The Washington Post has the story Democrats, in a stark shift in messaging, to make big tax-break pitch for middle class.

The centerpiece of the proposal, set to be unveiled Monday by Rep. Chris Van Hollen (D-Md.), is a “paycheck bonus credit” that would shave $2,000 a year off the tax bills of couples earning less than $200,000. Other provisions would nearly triple the tax credit for child care and reward people who save at least $500 a year.

The windfall — about $1.2 trillion over a decade — would come directly from the pockets of Wall Street “high rollers” through a new fee on financial transactions, and from the top 1 percent of earners, who would lose billions of dollars in lucrative tax breaks.
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All told, the package is about a third of the size of tax cuts enacted under President George W. Bush. It would transfer about 0.6 percent of national income, or gross domestic product, from millionaires and Wall Street traders to about 150 million American workers, with the paycheck bonus alone reaching at least 100 million workers.

I wonder if The Washington Post called it a windfall when President George W. Bush had tax cuts three times larger enacted during his administration.

If you read the story, it says that this proposal is an attempt to go beyond playing around the edges of extending the benefits of a “booming” economy to the middle-class and the poor.  To me, this plan is certainly headed more to the crux of the problem, but it is still playing around the edges. $1.2 trillion over a decade is maybe 10 times too small.  Where is the massive investment in infrastructure, education, research, and fair trade that should amount to $1 trillion in a lot less than ten years?

Though the article may think that:

Enter Van Hollen, 56, the senior Democrat on the House Budget Committee and a former chairman of the party’s campaign arm for House races. Close to Pelosi and the White House, he has emerged as one of the party’s big thinkers on economic policy and political strategy.

I’d call him a medium thinker, or at least not extra small.

To avoid increasing federal budget deficits, Van Hollen proposes

You see, right there, he is repeating the Republican lie.  Bernie Sander’s has chosen a Chief Economist for the Minority on the Senate Budget Committee. Stephanie Kelton will try to educate the politicians about how counter-productive it is to  talk about avoiding increasing federal budget deficits in the current circumstances.  Did you see the emphasis, IN THE CURRENT CIRCUMSTANCES?

IN THE CURRENT CIRCUMSTANCES

Let me repeat that,

It is easy to know what special current circumstances are. The inflation rate is well below the target 2% a year, and it is approaching negative territory. See the previous post Replacing the Budget Constraint with an Inflation Constraint.

New Economic Perspectives has an article that points to an article in Renewal titled Modern money and the escape from austerity by Joe Guinan.  The New Economic Perspectives author L. Randall Wray called the Renewal article:

Here’s one of the best and fairest summaries of MMT that I’ve seen:

Before realizing there was more to the Wray article, I immediately followed the link to the Guinan article.  The article is eye opening in a lot of respects even for me who has been reading about and blogging about MMT for quite some time now.

On 2 January 1879 the United States returned to the gold standard. Specie payments had been quietly suspended in 1861 to meet the costs of the Civil War, with Congress authorising the issuance of $450 million in ‘greenbacks’ – legal tender treasury notes – that greatly increased commercial liquidity and triggered an economic boom. But with wartime exigencies over, banking interests demanded a return to financial propriety and redeemable hard money. ‘Though the Civil War had been fought with fifty-cent dollars’, historian Lawrence Goodwyn explained, ‘the cost would be paid in one-hundred-cent dollars. The nation’s taxpayers would pay the difference to the banking community holding the bonds’ (Goodwyn, 1978, 11). What followed was one of the most extraordinary and creative episodes in the history of popular democratic understanding of money.

You need to read his description of the history of what happened at that time to get an appreciation of how wrong is your current understanding of how money works.  If you think that MMT goes against every notion you have about how money works, then this history tells you that what you think you know cannot possibly explain what happened in 1879 and the following years.  MMT explains it quite well.  So rather than thinking that MMT has no historical precedent, you will learn that historical precedent explains exactly what is wrong with today’s orthodox theory.

As further proof  of what is wrong with the orthodox theory that the public is told, is the following excerpt from the article:

That there was an alternative can be glimpsed in the operations of central bankers. Even as public budgets were being slashed, central banks were pumping staggering sums of new money – hundreds of billions in the UK alone – into the financial system to repair the balance sheets of commercial banks through bailouts and quantitative easing (QE). These central bank operations are not new, but their scale is unprecedented – central bank balance sheets are now three times their pre-crisis levels (Streeck, 2014, 39) – and not a penny had to be ‘paid for’ through taxes or borrowing. ‘It’s not tax money’, former Federal Reserve Chairman Ben Bernanke explained in a TV interview: ‘The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed’ (Pettifor, 2014, 24). Free money, in other words, was made available to those who caused the crisis in the first place, but not to the vast majority who continue to suffer its consequences. The only reason governments have been able to get away with this is because of public ignorance, fostered by politicians of all stripes, of the basics of banking and money creation. ‘It is well enough that the people of the nation do not understand our banking and monetary system’, Henry Ford once said, ‘for, if they did, I believe there would be a revolution before tomorrow morning’ (Greider, 1987, 55).

The aforementioned New Economic Perspectives article is uselessly named Odds and Sods: Some Good Reads For a Cold Winter Friday.  It has lots of good stuff in it besides the link to the Renewal article, but it is badly enough named that I almost didn’t bother to read it.

Common Dreams has the article I Will Grieve. I Will Laugh. But I Am Not Charlie by Josh Healey. This article beautifully puts into words why I have felt some unease about the Euro/American support for Charlie Hebdo magazine.

This excerpt about Molly Ivins captures the way I think about satire.

As the late great Molly Ivins said, “Satire is traditionally the weapon of the powerless against the powerful. I only aim at the powerful. When satire is aimed at the powerless, it is not only cruel — it’s vulgar.”

This is a good description of the kind of satire I like and the kind that I can easily live without. For instance, this is why I preferred David Letterman instead of Jay Leno.

Josh Healey had a pithy summary point of his own.

 I love free speech as much as anyone, but I can separate the right of people to have free speech with my support for their actual speech. When the ACLU supported the right of neo-Nazis to march through the suburban shtetl of Skokie, IL, they didn’t go around saying #IAmHitler.

I don’t really know why Josh Healey’s explanation should come as a surprise to anyone.  There can’t be very many people who are unfamiliar with the following quote:

I disapprove of what you say, but I will defend to the death your right to say it.

See two Wikipedia articles for the source of the quote, Evelyn Beatrice Hall and Voltaire.  Hint: If you believe Wikipedia on this subject, the phrase was not coined by Voltaire.

Thanks to Chris Spear for commenting on this article on a Facebook post. His comment is what brought this article to my attention.

Chicago Magazine has the article These Chicagoans Are Pushing Elizabeth Warren to Run for President.

Just how worried Hillary is about Warren was evident in the awkward pronouncement she made at a 2014 midterm campaign event that also featured Elizabeth Warren: “Don’t let anybody tell you that it’s corporations and businesses that create jobs.” Hillary quickly had to walk that back, in the process appearing to lack Warren’s most prominent quality: the courage of her convictions.

I saw a video of Clinton’s awkward pronouncement. Awkward doesn’t nearly convey how bad Clinton would be if she tried to convey Elizabeth Warren’s message.  This is exactly why I doubt that Hillary Clinton would be an effective substitute for Elizabeth Warren.  If Clinton were to become the nominee, she would have to up her game considerably before I would work for her election or even vote for her.

Naked Capitalism has the article How the Shale Oil Revolution Has Affected US Oil and Gasoline Prices. This article provides some very useful information about the oil business that I didn’t know about.  You may be similarly enlightened if you were in the same state of ignorance that I was.  Below, I have attempted to choose an excerpt that will hint at some of the information you might not have known.

The US shale oil boom was preceded by a persistent and growing shortage of light sweet crude oil in world markets. US refiners responded to this trend by expanding their capacity to process heavy crudes that remained in abundant supply, becoming the world leader in this field. They were therefore taken by surprise when the US market was inundated with shale crude oil from the centre of the country after 2010.

I don’t know how to take advantage of the knowledge I have gained from the article, but having it has certainly got to be better than not having it.

New Economic Perspectives has the article What if the Public Understood How Money Works? by William K Black.  After he explains why the high priests of economics think it would be dangerous for the public to understand how money works, he mentions one way in which the information leaks out in times of war.

If you opened the box, you need to know that the MMT mentioned above is Modern Money Theory as Bernie Sanders’ chief economist is about to unleash upon the Senate budget committee.  The other MMT that Black talks about is Monetary Myth Theory.  This is what even revered economists such as Paul Samuelson wanted you to think you knew.  He  even has a Samuelson quote stating that Samuelson wanted the real MMT kept secret.  By the way, the word modern in the Modern Money Theory refers to the era that started several thousands of years ago and continues to this day.

Thanks to Mary A for sending me a link to The Daily Kos article #FoxNewsFacts trending after “expert” says major British city entirely Muslim.

She called the comments funny.  I call them hilarious.

Fortune Magazine has a great interview with Elizabeth Warren that they stupidly titled Elizabeth Warren: I’m not running for president. In talking about this article, HuffPo called it Elizabeth Warren Says She’s Not Going To Run For President.  Both headlines have more words in them than were spoken by Warren in the interview about the subject of running for President.

You can always depend on the lame stream media to trivialize a great interview. The headline in Fortune and on HuffPo is about a single word in the interview. They don’t seem to want us to concentrate on all the great ideas that were discussed.

Thanks to Jacob J Ryan’s Facebook comment that brought this article to my attention. I forgive him for falling for the lame stream media’s trap of concentrating on the horse race aspects while ignoring the issues.

Below are just a snippet or two of the great issues that were discussed in the article, and even these snippets don’t do it justice.

Fortune: So if you were dictator and there were three things you could do to help the middle class, what would they be?

Warren: First, invest far more in education.

Second, rebuild our infrastructure, both to put people to work immediately in better paying jobs, but in the long run, to help our economy because strong infrastructure is what encourages businesses to invest and grow. China is investing 9% of its GDP in infrastructure. Here in the US, we are investing about 2.5%. China is building a future for its businesses. We are letting our infrastructure crumble. We have $3.4 trillion in deferred maintenance. If we want to have a vibrant economy going forward, we need safe roads and bridges, power grids, communications networks. That’s the part we all invest in. Even if we didn’t need the jobs, we should do this, but we do need the jobs and infrastructure is an investment in the middle class.

Third, research. I’d invest in research. Medical, scientific, engineering and the reason for that, this is an exceptional country. The investment here would be much smaller than the other two. But it’s the great pipeline of ideas that creative people build off of to turn the research into something extraordinary. And you could go down the list of what government sponsored research has given us: nanotechnology, touch screens, vaccines, gene therapies, GPS – and then, entrepreneurs– people who have worked their tail ends off – they have turned that research into extraordinary businesses that employ a lot of people.

The interview ends with this comment which explains so much about why Elizabeth Warren understands how to do politics far better than Barack Obama does.

Fortune: Obama’s core constituency has lost ground during his Administration. That’s not all on him. This has been a longstanding trend. But things have gotten worse.

Warren: The middle class has been under assault for 35 years — the combination of stagnant wages and rising core expenses have squeezed families beyond endurance.

Fortune: But he hasn’t been able to reverse that trend. What advice do you have for him for his last two years?

Warren: Get out and fight for America’s families and be clear what you are fighting for. Don’t just say it once. Give one speech, and then another, and then another. Talk to the Democrats on the Hill to propose the legislation that you want and invite the Republicans in. And ask if there is a way to do it together. But get out there and fight for our families, they need it.

By the way, the snippet below is all that was said in the interview about her running for President.

Fortune: So are you going to run for President?

Warren: No.

Elizabeth Warren has posted on her Facebook page.

House Republicans are trying over and over again to water down the financial regulations on Wall Street and give the big banks more time to gamble with taxpayer-backed money.

She included a link to the Statement of Administration Policy – H.R 37 – Promoting Job Creation and Reducing Small Business Burdens Act.

The Dodd-Frank Wall Street Reform and Consumer Protection Act is helping prevent the kinds of excessive financial risk taking that caused the worst recession in more than 70 years, left millions of Americans unemployed, and resulted in trillions of dollars in lost wealth. These reforms help protect hard working families in everything from saving for retirement to the ability of small businesses to access credit through a stable financial system. H.R. 37 unnecessarily puts these working and middle-class families at risk while benefitting Wall Street and other na rrow special interests

If the President were presented with H.R. 37, his senior advisors would recommend that he veto the bill.

I feel slightly more comfortable now that I see this in black and white and posted on the internet for all to see.  The President certainly could not back down from this position, could he?

Some days there is just so much good stuff being published that it is hard to know when to stop blogging. New Economic Perspectives has the article Dynamic Scoring—a First Step? by J. D. Alt.

I think this is a brilliant presentation of how the federal budget is and is not like a household budget. The excerpt below is an example of how static scoring as opposed to dynamic scoring is like a very stupid way to run a household budget that would also  be a stupid way to run a federal budget.

The net result of static scoring in a budgeting process, of course, is that the “household” has a lot less calculable money to spend—and a much harder time justifying the spending of it—because the concept of “investment” and “return on investment” are not operable factors. It may well be, in fact, that the static “score” assigned by the Congressional Budget Office will indicate that the federal “household” cannot afford to buy any seeds at all. Just have to tighten our belts and do without. Unless, of course, we want to take money away from something else we’ve already agreed to spend it on. Then we can spend it. If we want to fix failing bridges, we have to NOT provide school lunches in poor urban neighborhoods. In other words, our Congressional leadership is operating with the approximate intellectual acuity and managerial insight of a five year old child on a weekly allowance.
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If nothing else, the ensuing analysis and debates would begin to demonstrate and establish one of the basic principles of modern money: that the purpose of sovereign spending is to pay people to do measurably useful things that result in returns with calculable value—like, for example, repairing dangerous bridges or instructing a society’s young adults in the art and technologies of the nation’s commerce.

Besides his household example, I like to point out that no self-respecting private business person would ever consider the cost of a capital investment without considering the return on that investment.  Any politician who claims to want pro-business policies ought not pretend that he or she does not understand the idea of return on investment.  Even socialists understand the concept.