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Using MMT for Evil

February 25, 2011

Out of the comments, Tom H had a gem:

Waren has pointed out that Art Laffer understands monetary ops perfectly. His whole game is cutting taxes, cutting spending on social programs, and increasing corporate subsidies. This is the source of Cheney’s famous, “Deficits don’t matter.”

The problem is that “they” do get it and have been using it to advantage. Laffer’s current disciple is GOP “budget whiz” Rep. Paul Ryan. But now the fiscally conservative GOP wing is objecting to what Poppy Bush called “voodoo economics.” So we’ll have to see how this shakes out on the GOP side. So far the Lafferites are winning, with tax cuts blowing out the deficit, which is good from the MMT vantage at this point in time, with huge leakage from demand due to increased saving/delevering and an outsized CAD.

I confess, I knew that Laffer knew monetary operations, and how it all worked.  I just didn’t put together that someone could use the ideas of MMT in evil ways.  Doh!  How did I not see this?!?

If Art Laffer really gets and believes MMT, then he must be a pretty heartless guy.  As far as I can tell, he does not now and has never advocated a payroll tax reduction, even though those are the people that could boost demand the most.  And he even goes out of his way to misrepresent the amount of taxes working people pay.

Let’s take a look at the bottom 75% of taxpayers over this same time period — the group current Democrats refer to as middle- and lower-income earners. From 1981 through 2005, the share of all income taxes paid by the bottom 75% of all income earners (as reported on the individual income tax returns) declined to 14.01% from 27.71%. As a share of GDP, total taxes paid by the bottom 75% fell to 1.05% from 2.50%. The bottom 75% of all taxpayers today pay less than 35% of all the taxes paid by the top 1% of all income earners.

Over the last 25 years, the bottom 75% of all taxpayers’ tax payments fell and their tax rates fell. This is the group the Democrats are targeting for tax cuts.

Where is any mention of Social Security taxes?  If he knows MMT – which according to Warren he does – then he cannot be ignorant of the impact on the lower classes of these taxes.  Also, he must then realize that the greatest corporate tax break possible would be to reduce the employer side of Social Security taxes.  But he doesn’t talk about this – even though it would be the most logical and large tax reduction we could have.

I bring this up because all he really talks about is reducing taxes.  So why not aim at the biggest tax pie out there?

His life goals must involve some form of bringing back poor houses and trying to undermine the government.

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  1. Tom Hickey
    February 25, 2011 at 8:58 pm

    His life goals must involve some form of bringing back poor houses and trying to undermine the government.

    Art Laffer was an economic advisor to President Reagan the guy who said that government is the problem and took it as his mission to take apart the welfare state and put an end the New Deal. Laffer was the architect of Reaganomics, which GOP fiscal conservatives like Poppy Bush called “voodoo economics.” Here is Laffer’s own summary of Reaganomics.

    Reagan Centennial Tribute Dinner w/ Art Laffer

    Oh, and Margaret Thatcher, too.

    Art Laffer of Laffer Curve fame and Baroness Thatcher attend TaxPayers’ Alliance gala dinner

    • TC
      February 25, 2011 at 9:31 pm

      What a jackass. According to this, he is lying when he says”

      “From December 1982 to June 1990, Reaganomics created over 21 million jobs—more jobs than have been added since. Union membership and man-hours lost due to strikes tumbled. ”


      It looks like Reagan plus Bush I didn’t create that many jobs, and Clinton created more in any case. Why lie about something so easy to verify?

  2. Peter D
    February 26, 2011 at 12:02 am

    The way I see it MMT is really a-political and as a tool can be used for good and for bad. I remember reading a comment that claimed that Hitler’s management of economy was essentially MMT put to practice. Cannot find it now, but found this instead:

    JK Galbraith wrote (pp 237)
    By the mid thirties there was also in existence an advanced demonstration of Keynesian system. This was the economic policy of Adolf Hitler and the Third Reich. It involved large scale borrowing for public expenditures, and at first this was principally for civilian works – rail roads, canals and the Autobahnen. The result was a far more effective attack on unemployment than any other industrial city. By 1935, German unemployment was minimal. ‘Hitler had already found how to cure unemployment before Keynes had finished explaining why it occurred’ . In 1936, as prices and wages came under upward pressure, Hitler took the further step of combining an expansive employment policy with comprehensive price controls.

    The Nazi economic policy, it should be noted was and ad hoc response to what seemed over-riding circumstance. The unemployment position was desperate. So money was borrowed and people put to work. When rising wages and prices threatened stability, a price ceiling was imposed. Although there had been much discussion of such policy in pre-Hitler Germany, it seem doubtful if it was highly influential. Hitler and his cohorts were not a bookish lot. Nevertheless the elimination of unemployment in Germany during Great Depression without inflation – and with initial reliance on essential civilian activities – was signal accomplishment. It has rarely been praised and not much remarked. The notion that Hitler could do no good extends to his economics as it does, more plausibly, to all else.

    Thus the effect of ‘The General Theory written by Keynes was to legitimize ideas that were in circulation. What had been the aberrations of cranks and crackpots become now respectable scholarly discussion. To suggest that there might be over-saving now no longer cost a man his degree or his promotion. That the proper remedy for over-saving was public spending financed by borrowing was henceforth a fit topic for discussion – although it continued to provoke their bitter rebuke. The way was now open for public action”

  3. beowulf
    February 26, 2011 at 6:23 am

    “Since late 2007 the federal government has spent somewhere around $3.6 trillion to stimulate the economy. That is a lot of money.

    My suggestion would have been to take all $3.6 trillion and declare a federal tax holiday for 18 months. No income tax, no corporate profits tax, no capital gains tax, no estate tax, no payroll tax (FICA) either employee or employer, no Medicare or Medicaid taxes, no federal excise taxes, no tariffs, no federal taxes at all, which would have reduced federal revenues by $2.4 trillion annually. Can you imagine where employment would be today? How does a 2.5% unemployment rate sound?”

    • TC
      February 26, 2011 at 1:56 pm

      His real time record is atrocious. During th eworst parts of the crisis, he was flogging tax cuts on the top 1% as though they were a reasonable solution for the crisis.

      Here he is talking up lowing tax rates on the rich and texas tax rates in May of 2009, which now appears to be the among the worst of the bunch: http://online.wsj.com/article/SB124260067214828295.html

      Here warning about inflation twice in 2009:


      Here he is warning in January 2008 – after the recession had already begun, and just months before the worst parts of the crisis – that the worst threat to prosperity is high taxes on the rich:


      Today -he bangs the drum for a payroll tax holiday. The payroll tax holiday is listed after income, cap gains, and corporate profits tax, and he is awfully careful to include the employer portion. Maybe he was just playing to the WSJ crowd – maybe. Or maybe it is just a very low priority for him, which seems more likely given his real time writings. I’ll backoff from “Evil” – but hey, I try for punchy article titles too!

      • Tom Hickey
        February 26, 2011 at 4:58 pm

        Laffer is pure “trickle-down.” But his version also comes with piss on the middle class and poor as part of that trickle.

        The issue is the government budget balance as the fiscal means to address demand leakage. The number is obvious from the sectoral balance equation, which is a national accounting identity.

        Then it becomes a political question about how to achieve the requisite deficit by apportioning increased expenditure and decreased taxation.

        Laffer’s justification of tax cuts over welfare expenditure is based on trickle down, which has been shown not to work. Productivity gains were not passed along, and worker wages have remained stagnate while the top of the town has prospered wildly. In the end the greed and overreach wrecked the system, and we are still digging out. Now they want a re-do.

        Why are we still talking about this? Oh, right, the right wing, bankrolled by Big Money, is pushing it in the media as well as public discourse, which it influences through rented “experts” such as well-funded think-tanks and interested academicians, not to mention the revolving door and targeted contributions designed to subvert and suborn.

        Anyone who thinks this is not “evil” in the sense of intentionally subversive should read Bill Black on control fraud and state capture. People like Laffer give this cover with knowingly specious reasoning.

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