Home > The Economy > A statement from Professors Paul Davidson, James Galbraith and Lord Skidelsky

A statement from Professors Paul Davidson, James Galbraith and Lord Skidelsky

We three were each asked to sign the letter organized by Sir Harold Evans
and now co-signed by many of our friends, including Joseph Stiglitz, Robert
Reich, Laura Tyson, Derek Shearer, Alan Blinder and Richard Parker.   We
support the central objective of the letter — a full employment policy
now, based on sharply expanded public effort. Yet we each, separately,
declined to sign it.
 
Our reservations centered on one sentence, namely, “We recognize the
necessity of a program to cut the mid-and long-term federal deficit.. “
Since we do not agree with this statement, we could not sign the letter.
 
Why do we disagree with this statement?  The answer is that apart from the
effects of unemployment itself the United States does not in fact face a
serious deficit problem over the next generation, and for this reason there
is no “necessity [for] a program to cut the mid-and long-term deficit.” 
 
On the contrary: If  unemployment can be cured, the deficits we presently
face will necessarily shrink   This is the universal experience of rapid
economic growth: tax revenues rise, public welfare spending falls, and the
budget moves toward balance.  There is indeed no other experience in modern
peacetime American history, most recently in the late 1990s when the budget
went into surplus as full employment was reached. 

 We agree that health care costs are an important issue. But health care is
a burden faced by both the public and private sectors, and cost control is
a job for health policy, not budget policy.  Cutting the public element in
health care – Medicare, especially – in response to the health care cost
problem is just a way of invidiously targeting the elderly who are covered
by that program.  We oppose this.

 
The long-term deficit scare story plays into the hands of those who will
argue, very soon, for cuts in Social Security as though these were
necessary for economic reasons.  In fact, Social Security is a  highly
successful program which (along with Medicare)  maintains our entire
elderly population out of poverty and helps to stabilize the macroeconomy.
It is a transfer program and indefinitely sustainable as it is.
 
We call on fellow economists to reconsider their casual willingness to
concede to an unfounded hysteria over supposed long-term deficits, and to
concentrate instead on solving the vast problems we presently face.  It
would be tragic if the Evans letter and similar efforts – whose basic
purpose we strongly support – led to acquiescence in Social Security and
Medicare cuts that impoverish America’s elderly just a few years from now.
 
Paul Davidson   James K.  Galbraith   Lord Robert Skidelsky 

Paul Davidson is the Editor of the Journal of Post Keynesian Economics and
author of “The Keynes Solution.”

James K. Galbraith is a Professor at The University of Texas at Austin and
author of “The Predator State.”

Lord Robert Skidelsky is the author, most recently, of “Keynes: The Return
of the Master.”

 

  1. July 22, 2010 at 3:08 am

    Hear, hear!

    This message should be shouted from the rooftops.

    Sad to see so many sensible people stampeding over a cliff, driven by false fears stirred up by the Deficit Terrorists. These fear-mongers have opposed Social Securoty and Medicare from the beginning.

    As the authors do here, we must expose the Big Lie that Social Security will go bankrupt unless we “tighten our belts” and cut benefits.

    And we must draw a line in the sand:hands off our Medicare.Cut military spending and bank bailouts, not healthcare for seniors.

    • Alice
      July 22, 2010 at 6:24 am

      I am in complete agreement Tom. Deficit hawks still abound under a Democrat president and it is they who are slowly strangling the US economy and other economies around the world by robbing the poor and the middle classes of the simple wherewithall to consume.

      Deficit hawks continue to represent the interests of the powerful. They need to get on with the needed jobs of curbing the tax breaks and subsidies to powerful and profitable industries, royalty relief and tax havens abroad instead of continually pressing for downwards spending on government social and infrastructure expenditures.

      This pressure on useful peacetime and needed contracyclical spending is the direct result of ceding too much power to markets over decades. Powerful concentrated monopolistic market interests created by years of lax freedoms and lack of regulatory control have now grown bold enough that they actively seek to and have some success in debilitating governments across the globe.

  2. Dr. Timothy Nulty
    July 22, 2010 at 6:39 am

    Sirs:

    excellent statement…succinct, on point and entirely correct.

    congratulations

    TEN

  3. July 22, 2010 at 2:10 pm

    Let’s also blow up the phony myth that paying for deficits debt-free with Treasury-issued Greenbacks would produce hyperinflation.It wouldn’t. .

    The Deficit Terrorists continually paint a grisly picture of our grandchildren facing unpayable debt caused by our current deficits. .

    And to prevent even any mention of paying for those necessary deficits debt-free with Treasury – issued Greenbacks, they have scared people witless with the specter of hyperinflation.

    What everyone “knows” about governments destroying the U.S Continental in the 1770’s and the German Mark in the 1920’s by printing too much money is false. It was not the U.S. or German governments who ran the printing presses overtime to produce those wheelbarrowfulls of worthless paper. It was British army counterfeiters and debt-ridden private German bankers.

    This site should post articles destroying the destructive myths about hyperinflation. We need straight talk to counter the prevalent false mythology spread by the fear-mongers. Issuing Greenbacks covering current deficits would definitely NOT induce hyperinflation.

    We must gain public support for ending the growth of our national debt by issuing Greenbacks. Hyperinflation will not ensue. . .

  4. Peter Radford
    July 22, 2010 at 5:32 pm

    I agree completely that current calls for austerity could be a cover for attacks on social programs, but nowhere in the original Evans letter is such an attack either advocated or supported. The entire objection of the above signatories, and the reason for their rejection of the Evans letter, centers on the sentence whose wording suggests that long term deficits need to be addressed. This is hardly an advocacy of austerity or an attack on social programs.

    Further: the attempt to separate the cost of health care from discussions of the budget rings hollow to me. The rising cost of health care is a major problem, as the signatories above acknowledge, to both the private and public sectors. Shoving it aside as being, apparently, of no consequence to a discussion of the budget, undermines their credibility as overseers of that budget. Both the cost of retirement and the cost of health care are central budgetary issues. In my view they are crucial programs that need to be defended in an organized and unified manner. Appearing to divide them merely makes them more vulnerable.

    Lastly: the endorsement of perpetual deficits elides the nature of those deficits. By refusing to engage with the others, the signatories above seemingly support the nature of the current long term deficit which I see as rooted in the Bush tax policies that made an already bad income distribution even worse. Since I place great emphasis on income distribution as a factor in our malaise I feel that we cannot ignore the structure of the deficit. Even if the cost of health care is not, I think tax policy is worthy of inclusion in a discussion of the budget.

    I have a great deal of respect for all three of the signatories above and therefore I urge them to drop their opposition to the Evans letter and add their names to a unified opposition to austerity. By so doing I believe their reputations and knowledge will have more impact than were they to divide that opposition over a single sentence whose implications they read very differently from what Evans and the others surely meant.

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