Saturday, June 4, 2011

Macroeconomics 101 in Two Blog Posts with BONUS Tea Party Bitch Slap!

In a remarkable brace of blog posts (one and two), Stephanie Kelton over at New Economic Perspectives gives a simple, easy-to-understand explanation of how economies function vis-a-vi taxation, surplus, deficit and spending. She invokes the model of a see-saw (or teeter-totter if you prefer) to explain how it all works.  The close-loop economic model (for indeed, global capitalism is a closed-loop system) goes far to explain how stuff works economically.

From the first post:
Because the economy’s financial flows are a closed system – every payment must come from somewhere and end up somewhere – one sector’s surplus is always the other sector’s deficit. As the government “tightens” its belt, it “lightens” its load on the teeter-totter, shifting the relative burden onto you.

This is not rocket science, but it appears to befuddle scores of educated people, including President Obama, who said, “small businesses and families are tightening their belts. Their government should, too.” This kind of rhetoric may temporarily boost his approval ratings, but the policy itself will undermine the efforts of the very families and small businesses that are trying to improve their financial positions.
After some interesting 'back and forth" about the posting in the comments section (more below the fold here), in her second post, she says
As expected, this accounting truism ruffled the feathers of a flock of readers who have been programmed to launch into an anti-government tirade at the mere mention of the public sector and to regard the dangers of deficit spending as an unimpeachable fact. And while you’re certainly entitled to your own political views, you are not, as Senator Moynihan famously said, entitled to your own facts.
Facts are never something the Tea Party bother themselves with much, they get in the way of the doctrines of their faith-based minds.

Witness the complete diassembly of a Tea Party argument (along with the Tea Party idiot).  Enjoy!
Brj said...
This "simplistic" approach is flawed because there is no universal "you" on the other side of the teeter-totter. Fifty percent of the "yous" are always in the surplus because they never pay into the system to begin with. The other 50% are always into the negative.

And the economy is not a closed loop. Only the private sector creates wealth and expands the economy. (Printing money is not creating wealth.)

Public employees are not productive employees. They are paid by tax monies so all taxes they "contribute" are in the same realm as discounts or kickbacks.
May 31, 2011 10:20 AM

to which the following smackdown was directed
Anonymous said...
Brj said "Public employees are not productive employees."

Wow. What utter nonsense. So paying people to protect you (and society) is not productive? Killing Osama was not productive? I suppose you could argue that those things don't build anything (i.e. not 'productive') but preventing destruction and providing safety nets is productive in my book. Thank God we don't live in your sad, greedy "I got mine, screw you" Ayn Rand world.
May 31, 2011 1:37 PM
And this
Chewitup said...
Prof. Kelton is referring to a Macro model. Who pays taxes or not is not part of the teeter-totter. "YOU" plural refers to non-government, which is individuals, firms and foreigners as a whole.

The private sector creates production and output from which certain parties may become wealthy. All the dollars that become part of this wealth come from Government- the monopoly issuer of US dollars. Those dollars go into our monetary system by the government spending and crediting non-government accounts.
Next time you see a cop or a firefighter or a teacher or a serviceman or a crew paving a highway, stop and tell them how unproductive they are. See how you are received.
May 31, 2011 1:42 PM
BRJ makes a feeble attempt to redirect the argument away from the obvious flaws in his "reasoning," but nobody's going to let him off the hook that easily.  Live by the stupid, die by the stupid.
Brj said...
Chewitup said... "All the dollars that become part of this wealth come from Government."

The dollars themselves are not the wealth. It's merely how we exchange things of value amongst each other. In a fiat monetary system the value of that dollar his only worth what we believe it to be.

I never said that the service provided by public employees was not valuable, it simply does not create wealth. As government monopolies they are wealth wasters without the self-correcting influences of the market. If your police department is corrupt you can't hire a new one. If your teachers don't educate students you can't replace it.

However, a paving crew is most likely a private company working on contract. If they do a lousy job the state has a recourse.
May 31, 2011 5:42 PM
It's amazing how poor the Tea Partier's understanding of the world is.  Insular, isolated and ignorant.  The three "I"s of Tea Party Pride.
Anonymous said...

so - if service by public employees does not create wealth, then privatizing public services surely would?

Would private army create wealth? Or private firefighters and private police?
It would be interesting to see private army. I guess investors would buy it ammunition and gear and the army would create wealth by pillaging?
Then private police would create wealth by racketeering?
And private firefighters would create wealth by charging people for their services?
June 1, 2011 11:24 AM
In the end, there is little that can be said by any Tea Party idiot when it comes to the source of so much of America's wealth: public science.
Vilhelmo said...
The point of public infrastructure is to lower the cost of doing business, not produce a profit. Contrary to your belief, almost all wealth & innovation comes out of the public sector. Aviation, transistors, microchips, computers, the internet, biotech, aerospace, etc, all came out of the state sector, funded and developed to be handed over to the private sector for profit.
Remember, it's the Nanny State that made (& continues to make) Bill Gates rich. If it wasn't for the state forcing people to pay him for "his" intellectual "property", he would be nothing but a poor college drop-out.
The same could be said of many others.
June 2, 2011 8:01 PM
brj was not heard from again.  It sucks to be that stupid, doesn't it, brj?

No comments:

Post a Comment