Stephanie Kelton, Oct. 15, 2018

Presidential Lecture Series: Stephanie Kelton

But How Will We Pay for It? Making Public Money Work for Us” – Oct. 15, 2018

Our nation’s finances are a blistering topic. Democrats blame Republicans for “blowing up the deficit” with tax cuts, while Republicans insist that programs such as Social Security and Medicare are the real drivers of our fiscal mess. As politicians fight over who’s at fault, an important debate is getting lost in the fog.

Professor Kelton casts a different light on these fiscal feuds and the budget deficit, arguing that both sides are missing the bigger picture when it comes to paying for our future. Stephanie Kelton is a professor of public policy and economics at Stony Brook University. Before joining Stony Brook, she chaired the Economics Department at the University of Missouri—Kansas City, where she taught for seventeen years. She served as chief economist on the U.S. Senate Budget Committee (Democratic staff) in 2015 and as a senior economic adviser to Bernie Sanders’s 2016 presidential campaign. She is a former editor-in-chief of the top-ranked blog New Economic Perspectives and member of the TopWonks network of the nation’s best thinkers.

Bideoa: https://www.youtube.com/watch?v=WS9nP-BKa3M&t=212s

Warren Mosler tweeted this saying he liked it. Who was it that said that he doesn’t like the left wing economists who have taken over MMT? (http://mikenormaneconomics.blogspot.com/2018/10/stephanie-kelton-presidential-lecture.html)

Stephanie Kelton: But How Will We Pay for It? Making Public Money Work for Us

youtu.be/WS9nP-…

The government creates money by authorizing a budget. If it’s a wise budget then assets are produced. Enough quality production prevents inflation. The *deficit/debt is an asset if well utilized.

(https://www.reddit.com/r/SandersForPresident/comments/9papuq/stephanie_kelton_but_how_will_we_pay_for_it/)

Intro:

You’re not debating the merits of the proposal… We never end up having the really important debates because of the question.

4:43

it’s possible for us a nation to move beyond this question. To talk about the things that really matter and stop focusing always and everywhere on this one question. Getting beyond the money question is the goal.

10:22

Read the newspaper, see the headline “National Debt At All Time High” and have that nice glow about us and feel at peace with the world. There’s no reason to panic.

The issuer of the currency, the Federal Government in this case, can never:

  • run out of it.
  • go broke.
  • have bills coming due that it can’t afford to pay.
  • become insolvent.

This is the biggest hurdle: Getting beyond thinking of the government has a household.

1: What Is The Deficit?

15:00

Record a deficit “-6”. But the economy has a record as well: “+6”. It’s real. That’s the surplus that was created as a result of my deficit spending… Don’t you feel better? Trillion1 dollar surpluses could be the new normal. Maybe that’s not a bad thing.

2: What Is The National Debt?

18:24

The entire national debt is nothing more than a record of all of the dollars that were spent into the economy, not taxed back, and are currently being held in the form of US Treasury Bonds. If you hold some they are your assets. If you’re an investor they’re:

  • very nice to have.
  • safe.
  • liquid.
  • default risk free.
  • diversity for your portfolio.

And they pay interest… Now we don’t have to get so anxious because it doesn’t have the word ‘debt’ any longer.

19:42

Now we know it’s just an asset clock. It’s recording all of the dollars that are currently being held in the form of Treasuries as somebody’s savings. So now don’t you feel better?

3: What About China?

21:04

their time using their resources producing this stuff they don’t keep and consume and enjoy for themselves, they ship it to us. And we pay with dollars. So now China… could transfer those dollars into… a Treasury Bond. We have the stuff and we’ve borrowed from China… The only thing we owe China is a bank statementWe’re the beneficiary in this bargain.

4: Don’t We Eventually Have to Retire the Debt?

Eliminating the national debt means eliminating all of those safe securities called US Treasuries that people like to hold in their portfolios…

25:40

There have been 7 times in our nation’s history when the government began to run budget surpluses and pay down the debt… Depression, depression, not recession, depression: Deep contraction in the economy…

The private sector’s financial balance went deeply in the red and that’s what allowed the public sector’s balance to move temporarily into the black. But it didn’t last and it can’t last. Because it was driven by, primarily, households spending more than their income: Borrowing on the back of a dotcom bubble and then a housing bubble. And eventually the whole thing unravels. Too much debt, mostly for households.

It’s unsustainable when the private sector does it with households driving. But it’s perfectly sustainable for the federal government’s budget to remain in deficit for a period of decades.

5: What Can We Afford?

34:36

Boomers once they retire don’t stop consuming. They continue to consume, they just stop helping us produce the stuff… If the economy is not productive enough 5/10/20/30 years from now… We’re all going to be competing for a smaller and smaller quantity of actual stuff, and we’re going to create an inflation problem…

Instead of saying ‘Social Security is going broke’, ‘We have to cut benefits’, ‘The system is unsustainable’: Forget all of that. What are the investments we can make today to increase the odds that in 5/10/20 years the US economy is productive enough:

  • Republicans would say tax cuts & deregulation
  • Democrats would say education, infrastructure, R&D

A good, constructive, productive debate over the real issues that matter instead of this phony ‘The money is running out’. The US Government is never going to run out of the US dollar.

How We Pay For It:

37:00

The stadium can’t run out of points. The US Government can’t run out of dollars. It’s a unit. The government spends by instructing its’ bank to change the numbers in someone’s account upward. That’s how we pay for things:

  1. The spending comes first. Congress authorizes a budget.
  2. Once people receive income from the government’s spending, people start paying taxes.
  3. And now there’s money to also buy those bonds.

38:26

WE PAY FOR IT BY:

  • Hiring workers
  • Using manufactured goods
  • By using spare factory capacity
  • Mobilizing equipment

That’s how you pay for it: Real resources.

If you have spare capacity, idle people, ideal machines, raw materials: The government can step in and mobilize resources in a responsible way (without causing inflation)… put them to work, improve the standard of living, in the interest of the public good.

Thank you very much.

 Q&A

Most of the feedback the CBO gives is ‘this will be the impact on deficits & the debt’.

41:32

It would be useful for the CBO to go beyond (and maybe not even do that):

  • This is how many kids would be lifted out of poverty
  • What that might do to inequality if we pass this legislation

Once Greece gave up the sovereign currency and started borrowing the Euro it invited all kinds of problems. But the US has a sovereign currency. We can afford to buy whatever is for sale in our domestic currency.

43:40

It’s not enough for just academia to come aboard. What helped push this message forward was when financial journalists started writing about MMT: Modern Monetary Theory.

  • People putting better questions to our politicians.
  • Writing better articles for people to digest.
  • Telling better stories on the news.

It’s going to take a lot of work.

47:14

The multiplier effect: How much bang for the buck. If government does a trillion dollars of infrastructure investment, what are the benefits to the economy as a whole in terms of:

  • In whose hands does the money find itself?
  • How much of it do they respend into the economy?

So you get a multiplier effect vs. tax cuts that are disproportionately skewed to the people at the top who only spend a very little amount back into the economy.

You want to make efficient & judicious use of the budget, and efficient use of the resources that you have without putting a strain on the economy… low income people can feel the pinch the worst as food prices and rent and those sorts of things accelerate. The whole point is to be sensitive to the limitations and avoid setting off that kind of inflation.

49:26

Medicare For All: We’re already paying for it. We’re just paying more than any other country in the world. So moving to a system of Medicare For All means paying less than we’re already paying. Right now people are paying in the form of:

  • co-pays
  • premiums
  • deductibles

We would end up paying less for it at the end of the day.

Thank you.

-Dr. Stephanie Kelton, Oct 15th ’18


1 Amerikar trilioia = Europar bilioia.

Iruzkinak (1)

  • joseba

    Stephanie Kelton: politika fiskala birpentsatuz

    Week 2 lecture – Stephanie Kelton: Rethinking fiscal policy
    Rethinking Capitalism undergraduate module Week 2: Rethinking fiscal policy by Stephanie Kelton This week’s lecture by Stephanie Kelton will focus on fiscal policy: government decisions on spending and raising money, how it manages the public debt and how this effects economic growth.

    Bideoa: https://www.youtube.com/watch?v=c6ss3p4jjI4&feature=youtu.be

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