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US Democratic Party should be dissolved

Tomorrow, I will consider the furore that has arisen in the last few days after the US Congressional Budget Office released its latest forecasts, which showed the US deficit will rise, and, because they still insist in matching the deficit with bond-issuance to feed the corporate welfare machine, public debt will also expand. With an on-going jobs gap and depressed labour force participation rate, the rising deficit if properly targetted would be desirable. The rising public debt is a negative but only as a result of its unnecessary corporate welfare dimension rather than any concerns about capacity to pay etc. But today, given it is Wednesday and a ‘blog light’ day for me now I have only one related observation to make, which will contextualise tomorrow’s more detailed discussion. For today though I am mostly engaged in revising the final manuscript of our new, upcoming Modern Monetary Theory (MMT) textbook after receiving edits from the publishers, Macmillan.

There is a need for a new political force in the US

The US Democratic Party has lost its right, in my view, to attract the progressive vote.

The CBO Report, which I will discuss in technical terms tomorrow, really just estimated that the latest policy shift under Trump will increase the US fiscal deficit and public debt ratio.

The main game should have been on debating whether the the composition of the US fiscal deficit was beneficial to all Americans or not, rather than running a hysterical political response about the need to cut deficits and stop the public debt sacrificing the prosperity of future generations.

It should also attack the public debt issuance in terms of its corporate welfare aspects and the fact that the US government spending is not reliant on raising revenue from either taxes or debt-issuance.

Unfortunately, the Democrat leadership do not seem to know any better than just mouthing the neoliberal refrain.

Here is the Democratic House leader Nancy Pelosi on the CBO statement (April 9, 2018) Source):

The CBO’s report exposes the staggering costs of the GOP tax scam and Republicans’ contempt for fiscal responsibility. In their craven haste to give corporations and the wealthiest 1 percent massive tax breaks, Republicans saddled our children and grandchildren with trillions of dollars of debt …

The American people cannot afford Republicans’ fiscal hypocrisy … Democrats will continue to fight for real action to create good-paying jobs, reduce the deficit and grow the economy for everyone …

And then there was the response from the Democrat Senate leader Chuck Schumer (April 9, 2018) (Source):

The CBO’s latest report exposes the scam behind the rosy rhetoric from Republicans that their tax bill would pay for itself. From day one, the Republican agenda has always been to balloon the deficit in order to dole out massive tax breaks to the largest corporations and wealthiest Americans, and then use the deficit as an excuse to cut Social Security and Medicare.

No statement from either that the rising deficit is not the issue.

No statement that the increase in public debt does not burden future generations – au contraire – as in Pelosi’s fear mongering!

I consider the way in which the US Democratic Party leadership had lost the plot in this blog post – When neoliberals masquerade as progressives (November 9, 2017).

It is clear that the political arm of the Party, at least, is infested with neoliberal mantras, which only perpetuate everything they claim to oppose.

All this talk of “wealthiest 1 per cent” and “massive tax breaks to the largest corporations and wealthiest Americans”, the Democrats have been instrumental in ensuring policy is biased towards these groups.

To put a finer point on it, a month earlier (March 6, 2018), 17 of their Democrat colleagues in the US Senate, all of whom received substantial donations from the financial sector over the past five years, voted to pass the ” the Economic Growth, Regulatory Relief, and Consumer Protection Act” (Source) which was designed:

… to allow bankers to return to the same dangerous practices that gave us the economic recession in the first place. They are giving Wall Street the go-ahead to gamble with money that isn’t theirs. They are giving lenders more leeway to discriminate against black homeowners and other people of color.

It was reported that “Senate Minority Leader Chuck Schumer technically voted against the bill, he also did nothing to stop its progress”.

Back on January 10, 2008, Schumer did support the ‘Emergency Economic Stabilization Act of 2008’ which included George W. Bush’s massive bailout payments to the banksters – along the lines of the ‘privatise the returns, socialise the losses’ narrative that the neoliberal era has refined to an art form.

No Iceland solution was imposed – forcing the losses onto the banks’ shareholders. No, no-no.

A public bailout which saw the US government take bad assets off the banks. The Senate Democrats were up to their necks in supporting this bill.

Time for Bernie or someone to abandon this shell of a political party and break out with something new and credible.

I challenge all citizens in the US who identify both with being progressive and a Democrat supporter to break the link and abandon their affiliation to the Democratic Party.

I don’t believe one can be both.

Music I am listening to while working …

This is Albert King playing his version of the classic song – As the Years Go Passing By – written by Peppermint Harris.

Albert King recorded it on his 1967 Stax album Born Under A Bad Sign, which is the version I have been listening to today.

It has all the great players on it – Steve Cropper, Booker T. Jones, Isaac Hayes, Donald Dunn, Al Jackson, Wayne Jackson, Andrew Love and Joe Arnold.

You cannot get a better band than that.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.

This Post Has 14 Comments

  1. Another approach would be to agree that no more treasuries will be issued to MATCH govt deficit spending and that a support rate will now be used instead of a target rate for the same reason. The banks can stay in reserves at the support rate.



  2. It is even worse than you indicate, Bill. In the Zuckerberg Facebook hearing yesterday, Senators asked Zuckerberg if he would work with them in cleaning up the problem. He naturally said that he would. Oh, dear. Many of them had to ask their aides, on the day of the hearing no less, what questions to ask, so technogically clueless are they. So useles are they that they could not be bothered to get some tutorials from their aides on the nature of the technology and the issues it faces from a technical perspective. Because of this, most of the questions, at least in the parts that I was able to watch, weren’t very penetrating. And it wasn’t helpful that each Senator only had 5 minutes to ask their questions. Hence, they had to be incisive, which they weren’t. They can’t get this right. They can’t get the deficit right. What do they get right? What good are they?

  3. In contrast with the deficit mongers, one might monitor the progress of Russia, a country that is currently running an accelerating surplus. Accompanying that surplus is a falling stock market, a shrinking economy and a weakening currency. Let’s not worship at the altar of the fiscal surplus!

  4. No one is talking about America’s private debt that cannot be retired without public debt, and the Dems perpetuate the illusion that all will be right with the world if we simply eliminate public debt. If the deficit was entirely dedicated to retiring private debt we would still be left with 50% of GDP debt load and no money to pay it with. That debt “will” be left to our children and they will not have the necessary infrastructure to keep up the payments because we spent decades satisfying the desire to net save of the top of the economic food chain. When their desire to save requires 85% of our productivity there is nothing left for the bottom half of earners that doesn’t require them to leverage their private debt further just to stay even. For those without access to credit, there are no options and every downside of the business cycle removes that access from more Americans.

  5. Yes and everywhere! In NZ we have “left-wing” Robertson who does nothing but emphasis the need to keep government spending under 30% of GDP and to reduce public debt to less than 20% of gdp. As if that magic formula will somehow make us all prosperous and content. Even conservative economists are surprised at Robertson’s excessive commitment to paying down debt. It’s all about optics rather than good policy.

    At least the Greens came out yesterday saying the fiscal responsibility rules need to be revised for a new economic age. Probably because party members like me are well sick of the fiscal straight-jacket and would not support a party in the future who keeps dogmatically supporting it.

  6. Albert King – Born under a bad sign. That’s another one I’ve got, I’ve got the John Mayall ones too. Still reading your blogs, and trying to get a sound understanding of MMT!

  7. Bill ,I need to correct you on the cause of Rory Gallagher death.
    Rory indeed enjoyed a drink but the main reason for his demise was caused by the excess use of Paracetemol to alleviate the pain of tendonitis which was affecting his guitar performance. This caused liver damage and he died of the hospital bug MRS after a successful transplant operation.
    I knew Rory from his early days, we shared the same school and local beat clubs. RIP

  8. Bill,

    The idea that the issue of Bonds is unnecessary always confuses me. By law, the Treasury can not run an overdraft, so there needs to be some mechanism that returns the surplus Reserves (or ESA’s in Australia) in the banking system back to the Treasury – hence the Bond issuance. I hope you cover this in more detail in your follow-up post.

  9. “By law, the Treasury can not run an overdraft,”

    Change the law. It’s a voluntary constraint that has no basis in fact. If you own/control a bank, why would you get your money from anywhere else?

    You wouldn’t – because the interest you paid would return to you as a dividend. So why should your government?

  10. The notion that progressives should abandon the Democratic Part is highly damaging. In the US, its a 2 party system, for better or worse. Splitting off and forming 3rd parties will only split the progressive vote and result in decades of Republican rule. I certainly do appreciate the sentiment as the sclorosis of the leadership in the party on “money in politics” and economic matters is highly damaging to their ostensible constituantcy and their chances of winning. The solution is to nurture and support the Democratic wing of the Democratic Party. Groups such as Justice Democrats are making inroads and will facilitate a takeover of the Democratic party.

    The efforts by Stephanie Kelton and Steve Grumbine and others hopefully will assure that MMT is the basis for the the economic policy plank in the Party.

  11. Neil Wilson says:
    Thursday, April 12, 2018 at 21:55
    “By law, the Treasury can not run an overdraft,”
    Change the law. It’s a voluntary constraint that has no basis in fact. If you own/control a bank, why would you get your money from anywhere else?
    You wouldn’t – because the interest you paid would return to you as a dividend. So why should your government?

    As a matter of interest, can you Neil, or anyone, quote the law or laws that apply in the case of the UK?
    Although actually, if you own/control the bank (which I believe that the UK government does, although I think some people question this (muttering about flaws in the supposed post-war nationalisation)), then realistically, it wouldn’t even be an overdraft. And I suppose the UK Treasury has the same authority to mint a “trillion pound coin” as the US Treasury has to mint a “trillion dollar coin”, if it ever came to the crunch.

  12. I agree with the gist of Bill’s post. But here is a different perspective. *Both* US parties should be dissolved and replaced by something better. Bill assails the donkeys because they are *supposed* to be the progressive party and they are not. But maybe that is not the right way to frame the “progressive” character of MMT. MMT, it seems to me, touts principles and policies some of which should appeal to elephants (lower taxes, more spending for the military, …) while some should appeal to donkeys (healthcare for all, a job guarantee, quality public K-C education, …) and others will not appeal or will seem bonkers to either party (insolvency is *not* a problem, the need for tighter federal regulation of implementations of federal fiscal initiatives, …).Rather than seeing MMT as somewhere leftish of the donkeys on a 1-dimensional donkey-vs-elephant axis, MMT synthesizes some of the better aspects of both parties but otherwise goes beyond both of them. It would change the political framework in radical ways that are neither left nor right in the older (existing) framework.

  13. Expanding on my last comment:
    MMT synthesizes the better aspects of both parties but otherwise goes beyond both of them. It would change the political framework in radical ways that are neither left nor right in the older (existing) framework. In another sense, it would change the political framework in radical ways that are more right than the existing right, and more left than the existing left. It is something else altogether. Truly new. Truly progressive.

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