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Is Obama Screwed?

by Dan Kervick 5/6/2012 - 2:18 am

If you asked me a few months ago, I would have said - and did - that Obama would win easily.

But with 8.2% unemployment and continuing decline in labor force participation, and with the general level of misery, and with the economic numbers now headed in the wrong direction again, I think Obama has left a massive truck-sized hole that even Herbert Hoover could drive through.

I'm starting to think he's toast.  The line that he saved the country from a depression that would have been worse isn't going to fly.  Krugman says we're still in a depression. [Read more]

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Developing Nations

by Dan Kervick 5/4/2012 - 2:04 pm

Matt Yglesias has described three popular contemporary political approaches to the challenge of maintaining our national commitment to “providing health care services to the elderly, the disabled, and the poor and also to bolstering the general incomes of elderly people.”  One is Congressman Paul Ryan’s approach of reducing the level of the future commitment in order to bring it in line with “historic norms about the level of taxation.”  The second is the liberal approach of preserving our existing level of commitment into the future, even if that means raising taxes in the aggregate.  The third is “the hazy Obama/Simpson-Bowlesish center that wants to raise taxes and cut programs.”

Perhaps this short list characterizes the main political answers reasonably well, if the main political question is how to tame the budget, and shrink or control the deficit.  But I would like to point out that all three answers have something in common:  Not a single one of these approaches, as usually presented, contains any call for the national government to engage seriously in what one might call “investing in our future”.  All three of them reflect the defeatist mindsets of different camps of worn out oldsters, each promoting a different way of giving up, making do, or just hanging on.  They are all pathologies of the dismal “No, we can’t!” era in which we now live. [Read more]

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Why Does Uncle Sam Borrow?

by Dan Kervick 4/26/2012 - 11:58 am

The Unites States government operates a fiat currency system.  The government is therefore the monopoly supplier of the final means of payment in our dollar-based economy, and is ultimately responsible, in one way or another, for any net increase in dollar-denominated financial assets in the private sector.

And yet, we continue to hear bipartisan expressions of fear and angst about the budget deficit and the national debt.  Both major parties seemingly agree that we are “out of money”.   They wrangle over various competing approaches to shrinking the gap between tax revenues and government spending.  They appoint commissions to study the government budget and recommend some combination of slashed spending and higher taxes in order to close that budgetary gap.   They warn us that we will transform ourselves into banana republic status if we do not urgently address our public debt problems.

This situation should be perplexing.  Why does a government that is the issuer of the national currency have to borrow that currency back from the public to which the currency is issued?   And how could such a government ever experience the kinds of budgetary squeezes and debt burdens that can pose severe problems for households and businesses?

I wish to make a radical suggestion:  Public borrowing is an outdated practice, and we could dispense with it entirely. [Read more]

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The Political Path to Full Employment

by Dan Kervick 4/6/2012 - 12:35 pm

Paul Krugman argues in a recent New York Times column  that right-wing critics of Ben Bernanke and his colleagues are trying to bully the Fed into a misguided obsession with inflation, and that “the truth is that we’d be better off if the Fed paid less attention to inflation and more attention to unemployment. Indeed, a bit more inflation would be a good thing, not a bad thing.”

Krugman is absolutely right to lament conservative pundits’ and politicians’ obsessions with inflation when tens of millions of Americans are languishing in unemployment, with all of the personal, social and economic misery and waste that unemployment entails.  But his argument, which assumes that the Fed can boost employment by engineering higher inflation, is problematic.  He defends the inflationist approach this way:

“For one thing, large parts of the private sector continue to be crippled by the overhang of debt accumulated during the bubble years; this debt burden is arguably the main thing holding private spending back and perpetuating the slump. Modest inflation would, however, reduce that overhang — by eroding the real value of that debt — and help promote the private-sector recovery we need. Meanwhile, other parts of the private sector (like much of corporate America) are sitting on large hoards of cash; the prospect of moderate inflation would make letting the cash just sit there less attractive, acting as a spur to investment — again, helping to promote overall recovery.”

I believe this is the wrong approach.  The Fed’s ability to boost employment is very limited, well-intentioned citations of the Fed’s full employment “mandate” notwithstanding.  Rather than looking to central bankers and the banking system to accomplish a task for which they are not really cut out, we should turn our attention back toward fiscal policy as the primary tool for bringing the country up to full employment and keeping it there.   And rather than seeking engineered inflation as the mechanism for boosting spending and employment, we should implement the MMT job guarantee proposal to achieve full employment and price stability at the same time.

... Read the rest at New Economic Perspectives [Read more]

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Bring Back Fiscal Policy

by Dan Kervick 4/4/2012 - 1:01 pm

The recent exchange on the nature of banking among Paul Krugman, Scott Fullwiler, Steve Keen and others has been feisty and instructive.  But some readers might be left wondering whether the whole exercise is too wonky by half.   The anatomical details of banking systems might be juicy and interesting for the academics who like to dissect those systems and dig deep into their entrails.  But how significant are the details for practical questions of public policy?  They are in fact very significant.

The functional details of institutions matter, and without understanding how the banking system actually works it is impossible to distinguish causes from effects in our attempts to guide that system toward the service of the public good.  Conventional textbook models of banking and monetary systems are responsible for widespread commitment to the money multiplier and loanable funds models of the relationship between central bank reserves and the volume of bank lending.  Relying on these models, some prominent economists and pundits have been telling us throughout our recent economic crisis that we can address the problems of a stagnating economy and persistently high unemployment with the reserve management tools of monetary policy alone.

Read the rest at New Economic Perspectives [Read more]

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A Profound Interrogation of the Correct Liberal Response to the Gathering Mormon Threat

by Dan Kervick 2/7/2012 - 11:25 pm

I don't want to talk about high principles like freedom of religion in America and what our civil compact on religious questions means for the way we should conduct presidential elections.

I just want to talk about the fact that I never realized liberals had so many sticks up their asses about Mormons.

Maybe I've missed something.  Mormons sound dangerous.  Is there a temple or community center going up somewhere that I can protest?  I have now obtained a stick and will do my best to insert it into my rectum along with everyone else.  But I'm kind of a natural born tightass, so it might not fit in there with all the other sticks I carry around. [Read more]

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Doing What Needs to Be Done: Facing the Future with Full Employment and a Renewed Public Sector

by Dan Kervick 2/2/2012 - 9:35 pm

As you read this, millions of Americans who desperately want to work either cannot find employment at all, or cannot find the quantity and quality of work they need to meet their own needs and the needs of their families.  This is real suffering.  The unemployed are real flesh-and-blood people, not just fractions of percentage points on Labor Department spreadsheets.

At the same time, we have tremendous unmet social needs.  Any well-informed high school student can point to large, daunting national challenges that we sorely need to address, but that we are not addressing with anything approaching the urgency and commitment that the gravity of the challenges would seem to demand of us. [Read more]

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Public Money for Public Purpose

by Dan Kervick 1/4/2012 - 5:34 pm

A new year is upon us.   And even before its first hour has been rung in, 2012 is already taking shape before us as a pivotal year in global politics.   We can all feel the awakening under way.   A revived longing for equality, shared prosperity and democratic solidarity is inspiring a vibrant new politics around the world.   This new activist spirit is quickened by the keen apprehension of young people on every continent that something is very, very wrong with the present economic and political order.   The rising generation, heirs to sick and damaged societies that have been unbalanced by decades of plutocratic rule and antisocial cupidity, have now begun to rouse themselves - and in the process they have rallied the moral outrage of t [Read more]

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Send the One Dollar Message

by Dan Kervick 12/10/2011 - 10:28 pm

[One of the OWS-related sites I visited has been soliciting suggestions for actions to further support the movement. I posted a briefer version of the following suggestion:]

Send the One Dollar Message

Give one dollar (or one euro, or one peso, or ... etc.) to one person of your own choosing. If you give it to your friend Sarah W., write somewhere on the dollar, "Sarah W. is more important than this dollar." If you give it to a stranger write, "Brother, sister, you are more important than this dollar." [Read more]

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Capitalism

by Dan Kervick 12/9/2011 - 1:58 pm

... It doesn't work.   It is a morally ugly and economically inefficient system that is incapable of guaranteeing fairness and a decent, dignified life for the majority of people living under it.  It undermines human dignity and depraves the human spirit.    It is also incapable of generating rational solutions to significant social challenges of any scope.

It needs to be changed.  Suggestions?

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