My column in The National this week came out last night instead of being in its usual Friday slot:
My argument is:
One big issue that is looming on all our horizons at present is politicians' newfound enthusiasm for what are called fiscal rules. Like so much else in economics, the term ‘fiscal rule' is not what it seems. It's meant to convey order. What it actually means is that the person promoting the rule intends to balance the Government's books so that government expenditure is equivalent to it tax income.
And as I point out:
Labour are not alone in saying this though. The Tories already have such a rule. They might have abandoned it during Covid, but Rishi Sunak is set to restart using it in his budget to be announced this month. And just in case there is any doubt about it, this is also logic that underpins Andrew Wilson's Growth Commission Report for the SNP, which is the best indication of that party's thinking on this issue.
In other words, we are in trouble on all fronts. The ability of neoliberal economics to crush the lifeblood out of an economy and the people of a country has not ended as yet, and all because our politicians refuse to engage with the economic alternatives that really do exist and which so obviously work. One day we will have politicians that do that. But not yet it seems.
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‘Fiscal rules’ are nothing more than an abrogation of responsibility by people who do not have the courage or depth of knowledge to do the right thing. That’s about 99.9% of MPs BTW.
These days they should be called ‘fiscal cruels’ – because these are decisions made in the presence of factual alternatives that are simply ignored.
They can get away with it because to most people macroeconomics is extremely counterintuitive. One reason many people give up modern physics is because it is so counterintuitive. But it works!
But many things that work are counterintuitive. For instance, if you had never seen or heard of a spinning top, would you believe it could stay upright merely by spinning? I could show you the equations of motion of the object but you might not have the ability or inclination to follow what I was saying. If you had then maybe you would say “So much the worse for Newtonian mechanics!”. Many would not even bother to engage with my argument because what I am proposing is obviously preposterous, after all every time they had tried to balance an object that shape it had fallen over.
However there is a lesson to be learnt here. Most of us believe a spinning top will remain upright merely because we know it will. I think the same could apply to MMT. Once people see it works, many will be quite happy with the idea. There is a place for those who study the economics of the subject, just as there is a place for theoretical phsysicists. But, for most people it will not be accepted until, in their experience, it is seen to work. At that point it may even become the new intuitively obvious.
Until then austerity will be an easy sell.
What a good point….
As I understand it, the main reason that government spending is not equal to the tax take is the amount saved. Logically then the government has to stop all savings or tax savings at 100%.
Sorry Ben – that is simply not true – the issue is vastly more complicate than that
Fiscal rules rule. How did numbers on a computer screen become more important than people’s lives? Who is it that says financial considerations come first and evrything else comes after? It’s preposterous. Glad to see you’re being published RM.
If sticking with the Fiscal Rules is bad for some – who is it good for?
The owners of debt