Thursday, October 24, 2019

Life's Pricing Structure Is Broken

Dig this from NPR.
When Rep. Alexandria Ocasio-Cortez rolled out her "Green New Deal," calling for clean energy, universal health care and guaranteed jobs, one of the first questions she got was: How do you plan to pay for it?

The New York Democrat argued that ambitious programs can easily be financed through deficit spending.

"I think the first thing that we need to do is kind of break the mistaken idea that taxes pay for 100% of government expenditure," Ocasio-Cortez told NPR's Morning Edition in February.

In doing so, she shined a spotlight on a once-obscure brand of economics known as "modern monetary theory," or MMT.
And this.
"If Congress authorizes a few billion dollars of additional spending, or a few hundred billion dollars, then the Fed's job is to make sure that those checks don't bounce," Kelton (an ignoramus hired by a prestigious university to spout twaddle at even more ignorant children) told NPR.
What could go wrong?
"Too often, people get a whiff of MMT, they don't read the literature, and they somehow arrive at the takeaway that MMT is about printing prosperity," Kelton said. "And of course when people hear printing money, they go straight to Zimbabwe or Weimar Germany."

Those are notorious cases of hyperinflation. But Kelton argues that runaway prices are only a danger when demand outstrips the real resources in an economy — the people, machines and raw materials. If there's idle capacity, MMT maintains that additional government spending does not trigger inflation.
It does not trigger inflation so long as clones of Kelton are the only ones making decisions. Once we run out of Keltonoids, however, all bets are off.

This graph stops in 2016. Fortunately for us, when the fiscally conservative Republicans took charge in 2017, the graph leveled off because they were prudent with our money.

What does it do to an individual when they discover that they can print money to spend, year after year?

What kind of car would you buy if you could print money? Me, I'd buy a Lotus. You might buy a Ferrari. Why don't you do it now? I don't have a Lotus because it would take me a year to earn it. The Lotus would represent a year of my life. If I could print money in the Catican, the Lotus would represent ... nothing.

Our pricing structure is broken. We no longer connect sacrifice with possessions. This is what I meant when I blogged yesterday, "It looks to me like American society has turned out the lights of reason and turned on the black lights of subjectivism. We're all kind of stumbling around, learning as we go just what this means."

How is it that the following are simultaneously true?
  1. Unemployment is at historic lows.
  2. Wages are rising.
  3. The government is borrowing and spending more than ever.
Government social spending allegedly exists to take care of those who cannot take care of themselves. With a 3.5% unemployment rate, how many of those people really exist? In spite of that, the chart above is going vertical.

The pricing structure is broken and our politicians are each, individually, gradually discovering just what this means. AOC points the way. 

"Americans aren't willing to work and pay taxes for the Green New Deal. There simply isn't a big enough payoff to sacrifice other things for it. However, if we can just print money to pay for it ..."

Republican deficit hawks are all in on this one. "You know, that little town with lots of voters in my district, Splorksville, needs a new library. If we can just print money to pay for it ..."

Obama was the king of this. "Solyndra is a trash company, but their owners are my spiritual kin. The taxpayers would never go for it if I told them they needed to pour money into it, but since we can just print the stuff ...."

With the pricing structure broken, we're stumbling to the inevitable conclusion that we can have not just a Lotus or a Ferrari, but a Lotus and a Ferrari and lots, lots more. We've become spoiled children who have gotten used to mommy and daddy buying them everything they want.

In a world of spoiled children, anyone who asks, "How are we going to pay for that?" is just mean.

1 comment:

tim eisele said...

I'd like to welcome back Fiscal Conservative KT. I'd wondered where you'd got off to.

There was one bit in that NPR piece where one of the experts said that MMT was "the Laffer Curve for liberals" - basically a way to justify spending money that the government hasn't got.

You can bet that both parties are going to try to distract us with everything but national finances, from now until the election. This will continue right up until something gives big-time like it did in 2007. At which point, everyone involved will wail, "But how could we possibly have known that would happen? We didn't know it was loaded!"

And then they'll go right back to worrying about which party is in power and how to fix blame on their opponents, and not about Actually Fixing the Goddamned Problem.