The theme seems to be “reduce operating spending, increase capital spending”. We’ll see how that will blow over with the opposition.
The theme seems to be “reduce operating spending, increase capital spending”. We’ll see how that will blow over with the opposition.
No, that’s not at all how that works.
At all.
Sorry, but if the first claim is that government spending is inflationary, then there’s no way to claim that taxes aren’t disinflationary.
Lol, wait, what?
Just… Walk me through how you think this would work, say as Canada’s inflation rate hit 8% in summer 2022. Who would you have taxed, what would you have done with said taxes and why you think this would somehow lower inflation?
https://www.marketplace.org/story/2019/01/24/modern-monetary-theory-explained
Really just linking this for the diagrams, which are the most succinct explanation for this that I know of - but this is the theoretical basis for what I am talking about
I get the misunderstanding now! I figured it was something similar to this, which is why I asked whom you would tax and what you would do with the taxes.
So, a handful of things. First, this is a theory that is pretty much rejected by almost every mainstream economist (it’s rare you see both the Chicago school of economics and Paul Krugman on the same side but here we are.) You might take a quick google at Modern Monetary Theory critiques.
But, ignoring that, if you dive into the theory a bit, you’ll see it doesn’t work as you’ve outlined. Looking back to your original point “Dollars are not scarce items; the government can issue currency essentially at will. Taxes aren’t there to fund services. They exist to reduce inequality.”
In the MMT, taxes both fund services (say, the CERB) as well as help stabilize inflation. So, in your CERB example, sure, government prints a bunch of money which would cause inflation and then, you’re now saying the government should just tax it back to get to a neutral rate. Which, fine, tax the CERB back. But then what was the point of issuing it in the first place? If the answer is “well we just tax the rich” then what’s the point of printing a bunch of currency instead of just using the tax proceeds from the rich?
To quote Kelton:
So, to stop the inflation caused by government spending on CERB, we just tax the money back and hold onto it (instead of using it on services, otherwise you’re back to the same inflationary pressures.) In essence, you’ve just changed all the programs from help to those who needed it, to a predatory loan.
Krugman has come around on it over the last few years actually, through discussions with noted MMT proponents Rohan Grey and Nathan Tankus. So you might want to search for more recent stuff.
incorrect, in MMT taxes remove money from the economy
In your CERB example, there are a lot of factors involved. One is that there really were supply chain disruptions as spending shifted from services to material goods, combined with a lot of intentional price gouging as inflation narratives took hold.
Neither these phenomena nor the disinflationary effect of taxation are immediate or direct in their effects, so I definitely feel for policymakers when crises like these hit.
But we’re now very far from the original point, and you seem to be pointing to an exceptional circumstance to try to prove a generality, as well as trying to claim I’m saying things about that exceptional circumstance that haven’t said.
Can you share anything to this end? I’ve looked and found a couple of interviews with Tankus but nothing that at a glance would seem to change Krugman’s assertion that MMT is essentially Calvinball. (I’d rather not read through all their chats.)
Pal, you were the one to bring up Covid/CERB as your first defense of printing money!
But at the end of the day, whether the program happened in a pandemic or not, the core issue remains. Governments have deficits to cover spending, e.g., on public servant salaries. According to MMT, this isn’t an issue because you just print money to pay your debts and then tax money out of the system to prevent inflation. Which, groovy but that spending was there for a reason! Like, okay, keep the salaries but then what, just tax everyone else more? You’ve just created austerity with more steps.
Tankus has blogged about Krugman’s evolution.
And my “defense of printing money” was not a judgement about the inflationary pressure of doing so, it was a recognition that there are more things to consider - such as the risk of millions of people being evicted from their homes or going hungry.
You’re still trying to put words in my mouth, and you’re not engaging earnestly, so, goodbye
(edit: typo)
So nothing from Krugman himself? Seems reasonable…
Lol, yes by quoting you and adding the exact context.
I strongly recommend, just give a quick look at any of the dozens well rounded critiques of MMT. Some may be a little obtuse if you don’t have an econ background but feel free to reach out and i’ll explain as best I can!
Cheers.