The Fight for the NHS/MMT economics

[Heckyman]

How does a limit to spending mean that you do have to tax to spend??

I never said it did. Whether you tax upfront, after the event or not at all there is _some_ limit to spending minus tax, no?

 

[ks.234]

You're right. I got his argument backwards: he's saying that it benefits the rich for interest rates to stay low, as it allows them to control assets. Therefore, he asserts, as long as rates stay low there won't be a recovery, because there is no incentive to invest in productive capacity.

Just in case there’s any chance of an agreement breaking out here, I should point out that MMT says that interest rates are regressive in that an increase in interest rates is an assets transfer from the poorer borrower, to the richer lender. Which makes sense.

 

[ks.234]

I never said it did. Whether you tax upfront, after the event or not at all there is _some_ limit to spending minus tax, no?

But you did. I said ‘you have to tax to spend is a lie’ and you responded that it was only a lie in a technical sense. In what sense/circumstance are you saying ‘you have to tax to spend’ is true?

Government spending is after tax is deleted, that is the deficit is which is what government spends.

 

[Heckyman]

Just in case there’s any chance of an agreement t breaking out here, I should point out that MMT says that interest rates are regressive in that an increase in interest rates is an assets transfer from the poorer borrower, to the richer lender. Which makes sense.

Makes no sense to me. The asset backed rich can borrow money at low rates and throw it into speculative assets like residential housing that the poor then can't afford (they can't borrow as much as the rich because they have no collateral or savings, only an income multiple of their wages and (hopefully) a secure job).

 

[Heckyman]

But you did. I said ‘you have to tax to spend is a lie’ and you responded that it was only a lie in a technical sense. In what sense/circumstance are you saying ‘you have to tax to spend’ is true?

True in the sense that you can't stop just collecting tax and let spending increase and increase.

 

[ks.234]

True in the sense that you can't stop just collecting tax and let spending increase and increase.

Who is talking about stopping collecting tax? Who is proposing increasing spending on and on?

And most of all, how does stoping just collecting tax make ‘you have to tax to spend’ true?

 

[ks.234]

Makes no sense to me. The asset backed rich can borrow money at low rates and throw it into speculative assets like residential housing that the poor then can't afford (they can't borrow as much as the rich because they have no collateral or savings, only an income multiple of their wages and (hopefully) a secure job).

I have already conceded upthread that interest rate have a role in controlling the economy.

 

[Heckyman]

Who is talking about stopping collecting tax? Who is proposing increasing spending on and on?

And most of all, how does stoping just collecting tax make ‘you have to tax to spend’ true?

I just don't understand why we need a new economic theory to argue about spending more on the NHS, if that new theory doesn't imply that we can actually spend more (or tax less) in total.

 

[ks.234]

I just don't understand why we need a new economic theory to argue about spending more on the NHS, if that new theory doesn't imply that we can actually spend more (or tax less) in total.

Because the present economic model as interpreted by the Tories says that for the government to spend more, you and I have to pay more in tax which you have said is true in some sense?

We need a new economic model that points out the truth that government spending does not depend on raising tax. A new economic model that illustrates that government spending on the NHS, or anything else does not have to be paid for by an increased cost to taxpayers

 

[Heckyman]

Sounds perfect then! We get to spend more, but no-one has to pick up the bill. Who wouldn't vote for that?

 

[ks.234]

Sounds perfect then! We get to spend more, but no-one has to pick up the bill. Who wouldn't vote for that?

I’m confused, I presumed that you did not accept the line that government spending is dependant on tax. Are you saying that you do accept that line?

 

[Heckyman]

I was being ironic, sorry. Of course states can spend more by creating new money, there's a long history of such. We even just did it in response to Covid.

 

[ks.234]

I was being ironic, sorry. Of course states can spend more by creating new money, there's a long history of such. We even just did it in response to Covid.

Apologies, I have a literal tendency and don’t always get irony

 

[ks.234]

“Patients trying to book NHS GP services online are plunged into a ‘baffling’ system of paid-for tests and ‘backdoor privatisation.

More than once, Rachel found herself waiting up to three-quarters of an hour to get through to book an appointment with her south-east London GP – just at the time she has a school run to do. “You call at 8 – at 8.28, you think, we have to go to school in two minutes, do I hang up now?”

So Rachel followed the advice on the recorded message on the phone line and turned to her surgery’s website. It encouraged her to “Book your appointment online 24/7 with Patient Access.”

But when she clicked on the booking button on the Patient Access website, the site informed her: “Sorry, your practice does not offer this service.”

Instead, underneath, it offered her a long list of private, paid tests and procedures “outside your GP practice”.

https://www.opendemocracy.net/en/ou...ppointments-offers-mostly-private-healthcare/

Privatisation. It’s bollocks?

 

[Jim Audiomisc]

Many times over the years I've wondered why we never see a repeat on TV of the series made by Galbriath. The book is good as a summary of what he said, but the programs probably cut though more effectively as he was such an entertaining presenter with a dry wit. I did once find really poor (tech) quality copies of some of the programmes on youtoob, but the video and sound are awful. Surely it was originally made on film!

 

[ks.234]

Many times over the years I've wondered why we never see a repeat on TV of the series made by Galbriath. The book is good as a summary of what he said, but the programs probably cut though more effectively as he was such an entertaining presenter with a dry wit. I did once find really poor (tech) quality copies of some of the programmes on youtoob, but the video and sound are awful. Surely it was originally made on film!

https://en.wikipedia.org/wiki/John_Kenneth_Galbraith

It appears that Milton Friedman and Paul Krugman were as critical of Keynesianism as they were MMT!

 

[matthewr]

You insist that MMT says that a country that prints its own money cannot go bankrupt. I say MMT does not say that.

Keynesian economics definitely says that. Indeed the whole disaster of Austerity is based on Cameron and Osborne not understanding this very point and relying on it's intuitive appeal to pursue their dangerous, radical economic experiment with predictable results.

I am also 99% sure MMT believes that, although I am happy to be proved wrong if things have changed.

You insist MMT abandons interest rate, I say it does not.

This I don't understand at all. Everything I have read about MMT refutes the idea of interest rate as a tool for influencing aggregate demand and replaces it with fiscal policy and (eventually) taxes. Kelton famously described interest rates as "weak tea".

The danger of the Keynesian argument with MMT is that it will serve to undermine a proper understanding of how the economy works at a basic level

I think it's the other way around.

Keynesian economics (or some flavour thereof) is the mainstream view and has been for decades. You can find any number of academics, economists and sober, be-suited central bankers who will talk about and explain these ideas.

Even more so as we have just lived through a decade of very obvious, high profile fiscal expansionism and these ideas are as high profile as they ever have been -- the Bank of England (the BoE!) even wrote a public paper on money creation that was widely covered in the mainstream media. It is, in practical terms, broadly accepted fact amongst economists, politicians and institutions. Where it is not accepted there are almost always bad faith arguments.

However, the problem for Keynesians has always been that it's very nature is so counter-intuitive that it has been extremely difficult to explain and convince the general population. Periodically the arguments get mainstream attention during times of significant economic upheaval (the great depression, WWII, GFC, COVID, etc.) when the facts on the ground overcome the difficulties of the messaging. And then fall from the public eye when things get back to normal and we have to have another go around explaining it all again next time.

From a policy point of view, this is the central problem of Keynesian economics -- there is lots of strong evidence that it is correct but every time it comes around this difficult argument has to be won again. And yes a lot of this is due to the failings of the media, to the efforts of vested interests and to the pervasive extent and influence of conservative and neoliberal views.

But because of all this it remains a difficult sell and I am reminded of the mullering Gordon Brown got when Ed Balls bizarrely got him to mention Post-classical exogenous growth theory (essentially the Keynesian idea that spending on infrastructure and investment is not constrained by the deficit) in a speech in the late 90s.

MMT faces this problem only increased by several orders of magnitude. It's even less intuitive; it's got essentially no institutional or political support and virtually no academic support; the traditional intuitive political arguments used against Keynesianism (magic money trees, other peoples money, household budgets, etc. etc.) would be even more effective. In addition there are lots of credible arguments that it would be at best no better than orthodox thought and at worst dangerous and inflationary.

Hence why if MMT is to become a widespread policy discussion it needs to win the economics argument first. If it cannot do this it will never gain the intellectual, institutional and political backing to become a significant force.

 

[ks.234]

Keynesian economics definitely says that. Indeed the whole disaster of Austerity is based on Cameron and Osborne not understanding this very point and relying on it's intuitive appeal to pursue their dangerous, radical economic experiment with predictable results.

I am also 99% sure MMT believes that, although I am happy to be proved wrong if things have changed.

MMT says that a government like the UK cannot run out of £’s and can buy whatever it has the votes for in £’s. If that’s the same as bankruptcy or not, so be it.

This I don't understand at all. Everything I have read about MMT refutes the idea of interest rate as a tool for influencing aggregate demand and replaces it with fiscal policy and (eventually) taxes. Kelton famously described interest rates as "weak tea".

MMT says that interest rates are regressive and not, on their own, sufficient to balance the economy. It also points out that the use of interest rates can cause inflation. But I have yet to read anywhere that MMT rejects interest rates as you have said they do, on the contrary, I have read repeatedly that MMT says that all tools should be on the table to balance the economy

I think it's the other way around.

Keynesian economics (or some flavour thereof) is the mainstream view and has been for decades. You can find any number of academics, economists and sober, be-suited central bankers who will talk about and explain these ideas.

Even more so as we have just lived through a decade of very obvious, high profile fiscal expansionism and these ideas are as high profile as they ever have been -- the Bank of England (the BoE!) even wrote a public paper on money creation that was widely covered in the mainstream media. It is, in practical terms, broadly accepted fact amongst economists, politicians and institutions. Where it is not accepted there are almost always bad faith arguments.

However, the problem for Keynesians has always been that it's very nature is so counter-intuitive that it has been extremely difficult to explain and convince the general population. Periodically the arguments get mainstream attention during times of significant economic upheaval (the great depression, WWII, GFC, COVID, etc.) when the facts on the ground overcome the difficulties of the messaging. And then fall from the public eye when things get back to normal and we have to have another go around explaining it all again next time.

From a policy point of view, this is the central problem of Keynesian economics -- there is lots of strong evidence that it is correct but every time it comes around this difficult argument has to be won again. And yes a lot of this is due to the failings of the media, to the efforts of vested interests and to the pervasive extent and influence of conservative and neoliberal views.

But because of all this it remains a difficult sell and I am reminded of the mullering Gordon Brown got when Ed Balls bizarrely got him to mention Post-classical exogenous growth theory (essentially the Keynesian idea that spending on infrastructure and investment is not constrained by the deficit) in a speech in the late 90s.

MMT faces this problem only increased by several orders of magnitude. It's even less intuitive; it's got essentially no institutional or political support and virtually no academic support; the traditional intuitive political arguments used against Keynesianism (magic money trees, other peoples money, household budgets, etc. etc.) would be even more effective. In addition there are lots of credible arguments that it would be at best no better than orthodox thought and at worst dangerous and inflationary.

Hence why if MMT is to become a widespread policy discussion it needs to win the economics argument first. If it cannot do this it will never gain the intellectual, institutional and political backing to become a significant force.

The barrier to both Keynesianism and MMT is the Monetarist nonsense that government has to tax to spend, and that government spending is necessarily inflationary.

It is that monetarist nonsense that is the barrier to improving our public services, improving the life chances for a majority of people and improving the life supporting capacity of the planet.

Having failed to break down that barrier itself, the Keynesianism you describe, rather than combining forces in a new attempt to break down that barrier, has stood behind it by joining in with the argument that MMT is necessarily inflationary. Rather than coalescing around fundamental truths that government spending is not constrained by tax income, Keynesianism has lent weight to Monetarist arguments about government spending and inflation against what it sees as a rival.

Keynesianism comes from Academia, whereas MMT comes from the world of fund managers and Bond traders. Tensions between the two seem to be behind arguments so far, rather than arguments about fundamental truths

MMT has addressed interest rates and inflation many times

Warren Mosler addresses those issues and more here

 

[laughingboy]

I just don't understand why we need a new economic theory to argue about spending more on the NHS, if that new theory doesn't imply that we can actually spend more (or tax less) in total.

As I understand it, the big MMT difference lies in the Job Guarantee. What MMT says is, the traditional view is that interest rates are used to alter aggregate demand. In effect, MMT says that this is a misdirection: interest rate targeting actually relies on a stock of unemployed people, and raising interest rates actually puts people out of work. Unemployment is the buffer stock that allows control of the economy and inflation.

MMT's Job Guarantee - if you accept the analysis - uses an employment buffer stock (jobs offered at a lowish wage) to stabilise inflation. The claim - which I don't know enough economics to critique - is that this is superior, and should lead to higher output for a given interest rate.

At this point, MMT says that you maximise output by having the interest rate at zero. Again, I don't grasp why. But that's the claim.

 

[ks.234]

As I understand it, the big MMT difference lies in the Job Guarantee. What MMT says is, the traditional view is that interest rates are used to alter aggregate demand. In effect, MMT says that this is a misdirection: interest rate targeting actually relies on a stock of unemployed people, and raising interest rates actually puts people out of work. Unemployment is the buffer stock that allows control of the economy and inflation.

MMT's Job Guarantee - if you accept the analysis - uses an employment buffer stock (jobs offered at a lowish wage) to stabilise inflation. The claim - which I don't know enough economics to critique - is that this is superior, and should lead to higher output for a given interest rate.

At this point, MMT says that you maximise output by having the interest rate at zero. Again, I don't grasp why. But that's the claim.

Yes, that’s my understanding, which you’ve vocalised better than me.