Re: C-FEPS report on Economists' Statement

[mongiovg@xxxxxxxxxxx (Mongiovi Gary)]

Of course I don't suggest that people should state things they don't
believe, and I'm sure Paul's not saying that either. But when we issue
manifestos intended to influence policy and the direction of policy
discourse, nuance matters, and we ought to think strategically. It's all
well and good to make the point that deficits don't cause the problems
that mainstream textbooks say they do: by all means, let's keep at that.
I suspect we might even get a few progressive mainstreamers on board for
a deficit that stems from public investment in much-needed social
capital (education, health care, housing, environmental improvement and
so forth).

But Dubya's budget is a disaster waiting to happen. I'm not sure if this
question's ever been hashed out on this list, but is it in fact the
C-FEPS view that deficits are always desirable, regardless of their
magnitude and regardless of the composition of public spending? The Bush
budget starves social investment and enlarges useless military
expenditure, while (as Barkley reminds us) recalibrating the tax burden
in a way that increases after-tax income inequality. Meanwhile, the
right wing of the Republican Party have gone on record to say that the
deficits resulting from Bush's budget will provide ammunition for future
curtailment of public spending. To be sure, the C-FEPS statement argues
against spending cutbacks. But if the statement shows up on conservative
radar screens at all, the emphasis will be on the support it provides to
the Bush budget, while the rather tepid expression of doubts about some
aspects of the President's plan will be ignored. I don't think this is
helpful to progressive goals. The focus should be on the extremely
objectionable aspects of the budget.

To put it another way: The C-FEPS statement endorses the
deficit-enlarging character of the budget and expresses mild concern
about some unstated particulars. In the current climate, the focus
should be on the plan's shockingly irresponsible particulars, and the
point about deficits per se not being the problem should be an aside.

Gary

Gary Mongiovi, Co-editor
Review of Political Economy
Economics & Finance Department
St John's University
Jamaica, NEW YORK 11439
USA

Tel: +1 (718) 990-7380
FAX: +1 (718) 990-1868
E-mail: mongiovg@xxxxxxxxxxx


-----Original Message-----
From: pkt-owner@xxxxxxxxxxxxxxxx [mailto:pkt-owner@xxxxxxxxxxxxxxxx] On
Behalf Of Warren Mosler
Sent: Tuesday, February 18, 2003 4:04 PM
To: pkt@xxxxxxxxxxxxxxxx
Subject: Re: C-FEPS report on Economists' Statement


--- pdavidso <pdavidso@xxxxxxx> wrote:
The fear of deficits that permeates
> mainstream economic theory is
> overblown -- but the political climate is NOT right
> for the CFEPS statement.

A couple of years ago I was at a meeting with
Art Laffer in California.  He got up to give
a talk on monetary policy, and began it something
like this 'I'm going to talk about monetary policy,
and Warren and Tom disagree, and they are right,
but this is the way I tell it.'  And then discussed
the money multiplier, how the Fed supplies reserves,
then the banks take those funds and make loans, etc.
in full knowledge that his story was dead wrong.
And he still tells it that way.
Guess he thinks the political climate isn't right...

Warren


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