The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
On Monday, December 13, 2010, William Black, associate professor of economics and law at the University of Missouri-Kansas City, wrote a post on his blog, New Economic Perspectives, titled, “Obama haters praise his tax policies because they believe those policies will make him fail” (I once spoke at the UMKC, and have great respect for the professors of economics whom I met there. I still correspond with Professor Randall Wray, one of the more brilliant minds in economics.)
The thrust of Professor Black’s post was summarized in his first paragraph:
Like the Sirens reputed to lure sailors onto rocks, a series of columnists who want President Obama to fail are praising Obama’s capitulation on extending the Bush tax cuts for the wealthy. The motif of these comments has three common characteristics – all designed to destroy the Obama presidency. First, and the chutzpah of this aspect is wondrous, those that hate Obama’s policies are telling Obama he is demonstrating his strength by surrendering on the Bush tax cuts to the wealthy. Second, they claim that Obama “moved to the center” by agreeing to support tax cuts for the wealthy. Third, they claim that Obama’s attacks on his strongest supporters are brilliant politics essential to saving his Presidency.
Professor Black’s fundamental complaint was:
Obama’s promise to end the Bush tax cuts for the wealthy was supported by a strong majority of Americans. . . The people who want Obama to fail consistently push him to abandon policies that are desirable and broadly supported by the public. . .
I commented on Professor Black’s post, and the essence of my comments was:
“A couple of problems. First, because the public does not understand monetary sovereignty, and so does not understand economics, the beliefs held by the public do not necessarily constitute ‘policies that are desirable.’
“Second, increasing taxes on any group, rich or poor, removes money from the economy, and so is anti-growth. There is zero economic benefit from increasing taxes on the rich, despite the emotional satisfaction it may give the poor.
“Obama was dragged kicking and screaming into exactly the right action, i.e. he didn’t increase any taxes other than the ‘death tax,’ and that went up less than feared.
“In total, his ‘capitulation’ is predicted to give us a continuation of the Bush tax rates, a reduction in FICA and a lesser increase in the death tax. Assuming this bill passes, we will have a much better chance of exiting the recession. If that’s ‘losing|,’ I’ll take losing over winning every time.”
I was quite surprised to read Professor Black’s post. Because he teaches at UMKC, I innocently had expected he would have a better understanding of federal finance and monetary sovereignty. Perhaps, the word has not yet had time to float around the hallowed halls.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”