Here are some truths about the deficit that need to be understood by this group of CEOs:
An MMT Fiscal Responsibility Narrative: Some Truths
By Joe Firestone - New Economic Perspectives
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– Since the US Government has no limits on its authority to create/spend money other than self-imposed ones, neither the level of the national debt, nor the debt-to-GDP ratio can affect the Government’s capacity to spend Congressional Appropriations at all. That’s why a fiscal policy that measures its success, not by its policy impacts, but by its success or failure in reducing deficits isn’t fiscally responsible, or likely to be sustainable.
– The Federal Government is not like a household! Households can’t make their own currency and require that people use that currency to pay taxes! So, their supply of dollars is always limited; while the Government’s supply is a matter of its decisions alone.
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– Austerity cannot work in the United States economy because budget surpluses, defined as tax revenue exceeding spending, destroy net financial assets in the private sector. Unless, these financial assets are replaced through revenues acquired by running a trade surplus; the continuous loss in net financial assets by the private sector is unsustainable, eventually leading to credit bubbles, recession or depression, and the return of deficit spending. For a Government and economy like the US, with both a trade deficit and a substantial output gap, evidenced by high unemployment and under-employment, a policy of deficit reduction aiming toward budget surpluses (austerity) is destructive and will only push the economy further into recession or depression.
– REAL Fiscal Responsibility is a pattern of fiscal policy intended to achieve public purposes, while also maintaining or increasing fiscal sustainability viewed as the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purposes.
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So, current claims that we have a fiscal crisis, must debate the debt, must fix the debt, and must immediately embark on a long-term deficit reduction program to bring the debt-to-GDP ratio under control, all misconceive the fiscal situation because they are based on the idea that fiscal responsibility is about developing a plan to bring the debt-to-GDP ratio “under control,” when it is really about using Government spending to achieve outputs that fulfill “public purpose.” There is no fiscal crisis that will require “a Grand Bargain” and cuts to popular discretionary spending and entitlement programs. It is a phoney issue.
Read the whole essay here