tag:blogger.com,1999:blog-2546602206734889307.post7187185417889130904..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Fiscal rule reduxMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger42125tag:blogger.com,1999:blog-2546602206734889307.post-56734491955191437742016-04-11T22:59:24.333+00:002016-04-11T22:59:24.333+00:00So, the idea of a fiscal rule seems reasonable, bu...So, the idea of a fiscal rule seems reasonable, but I think it would make much more sense to target a long-term structural deficit of, say, 2% rather than targeting a balanced budget.<br /><br />It seems to me that the rhetorical bias towards a long-term balanced budget (or worse, a surplus) is actually one of the causes for current economic woes.<br /><br />Rather than having exceptions for the budget balancing rule in the ZLB case, why not just target a sustainable (2%-ish) structural deficit so as to make ZLB-type problems less likely in the first place?Dimitrihttps://www.blogger.com/profile/00802842224248550248noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-41271481524967416712016-04-11T16:25:46.834+00:002016-04-11T16:25:46.834+00:00I've already given a more complete critique in...I've already given a more complete critique in your MMT post, but I think one of the underlying issues is that the terms of the "mediamacro" debate are still set by mainstream macroeconomics. Yes, sensible economists are clearly on the correct side of the mediamacro debate while the media is not, but it is the economists who are to blame for the misleading notion that a government "borrows" in its own currency. Dimitrihttps://www.blogger.com/profile/00802842224248550248noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-50869478605005234432016-03-31T16:51:59.170+00:002016-03-31T16:51:59.170+00:00Could you not approach them? Surely they would be ...Could you not approach them? Surely they would be prepared to listen to an offer of help from an Oxford professor of economics who has spent the past year attacking their opponents policies and coming up with ideas for alternatives? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-78340701872071536932016-03-31T12:43:29.489+00:002016-03-31T12:43:29.489+00:00An invitation!An invitation!Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-49804277278954313672016-03-30T23:00:43.942+00:002016-03-30T23:00:43.942+00:00"when monetary policy will stop any consequen..."when monetary policy will stop any consequent inflation?"<br /><br />Perhaps. Monetary policy is a blunt tool.Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-77191858167400749802016-03-30T19:10:22.952+00:002016-03-30T19:10:22.952+00:002. You're right it doesn't. And the media ...2. You're right it doesn't. And the media will probably regard it as another loophole if they ever catch on to its meaning. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-58180579803639771052016-03-30T17:57:26.027+00:002016-03-30T17:57:26.027+00:00'I would love to discuss this with other Labou...'I would love to discuss this with other Labour Party MPs'<br /><br />great - what's stopping you then?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-51348212337088799942016-03-30T17:14:27.932+00:002016-03-30T17:14:27.932+00:001. Wouldn't most governments want to avoid the...1. Wouldn't most governments want to avoid the distributional or political consequences of high interest rates? And is there not a limit to how far the cb could use interest rates to offset excessive government spending without inducing recession? A responsible government does not need to tie it's own hands with arbitrary rules. An irresponsible government will not be bound by them anyway.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-74499051116876352652016-03-30T10:54:40.062+00:002016-03-30T10:54:40.062+00:00But what I asking is why ,when NOT at ZLB, you wou...But what I asking is why ,when NOT at ZLB, you would prefer the lower of interest rates to a helicopter drop?-https://www.blogger.com/profile/05617000109355910830noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-637628044088529232016-03-30T10:39:48.773+00:002016-03-30T10:39:48.773+00:00Robert: What I'm trying to get at is where thi...Robert: What I'm trying to get at is where this leads you? That politicians should pursue bad economics, or that they have to?<br /><br />Anon: On your last suggestion, I would love to discuss this with other Labour Party MPs. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-8930091959785974342016-03-30T10:34:03.840+00:002016-03-30T10:34:03.840+00:001. What stops deficit bias (e.g. governments cutti...1. What stops deficit bias (e.g. governments cutting taxes or spending more using debt finance for political reasons) when monetary policy will stop any consequent inflation? <br /><br />2. I do not see why a rule that says debt must fall relative to trend GDP avoids a focus on deficits? Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-28032953570728212132016-03-30T10:26:07.340+00:002016-03-30T10:26:07.340+00:00At the ZLB, short term nominal rates are fixed, by...At the ZLB, short term nominal rates are fixed, by definition. So your question is really whether we should have QE as well as a fiscal stimulus at the ZLB. Not clear why we need QE, when fiscal stimulus is a better instrument.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-15477073589985615922016-03-29T19:45:23.002+00:002016-03-29T19:45:23.002+00:00On ‘Labour should put full employment via Job Guar...On ‘Labour should put full employment via Job Guarantee at the heart of its economic policy to neutralise the benefits debate’, I’ve commented before on my doubts about a JG scheme being able to handle 5-6 million people but I decided to do some searching on this.<br /><br />The most worked though proposal I have found is a report from Bill Mitchell’s CFEE on ‘creating effective local labour markets’ in Australia (http://e1.newcastle.edu.au/coffee/pubs/reports/2008/CofFEE_JA/CofFEE_JA_final_report_November_2008.pdf).<br />Given its lead author, I guess many supporters of MMT are aware of this report, although I also guess that at 300 pages few have read it all. I’m not claiming to have done so either but much is repetitive or detailed and the essence can be gleaned from a few sections. <br /><br />Of particular interest to me was section 10 outlining a strategic framework for regional development. The strategy has three elements: public sector and macroeconomic expansion targeted at employment, infrastructure and services; a comprehensive skills framework; and a JG scheme. So JG is here presented not as the whole solution but as the third of a set of proposals, which is much more plausible than how its UK advocates often present it.<br /><br />As regards Labour policy, the first two elements were already advocated during Jeremy Corbyn’s campaign through a National Investment Bank and a National Education Service. Quite a bit of work has been done since on the investment side, although less so far on skills. There is no specific proposal on a JG but the intention would be radically to reduce unemployment and underemployment through the first two points. As I have stated before, I can see scope for a guarantee of work at the margins of the employment market but this is not yet policy.<br /><br />Intriguingly, although MMT is discussed extensively in the report, the framework in section 10 is justified by ‘spatial Keynesianism’. This is a useful reminder that practical proposals on investment, employment and skills need not depend on theoretical agreement. It’s important that where we agree on specific policy steps, such as the current need for investment-led fiscal expansion despite the immediate impact on deficits, then we should campaign for that without letting theoretical divergences divide us. <br /><br />A JG scheme is the topic of section 13. Inflation control is discussed and it is recognised that fiscal authorities would need to reign in any private wage-price pressures, although some assumptions around the behaviour of private employers and the responsiveness of the education sector feel a little hopeful. There is also a long discussion of implementation issues: I was not entirely convinced by all the answers but it was good to see these getting serious attention. The smaller we can keep a specific JG scheme by putting most emphasis on investment and skills development, the easier it will be to manage.<br /><br />Hope this is helpful.Anonymoushttps://www.blogger.com/profile/10623963884259918737noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-64967259173262252702016-03-29T01:26:04.323+00:002016-03-29T01:26:04.323+00:00 Norway has less than one tenth the population of ... Norway has less than one tenth the population of the UK, and to date, has earned over $700 billion more from oil and gas production.Anonymoushttps://www.blogger.com/profile/01564096730987905967noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-9279673950414631042016-03-28T22:44:57.801+00:002016-03-28T22:44:57.801+00:00Doesn't a sovereign wealth fund simply increas...Doesn't a sovereign wealth fund simply increase the proportion of future goods and services that may be consumed by future generations of Norwegians, at the expense of future generations of non-Norwegians? I don't understand how Norway's building up such a fund substantially differs from Germany's present insistence on running a surplus. I can think of two objections to the Thatcher tax cuts. The first is that the conditions at the time may have been right for the government to do fiscal consolidation (I don't know, not being an expert, but the sentence in the post that follows the one being discussed here certainly seems to imply that this was the case). The second is that the tax cuts were regressive. In this latter case the argument concerns, surely, the most appropriate level of taxation, the level that best acheives fairness of distribution without overly compromising production. I can't really see how either of these objections is to do with intergenerational fairness. Certainly, I can see that intergenerational fairness might have been served by leaving the oil under the sea, rather than consuming a finite resource and causing considerable environmental damage in the process, but that is not, I think, what the Norwegians did.Anonymoushttps://www.blogger.com/profile/07115423820938009661noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-27194335657660168092016-03-28T15:12:12.381+00:002016-03-28T15:12:12.381+00:00They are both "creating money" but the m...They are both "creating money" but the monetary and the fiscal versions (lowering raters or helicopter type) have very different effects. Which do you think is better and why?-https://www.blogger.com/profile/05617000109355910830noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-62377086179214502402016-03-28T13:56:05.926+00:002016-03-28T13:56:05.926+00:00On the evidence of the last 6 years, the answer wo...On the evidence of the last 6 years, the answer would appear to be 'yes'!<br />Your fiscal rule may well be the best available under current institutional arrangements, but it is subtle, so convincing the media and the public is a major challenge. I applaud your efforts though and urge you to keep going. If you could convince more people in the Labour Party outside of the leadership ((Eg Ummuna, Reeve etc) they could probably sell it more effectively than Mcdonnell alone. Are there any plans for the EAC to engage with the wider Labour group?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-33344811855618863242016-03-28T12:24:36.603+00:002016-03-28T12:24:36.603+00:00Not necessarily, I have no problem with using mone...Not necessarily, I have no problem with using monetary policy in conjunction with fiscal policy depending on circumstances, why does it have to be always one or the other? Eg in my example above govt might decide to accept an interest rate rise or reduce spending or raise taxes. Of course politics will affect their decision but that's what happens in democracies and if they mess up they will be punished by the voters. I guess I am arguing against independent cb which just lets the govt off the hook.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-66661969763658337882016-03-28T12:07:53.113+00:002016-03-28T12:07:53.113+00:001. Please could you spell out why this is the case...1. Please could you spell out why this is the case as it is not obvious (to me at least)<br /><br />2. My point is that at times some current spending may be more important that some investment projects, at which point a rule that insists on balancing current spending becomes a straightjacket. The rule about reducing debt to tend gdp will guard against overspending so why do we also need the current balance rule, which IMO leads to renewed focus on the'balancing the books' nonsense.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-84260886684122204822016-03-28T11:27:26.237+00:002016-03-28T11:27:26.237+00:00"A good example of intergenerational theft wa..."A good example of intergenerational theft was how the UK spent North Sea Oil revenues (compare with Norway)."<br /><br />The UK government can cut taxes or increase spending if there are resources free regardless of North Sea oil.<br /><br />Why would the 'export-led growth' nations who export to the UK want the pound to depreciate? What possible advantages are there to a trade war?<br /><br />The 'mug' countries can indeed sometimes introduce export led growth and depress living standards in the short term. But generally that is a bad idea.<br /><br />SWF suffer from fallacy of composition and enforce global deflation, harming fellow humans in foreign countries.<br /><br />And this has *nothing* to do with the other things you have been saying on 'intergenerational fairness.' That has all been about the national debt. It is just using a popular myth as a smokescreen.<br /><br />It is pretty sick that economists who deliberately create *forced* unemployment - youth unemployment is above 12% at 'full employment' - still push this crap. You are no friend of young people.Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-74948320074516263532016-03-28T10:38:05.651+00:002016-03-28T10:38:05.651+00:00Of course not but what you and I might call "...Of course not but what you and I might call "basic economics" is not what the average voter calls it and it is the average voter that we are talking about.The fact that economically illiterate arguments persist - which you regularly highlight here - shows that this view is correct as much as you, and I for that matter, may lament it.Robert Joneshttps://www.blogger.com/profile/03593742130088640939noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-21885518614827829752016-03-28T10:31:49.141+00:002016-03-28T10:31:49.141+00:00On the theory of intergenerational fairness, read ...On the theory of intergenerational fairness, read my or Nick Rowe's posts on the subject. A good example of intergenerational theft was how the UK spent North Sea Oil revenues (compare with Norway).Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-40137665222055496692016-03-28T10:25:07.288+00:002016-03-28T10:25:07.288+00:00You want to change what I call the consensus assig...You want to change what I call the consensus assignment, and have the government using fiscal policy to manage demand at all times. So you need to explain why that would be better, and why governments across the world rejected that approach 40 years ago.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-86465963041360292742016-03-28T10:20:14.624+00:002016-03-28T10:20:14.624+00:00I think Boris will tell you we have created record...I think Boris will tell you we have created record levels of employment by fixing the deficit problem. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-85853389041766807782016-03-28T10:18:35.280+00:002016-03-28T10:18:35.280+00:00Are you saying that in the UK today it is impossib...Are you saying that in the UK today it is impossible to implement policies based on basic economics?Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.com