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Notes -
Government Programs Should Have Legible Budgets
This kind of rule may come across as obvious, pointless, or doomed depending on your perspective.
There is an impulse among many to see a problem in society and turn to government for a solution. I strongly disagree with this impulse. But I also think that these people and myself could come to terms on some shared "rules of engagement".
To start we should agree on some basic things:
There are many devils in the little details, but what these three basic things suggest is that there should be: A set way of collecting taxes. A budget using those taxes that pays out to various social causes. The determination of that budget can be debated upon in some agreed way (maybe by electing representatives to a 'congress'). And that all social programs must go through this set of procedures.
To address the criticisms:
"This is pointless we already do things this way."
Sometimes governments do it this way, sometimes they don't.
The Americans with Disabilities Act does not follow these rules. Private individuals are given the ability to sue other private individuals to provide accommodations for them. The threat of getting sued also encourages a lot of preemptive work on the part of companies. How much does all of this suing and preemptive work cost? No one knows. How much will it cost you to provide for people with disabilities? Maybe a standard amount. Maybe you'll be one of the unlucky ones that gets sued in a new novel interpretation of the law and you'll win a reverse lottery.
How much do you think it is worth it to help disabled people in this country? It seems like a valid political question, but right now the American Government is basically on a blind autopilot path. It cannot know how much is spent. It cannot control how much is spent. And it cannot work out more lucrative and appealing deals for edge cases.
A little while ago (maybe a decade) some university (maybe MIT) decided to put all of their classes online for digital consumption, for free. Sometime later they were forced to take down the entire archive, because they were not subtitled, and a deaf person could not access them. The deaf person wanted them all subtitled. Subtitling a free online resource would have been too expensive and not worth it. So they were instead just removed for everyone. This is the kind of problem that a competent government middleman can solve:
[In the alternative universe where the ADA creates a government middleman agency for solving disability issues.] Each deaf person is allotted $5,000 a year to solve for their disability. They can choose to spend this on hearing implants, or on paying towards having some work transcribed. If enough deaf people want a thing transcribed it gets done. No business owner or non-profit is suddenly held hostage. No single person or entity is stuck paying enormous costs. Things aren't removed from public consumption just because a disabled person can't access it. We know how much is spent on deaf people per year. Medical companies that want to solve or fix a disability have a clear customer market for potential solutions.
This is doomed people would rather have the costs hidden and less obvious.
As I said above, sometimes the government does follow the good set of rules. I'd consider an agency like NASA a good example. The American people give some vague indications of how important they think space science and exploration is to their elected representatives. Those elected representatives can talk with the scientists, engineers, and managers at NASA to determine if maybe there are some important research projects that the general public doesn't know about but might want if they did know about it. NASA's budget is paid through taxes and is a clear line item on the federal budget. For the last two decades NASA has been about 0.5% of the federal budget. Which sounds vaguely correct to me in proportion to how much Americans care about funding Space related stuff.
The cynical reason why I believe that programs have hidden or "laundered" costs is that I don't believe voters would be actually willing to fund them if the true costs were obvious. If a party has a temporary political victory the best the best way to leverage it is through hidden and laundered costs. Pass a medicare act that doesn't really change the rules until you are out of office. Pass a civil rights act with murky enforcement that can be slowly ratcheted up every year.
Despite politicians doing this pretty often, I don't think it is what voters actually want. There is a huge amount of frustration from people over these sorts of policies. Hanania's book the Origins of Woke kind of blew up one of these issues recently. But they are all going to become problems, because when you remove the funding control from government there is no funding control. There is no countervailing force to push down the costs of these various programs. And the only way to get rid of them is often just destroy them altogether. So while people might have supported the ADA if it was 1% of the budget, they might start getting pissed at the program when it balloons up to 10% of the budget and a bunch of reverse lottery sob stories start showing up in the news. And suddenly instead of 10% or even 1% of the budget, you get 0% for your cause and no one trusts you with a 1% allotment cuz they will all remember the horror days of 10%. I don't know how likely a full reversal to 0% is for any of these policies. But that seems to be whats on the table as far as alternatives go.
There is also an ongoing legal weakness to many of these policies. Now that the supreme court is mostly conservative it could start invalidating different laundered cost schemes that have been liberal policy staples for decades. Affirmative action has taken a hit. Paid housing for the homeless might get hit next.
Conclusion
In general I think we should be suspicious of any public program that tries to hide its costs, or launder those costs onto private actors. Anything that expands the scope of things that one individual can sue another for is laundering costs. If you want a social program done or accomplished, you need to be willing to raise taxes and pay for it. If voters can't stomach raising taxes to pay for a particular social program, then too bad! Nothing is free. Start comparing the costs and fighting for them in the agreed upon battlefield.
In this vein, I think it would be a very different world if the lines in the budget were listed as percentages, and then the overall total was determined based on a factor of tax revenue. So a simplified version would look like:
War: 25%
Social Security: 25%
Bureaucracy: 25%
Debt: 25%
Total budget: 1.25x tax revenue for 2023.
And then the actual amount of money would get calculated based on these figures. Right now the numbers are so disconnected from anything the average person can comprehend.
Edit: I don't really mean for the average person to see percentages. Of course one could calculate percentages after the fact.
I mean for the politicians to only see a percentage on each line item. I mean for politicians to argue that X program should get .01% of the budget, while that program only receives .005%. Percentages are a way of declaring priorities. And you can't exceed 100%.
And then, after the percentages are selected, the total budget compared to the tax revenue for the previous year is argued about and chosen.
Apparently it's not just for the average person.
To be fair, it's easy to mock people who ought to know what they're talking about but the US funding market is legitimately impossible to describe.
I think his interview was taken out of context. Atleast I hope it was. The reason we borrow money instead of just printing all we need is it basically soaks up money that would end up elsewhere and cause inflation instead of being saved. And inflation reduction device.
He should be smart enough to know that so I have to assume he was just tired or wasn’t sure where they were going and didn’t feel like providing a better answer.
He might be an MMTer. That's gotten popular among the in crowd recently for obvious "we can print as much money as we want without worrying about inflation" reasons.
This is rather MMTers poking some fun at other supposed macro experts who don't actually have a correct clear grasp on how money or government funding works. He kept tripping over his words because his intuition was leading him astray, so "government prints money and then lends it" kept coming out. The correct, clear, simple answer is that government prints money in the form of bonds every day, and swaps them with central bank reserves where appropriate (like swapping between $100 bills, $1 bills, and quarters where appropriate, perhaps when trying to ride the bus or go to the arcade). The only clash is that people have pre-existing non-sensical stricter definitions of the word "money", so MMT generally prefers to sidestep a language intuition issue and just refer more broadly to what matters, financial assets.
It's already been nearly a decade since mainstream economists stopped trying to say MMT is wrong, and switched to "we knew that already", so I guarantee you MMTers aren't saying something as obviously wrong as "we can print as much money as we want without worrying about inflation". And it's MMT who has pushed better & better verbal explanations to laypeople of all those interlocking balance sheets in IGI's linked NYFed diagram.
This might also be because talking with MMT'ers is often a constant exercise of dealing with motte-and-baileying with risible radical claims and commonsense stuff described in somewhat different words from usual.
It may be the case when dealing with random commenters on the internet, but that kind of goes for everything right? I'm talking about like Paul Krugman who kept being embarrassed when going a few rounds against MMT economists over the years, and he kept exposing that he couldn't shake some fundamental incorrect starting points like a loanable funds framework.
As for different words, that's definitely a communication hurdle where people feel like they're not speaking the same language. To me it seems to be warranted to actually cut to the heart of what matters with some different terminology, to avoid some pitfalls with peoples' everyday colloquial versions of money, lending, borrowing, etc., and talk about what is actually happening with each balance sheet operation.
But it has to be said that people in finance and central banking pretty much immediately understand MMT's descriptions in a matter of minutes. After MMT started gaining popularity, there were multiple central bank research papers put out saying the same types of things, to help educate the field and wider public, and to help correct classic misconceptions still being taught in economic textbooks. The only people who really struggled with it were mainstream academic economists, who had to try to translate real world explanations into their toy model terms. 'So you're saying that in your version of my model, my drawn curve here should be basically a vertical/horizontal line pushed out over here?'
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Bingo.
I looked deep into MMT many years ago to find out what descriptive claims they made that were different from mainstream economics. I found three:
(1) Confidence in fiscal policymakers to e.g. time fiscal policy to control demand.
(2) An approximately flat SRAS curve, though many of its advocates don't realise this and haven't read about SRAS curves, because they have never read an intro macro textbook. In plain English, it's like an on/off model of how increased demand affects prices: until full employment, stimulus is more or less non-inflationary. Mainstream Keynesians used to believed this.
(3) Various Old Keynesian claims about the monetary policy or interest rate changes, though this is not universal among MMT advocates.
That's it. Everything else is motte-and-bailey, rhetoric, distractions which have performed the useful function of hiding MMT from most rigorous scrutiny, or uninteresting errors that some advocates of MMT make when they mix up normative with descriptive claims about how e.g. the Treasury works.
I'm not an economist and I don't understand much about it, so I wish you and @LateMechanic would have a discussion to illuminate this a bit. He seems to be pro-MMT and you seem to be against. You two have any thoughts on the other's view?
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MMT covers a wide range of actual policy positions, some reasonable and some not. But in general it’s a retarded third world conspiracy that leads to stuff like Turkish and Argentine hyperinflation directed by idiotic leaders who reject any link between inflation and borrowing, not merely in theory but in practice. The unique situation the US and to a lesser extent other Anglo countries are in with regards to the effect of public borrowing on inflation is unique because of their balance of trade, foreign investment, very large service sectors and so on, just like Japan’s weird dynamic, and doesn’t prove MMT in any genuine way.
The core bulk of MMT is descriptive, showing how money, banking, and government finance work, from a fundamental logic & accounting level of interlocking balance sheets. When armed with these correct fundamentals, it's a lot easier to see where actual tradeoffs and choices apply, and to avoid being upset by goofy incorrect gut notions and suffering from various types of cognitive dissonance. If anyone even talks about "public borrowing", they likely still don't grasp what is even actually happening in the accounting plumbing.
The policy prescriptions which some MMT proponents tack onto that descriptive project is probably a mistake in my view. But most of them think that once you understand the real constraints, then some choices (like implementing a Job Guarantee / Employer of Last Resort program) are so obvious and moral that they should always be pitched at the same time, and ended up with a largely progressive following who wanted more of that. You can take or leave those prescriptions though, it doesn't make the descriptive project incorrect.
There is not a single MMT economist who is confused that different countries & currencies have different challenges. By the 2010s when they were starting to get traction after a decade, they probably knew more about it than almost anyone, because this was such a common early dismissal attempt 'yeah maybe they know about the US, but circumstances are special there'. The core logic still works in any situation, and understanding real constraints vs. imaginary or self-imposed constraints is the key thing to get right. There are definitely real constraints and tradeoffs in all cases.
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That wouldn’t even be a correct interpretation of MMT
https://en.wikipedia.org/wiki/Modern_monetary_theory
I think some butchered downstream version got all deficits are fake thing perhaps from the 2010’s where inflation was low so plausibly in their theory it was fake when inflation was below 2% and we had excess unemployment.
Having a correct interpretation of MMT does not in my experience seem to be a necessary precondition of being an MMTer.
The Low-IQ version of MMT while the high IQ version is right enough it may have been a better model in 1925.
It also I don’t think generalizes as well for a small open economy that isn’t as diversified or a powerhouse in every industry.
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