Real Fiscal Responsibility 2; Carter: Stagnation and Unemployment

New Economic Perspectives has a second installment, Real Fiscal Responsibility 2; Carter: Stagnation and Unemployment, in its series that I first mentioned in my previous post Real Fiscal Responsibility I: Preliminaries. I have excerpted part of the explanation for the second post as follows:

In this second post, I begin my evaluation of the extent of fiscal responsibility or irresponsibility of the Federal Government during the Carter Administration by covering two of the primary problems reflecting public purpose, and what the Federal Government did or did not do about them with its fiscal and monetary policies. The two are: ending economic stagnation, and creating full employment at a living wage.

I thought it would be really interesting that the author, Joe Firestone, had chosen to start his story in the Carter administration. This article disappoints me as I posted in my comment to the article as follows:

Your article fails to address a major issue that you seem to think you can hide under the phrase “demand pull inflation rather than cost push inflation”. Without addressing how Carter should have handled the “cost push inflation”, you leave a big hole in the article. As I remember it, inflation was a major concern for everybody in the years from the end of the Johnson administration to the beginning of the Reagan years. MMT claims that there are no limits to the US government spending as long as it does not bring on inflation. There is some talk under MMT of what to do if inflation should rise. If you ignore this issue when inflation was running rampant, then it feels like MMT is only paying lip service to the worries about inflation.

I am not saying MMT has no prescription for inflation, but I am saying that if an MMT proponent misses the opportunity to address the inflation issue during a historical period when inflation was rampant, then you give unnecessary ammunition to the people who do not want to believe in MMT and you cut the legs out from under the people who do want to believe in MMT.

MMT is the acronym for Modern Money (Monetary) Theory. It is a frequent subject of my blog. The New Economic Perspectives blog is a major source of my information and links to information about MMT.

I hope to get a lot of enlightenment from the response to my comment.

September 1, 2014

I did get a response to my critique.

Joe Firestone

I didn’t miss the “opportunity.” I just decided that this post would cover two of my 15 or so aspects of public purpose 1) ending stagnation, and 2) creating full employment with a living wage. Creating and Maintaining price stability; i.e. the inflation issue, is another aspect of public purpose, and is covered in my next post.

Please keep in mind that this a blog series, and that blog posts are not supposed to be long pieces. I’m trying to keep each one to 1500 words or so. So, if you think I’ve missed something,perhaps wait a few posts and then point that out if it’s still an issue.


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