{"id":18672,"date":"2021-05-08T11:50:52","date_gmt":"2021-05-08T18:50:52","guid":{"rendered":"http:\/\/occupysf.net\/?p=18672"},"modified":"2021-05-08T11:51:23","modified_gmt":"2021-05-08T18:51:23","slug":"the-u-s-can-go-big-on-infrastructure-spending-if-it-drops-its-fear-of-deficits","status":"publish","type":"post","link":"http:\/\/occupysf.net\/index.php\/2021\/05\/08\/the-u-s-can-go-big-on-infrastructure-spending-if-it-drops-its-fear-of-deficits\/","title":{"rendered":"THE U.S. CAN GO BIG ON INFRASTRUCTURE SPENDING IF IT DROPS ITS FEAR OF DEFICITS"},"content":{"rendered":"\n

WED, 5\/5\/2021 – BY CARL GIBSON<\/a>  (Occupy.com)   <\/p>\n\n\n\n

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According to his first 100 days joint address<\/a> to Congress, it\u2019s fair to say President Joe Biden is recognizing the severity of the current moment. This new, more progressive Joe Biden declared an end to trickle-down economics, uttered the phrase \u201cwhite supremacy is terrorism\u201d from the Speaker\u2019s dais, and proposed sweeping new programs that would invest trillions of dollars in revitalizing American infrastructure. It\u2019s no secret that Biden is trying to cast himself<\/a> as the 21st century version of Franklin Delano Roosevelt. But for all of his talk of massive public programs, Biden is still constraining himself with outdated economic thinking.<\/p>\n\n\n\n

President Biden promised he would \u201cpay for\u201d his new jobs programs \u201cwithout increasing the deficit\u201d by increasing taxes on corporations and the wealthy. While taxing the rich is certainly a good way to reduce economic inequality and curb the influence the wealthy have on democracy, it\u2019s not necessary to fund government spending. In her bestselling book The Deficit Myth<\/a>, former Senate Budget Committee chief economist Stephanie Kelton \u2013 one of the foremost proponents of the Modern Monetary Theory (MMT) school of economics \u2013 pointed out that today, federal taxes don\u2019t actually fund federal spending, and that government deficits are actually a sign of a healthy economy.<\/p>\n\n\n\n

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\u201cThere\u2019s only one way to fund anything. Congress authorizes the funding, and the Fed changes the numbers in the bank account,\u201d Kelton said in a phone interview.<\/p>\n\n\n\n

In 1971, President Richard Nixon blew up the Bretton Woods Agreement<\/a> \u2013 in which foreign governments could exchange US dollars for gold \u2013 and established the US dollar as a fiat currency. In layman\u2019s terms, this meant the US government could increase the money supply without having to worry about also increasing the supply of gold. While Nixon\u2019s presidency is rightfully remembered as one rife with corruption and hubris, his monetary policy proved historic \u2013 and could actually be what gets us out of the Covid recession.<\/p>\n\n\n\n

In her book, Kelton describes the US as one of the few countries that has \u201cmonetary sovereignty.\u201d Article I, Section 8 of the Constitution states that Congress has the sole authority \u201cto coin money<\/a>,\u201d meaning nobody can issue US currency other than the US government. In a nutshell, this means it\u2019s actually healthy for a currency issuer like the US to run deficits \u2013 especially since Federal Reserve Chair Jerome Powell said last year that \u201cthere\u2019s no limit<\/a>\u201d to how much stimulus Congress should pursue, and that interest rates would remain near frozen until at least 2023<\/a>.<\/p>\n\n\n\n

\u201cTrade deficits work like a vacuum. The trade deficit means the rest of the world is selling us more than they\u2019re buying from us and as a consequence, dollars go out of the US economy. A government deficit does exactly the opposite. It works like a blower,\u201d Kelton explained. \u201cWhen the government puts $100 into the economy and only taxes $90 back out, government deficits make a financial contribution to our economy. A trade deficit sucks dollars out, a government deficit blows them onto balance sheets \u2013 it adds them.\u201d<\/p>\n\n\n\n

\u201cA government deficit should never be something we try to eliminate,\u201d she continued. \u201cIt\u2019s just a matter of calibrating the flows, so the private sector, when it\u2019s prepared to take the lead and consumers are optimistic and consumer sentiment is strong and wages are growing and households are spending a lot of money, that will crank the wheel of the economy and it will lead to economic growth and job creation because businesses will be swamped with customers. And when they\u2019re swamped with customers, they respond by hiring and investing more. They\u2019ll build more factories. They\u2019ll buy more capital equipment.\u201d<\/p>\n\n\n\n

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Supporters of the Green New Deal \u2013 which the youth-led Sunrise Movement<\/a> describes as a massive new jobs plan that would \u201cmobilize every aspect of American society to 100 percent clean and renewable energy\u201d \u2013 argue that Biden\u2019s proposed $4 trillion<\/a> infrastructure package is not ambitious enough. A United Nations climate panel warned in 2018<\/a> that unless global carbon emissions were cut by 45 percent by 2030, the global temperature would increase by 1.5 degrees Celsius, causing irreparable damage to the biodiversity that maintains food chains and ecosystems. Congresswoman Alexandria Ocasio-Cortez (D-New York) has called on Biden to put forth a plan that would spend at least $10 trillion<\/a> over ten years.<\/p>\n\n\n\n

\u201cMillions of people in the United States are unemployed,\u201d Rep. Ocasio-Cortez said last month. \u201cWe have a truly crippled healthcare system and a planetary crisis on our hands, and we\u2019re the wealthiest nation in the history of the world. So we can do $10 trillion.\u201d<\/p>\n\n\n\n

The prospect of injecting trillions of new dollars has conservatives worried about hyperinflation. Should Congress rely solely on printing money, they argue<\/a>, it could make the value of the dollar worthless, raise the price of consumer goods, and force the Fed to raise interest rates. But Kelton is skeptical about inflation becoming a problem down the road.<\/p>\n\n\n\n

\u201cIf we did something really wild and juiced aggregate demand to the point that we got a full employment economy before 2023, and the economy was so strong that the Fed was in a position to hike [interest rates], then yes, it would impact interest-sensitive sectors like housing and automobiles,\u201d Kelton said. \u201cBut that\u2019s a pretty hard point to get to.\u201d<\/p>\n\n\n\n

In a New York Times essay<\/a>, Kelton proposed several policies to curb inflation should the economy begin to overheat. This includes relaxing limits on immgration to allow for more workers to take open jobs that otherwise wouldn\u2019t be filled, repealing trade tariffs to make it easier for businesses to import raw materials from overseas and to incentivize consumers to buy imported goods, and passing new taxes to discourage corporations from outsourcing labor overseas, among others. Ultimately, Kelton believes there can be a symbiotic relationship between the public and private sectors, which would ultimately be driven by the deficit.<\/p>\n\n\n\n

\u201cThe private sector can drive expansion until it can\u2019t. At some point, something will happen. That\u2019s why we have business cycles. If there\u2019s a decline in spending, we get a contraction,\u201d Kelton told me. \u201cIt\u2019s not that the government\u2019s deficit ever disappeared. It just got too small.\u201d<\/p>\n\n\n\n

\u201cCapitalism runs on sales. That\u2019s the bottom line,\u201d she added. \u201cAnd when sales falter, goods don\u2019t get sold and businesses lay off workers. Because you don\u2019t need workers if the demand is not there.\u201d<\/p>\n\n\n\n

Should Biden wish to be remembered as the next iteration of FDR, he\u2019ll need to do more than simply build new roads and bridges \u2013 he\u2019ll have to reject old ways of thinking about spending, embrace Modern Monetary Theory, and put forth a plan that\u2019s just as, if not more ambitious than, the original New Deal. We may only get one shot at this \u2013 we owe it to future generations to get it right this time.<\/p>\n\n\n\n

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Carl Gibson<\/a> is a freelance journalist whose work has been published in CNN, The Guardian, The Washington Post, The Houston Chronicle, Barron\u2019s, Business Insider, The Independent and NPR, among others. Follow him on Twitter @crgibs<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

WED, 5\/5\/2021 – BY CARL GIBSON  (Occupy.com)    According to his first 100 days joint address to Congress, it\u2019s fair to say President Joe Biden is recognizing the severity of the current moment. This new, more progressive Joe Biden declared an end to trickle-down economics, uttered the phrase \u201cwhite supremacy is terrorism\u201d from the Speaker\u2019s… Continue reading → <\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/18672"}],"collection":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/comments?post=18672"}],"version-history":[{"count":2,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/18672\/revisions"}],"predecessor-version":[{"id":18674,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/18672\/revisions\/18674"}],"wp:attachment":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/media?parent=18672"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/categories?post=18672"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/tags?post=18672"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}