Re: Functional Finance

["William B. Ryan" <william_b_ryan@xxxxxxxxxxx>]

>From Abba Lerner, *Economics of Employment,* published 1951, pp.
126-127:

"If total spending is inadequate there are three ways in which the
government can increase it, and there are three corresponding ways in
which the government can decrease total spending when it is excessive:
(1) The government can increase total spending directly by increasing
its own purchases (or offset the insufficiency of demand in relation
to supply by reducing its own sales of goods and services). (2) The
government can increase total spending indirectly by inducing
individuals to spend more.  This is done most effectively either by
giving more money away (in pensions, subsidies, social-security
benefits, and even 'social dividends') to people who will spend it (or
a part of it) or by taking less money away from people in taxes so
that they will have more money left to spend.  (3) The government can
increase total spending even more indirectly by going into the loan
market and lending money or (what amounts to the same thing but is
less astonishing) repaying some of its existing debt with newly issued
money.  This will have the effect of lowering the rate of interest..."

The key elements here are "repaying some of its existing debt with
newly issued money" which "will have the effect of lowering the rate
of interest."

To repeat what I said before, Lerner never advocated repaying debt
from surplus tax revenues in order to "stimulate the economy," as was
asserted by Tim Canova.

And he never uttered the phrase, "repaying the surplus," which is
simply a cute phrase concocted by Mr. Canova having nothing to do with
either Abba Lerner or his principles of functional finance.

But to Mr. Canova, it probably depends on what the definition of
"is" is.

To be continued.

Bill Ryan: http://www.geocities.com/CapitolHill/Senate/7018



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