GoofyGoose
1yr ago
I recently read the one by David Friedman. Curious to know what more knowledgeable mottizens think.
Here is the conclusion statement from the article
Project 2025 is neither a Trumpist document — it contains arguments against as well as for some of his positions and a good deal of advice that I do not expect him to take — nor a sinister plan to destroy democracy. It contains a good deal of libertarian rhetoric and advocates at least a few libertarian policies but is by no means a libertarian document. It is a battle plan for conservatives, for, as it repeatedly says, a conservative president. It contains a good many things I agree with, a good many I do not. If fully implemented the result would be far from my ideal but perhaps a little closer than we are likely to get from either a Trump or a Biden administration.
GoofyGoose
1yr ago
On the mainstream theories
I don't see how the Monetarist model can be seen as contrived. It is the simplest model and the one most in line with standard economic principles without bells and whistles. All prices are relative and we can think of the "price" of money relative to other goods. Money is a (durable) good with well-defined demand and supply. (Sure, the demand and supply functions must be described in "real" rather than "nominal" terms, because dollars are valued according to what they can buy not just for themselves). Demand and supply determine the relative price of money. If supply is increasing relative to demand—a monetary expansion— the price of money will be going down and we have inflation. Granted, there are a lot of important details: what should count as money, how substitutable bank deposits and cash are, how should we aggregate them into a single composite measure of total money; but the core of the framework is just that. Just basic supply and demand analysis.
The New Keynesian model recognizes this, but it gets hidden in their "cashless limit" so that the standard textbook version has no mention of money quantities at all. But it is there in the background. The contrived parts of the New Keynesian model comes from their decision to select and rule out certain types of equilibria and not being careful with working directly with the limit version of the model rather than solving the model first and taking the limit later.
On the discount rate
The fact that the discount rate matters for saving decisions does not mean that the discount rate changes with the environment. If the government has some expansionary fiscal policy, my budget constraints will change and I might substitute consumption intertemporally even if my discount rate is the same.
In the theory of (consumption-based) asset pricing, economists generally talk about the stochastic discount factor which takes into account the marginal utility in the future (in the different possible futures, hence stochastic). For instance, changes in this stochastic discount factor are used to explain the changes in the value of the stock market. But the idea there is that my rate of time preference between 1 utility unit today and 1 utility unit tomorrow remains the same, I just have a different rate of preference between 1 unit of consumption today and 1 unit of consumption tomorrow. If this is your point, then it makes sense. But it is not a point that is missed by the mainstream theories, it is literally taught in the first-year classes of any mainstream school.
The problem is never the amount of debt, but the backing of that debt. It is true that government debt is useful: money is a government liability (zero coupon, infinite maturity for cash) and treasuries are a safe security (until we default) in a world where safe securities are scarce. In the 90s, people were worried that by lowering deficits we would create a shortage of government debt and safe assets. This was completely misguided because we can always issue more debt and use the proceeds to buy valuable assets to finance the repayment.
When people say that they are worried about government debt, they mean relative to the ability to repay. Since we see that increases in debt don’t go towards increasing our ability to repay it but rather decrease it, it is natural to say that we want government debt to stop increasing.
I actually think that there is not enough Treasuries around as we can see by the convenience yield that they have. This convenience yield says that we could profit by issuing debt and investing in real assets, turning the federal government into a massive bank (which it kind of is). Yet issuing more Treasuries and then wasting the proceeds is not sustainable.
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