Tag Archives: Deficit Spending

Baker on deficits

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Overcoming the Debt Trap

By Dean Baker

The deficit hawk gang is again trying to take our children hostage with new threats of enormous debt burdens. As in the past, most of what they claim is very misleading, if not outright false.

Agreed.

First and foremost, the basis of the bulk of their horror story has nothing to do with spending being out of control, but rather a broken private health care system. If per person health care costs were comparable to the costs in any other wealthy country, we would be looking at long-term budget surpluses, not gigantic deficits. This would lead honest people to focus their energies on fixing the US health care system, but not the deficit hawk gang.

I’d guess the deficit would be much the same as it grew counter cyclically with the automatic stabilizers kicking in as the economy weakened to the point the deficit got large enough to where it provided the income and net financial assets needed to stabilize output and employment. Not that there isn’t much to be done to fix the US health care system.

But there is another part of their story that contains some truth. The government is borrowing large amounts of money right now to sustain demand in the wake of the collapse of private sector spending following the deflation of the housing bubble.

Yes, the government is spending large amounts to sustain demand, but that spending is not dependent on borrowing, though it is associated with borrowing.

If the deficit continues on the projected path, the country will substantially increase its debt burden over the course of the decade.

Yes, the deficit could go higher but ‘burden’ isn’t the right term. The national debt is the dollar savings of the ‘non government’ sectors, and as such lightens the financial burden of those sectors.

A higher debt burden will imply much larger transfers from taxpayers to bondholders in future years. This will require either higher taxes or cuts in other spending.

Not necessarily. Taxes function to regulate aggregate demand. So tax increases and/or spending cuts would be in order only should aggregate demand be deemed too high, evidenced by unemployment being too low. In that case, taxes increases and/or spending cuts would serve to cool demand, not to make payments on the debt. Also, the interest on the debt only alters demand if it gets spent, which does not necessarily happen. Japan has never spent a penny of their interest income, for example.

Alternatively, the government could run larger deficits.

The informed approach is, for a given amount of spending, to adjust taxes to the level that corresponds to desired levels of employment, whatever size deficit that might mean.

However, in a decade or so, if the economy is again near full employment, higher deficits will either lead to higher inflation if the Fed opts to accommodate the deficits, or higher interest rates if it targets a low rate of inflation. The latter could crimp investment and long-run growth.

Should the informed approach be taken, and taxes lowered and the deficit thereby increased to the level that coincides with full employment, yes, the government could then go too far and keep taxes too low and sustain excess demand that drives up prices. This would be the case whether the Fed ‘accommodated the deficits’ or not. And if the Fed did elect to implement policy to raise rates to slow inflation, the point would be to slow nominal spending without slowing real spending. And in any case there is no such thing as crowding out investment, as investment is a function of consumption, with demand driving prices to a level where investment is funded.

For these reasons, it is desirable to prevent the debt from reaching the levels now projected, even if the outcome may not be the disaster promised by the deficit hawks.

Nor is the outcome that promised by the deficit doves. US deficits incurred as a by product of fiscal balance that sustains full employment do not have negative side effects if managed by an informed government.

There is a simple way to avoid a sharp rise in the interest burden associated with a higher debt. The Federal Reserve Board can buy and hold the debt that is currently being issued by the Treasury to finance the deficit.

The Fed buying the debt is functionally the same as the Treasury not issuing it. And I have supported the Treasury not issuing anything longer than 3 month T bills for a long time, etc. More on that below.

The logic of this is straightforward. If the Fed holds the debt, then the interest on the debt is paid to the Fed. The Fed then returns the interest to the Treasury each year, meaning the net cost to the government is zero.

Not exactly. What that policy would do is add the deficit spending to bank reserve balances held at the Fed, which currently pay what for all practical purposes is the overnight rate of interest targeted by the Fed. The Fed controls the fed funds rate by offering and paying interest on the overnight balances held at the Fed. This rate is currently .25%. Interestingly, 3 month Treasury bills are purchased to yield only .14% for technical reasons. I do support the policy of the Treasury not issuing securities longer than 3 months, which will produce similar results. But in either case, should the Fed decide to hike rates the balances created by federal deficit spending will earn those rates under current institutional arrangements. One way to avoid all interest payments on deficit spending would be to increase required reserves for the banking system and not pay interest on them. That, however, becomes a ‘bank tax’ that is passed through to all borrowers, passing the interest rate burden on to them.

This is not slight of hand. The point is that the economy has a huge amount of idle resources in the form of unemployed workers and excess capacity. In this situation, the increased demand created by government spending does not have to come at the expense of existing demand. The economy can simply expand to fill the additional demand created by larger deficits.

This is 100% true and I fully support the policy of adjusting the fiscal balance to that which coincides with full employment, without consideration of the interest paid on balances created by deficit spending, as above.

While that may not be true in five or ten years, assuming the economy is again near full employment, right now deficits need not lead to either higher interest rates or higher inflation.

Again, fully agreed with the conclusion.

In fact, the financial markets and the “bond market vigilantes” should even support the decision to have the Fed purchase and hold the government debt being issued now to finance the deficit. This practice will lessen the future interest burden on the Treasury. In fact, interest should be seen as an entitlement like Social Security and Medicare since it is paid each year without new authorization by Congress. If the deficit hawks had any integrity they would be insisting that we should require the Fed to hold the government debt issued during this downturn. It is a sure fire way to substantially reduce entitlement spending.

Again, the Fed buying Tsy securities is functionally identical to and nothing more than the Treasury not issuing it in the first place. Nothing more.

Of course, no one ever accused deficit hawks of being consistent. Not only do they not advocate having the Fed buy and hold the debt, they don’t even want this policy discussed in their “everything is on the table” sessions. Keeping this simple solution off the table makes good sense if your concern is not deficit reduction, but rather cutting Social Security, Medicare and other important social programs.

Fortunately, the rest of us don’t have to be bound by the deficit hawks’ agenda. If Social Security and Medicare are on the table, then having the Fed hold the debt better be on the table; otherwise, this exercise is just a charade to cut the country’s most important social programs.

Social Security has no business being on the table even under current policy of issuing longer term Treasury securities, no matter how large the deficit might be, if there is excess capacity/unemployment. How could it possibly make sense to cut aggregate demand in the current environment? It’s not like our seniors are consuming scarce real resources and creating shortages for the rest of us.

This will be a great lie detector test. We will soon know whether the deficit hawks care about the interest burden on our children or just want to destroy the social safety net.

The doves are on the right side of this argument, but if they don’t get their act together on monetary operations and reserve accounting it looks like they will continue to go down to defeat with what are inherently winning hands, with all of us the losers.

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Our govt molding our children’s minds

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See below what our govt. is directing at our children.

Truly depressing.

All donations to my campaign are added to what I’m spending anyway to try to get the word out.

Many thanks to all of you who have already donated, no matter how small!!!
It all goes into the pot to sustain the effort.

Also many thanks to all of you who continue to try to organize meetings and speaking events for me- much appreciated!

CBO’s Director’s Blog: Letter to a Seventh Grader

A short time ago, I received an interesting letter from a young man in Michigan asking about federal budget deficits. I thought that perhaps other students would be interested in the kinds of questions he asked and how I answered him, so I’ve decided to share my letter to him with all of you. Here’s what I wrote:

1. What are the primary causes of the current federal budget deficits?

The current large deficits are the result of a combination of factors. These include an imbalance between tax revenues and the government’s spending that began before the recent economic recession and turmoil in the financial markets, sharply lower revenues and higher spending related to current economic conditions, and the budgetary costs of policies put in place by the government to respond to those conditions.

2. How will budget deficits affect people under the age of 18?

The government runs a budget deficit when it spends more on its programs and activities than it collects in taxes and other revenues. The government needs to borrow to make up the difference. When the federal government borrows large amounts of money, it pushes interest rates higher, and people and businesses generally need to pay more to borrow money for themselves. As a result, they invest less in factories, office buildings, and equipment, and people in the future—including your generation—will have less income than they otherwise would.

Also, the government needs to pay interest on the money it borrows, which means there will be less money available for other things that the government will spend money on in the future. Squeezing other spending affects different people in different ways, depending on their individual situations. For example, many young people benefit from government programs that provide money to families in need of food or medical care or to people who have lost their job, or from the financial support the federal government provides to local schools, or from the grants or loans the government offers to help pay for college education.

3. How is the U.S. government working to reduce budget deficits?

The President created a National Commission on Fiscal Responsibility and Reform to draw up plans to address the deficit problem. Most of the people on the commission are Members of Congress.

The commission will consider ways to reduce the budget deficit by 2015 as well as ways to improve the long-term budget outlook. Under current government policies, the gap between the government’s spending and revenues in coming years will be large. Therefore, balancing the budget would require significant changes in spending, taxes, or both. On CBO’s Web site, you can find information about the budget outlook during the next 10 years and over the long term.

More information about the commission can be found on its Web site: http://www.fiscalcommission.gov.

Congress also has enacted a new law (called “Pay-As-You-Go”) that typically requires legislation that increases spending or lowers tax revenues to include other measures to offset the costs of those changes.

4. What can people, and especially school-aged children, do to help curb budget deficits? The most important thing that school-aged children can do to help reduce future deficits is to study hard and acquire the best possible education. This will help you and your classmates get better jobs when you grow up, which will help the economy grow. In turn, a stronger economy will produce higher tax receipts for the government, which will lower the deficit.

When young people get jobs, they should be sure to save some of the money they earn. Through a fun and important bit of math called compounding, savings of small amounts can grow over time into significant amounts. For the economy as a whole, the more people save, the more money is available for businesses to invest in factories, office buildings, and equipment. For individuals and families, more savings provide a financial cushion in times of economic difficulty. In particular, more savings can help people pay large medical expenses or save their home in case they lose their job or become ill, thus helping them avoid needing government assistance.

People of all ages can also help to reduce the deficit by learning how the government spends money and from whom the government collects money. Understanding the current budget is essential for choosing intelligently among different ways to change programs and policies in order to reduce deficits.

5. If I am to convey one key message to my school regarding the federal budget deficit, what would it be?

The prospect of budget deficits for many years in the future is a serious problem for our country. Ultimately, people in the United States will have to bring into balance the amount of services they expect the government to provide, particularly in the form of benefits for older Americans, and the amount of taxes they are willing to send to the government to finance those services. Because it takes a long time to implement major policy changes, deciding what those changes will be is an urgent task for our citizens and for our policymakers.

Thank you for taking the time to write to us about these difficult issues.

Best wishes,

Doug Elmendorf

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senator kohl on SS “solvency”

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Press Release of AGING – NON Committee

KOHL: SOCIAL SECURITY SOLVENCY, TARGETED BENEFITS CAN BE IMPROVED WITH MODEST TWEAKS

Aging Committee Report Delivered to Members of the Fiscal Commission
Contact: Ashley Glacel (202) 224-5364
Tuesday, May 18, 2010
WASHINGTON, D.C. – Today U.S. Senator Herb Kohl (D-WI), Chairman of the Senate Special Committee on Aging, released an official Committee report on Social Security. The report outlines the challenges currently facing America’s retirement program and highlights options for addressing program solvency,

There is no solvency issue. The premise for the changes is a mistake.

benefit adequacy, and retirement income security for economically-vulnerable groups. Emphasizing that a majority of America’s seniors rely on Social Security as their primary source of income, the report calls on Congress to enact modest changes to Social Security in the near future to bring its long-term financing into balance and improve benefits for those who need them most.

“This report shows that, contrary to popular belief, the sky is absolutely not falling for Social Security. By implementing one or more of these modest changes, we can ensure solvency and even strengthen benefits for those who count on their monthly check the most,” said Chairman Kohl.

The sky is not falling even with the ‘modest changes’

Copies of the report were delivered to all eighteen members of President Obama’s National Commission on Fiscal Responsibility and Reform. Many of the Commission’s members have publicly mentioned their interest in addressing Social Security as part of their work to reduce the federal deficit.

Deficit reduction also stems from an incorrect premise

“Social Security has never been responsible for one penny of the federal deficit, and by law is barred from doing so. In fact, it has been in surplus every year since its inception. If the Commission chooses to take a look at the program, it is my hope that they find our Aging Committee report of use,” Kohl said.

Whether it is in surplus or deficit alters aggregate demand, not solvency. Solvency is not the issue.

The report points out that the nation’s demographics have changed significantly since the Social Security program began in 1935. Americans are living longer, women’s participation in the labor force has significantly increased, and with a rise in the divorce rate, household composition has changed. The labor force is also growing more slowly and with fewer companies offering pensions, the nature of work and compensation has altered in ways that affect workers’ ability to save for retirement. Therefore, in addition to improving solvency,

Solvency is not an issue

any future reforms to the program should take into account America’s evolving demographics in order to ensure that benefits are adequate and equitable for generations to come.

Those are the only relevant criteria.

The report includes an important disclaimer that the options laid out represent a range of commonly-considered proposals, and that none of them should be construed as having been endorsed by the Committee or its members. In the foreword, Chairman Kohl asserts: “Many members of the Committee, including myself, do not support and actively oppose many of the options. However, a full and informed debate begins with the collection of research and information, and it is our hope that this report will serve as a resource to Congress and policymakers as they discuss ways to ensure that Social Security will remain strong for another 75 years.”

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ECB meeting preview / ECB intervention?

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In case you had not seen this.

If the ECB bought Greek bonds in the secondary market and issued an ECB bond as suggested below,

that could be a reasonable solution out of this mess?

They don’t need to issue the ecb bonds unless the money markets have excess reserves driving short rates below target rates

It doesn’t solve much any more than the Fed buying Lehman bonds in the secondary market would have helped Lehman.
It just lets some bond holders get out, presumably on the offered side of the market.

That’s why it’s allowed in the first place- it does not support the member nation and introduce that moral hazard.

To keep things fair, they could state that they would buy up to a maximum of a certain amount of bonds per capita (or even the average of the last 5 years of GDP) for all EUR denominated countries on a discretionary basis.

As above.

It sort of accomplishes what you suggested but with tools already in place and most importantly with the mainstream economists actually discussing it?

I don’t think so, as above. The member nations would still be in Ponzi, where they have to sell debt to make an expanding amount of debt payments.

The ECB might even make money if Greece paid off; just like the FED did with mortgages and bank stocks.

The ‘profits’ are similar to a tax, removing net financial assets form the private sector. They made money because the Federal deficit spending was sufficient to remove enough fiscal drag to allow the private sector to return to profitability.

The Fed and Tsy profits simply somewhat reduced the deficit spending.

— Original Sender: —

From our Economics Team…..

ECB meeting preview / ECB intervention

The current market action has prompted many questions on the ECB possible interventions and what Trichet might say/announce tomorrow at the ECB press conference. I think an ECB intervention is indeed now becoming very likely. Remember that the ECB “printed” 500Bn EUR in just 2 weeks in October 2008 to fund the money market which had became dysfunctional after Lehman. The primary mandate of a central bank is to maintain financial stability; hence the Oct 2008 change in repo rule and the 500Bn of money created; de facto, the ECB made teh clearing of the money market. The same might happen for the sovereign market.

Yes, but as above, it doesn’t address solvency or credit worthiness of a member nation in Ponzi, which is all of them.

The real problem is austerity probably won’t bring down deficits, as it weakens the economies, cutting into tax revenues and adding to transfer payments.

The following is a quick summary.

*** Fundamentals:

– The problem with Greece was a problem of sustainability of public finances. Lending more was not the solution, the solution was to cut dramatically the deficit to reduce it to a level at which public finances are sustainable. Hence the need for an IMF plan, i.e. loan and more importantly an ambitious fiscal consolidation.

Except that the cutting can actually increase deficits, as explained above.

– The other countries are in a very different economic and fiscal situation, the situation is manageable (for e.g. see our weekly last Friday comparing Greece and Portugal). So the problem for the other countries is essentially a problem of market liquidity. This means ECB intervention.

If that’s all it was, fine. But seems to me they also can’t bring down deficits with austerity, but only increase them, for the reasons above.

*** ECB intervention: When?
– Probably early next week.

– Usually markets react when money is provided, not when the plan is announced. This is what happened for e.g. with the TARP. So there is a case for waiting until the IMF plan is enacted to see market reaction and design the measures accordingly.

Agreed. And the IMF plan requires the member nations to buy SDR’s with ‘borrowed money’ to fund the IMF loans, so there is no help from the IMF balance sheet regarding credit worthiness.

No matter how they slice it, without the ECB doing the lending, any package for Greece diminishes the other member nation’s credit worthiness

– The German Parliament votes Friday. It is probably not desirable from the ECB perspective to act before.

They don’t have popular support as seems German’s don’t want to pay for Greek public employees salaries and benefits which are higher than their own.

*** ECB intervention: How?

There are probably an infinite number of intervention mechanisms available. The following bullet points list the most obvious ones. These bullet points are based on the note published Monday “Greece after the IMF plan”.

– The ECB could deploy its balance sheet, initiating expansionary liquidity provisioning. This would be pure QE with the ECB buying directly governments bonds. Note that this is not against the status of the ECB: the ECB (or any central bank of the Eurosystem) cannot “finance a public deficit” hence cannot buy on the primary market, but there is no limits on the secondary market.

This is allowed for a good reason- it doesn’t do much, as described above.

Note also that the intervention can be sterilized, the ECB has the possibility (although it never used it so far) to issue a bond, it could thus issue an ECB bond of the same size as its intervention on the market; having then a zero effect on the net liquidity provided. We though QE was unlikely given past ECB policy, but under the current circumstances it would definitely be a possible option.

‘Liquidity’ only matters if it drives the overnight rate below ecb target rates. They can then ‘offset operating factors’ as they call it as needed to keep the interbank rate on target.

This is purely technical and of no monetary or economic consequence.

– In theory, the ECB could deploy reserves under management, about €350Bn, to buy bonds of the country at-risk. Here, however, we doubt the ECB would respond in this fashion. The fund would be limited and it would imply that a disproportionate part of the reserves would be invested in the “trouble” countries.

Operationally they can readily buy anything they want.

– Rather, most ECB policy intervention is channeled through banks. Various options are available to the ECB, including adjusting repo rules or collateral rules on existing sovereign paper. One option would be to accept the paper at par instead of accepting it at market value. This would mean that a bank could buy a sovereign paper at 70cents and repo it at 100cents.

Yes, but still full recourse- the bank remains on the hook if the collateral goes bad, and it has to report its net capital accordingly- recognizing full ownership of the collateral.

Another option would be to argue current market failure and, as a consequence, repo at the average price of the past year (same logic, note that this option has been used for e.g. by the SFEF in the financing of French banks). The ECB could also accept as collateral banks loans to governments.

Bank liquidity is not an issue. The price of the repo is of no consequence until bank liquidity is an issue.

– Financing could even be channeled via supranational institutions. In that case the intervention would not need to need to be made public.

*** ECB press conference tomorrow: what will Trichet say?

– Difficult to preannounce the measures and give details even if ECB is planning an intervention.

– Impossible to say nothing about the current situation.

– Trichet is likely to say “we have the tools to intervene and will not hesitate to do so”.

Agreed!

This is unlikely to calm the market much.

Agreed!

The question is, does he care? The ECB still has the single mandate of price stability.

Technically they would intervene to stop deflation, or something like that.

But with higher prices pouring in through the fx window that’s now problematic as well.

Warren Mosler

UTFITF (unheard tree falling in the forest)

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Starving the beast

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How to fight back against Wall Street

Much like we killed the buffalo to defeat the American Indians, we can work to tame Wall Street by working to reduce its food supply. And a large part of that food supply is the US pension system. Created and sustained by the innocent fraud that savings funds investment in a ‘loans create deposits’ world, the powerful attraction of being able to accumulate ‘savings’ on a pre-tax basis has generated nearly $20 trillion in US pension assets in thousands of scattered plans, from the giant State retirement funds to the small corporate pension funds, to the various smaller individual retirement funds.

Before I get to the way we can eliminate these bloated whales being eaten alive by the sharks, let me first suggest a few ways to whales from becoming shark food. The first is to get back to ‘narrow investing’ and public purpose by creating a list of investments deemed legal for any government supported pension funds. And ‘government supported’ would include any funds that are in any way tax advantaged. Legal investments would be investments that are in line with further public purpose. Not a lot comes to mind. If the public purpose is safety for the investors government securities would be appropriate, as government securities are functionally government guaranteed annuities. New issue equities might make sense if portfolio managers were required to be sufficiently educated and tested to make sure they are up for the responsibility of deciding where new real investment is best directed. But that’s a major and impractical undertaking. And there is no public purpose in simply trading new issues for relatively short term gain with no longer term stake in the merits of the underlying business. Nor is there any public purpose to investing in the secondary equity markets. In fact, with the rules and corporate governance stacked against shareholders, there is public purpose to not investing in those markets. Nor are these my first choice for the institutions I’d want investing in corporate bonds. It makes more sense to utilize the 8,000 regulated and supervised Fed member banks, all of which already specialize in credit analysis. If there is public purpose to buying corporate bonds, better the banks perform that function and not the pension funds.

So it looks like the only investments that make sense are government securities. The problem there, however, is I’m also advocating the government stop issuing securities. So that would mean the only investments for pension funds that make sense from a public purpose point of view are insured, overnight bank deposits. And that would go a long way towards taking away Wall Street’s food supply, thereby greatly reducing the troubling kinds of activities that we’ve been witnessing. This drastic reduction in financial sector activity would make regulation and supervision of what’s left a lot less complex and far more effective, and at the same time work to stabilize the financial aspects of the real economy.

Longer term, with the recognition that we don’t need savings to have money for investment, we can change the tax laws that are fostering these problematic pools of savings, and let them wind down over time.

Racing to the bottom

Government is about public infrastructure for further public purpose. That includes the usual suspects such as the military and the legal system, but Federal public infrastructure also includes regulation to stop what are called ‘races to the bottom,’ which usually involve what are known as ‘fallacies of composition.’ The textbook example is the football game, where if one person stands up he can see better, but if all stand up not only is nothing is gained, and no one gets to sit and watch. Allowing anyone to stand to see better is what creates that race to the bottom, where all become worse off. A ‘no standing’ rule would be a regulation that supports the public purpose of preventing this race to the bottom.

Another example is pollution control. With no Federal regulation, the States find themselves in a race to the bottom where the State that allows the most pollution gets the most business. The need to attract business drives all the States to continuously lower their pollution standards resulting in minimal regulation and unthinkable national pollution. Again, Federal regulation that sets national minimum standards is what it takes to prevent this race to the bottom.

Insurance regulation has been at the State level, which was deemed too lax only after the failure of AIG, which was the end result of a race to the bottom the Federal Government should have addressed long ago. Discussion has now begun regarding national insurance regulatory standards.

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April 28 DC event

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Bloggers out in force:

Time to Sweep the Vampire Squid Off Our Faces and Make Room for the Real Change

April 22nd, 2010 by selise

Warning: At the end of this diary, I’m going to be asking for your support. Your financial support. Please consider making a donation today.

________________

I remember the fall of 2008 not as the time of an historic election but as a time of astonishment at the massive amounts of money our government, a Republican administration and a Democratic Congress, was willing to throw at the financial elites while demonstrating, for the most part, their utter cluelessness about why the money was needed or what would be done with it. At first is was $700 billion, then $850 billion and then trillions. All within the space of a few weeks.

Chris Floyd captured the moment perfectly (from Oct, 13, 2008 via x-post):

Perhaps the most striking fact revealed by the global financial crash — or rather, by the reaction to it — is the staggering, astonishing, gargantuan amount of money that the governments of the world have at their command. In just a matter of days, we have seen literally trillions of dollars offered to the financial services sector by national treasuries and central banks across the globe.

The effectiveness of this unprecedented transfer of wealth from ordinary citizens to the top tiers of the business world remains to be seen. It will certainly insulate the very rich from the consequences of their own greed and folly and fraud; but it is not at all clear how much these measures will shield the vast majority of people from the catastrophe that has been visited upon them by the elite.

But putting aside for a moment the actual intent, details and results of the global bailout offers, it is their very extent that shocks, and shows — in a stark, harsh, all-revealing light — the brutal disdain with which the national governments of the world’s “leading democracies” have treated their own citizens for decades.

Year after year, the ordinary citizens were told by their governments: we have no money to spend on your needs, on your communities, on your infrastructure, on your health, on your children, on your environment, on your quality of life. We can’t do those kinds of things any more.

Of course, when talking amongst themselves, or with the believers in the think tanks, boardrooms — and editorial offices — the cultists would speak more plainly: we don’t do those things anymore because we shouldn’t do them, we don’t want to do them, they are wrong, they are evil, they are outside the faith. But for the hoi polloi, the line was usually something like this: Budgets are tight, we must balance them (for a “balanced budget” is a core doctrine of the cult), we just can’t afford all these luxuries.

But now, as the emptiness and falsity of the Chicago cargo cult stands nakedly revealed, even to some of its most faithful and fanatical adherents, we can see that this 30-year mantra by our governments has been a deliberate and outright lie. The money was there — billions and billions and billions of dollars of it, trillions of dollars of it. We can see it before our very eyes today — being whisked away from our public treasuries and showered upon the banks and the brokerages.

Let’s say it again: The money was there all along.

A deliberate and outright lie. The money was there all along.

And now, just a year and a half later, the deficit hawks at the Peterson Foundation are at it again: attacking Social Security and Medicare, this time with a “National Fiscal Summit” including such notable “experts” as Robert Rubin and Alan Greenspan, among others “to Discuss Nation’s Rising Deficits and Debt.”

We have a massive need for a counter-narrative to their lies: that Federal deficit spending is bad, that it is a burden to the next generation, that deficit spending risks insolvency — basically that the Federal Government Budget is some how analogous to a household budget when, in fact, it is no such thing.

The Fiscal Sustainability Teach-In Counter-Conference on April 28th, 2010 in Washington, DC (At the George Washington University’s Marvin Center, Room 310, The Elliot Room, venue info here.) — the same day as the Peterson Foundation’s “Fiscal Summit” — aims to do just that. Here’s what Jamie Galbraith said about the Teach-In:

________________

“The Fiscal Sustainability Teach-In Counter Conference will be the important event in Washington on April 28. Unlike the other meeting, this one will feature important work by honest scholars. It deserves at least equal attention, and very much more respect.”

— James K. Galbraith, The University of Texas at Austin. [April 19, 2010 via email with permission]

________________

We can move beyond the false economic orthodoxy that got us into the current economic mess and that now is being promoted to attack Social Security and Medicare — and harming our Nation and its People in so many ways. But our help is needed (I warned you this was coming) to raise the money needed for speaker travel, venue, and other related expenses. No money is going to the organizers or to anything other than the conference. The Teach-In is being organized, at the last minute, with no charge for attendance and on a shoe-string budget, because the people involved believe in what they are doing.

Here is the program (see here and here in case of updates).

Time Period Topic Team Leaders
8:00–8:15 AM Welcoming Remarks
8:15–9:45 AM What Is Fiscal Sustainability? Bill Mitchell, Research Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW Australia, and blogger at billy blog
9:45–10:00 AM BREAK
10:00 AM–11:15 Are There Spending Constraints on Governments Sovereign in their Currency? Stephanie Kelton, Associate Professor of Macroeconomics, Finance, and Money and Banking, Senior Scholar at The Center for Full Employment and Price Stability (CFEPS), University of Missouri – Kansas City, Research Associate at The Levy Economics Institute of Bard College, and blogger at New Economics Perspectives
11:15–11:30 BREAK
11:30–12:45 The Deficit, the Debt, the Debt-To-GDP ratio, the Grandchildren and Government Economic Policy Warren Mosler, International Consulting Economist and blogger at moslereconomics.com
12:45–1:00 PM BREAK
1:00–2:15 PM Inflation and Hyper-inflation Marshall Auerback, International Consulting Economist, blogger at New Deal 2.0 and New Economic Perspectives;
Mat Forstater, Professor of Economics, Director of CFEPS, Department of Economics, University of Missouri — Kansas City, Research Associate at The Levy Economics Institute of Bard College, and blogger at New Economic Perspectives
2:15–2:30 PM BREAK
2:30–4:00 PM Policy Proposals for Fiscal Sustainability L. Randall Wray, Professor of Economics, Research Director of CFEPS at the University of Missouri – Kansas City, and Senior Scholar at The Levy Economics Institute of Bard College;
Pavlina Tcherneva, Assistant Professor of Economics at Franklin and Marshall College, Senior Research Associate at CFEPS and Research Associate at The Levy Economics Institute of Bard College and bloggers at New Economic Perspectives

Please help by contributing to the cost of the Teach-In today. Donate Here. Every little bit helps.

Some other things you can do:

  1. Ask your friends to donate too
  2. Attend the Teach-In
  3. Spread the word — write a blog post, tell your family, friends, neighbors and co-workers
  4. Educate yourself — some great introductory resources are:

Finally, here is a bit of inspiration from Rob Parenteau, who also gave me the title of this post (both via email and used with permission):

Of course, there is a need to reconstruct the way economics is taught in academia. But this is not the highest priority at the moment. We have many average people and citizens walking around looking for answers. We need to learn to speak to them and persuade the entrepreneurs, the unionists, the teachers, the housewives, the priests, the cab drivers, etc. They are hungry for answers and vulnerable to demagogues.

We have demonstrated some capacity to finally forge our way through the last mile problem on MMT, functional finance, and the financial balance approach in the blog world and elsewhere. Some like Marshall, Bill Black, and Jamie are even able to get the message across through more mainstream media channels. The tenured academics will surely be the last to follow, and of course, that is their perogative. We should let Rob Johnson and INET continue to work on that contigent while we take our case to the misinformed and extremely frustrated public. They are desperate to make sense of what has happened and to figure out how to find a plausible way forward to a more sensible and satisfying world. We can do that. We can completely engage them, and get the ball rolling.

Marshall and I have dialogued with pure blooded Austrian Schoolers on blog sites and actually gotten some traction with them. It is possible to help people find new perspectives or at least question and possibly move beyond limited old ones. I unfortunately cannot attend this one because I have other commitments I cannot break that day, but I have a funny feeling it will not be the last one either and I wish you all the greatest success and effectiveness with this inaugural teach-in. I am certain you will be making history. Feel the power of this moment and wield it wisely.

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