I didn’t have much time last night to write about the Federal Budget. Today, there are a few general points I want to focus on which are relevant to the debate in most nations at present and bring out some principles of Modern Monetary Theory (MMT). The development of these general ideas hopefully will mean that readers from abroad should find things that they can apply to the debates within their own countries rather than be bogged down in the nuances (ugly as they are) of the Australian fiscal debate. These observations lead me to conclude that it is well past the time to end the “deficits are bad/surpluses are good” narrative.

Restoring Fiscal Sanity in the United States: A Way Forward. Essentially, the article is a non-article but a sign-up page to access a speech of the same title by David M. Walker, former top public accountant in the US (Comptroller General) which apparently makes him qualified to speak about monetary systems. The speech is full of nonsense but it gave me some insights into what seems to be unfolding in the national capital over there in America. While I was at the airport today I heard some very sensational news – Navy SEALs stake out US building! Perhaps I am the first to blog about this development. Twitter universe – where are you?

I am still away from my office and have had a full-day of meetings today – so very little time to write. But earlier today I read another one of those articles from a senior US academic economist about the need to cut aged pensions in the US because the government is running out of money. Martin Feldstein – a Harvard professor – has been found to have engaged in highly questionable conduct (to say the least) by investigations into the causes of the financial crisis. Feldstein must surely know that the government cannot run out of money. Which brings into question his motivation for providing misleading interventions into the policy debate. He has demonstrated over a long period his willingness to hide behind the “authority” of economic theory in order to pursue an ideological obsession with privatisation and deregulation. When writing what seemed to be academic papers or opinion pieces supporting financial deregulation, for example, he didn’t at the same time declare that he was personally gaining from such a policy push. His subsequent track record as a board member of companies, some of which collapsed in the crisis (AIG) or triggered the collapse has been appalling. Feldstein is not the sort of person anyone should take advice from much less pay for it.

I am travelling over the next few days and have limited time to write my blog. Today though I am writing about the latest US National Accounts data which I had the chance to examine carefully over the last couple of days. Clearly the news that real GDP growth has falling sharply in the first three months of 2011 is evidence that the current policy mix with an emphasis on public spending cuts is not working. At the same time the political debate is about to consider the public debt limit which expires in a few weeks. The conservatives are once again threatening not to extend this limit. One notable commentator said the failure of the US Congress to extend the limit would be the “most asinine act’ ever by them. I think that was an understatement. When you put the debate in the context of what is happening in the real economy (real growth down, jobless claims up) you have to conclude that the current behaviour of the US political leadership is worse than asinine.