Krugman says MMT again
He really needs to stop doing this. What's next -- Yglesias is going to bring it up? Back to Krugman:
Does the same thing hold true for the federal government? Well, the feds have the Fed, which can print money. But there are constraints on that, too — they’re not as sharp as the constraints on governments that can’t print money, but too much reliance on the printing press leads to unacceptable inflation. (Cue the MMT people — but after repeated discussions, I still don’t get how they sidestep the issue of limits on seignorage.)The Government can acquire real goods and services without spending money at all. Conscription. Kelo. Extension of the copyright act. The list goes on. Taxes, first and foremost, are a manifestation of sovereign power and thus lay the groundwork for fiat money. By draining the private sector of the funds it needs to purchase it's own output, they create room for the Government to take that output without generating inflation. Contra Krugman, now is an excellent time to understand how taxes reduce consumption because we are in a recession due to lack of aggregate demand due to lousy household balance sheets, and high taxes are preventing those balance sheets from being repaired. Last point to Krugman:
So taxes are, first and foremost, about paying for what the government buys (duh). It’s true that they can also affect aggregate demand, and that may be something you want to do. But that really is a secondary issue.
And may I say that now is an especially peculiar time to think that taxes matter only if they reduce consumption. We have lots of excess capacity in the economy; the government can easily buy more goods and services without requiring that the private sector buy less. The only reason to raise taxes now, or promise future rises, is to address solvency concerns.
Discussions like this really disturb me; they indicate that there are a lot of people with Ph.D.s in economics who can throw around a lot of jargon, but when push comes to shove, have no coherent picture whatsoever of how the pieces fit together.So true. Also, people with Nobel Prizes in economics demonstrate the same failings.