Saturday, September 27, 2014

Pruning Shears — Why Modern Monetary Theory is a dicey bet for liberals

Political and economic elites have a pretty good track record of co-opting movements. One that has the enormous wiggle room of Modern Monetary Theory’s non-monetary theory components could be immediately put in their service, without even a brief period of progressive utility. 
That’s why I think it is better to make the case for liberal policy up front, instead of obscuring it behind a Rorschach test presented as a monetary theory. Make the case for a job or income guarantee, or better funding of social programs, or what have you, make that case directly. If anyone asks how to pay for it, MMT. But lead by arguing in terms of justice and equity. Modern Monetary Theory is the details, and details belong in the background.
Well, I'd say that the strategy is good but the tactics not well conceived. I'd rather lead with policy than the wonkiness of monetary economics. However, a major reason in the way of progressive policy being taken seriously is the belief in the false government as big household or firm analogy.

Without addressing the funding concern, progressive arguments are going nowhere. A lot of the political push for fiscal "discipline," getting the deficit under control, reducing the national debt, and, on the left, taxing the rich to pay for the welfare state, is coming from a public that believes that taxes and borrowing are needed to pay for expenditure. It's just not possible to have an intelligent policy debate without addressing funding concerns.

It's not a tough sell. Clearly in a fiat system, the government creates its funding through currency issuance. Anyone can easily see that. They can also see that the existing system based on funding specific programs with taxes, borrowing, or cutting other programs makes no sense.

It's true that the monetary description that MMT provides can be used by left and right. But at present only the top of the town knows this and is using this knowledge to its own advantage. The desire for at least some aspects of the welfare state are bipartisan at the popular level. It is the ruling elite that is frustrating the desires of the people and obfuscating by sophistry like the government as household analogy that even President Obama has used — the meme that America is going bankrupt.

This is designed to create fear, uncertainty, and doubt in order to bias the policy debate. MMT to the rescue!

Pruning Shears
Why Modern Monetary Theory is a dicey bet for liberals
Dan


8 comments:

Tyler Healey said...

It's a good thing I'm not a liberal. I want there to be absolutely no chance of anyone associating me with the Liberal Party of Australia.

danps said...

Hi Tom. Thanks for the link and the commentary.

Your points are well taken. A couple things.

"It's just not possible to have an intelligent policy debate without addressing funding concerns."

I'm very much in favor of the monetary theory part of MMT, and I tried to be careful to point out that MMT can (and should) be used to discredit the austerity narrative. I completely support that effort.

But I don't think austerity has such a tenacious grip because policymakers don't properly understand how money works. I think austerity is popular in DC because of hostility to social programs.

As Alice pointed out, DC believes in MMT already - when it comes to wars and bailouts. How do MMTers explain that? When Dick Cheney wanted war in Iraq he said "Reagan proved deficits don't matter." Sounds like talking MMT to him would be preaching to the choir.

The project for liberals is to defend and expand just and equitable social programs, not to persuade elites of a concept they already believe when applied to their favored projects.

"The desire for at least some aspects of the welfare state are bipartisan at the popular level."

Right - so lead with Medicare for all. If anyone asks how to pay for it, refer them to Mr. Cheney.

Tom Hickey said...

Hi, Dan, thanks for stopping by. MMT economists distinguish policy, strategy and tactics, as well as MMT as a general case description and the special cases that fall under it. Roger and I also harp on context here. I don't think that there is necessarily one best way to pursue a political agenda.

The right is very good at organizing around an agenda and sticking to a message. The left has not been good at this.

The right has a clear policy statement — limited government, low taxes, strong defense, and traditional values that made America great. The approach is organized, for the most part, although there is some dissension in the ranks, now. But come election time the pull together. The left has nothing comparable and lacks shared vision and a commonly agreed upon approach.

I think it comes down to the various constituencies that activists address. Different approaches are appropriate for different ones, and the same person may be in different interest groups and be reached by different approaches that address those interests.

There is a lot of agreement on objectives popularly and it is bipartisan. Obviously, featuring that policy is the way to bring over voters. However, there is also popular support for many of the myths that TPTB promulgate through academia, think tanks, and the media.

The left needs to counter that by adopting appropriate strategy and tactics that support the policy objectives. That means busing a lot of myths and re-educating a critical mass.

Some are better suited to hammer on policy, and others on strategic objectives and tactics. I think that a strategic objective has to be advancing understanding of MMT in order to counter the propaganda that undermines much progressive policy objectives by raising fear and doubt of affordability, especially long term and "pilling up our bills on the grandchildren."

We need to address that with education about how the issue is not affordability but the availability of real resources to satisfy needs first and then wants now and in the future. Erroneous ideas about affordability undermine the ability to produce real resources, and that is the real robbing of future generations.

danps said...

I'd feel a lot better about what you've written if there was a well-defined liberal articulation of MMT: A group of proponents who collectively promote a specifically liberal implementation of MMT - and who put together something like a canonical text on what the progressive vision of MMT is.

A strong, progressive articulation of MMT should also include a repudiation of conservative policies that are theoretically acceptable under MMT but hostile to that vision.

Without something like that, I have this very uneasy feeling that the laudable effort you describe will succeed...and then be used to zero out the capital gains tax. The advancing understanding of MMT you write about is open to being, um, reappropriated if it's not presented in an explicitly progressive context.

What I hear from MMT right now is "here is what it *can* be used for." What I'd like to see from progressive MMTers is an agreed upon statement of what they *expect* it to be used for - and what conservative uses it *could* be used for but that they specifically reject.

Tom Hickey said...

I'd feel a lot better about what you've written if there was a well-defined liberal articulation of MMT: A group of proponents who collectively promote a specifically liberal implementation of MMT - and who put together something like a canonical text on what the progressive vision of MMT is.

Dan, Joe Firestone is perhaps the guy to talk to about that.

As for me, I don't think there is any lasting solution within the capitalist ideological paradigm.

Matt Franko said...

Dan consider what Cheney meant was that they didnt matter politically, in that if an admin was observed running high deficits, the voters would not hold them negatively accountable...

The Peterson people have slaved for the last 10 or more years to turn that around at least a bit and now it is a negative issue for both sides... in that an opponent can use high deficits against you politically...

rsp,

PS I agree with you that Progressive proposals should be made starting immediately... if the 'affordability' question comes up, folks can use some of the MMT stuff to explain how public finance works, etc...

Jonf said...

Dan, I like your approach. Make the progressive case for the program or policy first. Then, as needed and sparingly, use MMT to address other items. You only have to imagine how a conversation about MMT funding will go with a network conservative to see the potential pitfalls. How would Rick Santelli and friends react to saying taxes for funding were not needed. 99

Charles Hayden said...

There's a difference between MMT and what MMTers observe as operational fact. MMTers didn't create or found the monetary that we have. Deficit spending itself is not MMT. That's just weird.

So when Alice is talking about "MMT for the banks" maybe it's best not to take that too literally? She's certainly not talking about what Wray or Mosler would do to the banks.

Alice is just pointing out the fact, that we seemingly have endless funds for Wall Street bailouts and war, but somehow when it comes to matters of basic public purpose our leaders tell us we are all tapped out of keystrokes.