A selection of bits in other places:
So, what’s the difference between Modern Monetary Theory and tax and spend then?
So, in order to reduce the inflation brought about by government spending the newly printed money with gay abandon all you’ve got to do is raise taxes.
At which point it’s very difficult to see what’s so new about the idea really. We can raise government spending by raising the tax level without the magic money tree. And if we do use the magic money tree then we’re going to have to raise taxes once the politicians apply MMT (of either kind) to their pet projects. So, what’s the difference? An expansion of government spending is accompanied by an increase in the tax level.
So, what’s new about this?
Aye, well, there’s the rub, isn’t it?
There’s a rather breathless report from my native UK that we should all be preparing those emergency bunkers, polishing the shotguns and be ready to take off for the hills as sub-prime mortgages are making a comeback. This, it is thought and implied, is inevitably going to mean another collapse of the banking system, so we’d all better be prepared. However, given that it wasn’t sub-prime mortgages which collapsed either the US or UK banking systems last time around there’s not quite as much to worry about as people seem to think. This isn’t to say that the collapse was nothing to do with sub-prime: rather, to point out that the problems came from other aspects of the system, not that one.
Just to repeat again, there’s nothing wrong with the numbers here. It’s the interpretation that contains the error.
They are assuming that this change in that apportionment of the corporate income shows that American workers are getting the shaft. And that’s not obviously true, to say the least. For think about what we also know about American corporate profits since 2000. That’s right: more and more of them are coming from the overseas activities of American corporations. All those hundreds of billions a year that the likes of Apple AAPL -0.84%, Microsoft MSFT -1.36% and so on are piling up in those Caribbean accounts where the money can get a nice rum punch and a tan.
At which point we might want to remind the Good Churchman of someone that Jesus himself pointed out, that bit about to Caesar what is his, to God what is his. We economist types (and I am a “type” not an economist, Krugman is of course both) promise not to lecture on the differences between trans- and con- substantiation, something that a Protestant cleric is well versed in, on the proviso that Protestant clerics refrain from preaching on what they are less than fully informed about, perhaps the economic effects of a higher minimum or living wage level.
Well, yes, that’s quite obvious too. There’s been very little real wage growth in the UK in recent years (you have heard about the recession?). And yet the Living Wage has been rising each year because it is linked to living standards, not other wage incomes. So, the campaigners keep raising the Living Wage, real incomes aren’t rising much, so obviously more people are falling below that Living Wage. There really is no great mystery here.
Senator Ted Cruz gave us his tax plan yesterday and the excellent part of it is the reason that we need to use dynamic scoring to judge tax plans. That is we need to look at the effect of tax laws, tax rules, after all of the various effects have worked their way through the economy, not just look at the static effects of changing rates. And this is not just because of the dynamic effects of different tax rates, as is sometime alleged. This is hugely important when we look at a different structure of taxation, which is what Cruz is suggesting. Essentially Cruz is suggesting an abolition of corporate taxation, a huge reduction in capital taxation and an increase in consumption taxation. That’s the right way for the economy to move and we would expect it to have significant dynamic effects, over and above what we might find from the mere change in rates.