Leftist critique (not attempting to shit on Mamdani, just food for thought):
“Balancing the budget” on public finances is right wing propaganda. The public sector literally creates an indefinitely big amount of dollars, and fighting for “balancing the budget” implies restricting expenditure arbitrarily. This expenditure could fund welfare policy, improved social services, public housing, infrastructure…
The public sector isn’t (or rather shouldn’t be in practice) restricted by funding constraints, and any attempt to say otherwise is neoliberal propaganda designed to justify budget cuts to welfare.
Notice how I didn’t say local government. I specifically said not to criticise Mamdani because it’s not his fault, but he could and should be doing MMT propaganda explaining these concepts and showing how absurd it is that we make the political decision of giving this arbitrary limit to public spending at the local level.
I more or less agree with your point. But it’s hardly fair to make a comment in a thread about a specific topic then get upset if people discuss it in the context of that topic.
I’m not upset, I’m just bringing up the topic of how leftist politicians shouldn’t pride themselves on budget balancing because it’s harmful to welfare in the long run. I’m aware I’m the one bringing up the topic.
Agreed, but inflation doesn’t correlate with currency issuing. The vast majority of inflation in developed nations comes from supply shocks and from private companies using their market power to raise prices unilaterally. You’re living through this today, prices are rising dramatically because of energy supply shock consequence of the US attacks on Iran. Even Trump admits to this, yesterday himself he said he doesn’t care how this war affects the finances of Americans.
That’s true in this case, but we have to look at the long term. Even now, the US pays about $1 trillion per year just on interest on the debt. That is a huge chunk of the budget going towards something completely unproductive. As the debt increases, the share of interest payments will go higher unless interest rates are reduced but that will only kick the can down the road if the budget is not fixed to stimulate more productive activity.
As we continue down this road, there will come a time when there is little to no confidence that the US can pay back its debt and the US would be unable to sell its debt unless they significantly increase interest rates to entice investors. When that time comes, the US will have to print an even greater amount of money just to keep up with payments because so much of the budget is going towards unproductive activity that does not generate meaningful additional revenue. With confidence reducing in the US’s ability to pay back debts, that also means reduced confidence in the US dollar itself, making it worth less.
You’re right that the amount of US dollars issued is not enough to cause inflation on its own, but in this case it is a symptom of the problem of bad allocation.
How do you account for growth in the real economy, then? Spain invaded and obliterated the cultures of a whole continent in part because they didn’t have enough silver to match their accounting books.
I get that we have a problem with venture capital and defense contractors having access to the federal money spigot, but putting an arbitrary cap on the monetary supply will just impose a new set of problems.
The public sector should be constrainted by funding
No, it shouldn’t. Governments can literally create any amounts of money. At times, the correct economic policy is to have more deficit, at times the correct economic policy is to have less deficit, and being arbitrarily bounded by artificial balance budgets (which don’t apply to entities capable of issuing their own currency) implies unnecessary suffering for many.
You didn’t argue anything from knowledge, you just proudly stated your uneducated opinion on the topic.
Money isn’t supposed to be infinate. The system as is requires uncapped spending
This doesn’t even make sense, you’re contradicting yourself, finite money and uncapped spending are literally impossible to have together. Are you an AI?
Just make more money! Who would have thought of that?
Modern Monetary Theory economists. Randall Wray, Alberto Garzón, Stephanie Kelton. John Maynard Keynes… Apparently it’s such a radical thought that fools like you without economic training whatsoever can’t even conceive it, and it takes scholars with decades of study of macroeconomics to realize that the limits to public spending shouldn’t be arbitrary and should be dictated by macroeconomic needs and policy
The ability to create infinate money IS the problem
Again, by which metric? I’ve already explained to you how inflation does not correlate to currency creation empirically, what problem is the ability to create infinite currency?
It’s a artifact of our current debt = new money system.
I agree that debt is absurd, they should just create the currency outright, it’s pointless creating debt in a currency you denominate yourself
You haven’t said anything empirically you’ve just stated your case as fact ( just as I have but at least I’m not pretending to have presented it hard cold logic instead )
Anyway, the problem is being able to make the money. Your right at some point having to much money is good and sometimes having too much money is bad if your trying to manually control the economy . But doing that at all can be bad. It gives a few an immense power over the many. It’s best to limit it entirely rather then leave anyone’s thumbs on the scale.
Youre entirely right that it will have adverse consequences at times, but that’s kinda the point. You make a healthy economy by having healthy economic trade.
Here you have a wonderful source proving empirically the total lack of correlation between monetary aggregate increases and inflationary episodes. There is no contesting empiricism.
Your right at some point having to much money is good and sometimes having too much money is bad if your trying to manually control the economy
Yes, why wouldn’t you want to control the economy to make it better?
It’s best to limit it entirely rather then leave anyone’s thumbs on the scale
So we refer to my initial comment: “anyone telling you otherwise is just spewing neoliberal propaganda”.
You make a healthy economy by having healthy economic trade
No, you make a healthy economy by ensuring everyone has access to welfare, that’s what defines a healthy economy. The idea of economics should not be to maximize GDP but to maximize well-being of people as democratically decided by themselves.
Federal government deficit spending works because interest is often higher than return on federal bonds, so it’s literally cheaper for the government to go into debt and pay over a long period than to pay cash.
Local government can’t do that, but they do have other tools. The one I deal with the most often is Public Improvement Districts where we’ll cut a deal to waive municipal property tax or the city’s sales tax for like 20 years on a big development in return for the developers building the public infrastructure required to support that development, then transferring it to the City. For really big projects, we may even redirect the tax to the developer, which we actually kinda prefer when that 20-year clock times out and you don’t have business owners and residents suddenly getting new taxes they aren’t used to and freaking ALL the way out.
It’s a deal for the developer because they need that infrastructure anyway, and the only “extra” cost to them is oversizing stuff like wastewater lines beyond what they need, and it’s a deal for the city because those road, water, sidewalk, and wastewater extensions they install with the project end up serving more than just that development.
Federal government deficit spending works because interest is often higher than return on federal bonds
Federal government deficit spending works because the state holds the monopoly on violence and if you don’t pay taxes denominated in the state’s currency you go to jail, so everyone needs such currency. When European colonists wanted to implement their currency in their colonies in Africa, the first thing they did was imposing taxation on said currency.
Local government can’t do that
Because we politically decide not to allow it, but that’s exactly what I’m arguing against.
Federal government deficit spending works because the state holds the monopoly on violence and if you don’t pay taxes denominated in the state’s currency you go to jail, so everyone needs such currency.
That a related, but separate issue. That’s how taxes work at all, whether the government is doing deficit spending, the budget is in balance, or there is a budget surplus.
But it is taxation that gives value to currency in developed countries. If it was purely economic, people would indistinctly pay with $USD in the EU and with Euros in the USA.
That’s how taxation works, but it doesn’t solve government finance by itself.
The US government has always paid interest on the debt. It’s never missed a payment. That makes it a very stable investment, and until recently it was considered the most stable, predictable investment that could be made.
That also means the US could have stupidly-low interest on its debts. And because the investment is so safe, it also creates a bottom for interest rates. No other investment is safer, so any time the fed rate goes up, all other loan rates go up as well - otherwise investors would just put their money in the US instead of on a home or business loan.
That and other factors result in inflation generally being higher than the interest on loans made to the US, which results in a situation where paying cash up front is actually more expensive than getting a loan and paying with future tax revenue, because future tax revenue grows with inflation that outpaces the interest on the loan.
The US government has always paid interest on the debt. It’s never missed a payment
Hard to miss a payment when you literally can just create the currency that the payment is agreed on…
The following paragraph is a good description of state bond interest rates as a policy mechanism to control general interest rates in the society (governments also decide not just the minimum but the maximum interest rate through fiscal policy to banks in terms I myself am not very familiar with, but it’s a well-known fact and it’s how governments in Europe and the US decided to put higher but capped interest rates during the 2022-2023 inflation episode, and lower it after).
However you then make a non-sequitur to bring up inflation which hadn’t appeared in the conversation until that point. What you describe is actually backwards: central banks in the west (wrongly) believe that they can fix supply-shock inflation by raising interest rates which would supposedly cool down economic activity by reducing loans and therefore economic activity (most of inflation in developed countries is explained by shocks in supply, as we are literally seeing today with the Iran war, so this doesn’t work unsurprisingly). How is it that after living the energy crisis-caused inflationary episode of 2022-2023 and the current energy-caused inflationary episode of the Iran war, you still defend that inflation comes from monetary policy?
While the government can technically print money, it then has to tax people more to prevent inflation, so this “money doesn’t matter” “let’s build a utopia out of hopes and dreams” stuff is nonsense. I cannot take seriously claims that a party cares about people or causes if that party cannot be bothered to consider the actual logistics of solving problems. That’s just tribalism.
The government should absolutely drive economic activity by spending money to solve problems, and it does have a small advantage since very low inflation is desirable, but for the most part that money must come from carefully spent taxes – not taxes thrown blindly at corporations or pocketed by corrupt politicians.
I think you’ve read a lot into that person’s comment that wasn’t actually in the comment. What they said wasn’t that the government should spend with abandon; they said it shouldn’t be arbitrarily limited. And insisting on zero deficit spending at all times is indeed arbitrary.
If, for instance, they issue bonds in order to pay for better public education, that has a significant positive effect on the growth of the local economy a few years in the future, which they can reasonably expect to result in increased tax revenue at that time, and indeed a larger increase than what they’re spending in the present. Borrowing money to spend in this way isn’t fiscally irresponsible; quite the opposite. It pays for itself over a slightly longer time horizon and improves the city.
There are often similar effects with programs to support low-income residents, because support to these residents has a higher “velocity” than aid for higher-income residents. Infrastructure spending is also frequently justifiable.
Conversely, giving tax cuts to AI datacenters doesn’t become responsible stewardship if you offset the cost by increasing payroll taxes.
Budgeting for a government is really complicated, and oversimplifying that, whether it’s by saying “we need zero deficit!” or by saying “we have infinite money!” is gonna lead to bad decisions. But “we have infinite money” being false doesn’t make “we need zero deficit” true. Both are oversimplifications, and the right has been using the latter as a propaganda bludgeon for at least 40 years now.
While the government can technically print money, it then has to tax people more to prevent inflation
No, it doesn’t, this is a well-repeated lie from neoliberalism, but there is no experimental correlation between government spending (or debt) and inflation. It’s specially funny how we’re literally living through a severe inflationary period today with energy prices as consequence of the Iran war, and people keep blaming inflation on currency issuing. I repeat: there is no experimental data proving a correlation between currency issuing and inflation, inflation correlates primarily with supply shocks, and you’ve lived through this over the past 5 years twice.
This doesn’t mean that governments should create infinite money, just that the spending limit shouldn’t be dictated by balances when it comes to public institutions.
“money doesn’t matter” “let’s build a utopia out of hopes and dreams”
Huh? I explicitly said money does matter, I’m discussing monetary policy, not disregarding it. Also, utopia? What part of “issuing more currency” sounds utopian to you? Governments literally do this all the time… when it comes to funding wars, unfortunately. I’m yet to see a neoliberal economist complain about extra funding in EU or US for weapons over the past years in the grounds of inflation. Almost as if it wasn’t real, and it was just bullshit neoliberal dogma designed to keep welfare down.
not taxes thrown blindly at corporations or pocketed by corrupt politicians
I’m literally a communist, you don’t have to convince me of struggle against private companies and corrupt politicians.
MMT is simply saying “public expenditure isn’t bounded by arbitrary balances”. I made it leftist when I argued for welfare, social housing and infrastructure.
Leftist critique (not attempting to shit on Mamdani, just food for thought):
“Balancing the budget” on public finances is right wing propaganda. The public sector literally creates an indefinitely big amount of dollars, and fighting for “balancing the budget” implies restricting expenditure arbitrarily. This expenditure could fund welfare policy, improved social services, public housing, infrastructure…
The public sector isn’t (or rather shouldn’t be in practice) restricted by funding constraints, and any attempt to say otherwise is neoliberal propaganda designed to justify budget cuts to welfare.
Local government isn’t a currency issuer though. Sure a city can issue bonds but that’s real debt, just like household debt.
Currency issuing governments, well yeah that’s another story.
Notice how I didn’t say local government. I specifically said not to criticise Mamdani because it’s not his fault, but he could and should be doing MMT propaganda explaining these concepts and showing how absurd it is that we make the political decision of giving this arbitrary limit to public spending at the local level.
I more or less agree with your point. But it’s hardly fair to make a comment in a thread about a specific topic then get upset if people discuss it in the context of that topic.
I’m not upset, I’m just bringing up the topic of how leftist politicians shouldn’t pride themselves on budget balancing because it’s harmful to welfare in the long run. I’m aware I’m the one bringing up the topic.
Runaway inflation is also harmful to welfare in the long run.
Agreed, but inflation doesn’t correlate with currency issuing. The vast majority of inflation in developed nations comes from supply shocks and from private companies using their market power to raise prices unilaterally. You’re living through this today, prices are rising dramatically because of energy supply shock consequence of the US attacks on Iran. Even Trump admits to this, yesterday himself he said he doesn’t care how this war affects the finances of Americans.
That’s true in this case, but we have to look at the long term. Even now, the US pays about $1 trillion per year just on interest on the debt. That is a huge chunk of the budget going towards something completely unproductive. As the debt increases, the share of interest payments will go higher unless interest rates are reduced but that will only kick the can down the road if the budget is not fixed to stimulate more productive activity.
As we continue down this road, there will come a time when there is little to no confidence that the US can pay back its debt and the US would be unable to sell its debt unless they significantly increase interest rates to entice investors. When that time comes, the US will have to print an even greater amount of money just to keep up with payments because so much of the budget is going towards unproductive activity that does not generate meaningful additional revenue. With confidence reducing in the US’s ability to pay back debts, that also means reduced confidence in the US dollar itself, making it worth less.
You’re right that the amount of US dollars issued is not enough to cause inflation on its own, but in this case it is a symptom of the problem of bad allocation.
The public sector should be constrainted by funding and that funding should be remediated via taxes.
Money isn’t supposed to be infinate. The system as is requires uncapped spending.
How do you account for growth in the real economy, then? Spain invaded and obliterated the cultures of a whole continent in part because they didn’t have enough silver to match their accounting books.
I get that we have a problem with venture capital and defense contractors having access to the federal money spigot, but putting an arbitrary cap on the monetary supply will just impose a new set of problems.
Unlike gold and silver our token based monetary system allows you to split money into increasingly small units.
So as the economy improves the currency would deflate. That’s becomes an entire separate discussion.
No, it shouldn’t. Governments can literally create any amounts of money. At times, the correct economic policy is to have more deficit, at times the correct economic policy is to have less deficit, and being arbitrarily bounded by artificial balance budgets (which don’t apply to entities capable of issuing their own currency) implies unnecessary suffering for many.
You didn’t argue anything from knowledge, you just proudly stated your uneducated opinion on the topic.
This doesn’t even make sense, you’re contradicting yourself, finite money and uncapped spending are literally impossible to have together. Are you an AI?
Just make more money! Who would have thought of that? Your educated opinion is quite impressive.
p.s. the US government doesn’t issue their own currency, that’s the Fed.
Modern Monetary Theory economists. Randall Wray, Alberto Garzón, Stephanie Kelton. John Maynard Keynes… Apparently it’s such a radical thought that fools like you without economic training whatsoever can’t even conceive it, and it takes scholars with decades of study of macroeconomics to realize that the limits to public spending shouldn’t be arbitrary and should be dictated by macroeconomic needs and policy
The ability to create infinate money IS the problem. Also I said “The system as is” there is no contradiction in my statement.
It shouldn’t be that way.
I did argue from knowledge I know exactly that idea your stating. It’s a artifact of our current debt = new money system.
Also why are you so aggressive? Are you ok???
Again, by which metric? I’ve already explained to you how inflation does not correlate to currency creation empirically, what problem is the ability to create infinite currency?
I agree that debt is absurd, they should just create the currency outright, it’s pointless creating debt in a currency you denominate yourself
You haven’t said anything empirically you’ve just stated your case as fact ( just as I have but at least I’m not pretending to have presented it hard cold logic instead )
Anyway, the problem is being able to make the money. Your right at some point having to much money is good and sometimes having too much money is bad if your trying to manually control the economy . But doing that at all can be bad. It gives a few an immense power over the many. It’s best to limit it entirely rather then leave anyone’s thumbs on the scale.
Youre entirely right that it will have adverse consequences at times, but that’s kinda the point. You make a healthy economy by having healthy economic trade.
Here you have a wonderful source proving empirically the total lack of correlation between monetary aggregate increases and inflationary episodes. There is no contesting empiricism.
Yes, why wouldn’t you want to control the economy to make it better?
So we refer to my initial comment: “anyone telling you otherwise is just spewing neoliberal propaganda”.
No, you make a healthy economy by ensuring everyone has access to welfare, that’s what defines a healthy economy. The idea of economics should not be to maximize GDP but to maximize well-being of people as democratically decided by themselves.
Federal government deficit spending works because interest is often higher than return on federal bonds, so it’s literally cheaper for the government to go into debt and pay over a long period than to pay cash.
Local government can’t do that, but they do have other tools. The one I deal with the most often is Public Improvement Districts where we’ll cut a deal to waive municipal property tax or the city’s sales tax for like 20 years on a big development in return for the developers building the public infrastructure required to support that development, then transferring it to the City. For really big projects, we may even redirect the tax to the developer, which we actually kinda prefer when that 20-year clock times out and you don’t have business owners and residents suddenly getting new taxes they aren’t used to and freaking ALL the way out.
It’s a deal for the developer because they need that infrastructure anyway, and the only “extra” cost to them is oversizing stuff like wastewater lines beyond what they need, and it’s a deal for the city because those road, water, sidewalk, and wastewater extensions they install with the project end up serving more than just that development.
Federal government deficit spending works because the state holds the monopoly on violence and if you don’t pay taxes denominated in the state’s currency you go to jail, so everyone needs such currency. When European colonists wanted to implement their currency in their colonies in Africa, the first thing they did was imposing taxation on said currency.
Because we politically decide not to allow it, but that’s exactly what I’m arguing against.
That a related, but separate issue. That’s how taxes work at all, whether the government is doing deficit spending, the budget is in balance, or there is a budget surplus.
But it is taxation that gives value to currency in developed countries. If it was purely economic, people would indistinctly pay with $USD in the EU and with Euros in the USA.
That’s how taxation works, but it doesn’t solve government finance by itself.
The US government has always paid interest on the debt. It’s never missed a payment. That makes it a very stable investment, and until recently it was considered the most stable, predictable investment that could be made.
That also means the US could have stupidly-low interest on its debts. And because the investment is so safe, it also creates a bottom for interest rates. No other investment is safer, so any time the fed rate goes up, all other loan rates go up as well - otherwise investors would just put their money in the US instead of on a home or business loan.
That and other factors result in inflation generally being higher than the interest on loans made to the US, which results in a situation where paying cash up front is actually more expensive than getting a loan and paying with future tax revenue, because future tax revenue grows with inflation that outpaces the interest on the loan.
Hard to miss a payment when you literally can just create the currency that the payment is agreed on…
The following paragraph is a good description of state bond interest rates as a policy mechanism to control general interest rates in the society (governments also decide not just the minimum but the maximum interest rate through fiscal policy to banks in terms I myself am not very familiar with, but it’s a well-known fact and it’s how governments in Europe and the US decided to put higher but capped interest rates during the 2022-2023 inflation episode, and lower it after).
However you then make a non-sequitur to bring up inflation which hadn’t appeared in the conversation until that point. What you describe is actually backwards: central banks in the west (wrongly) believe that they can fix supply-shock inflation by raising interest rates which would supposedly cool down economic activity by reducing loans and therefore economic activity (most of inflation in developed countries is explained by shocks in supply, as we are literally seeing today with the Iran war, so this doesn’t work unsurprisingly). How is it that after living the energy crisis-caused inflationary episode of 2022-2023 and the current energy-caused inflationary episode of the Iran war, you still defend that inflation comes from monetary policy?
While the government can technically print money, it then has to tax people more to prevent inflation, so this “money doesn’t matter” “let’s build a utopia out of hopes and dreams” stuff is nonsense. I cannot take seriously claims that a party cares about people or causes if that party cannot be bothered to consider the actual logistics of solving problems. That’s just tribalism.
The government should absolutely drive economic activity by spending money to solve problems, and it does have a small advantage since very low inflation is desirable, but for the most part that money must come from carefully spent taxes – not taxes thrown blindly at corporations or pocketed by corrupt politicians.
I think you’ve read a lot into that person’s comment that wasn’t actually in the comment. What they said wasn’t that the government should spend with abandon; they said it shouldn’t be arbitrarily limited. And insisting on zero deficit spending at all times is indeed arbitrary.
If, for instance, they issue bonds in order to pay for better public education, that has a significant positive effect on the growth of the local economy a few years in the future, which they can reasonably expect to result in increased tax revenue at that time, and indeed a larger increase than what they’re spending in the present. Borrowing money to spend in this way isn’t fiscally irresponsible; quite the opposite. It pays for itself over a slightly longer time horizon and improves the city.
There are often similar effects with programs to support low-income residents, because support to these residents has a higher “velocity” than aid for higher-income residents. Infrastructure spending is also frequently justifiable.
Conversely, giving tax cuts to AI datacenters doesn’t become responsible stewardship if you offset the cost by increasing payroll taxes.
Budgeting for a government is really complicated, and oversimplifying that, whether it’s by saying “we need zero deficit!” or by saying “we have infinite money!” is gonna lead to bad decisions. But “we have infinite money” being false doesn’t make “we need zero deficit” true. Both are oversimplifications, and the right has been using the latter as a propaganda bludgeon for at least 40 years now.
No, it doesn’t, this is a well-repeated lie from neoliberalism, but there is no experimental correlation between government spending (or debt) and inflation. It’s specially funny how we’re literally living through a severe inflationary period today with energy prices as consequence of the Iran war, and people keep blaming inflation on currency issuing. I repeat: there is no experimental data proving a correlation between currency issuing and inflation, inflation correlates primarily with supply shocks, and you’ve lived through this over the past 5 years twice.
This doesn’t mean that governments should create infinite money, just that the spending limit shouldn’t be dictated by balances when it comes to public institutions.
Huh? I explicitly said money does matter, I’m discussing monetary policy, not disregarding it. Also, utopia? What part of “issuing more currency” sounds utopian to you? Governments literally do this all the time… when it comes to funding wars, unfortunately. I’m yet to see a neoliberal economist complain about extra funding in EU or US for weapons over the past years in the grounds of inflation. Almost as if it wasn’t real, and it was just bullshit neoliberal dogma designed to keep welfare down.
I’m literally a communist, you don’t have to convince me of struggle against private companies and corrupt politicians.
This seems to be an MMT critique rather than a leftist one.
MMT is simply saying “public expenditure isn’t bounded by arbitrary balances”. I made it leftist when I argued for welfare, social housing and infrastructure.