

Issues about governments sovereign in their own currencies, as well as many others will be addressed, and answered at the Fiscal Sustainability Teach-In Counter-Conference. It will be the answer to the Administration’s latest attempt to orchestrate a political process that will result in transferring more wealth from the middle class and the poor to the very well-off and the corporations.

Bloggers are picking this event up all over the netroots as are PR services. There’s also quite a twitter buzz about this. Search on “fiscal sustainability” and you’ll see it.

On Sunday night or Monday, perhaps before, a front page post at The Huffington Post by Lynn Parramore, will contain brief common sense statements by 8 economists, 7 of whom are speakers at the Conference on the primary myths in fiscal sustainability. Don’t miss that post. Don’t miss the Teach-In Counter-Conference. Help if you can. Follow-up afterwards by watching the youtubes and the documentary therealnews.com will be making about the event.

Carry the anti-deficit hawk message of the event. Since the United States Government is sovereign in its own currency: We. Are. Not. Running. Out. Of. Money. The. Money. Was. There. All. Along. The. Money. Is. There. Now. The. Money. Will. Be. There. Tomorrow.

Let’s make this the start of a movement that sweeps The Peterson Foundation, and the deficit hawks aside, and that forces this Administration to end this recession and rebuild our nation. Here’s the event web site with all kinds of information about it, our speakers, the issues being addressed, press releases, schedules, location, associated blogs and so on.

(Cross-posted at Correntewire and Fiscal Sustainability).

The administration’s roll-out of its austerity program for Americans fits a pattern we saw in health care reform, in the run-up to the Stimulus bill, in cap-and-trade, in financial reform, whatever. The Administration always operates from the top down, and then tries to mobilize support from the bottom. It decides what it wants to do and then brings interest group/think tanks like the Peterson Foundation to bear to reinforce its narrative in the non-Government sector. The think tanks collaborate with the Administration to set the parameters of public debate in the media. Much of the netroots joins the chorus. If needed parts of the public are mobilized to support the received view through Administration-friendly “progressive” organizations, and real solutions to real problems get shut out of sight and out of mind.

In the fiscal responsibility/reform drive the narrative is that we (the US Government) will run out of money (US Dollars), and won’t be able to borrow it, because interest rates will be too high; or get it through taxation, because raising taxes is deflationary. So the only way not to run out and leave some dollars for our children is to cut Government spending and at least decrease the debt-to-GDP ratio. [Read more →]

When people introduce a new meme into politics, their standard operating procedure is often to just start talking about some label, say that it’s a problem, make various dire predictions, and then keep writing more and more screeds to try to get everyone else to think that it’s a problem. The meme or label used in campaigns like this is value loaded in some way, and the label often has little to do with what the writer is talking about, because the label is rarely explicitly defined and journalists, pundits, or commentators think it’s very pedantic and academic to start talking about definitions. Pretty soon after a process like this gets going, there’s very little connection between a label and what is being talked about under that label. So it is with fiscal sustainability. [Read more →]

[Give BDBlue some comment love at OL! –lambert]

My friend Ralph writes about the fiscal sustainability issue:

Real. Simple (but accurate). Language. Why should people be scared about the Peterson agenda? What are they trying to distract the public’s attention from? What do the American people deserve from their government’s economic policy? Why is this not “leftist” but in fact mainstream — even conservative — anywhere else in the world?

”Explain it like you’re talking to my grandmother. Make it real, real simple, especially given that she’s dead.”

So, here goes. Let’s have a dialogue with Grandma, but with a real live and skeptical one, who’s far from dead yet. [Read more →]

Background

Fiscal sustainability is very much in the News these days because of the activities of the President’s National Commission on Fiscal Responsibility and Reform, The Peterson Foundation’s very vigorous efforts to present a point of view on fiscal sustainability that reinforces and expands the outlook of the National Commission’s statement of purpose, The Washington Post’s continuing expression of the deficit hawkism point of view, and CNN’s “news alliance” with The Peterson Foundation. All this and more is part of a steamroller being formed to ensure that only one point of view on fiscal sustainability, namely a neo-liberal point of view dominates the landscape of public discussion.

When that sort of thing happens, as it did in the health care debate, the people suffer, because any policy, based on an alternative framing of the fiscal sustainability problem, is immediately off the table of policy consideration because it is outside the frame of “legitimate debate.” Let’s not let that happen with fiscal sustainability. Let’s keep a number of frames under consideration, so that we can consider all fiscal sustainability policies that might work. The test we use to determine whether a policy will work needs to be an evaluation of its consequences; not an evaluation of whether it’s outside a dominant frame of ideology. [Read more →]

A little more than a week ago, I proposed a Fiscal Sustainability Teach-In and Counter-Conference to be held in Washington, DC as a response to the First Meeting of the Administration’s National Commission on Fiscal Responsibility and Reform, sardonically called by some the “steal our retirements commission,” on April 27th. The Counter-conference would also be a response to the Conference scheduled by The Peter G, Peterson Foundation’s (PGPF’s) “fiscal summit” on April 28th. This conference will be full of notables but won’t include even a single economist who doesn’t share the neo-liberal view of fiscal sustainability, centered around budget deficits, the national debt, and the debt held by the public to GDP ratio. The PGPF Conference, some powerful Senators and the President’s commission are spearheading a very broad-ranging campaign to persuade the American people that austerity is necessary for ordinary Americans (as if we haven’t had enough of that since the crash of 2008), including cutbacks on entitlements while, at the same time, the same people do all they can to preserve one of the periodic “great barbeques” in American history where well-off people accumulate immense wealth by looting the few resources owned by working people. It’s the purpose of the teach-in Counter-conference to oppose this deficit hawkism point of view with a alternate new economic paradigm offered by Modern Monetary Theory (MMT) that offers opportunity, balanced growth, and public purpose, in place of austerity, private irresponsibility, and hopeless Hooverism. [Read more →]

The purpose of the President’s recently constituted National Commission on Fiscal Responsibility and Reform as stated in Section 4 of the President’s Executive Order establishing the Commission is:

Sec. 4. Mission. The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the Commission shall propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. This result is projected to stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers. The magnitude and timing of the policy measures necessary to achieve this goal are subject to considerable uncertainty and will depend on the evolution of the economy. In addition, the Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.

Key words/phrases in this statement are: “fiscal situation,” “fiscal sustainability,” “balance the budget, excluding interest payments on the debt, by 2015,” “stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers,” policy measures subject to uncertainty depending on the evolution of the economy,” and changes “that meaningfully improve the long-run fiscal outlook,” and “the gap between the projected revenues and expenditures of the Federal Government.” How are these related to each other?

[Read more →]

On April 28, 2010, the Peter G. Peterson Foundation is sponsoring a “Fiscal Summit” in Washington, DC. The purpose of the Conference, which is scheduled for the day after the first meeting of the President’s recently constituted National Commission on Fiscal Responsibility and Reform (btw, where the Conference is happening is a mystery not cleared up on the PGPF web site) is:

”. . . to further a national dialogue on solving America’s fiscal challenges through several moderated discussions with leaders on the issue from across the political spectrum. In addition to President Bill Clinton, who will be interviewed by George Stephanopoulos, we will hear from a range of experts, including Paul Volcker and Alan Greenspan, Former Chairmen of the Federal Reserve; Bob Rubin, Former Secretary of the Treasury; Alice Rivlin, former OMB Director and Member, National Commission on Fiscal Responsibility and Reform; Senator Judd Gregg (R-NH), Member, National Commission on Fiscal Responsibility and Reform; John Podesta, President and CEO of the Center for American Progress; John Castellani, President of Business Roundtable, and others.”

[Read more →]