Re: Keynesian State of the Union

[Bill Mitchell <ecwfm@xxxxxxxxxxxxxxxxxxxxxxx>]

> Warren Mosler wrote:
> >
> > Just saw O'Neil on tv reminding us that
> > every $ the govt spends ultimately comes from
> > the taxpayers.

Sven Larson replied

> Sidewalks are pavements.

as are footpaths but if you are implying that O'Neil's statement is just a
truism then your
evaluation is incorrect.

every dollar the government spends provides the essence for the non-govt sector
to pay its taxes not the other way round.

We have to break this notion that government spending needs to be financed.

The only constraint o government spending is real - the ability/willingness
of the
non-government sector to exchange goods and services in return for
government issued currency. In general, this
willingness is strong because (a) the private sector requires "government"
money to discharge their tax
liabilities, and (b) the same sector desires to net save in the unit of
account. So you can also draw another
inference from (a) and (b), and that is that generally a government deficit
will be required to maintain full
employment.

warren's post illustrates how top "economic" officials in government fail
to understand basic
macroeconomics.

best wishes
bill




------

William F. Mitchell
Professor of Economics
Director, Centre of Full Employment and Equity
University of Newcastle
New South Wales, Australia
E-mail: ecwfm@xxxxxxxxxxxxxxxxxxxxxxx
Phone: +61-2 4921 5065
Fax:   +61-2 4921 6919
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http://econ-www.newcastle.edu.au/economics/bill/billeco.html
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