Randall Wray on MMT and the US Economic Crisis

Randall Wray gives an enlightening talk here called “Money and the Public Purpose: The Modern Monetary Theory Approach” (Capitalist Mode of Power: Past, Present, Future Conference, October 20, 2011, York University, Toronto), on MMT and the current economic crisis in America.

Excellent analysis and explanation of MMT. Wray speaks first, but there is a second speaker after him (so Wray’s talk is only the first half of this video).

Noam Chomsky on US Economic Crisis

An interesting interview here with Noam Chomsky. He is correct that the $447 billion jobs package was at least a step in the right direction. However, one could say that

(1) Tax increases are not necessary at the moment for a large stimulus. But to the extent that any tax increase is made highly progressive, the more likely it is that such government deficit spending will lead to increased aggregate demand. Why? The reason is that the taxed income of the extremely wealthy is unlikely to be spent on producible commodities: instead it gets pumped into financial asset markets and primary commodity speculation. Nevertheless, the time for a major tax increase and reform of the tax system is not now, but when the economy has been stimulated back into full employment and the issue of debt deflation has been resolved.

(2) I think that Chomsky is wrong to say that Reagan was “fiscally irresponsible.” On the contrary, fiscal stimulus under Reagan was the right thing to do: the problem was the regressive tax cuts, wasteful military spending, cuts to social spending, and attacks on labour rights. In other words, the main problem with Reagan’s deficits was the composition of government spending, not the government spending per se. Indeed, whatever one thinks of Reagan (I don’t think much of him, frankly), that senile old man was the last president who implemented a Keynesian stimulus with reasonable success, driving down unemployment to comparatively low levels. This is one of those bizarre paradoxes of recent history.