Home > Uncategorized > Vickrey on deficits and obfuscatory financial rectitude

Vickrey on deficits and obfuscatory financial rectitude

from Lars Syll

wvickreyWe are not going to get out of the economic doldrums as long as we continue to be obsessed with the unreasoned ideological goal of reducing the so-called deficit. The ‘deficit’ is not an economic sin but an economic necessity […]

The administration is trying to bring the Titanic into harbor with a canoe paddle, while Congress is arguing over whether to use an oar or a paddle, and the Perot’s and budget balancers seem eager to lash the helm hard-a-starboard towards the iceberg. Some of the argument seems to be over which foot is the better one to shoot ourselves in. We have the resources in terms of idle manpower and idle plants to do so much, while the preachers of austerity, most of whom are in little danger of themselves suffering any serious consequences, keep telling us to tighten our belts and refrain from using the resources that lay idle all around us.

Alexander Hamilton once wrote “A national debt, if it be not excessive, would be for us a national treasure.” William Jennings Bryan used to declaim, “You shall not crucify mankind upon a cross of gold.” Today’s cross is not made of gold, but is concocted of a web of obfuscatory financial rectitude from which human values have been expunged.

William Vickrey

This — really — should not be so hard to understand. It is not rocket science. It is simple. In ‘affluent society’ — as Galbraith had it — rich people save more than poor. To close the demand gap governments have to run deficits.

The economic policies pursued by authorities nowadays cannot turn bad austerity policies into good job creating policies. Austerity policies and simple-minded fixation on inflation ​are not what it takes to get our limping economies out of their present-day limbo. They simply do not get us out of the ‘magneto trouble’ — as Keynes had it — and neither do economists and politicians who seem to think that cutting government budgets would help us out of recessions and slumps. In a situation where monetary policies have​ become more and more decrepit, the solution is not fiscal austerity, but fiscal expansion!

michalAmong the opposers of this doctrine there were (and still are) prominent so-called ‘economic experts’ closely connected with banking and industry. This suggests that there is a political background in the opposition to the full employment doctrine, even though the arguments advanced are economic. That is not to say that people who advance them do not believe in their economics, poor though this is. But obstinate ignorance is usually a manifestation of underlying political motives …

Michal Kalecki Political aspects of full employment

  1. Patrick Newman
    April 24, 2019 at 12:40 pm

    The apparent opposition to continuing deficits is at best a false understanding of finance and economics which I like to characterise as Micawber moneynomics. I can also borrow from another literary figure – Lewis Carroll – reducing the deficit means what I choose it to mean – neither more nor less. In the UK the application of Micawberism in the form of spending austerity was not consistent because the Tory government implemented substantial tax cuts to both wealthy individuals and corporations whilst at the same time cutting benefits and public services.

  2. April 24, 2019 at 2:47 pm

    Expert economists seeking to spur economic growth so the masses can have wage slave jobs building plastic fantastics are actually working on job security via capitalist grants to their departments. The argument against deficits goes like this;

    Budgetary Balance

    Eliminate all subsidies and sanctions. A balanced budget improves democracy. The
    opposite is true of deficit spending laid out with central plans made by experts. A very
    brief look at reality is enough to see that most deficit spending goes to endless war.

  3. Ikonoclast
    April 24, 2019 at 8:53 pm

    The argument is that we need more deficit spending and higher taxation of the rich to mobilise our resources properly. This is true under the current “command by capital” system. That is to say, it remains true while we don’t change that system. It is of course a pretense to state or imply that capitalism is not a command system. Capitalism too is a command system. The commands are simply given by those with capital. And insofar as the algorithms of ownership and capitalisation automate and coordinate capitalist behaviors, these algorithms constitute an autopilot system which humans have collectively built, and then by consent, coercion or recruitment, they have given over control of the economy to that autopilot system. The algorithms of capitalism themselves must be questioned.

    We need to grapple with the problem that endless growth is impossible on a finite planet. Thus, we need not quantitative growth but qualitative growth and change. If we get more consumerist capitalist growth from budget deficits in the current system this will simply lead to a more rapid collapse of the biosphere and more rapid destabilization of the benign Holocene climate.

    We need to switch from a consumerist and capitalist society to one that socially produces low energy infrastructures, clean, healthy and simple foods, human services, environmental remediation and re-wilding as main societal products. Excess production and consumption of all types need to be stripped out of the system. As an example, we need mass transit systems not private cars. We need adequate housing for all people, not mansions and holiday homes for the well heeled. We need 100% renewable energy and so on. A new statist program must command a transition to renewable energy and a sustainable “green” infrastructures along with a much greater emphasis on social production such as health, education and welfare. We need a plan to create a new system not just a plan to re-stoke the existing system.

  4. Rob
    April 25, 2019 at 2:52 am

    Well said, I am 100% behind this vision.

  5. Frank Salter
    April 25, 2019 at 8:29 am

    There is always conflation between the real effects of government debt, deficit and money supply. Consider a stylised working economy. Workers are paid in arrears. The government needs to supply the money to pay them in order to buy the food and goods which they produce. For the economy to function smoothly, the state should supply money, the total value of which should be able to buy everything purchasable in the economy. If this is not done then serious friction will occur.

    • Craig
      April 25, 2019 at 5:21 pm


      Yes, that is the static classical goal. The neo-classical goal alleges, falsely, that it accomplishes that. Heterodox theorists think they can resolve the problem with more money, but all they are able to do is palliate it because they don’t know how to handle time. The new paradigm goal is abundant interactive, integrative free flowingness reflective of the temporal universe/cosmos. You just have to actually look at the free flowing moment, at the the most significant scientific point in the flow of the economic process itself and then remedy the problems everyone agrees ARE the problems at that point with monetary policies that will create such free flowingness at the point in time where the entire economic process stops and every metric and factor in its flow is expressed.

  6. Ken Zimmerman
    May 2, 2019 at 1:52 pm

    If half or even more of the Sapiens population died tomorrow, the species would continue. So, we don’t “need” to spend more, or provide “adequate” housing, food, transportation, etc. We may want these things and we may find through experience that they improve the health, happiness, or longevity of the species. If we “believe” these goals are good and worth pursuing, then we can work for that. But in the past our species has survived conditions much more destructive and oppressive than anything present on the planet today. This is not about needs. It’s about wants. The rich and powerful among Sapiens have shown a tendency to always want more wealth and more power. It’s what they want. If the other 90% of Sapiens want to chase different goals and outcomes, then that group of Sapiens will need to push the 10% out of the way and destroy their ability to control the future of Sapiens. It’s my view that no social scientists’ research or publications can achieve this. That work must be performed by political, community, and even physical power. Exercised at times with a level of viciousness some of us might find uncomfortable. Wants are not achieved because we want them. They’re achieved because we force others to bend their will so we can have them. Perhaps those who say wants can be voted in are correct. History seems to indicate, however that the success of voting is inconsistent and impermanent, at best. If there are other alternatives, I would love to hear them.

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