The deflation plot on social security
Inflation is not a problem. The economy is in a depression. The historic low yields on Treasuries indicate an appetite for high-quality liquid assets. The Fed should satisfy that need by issuing more debt, selling more Treasuries, increasing inflation expectations. That would increase spending and pull the economy out of the doldrums. Instead, Bernanke preaches austerity, because the real objective is political–dismantling Social Security and other popular programs. Bernanke (a Republican) has aligned himself with the GOP and Wall Street who seek to bury Obama in the midterms by trashing the economy, keeping unemployment high, and increasing the prospect of another vicious downturn.
Todd Boyle:
See Money as Debt, a film by Paul Grignon. It does a good job explaining the problems with an economy based on debt money.
http://www.moneyasdebt.net/ and watch it online, http://video.google.com/videoplay?docid=-2550156453790090544#
What we want is NOT more debt. We want fiscal stimulus, not monetary stimulus. And that’s exactly what the USG is doing, with huge deficit spending. They don’t dare to do otherwise, they have no choice. Even if they raise taxes on the rich, that money would ALSO need to be poured back into the economy.
The real battle is to break out of paying endless interest to global financiers, when the USG prints money. I am a fan of the American Monetary Act, check it out.
15 July 2010, 3:10 pmHenry:
Voters Say To Hell With Deficit Reduction, Help The Unemployed
Two national polls released Tuesday revealed that registered voters think it’s more important to help the unemployed than to reduce the deficit.
Voters are generally wary of government spending to boost the economy, but they nevertheless told ABC News and CBS News that the deficit is no reason not to help the unemployed.
Fifty-two percent of voters told CBS that Congress should extend unemployment benefits “even if it means increasing the budget deficit,” including 35 percent of Republicans. Sixty-two percent of registered voters told ABC Congress should extend benefits despite concerns that doing so “adds too much to the federal budget deficit.”
In a Bloomberg survey, 70 percent of voters said reducing unemployment is more important than reducing the deficit. But only 47 percent said Congress should reauthorize extended benefits, which in some states provided the unemployed with up to 99 weeks of checks.
More:
http://www.huffingtonpost.com/2010/07/14/unemployment-deficit-polls-voters_n_646600.html
15 July 2010, 3:34 pmHenry:
Deficits Do Matter, But Not the Way You Think
Tuesday, 07/20/2010 – by L. Randall Wray
Budget deficits and government spending are necessary to end today’s crisis.
In recent months, a form of mass hysteria has swept the country as fear of “unsustainable” budget deficits replaced the earlier concern about the financial crisis, job loss, and collapsing home prices. What is most troubling is that this shift in focus comes even as the government’s stimulus package winds down and as its temporary hires for the census are let go. Worse, the economy is still-likely-years away from a full recovery. To be sure, at least some of the hysteria has been manufactured by Pete Peterson’s well-funded public relations campaign, fronted by President Obama’s National Commission on Fiscal Responsibility and Reform — a group that supposedly draws members from across the political spectrum, yet are all committed to the belief that the current fiscal stance puts the nation on a path to ruinous indebtedness. But even deficit doves like Paul Krugman, who favor more stimulus now, are fretting about “structural deficits” in the future. They insist that even if we do not need to balance the budget today, we will have to get the “fiscal house” in order when the economy recovers.
More:
http://www.newdeal20.org/2010/07/20/deficits-do-matter-but-not-the-way-you-think-15355/
20 July 2010, 10:50 amMarcilla Elizabeth Smith:
I love when people talk about “when the economy recovers” as if it were a given fact like gravity or something. I like to think that every time they say that, we are that much closer to total system failure (and, of course, the ensuing restructuring phase)?
20 July 2010, 9:38 pmMarcilla Elizabeth Smith:
Dear mod, That wasn’t supposed to be a question mark, but apparently the website don’t like unicode (at least outside html).
20 July 2010, 9:39 pmHenry:
Wednesday, July 21, 2010
Deficit Doves Meet the Deficit Owls
By Paul Davidson, James K. Galbraith and Lord Robert Skidelsky
** First published at New Deal 2.0
On July 19, The Daily Beast published a piece by Harold Evans, Joseph Stiglitz, Alan Blinder, Robert Reich and others, urging greater fiscal stimulus in the short-term and renewed fiscal discipline over the medium- and longer-term horizon. A number of bloggers on this site were asked to support their deficit-dove petition. We declined, and so did the three wise owls who wrote the following statement, which first appeared at New Deal 2.0.
“We three were each asked to sign the letter organized by Sir Harold Evans and now co-signed by many of our friends, including Joseph Stiglitz, Robert Reich, Laura Tyson, Derek Shearer, Alan Blinder and Richard Parker. We support the central objective of the letter — a full employment policy now, based on sharply expanded public effort. Yet we each, separately, declined to sign it.
Our reservations centered on one sentence, namely, “We recognize the necessity of a program to cut the mid-and long-term federal deficit…” Since we do not agree with this statement, we could not sign the letter.
Why do we disagree with this statement? The answer is that apart from the effects of unemployment itself the United States does not in fact face a serious deficit problem over the next generation, and for this reason there is no “necessity [for] a program to cut the mid-and long-term deficit.”
On the contrary: If unemployment can be cured, the deficits we presently face will necessarily shrink. This is the universal experience of rapid economic growth: tax revenues rise, public welfare spending falls, and the budget moves toward balance. There is indeed no other experience in modern peacetime American history, most recently in the late 1990s when the budget went into surplus as full employment was reached.
We agree that health care costs are an important issue. But health care is a burden faced by both the public and private sectors, and cost control is a job for health policy, not budget policy. Cutting the public element in health care – Medicare, especially – in response to the health care cost problem is just a way of invidiously targeting the elderly who are covered by that program. We oppose this.
The long-term deficit scare story plays into the hands of those who will argue, very soon, for cuts in Social Security as though these were necessary for economic reasons. In fact, Social Security is a highly successful program which (along with Medicare) maintains our entire elderly population out of poverty and helps to stabilize the macroeconomy. It is a transfer program and indefinitely sustainable as it is.
We call on fellow economists to reconsider their casual willingness to concede to an unfounded hysteria over supposed long-term deficits, and to concentrate instead on solving the vast problems we presently face. It would be tragic if the Evans letter and similar efforts – whose basic purpose we strongly support – led to acquiescence in Social Security and Medicare cuts that impoverish America’s elderly just a few years from now.”
Paul Davidson is the Editor of the Journal of Post Keynesian Economics and author of “The Keynes Solution.”
21 July 2010, 4:09 pmJames K. Galbraith is a Professor at The University of Texas at Austin and author of “The Predator State.”
Lord Robert Skidelsky is the author, most recently, of “Keynes: The Return of the Master.”