A comment on Auerback’s recent post

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I am undeniably disappointed in Obama, though I recognize that he has had some very difficult stuff to deal with.

At the time I voted for him, I was a deficit hawk and pretty neo-liberal in outlook. Initially I was even highly skeptical of the stimulus! After Obama was elected, I realized that as an ordinary citizen, I did not understand economics at all. So I have been trying to actually learn about it, and read Keynes, Friedman (for balance, I guess), and Minsky, along with every economics blog I could find (left, right, and center). The result (so far) is that I end up going through an “everything you know is wrong” revelation with MMT. The tipping point for me was Warren Mosler asking where the points come from on a scoreboard and saying that when you pay taxes, the government destroys your money, because it does not need it to spend, via your “Should America Kowtow to China?” post. Then it just hit me like a ton of bricks – everything you know about macroeconomics is wrong. It’s hard to sufficiently emphasize how hard I was suddenly hit by it. So at least from my perspective, much of the disappointment arises from me actually changing my opinions, less from disappointment in him.

Another, larger, better targeted fiscal stimulus is needed. But with his current economic advisers, not to mention the political mood, there is no way that will actually happen. People don’t understand why it is needed because people do not understand the macro-economy. People are scared by the banal gold-standard conventional wisdom that “our children will have to re-pay the national debt,” and that “the government is going to go bankrupt.” As long as (normal but reasonably educated) people think that way, it would be suicide for any politician to actually do what is needed to fix the economy, even if that politician actually understood why it was necessary, which of course none of them do.

Well, at least Obama’s better than McCain. We would probably have lunacy like a spending freeze with him in charge.


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