Re: Functional Finance

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

1.  Tim Canova writes:
http://csf.colorado.edu/mail/pkt/apr99/0135.html

Yes, Mr. Ryan, repaying debt with newly printed money is the best of
all possible worlds.  I never disagreed on that front.  Lowering
taxes is probably better than collecting taxes and using such tax
revenues for debt repayment.  But I still haven't heard a logical
reason why the latter course of action must necessarily be
recessionary and lead to flight from the dollar.

-----in reply-----

My objection is not so much to this opinion of yours, but your
invocation of the name of Abba Lerner and his theory of functional
finance.

According to the principles of functional finance, taxes are not a
source of funding for anything; certainly taxes are not a source of
funding for repaying debt.

The truth is we live in a world where the Treasury conducts itself as
if every disbursement must be funded dollar-for-dollar by collecting
taxes or borrowing.  There is therefore no scope for the application
of the principles of functional finance.

Policy-makers in government are then left with the limited choice of
attempting to run budget surpluses or deficits to obtain their
objectives, which was the subject of Paul Davidson's and James
Galbraith's petition and Wall Street Journal op-ed piece.  The
question remains, is it better to deficit spend or pay down debt?
The third option is to somehow "balance the budget."  The fact
that "surpluses" are projected means that debt is projected to be
paid down from tax collections.  In Davidson's and Galbraith's
opinion, considering the present economic conditions, it would be
better to deficit spend.

It is possible to argue the other way, but such an argument cannot be
made from the concepts of functional finance.

In *Economics of Employment* Lerner wrote, pp. 135-136:

"...Functional Finance is not a policy.  It is only a framework
within which all sorts of different policies may be applied.  It
merely indicates how the government, in addition to doing whatever it
may want to do on all other matters, can also prevent inflation and
deflation and thus give us full employment...Functional Finance is
compatible with conservatism or with communism, with liberalism or
with dictatorship, with every conceivable policy other than one which
directly contradicts Functional Finance in insisting on having
deflation or inflation."

2.  Canova writes:

As Ryan wrote in response to Louis Proyect (who had written: 'Perhaps
it might help our discussion if Doug [Henwood] could find textual
support in Marx for such an odd concept.')

"At long last, Mr. Proyect admits what we already suspected, that
Marxism is not a science but is really a religion, where 'truth' is
found only in Holy Scripture."

To Ryan, some scripture (Marx) is Scripture and other scripture
(Lerner) is just plain gospel.

-----in reply-----

Not only when you quote Lerner but when you quote me or anyone, you
should have some awareness of the context.

Doug Henwood had stated his personal opinion on some matter,
whereupon Louis Proyect ridiculed him by challenging him to find
textual support in Marx, inferring thereby that any opinion not
textually supported from Marx is worthless.

You, on the other hand, in challenging Davidson and Galbraith et al.,
expressed what was in fact your personal opinion but buttressed your
opinion by stating that it was really Abba Lerner's opinion, in
support of which you ineptly paraphrased Lerner.

I challenged you to provide actual citations and quotations.

To which you reacted with a series of profane insults such as
"dunderhead," "SOB," "rude," "boorish," "bully," and "insulting."

So much for reasoned discussion.

3.  I had stated: "I seriously doubt Lerner ever used the phrase,
'repaying the surplus.'"

You responded:
http://csf.colorado.edu/mail/pkt/feb99/0246.html

"I am beginning to seriously doubt whether Ryan has ever read Lerner."

-----in reply-----

Will you admit that Lerner NEVER used the phrase, "repaying the
surplus"?

To be continued.

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






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