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Government Programs Should Have Legible Budgets
This kind of rule may come across as obvious, pointless, or doomed depending on your perspective.
There is an impulse among many to see a problem in society and turn to government for a solution. I strongly disagree with this impulse. But I also think that these people and myself could come to terms on some shared "rules of engagement".
To start we should agree on some basic things:
There are many devils in the little details, but what these three basic things suggest is that there should be: A set way of collecting taxes. A budget using those taxes that pays out to various social causes. The determination of that budget can be debated upon in some agreed way (maybe by electing representatives to a 'congress'). And that all social programs must go through this set of procedures.
To address the criticisms:
"This is pointless we already do things this way."
Sometimes governments do it this way, sometimes they don't.
The Americans with Disabilities Act does not follow these rules. Private individuals are given the ability to sue other private individuals to provide accommodations for them. The threat of getting sued also encourages a lot of preemptive work on the part of companies. How much does all of this suing and preemptive work cost? No one knows. How much will it cost you to provide for people with disabilities? Maybe a standard amount. Maybe you'll be one of the unlucky ones that gets sued in a new novel interpretation of the law and you'll win a reverse lottery.
How much do you think it is worth it to help disabled people in this country? It seems like a valid political question, but right now the American Government is basically on a blind autopilot path. It cannot know how much is spent. It cannot control how much is spent. And it cannot work out more lucrative and appealing deals for edge cases.
A little while ago (maybe a decade) some university (maybe MIT) decided to put all of their classes online for digital consumption, for free. Sometime later they were forced to take down the entire archive, because they were not subtitled, and a deaf person could not access them. The deaf person wanted them all subtitled. Subtitling a free online resource would have been too expensive and not worth it. So they were instead just removed for everyone. This is the kind of problem that a competent government middleman can solve:
[In the alternative universe where the ADA creates a government middleman agency for solving disability issues.] Each deaf person is allotted $5,000 a year to solve for their disability. They can choose to spend this on hearing implants, or on paying towards having some work transcribed. If enough deaf people want a thing transcribed it gets done. No business owner or non-profit is suddenly held hostage. No single person or entity is stuck paying enormous costs. Things aren't removed from public consumption just because a disabled person can't access it. We know how much is spent on deaf people per year. Medical companies that want to solve or fix a disability have a clear customer market for potential solutions.
This is doomed people would rather have the costs hidden and less obvious.
As I said above, sometimes the government does follow the good set of rules. I'd consider an agency like NASA a good example. The American people give some vague indications of how important they think space science and exploration is to their elected representatives. Those elected representatives can talk with the scientists, engineers, and managers at NASA to determine if maybe there are some important research projects that the general public doesn't know about but might want if they did know about it. NASA's budget is paid through taxes and is a clear line item on the federal budget. For the last two decades NASA has been about 0.5% of the federal budget. Which sounds vaguely correct to me in proportion to how much Americans care about funding Space related stuff.
The cynical reason why I believe that programs have hidden or "laundered" costs is that I don't believe voters would be actually willing to fund them if the true costs were obvious. If a party has a temporary political victory the best the best way to leverage it is through hidden and laundered costs. Pass a medicare act that doesn't really change the rules until you are out of office. Pass a civil rights act with murky enforcement that can be slowly ratcheted up every year.
Despite politicians doing this pretty often, I don't think it is what voters actually want. There is a huge amount of frustration from people over these sorts of policies. Hanania's book the Origins of Woke kind of blew up one of these issues recently. But they are all going to become problems, because when you remove the funding control from government there is no funding control. There is no countervailing force to push down the costs of these various programs. And the only way to get rid of them is often just destroy them altogether. So while people might have supported the ADA if it was 1% of the budget, they might start getting pissed at the program when it balloons up to 10% of the budget and a bunch of reverse lottery sob stories start showing up in the news. And suddenly instead of 10% or even 1% of the budget, you get 0% for your cause and no one trusts you with a 1% allotment cuz they will all remember the horror days of 10%. I don't know how likely a full reversal to 0% is for any of these policies. But that seems to be whats on the table as far as alternatives go.
There is also an ongoing legal weakness to many of these policies. Now that the supreme court is mostly conservative it could start invalidating different laundered cost schemes that have been liberal policy staples for decades. Affirmative action has taken a hit. Paid housing for the homeless might get hit next.
Conclusion
In general I think we should be suspicious of any public program that tries to hide its costs, or launder those costs onto private actors. Anything that expands the scope of things that one individual can sue another for is laundering costs. If you want a social program done or accomplished, you need to be willing to raise taxes and pay for it. If voters can't stomach raising taxes to pay for a particular social program, then too bad! Nothing is free. Start comparing the costs and fighting for them in the agreed upon battlefield.
The degree to which a government decision is about budget exists on a sliding spectrum.
Consider two extremes:
ADA is somewhere in between these extremes. It is clearly has a direct monetary impact on businesses. And sometimes as with the free videos, the outcomes are clearly bad.
But I don't think it is 100% only about money.
Consider a community of 10k of people with 20 wheelchair users and a single non-wheelchair supermarket. Say the owner has done the math and building a wheelchair ramp would not be cost-effective. I see the following options:
A) The government shrugs. B) The government pays some allowance to the wheelchair users. They try to pool together to get that ramp. The owner agrees. Good outcome. C) Like B, but the owner still not want the ramp. The ramp would take one of the spots of the parking lot (in fact, the best spot!), and he wants rent for that. Eventually the government overpays severely for that ramp. D) Like B, but the government forces the owner to allow that ramp. The owner mumbles something about commies. E-G) Like B-D, but the money comes from the government directly based on general rules instead of the actual demand. This bypasses coordination problems, but risks being less cost-effective. H) The government forces the owner to pay for the ramp out of his own pocket. Again he grumbles something about land of the free. In the end, everyone pays through increased supermarket prices and the general costs of having to follow more laws. I) Some kind of technical solution. Exo-skeletons, shopping-as-a-service, whatever.
Most of these options are not great. Excluding wheelchair users whenever the market forces are not in their favor is not nice. Creating more regulations is also not nice. Having a bureaucracy which figures out how much the supermarket should be paid for allowing that wheelchair ramp also is not nice. Relying on technological solutions will not always work.
Making the supermarket owner pay for the ramp has at least the advantage that there is little bureaucratic overhead. You do not need to figure out a fair price for getting the owner to allow that ramp, or if the government should pay for a ramp in the primary color of the market, and how much the government should pay if the owner also uses that ramp to move carts of goods, or employ wheelchair ramp inspectors. Pay for the ramp or get sued is not the simplest law there could be, but it is not the most complicated either.
This does not mean that the pathologies you mentioned (e.g. that it is easier to sell hidden costs than visible costs) don't play a role, though.
Why not? Putting a request for grocery pickup with reimbursement on Instacart or Craigslist or the public library's bulletin board or whatever seems very simple and reliable. I assume it's backed up with small-claims court.
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I mean this seriously: who fucking cares? Government is supposed to be fair and just, not nice. It is also supposed to be deliberately limited in scope and power, and demanding every single building in the country include ramps if they want to let people in off the street isn't part of it.
The crippled should take it up with God, not with Uncle Sam.
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Civil suits have been really popular, lately. Texas SB 8 for abortions. I think Florida’s HB 1557 does something similar for teaching about gender? Surely I’m missing some others.
In theory, these are blank checks for transferring money, just like the ADA. In practice, there’s only so many people getting abortions. Why shouldn’t disability suits be the same?
Civil suits can be very Zif's Law-prone, where a small number of actors can put an outsized number of lawsuits forward, unless the statute is very limited (and the various enforcement arms actually stick to that rather than redefining it). Laufer from Acheson Hotels v. Laufer, for example, filed "557 suits in sixteen different states, plus the District of Columbia", and while she's at the higher end of ADA testers, individual people with thousands of tester lawsuits exist.
But that depends on a number of very specific attributes: ADA tester targets have a lot of capital, they're often represented by insurance companies that are willing to give cash, the (court and administrative interpretation of) relevant statutory language in many circuits allows both standing and damages to be found without normal concrete harm, a very compliant regulatory system that writes increasingly broad material to base a lawsuit on, so on. Hence why SB8 lawsuits are very thin on the ground, and with HB1557 only allowing declaratory and injunctive relief it'll be the domain of morons tilting at windmills. The gun private right of action laws tend to be much more mixed -- lots of cash out there both to support lawsuits going in and reward them coming out, but standard of harm is a mess, and the PLCAA is only dying rather than dead.
In theory, it should be possible to write statutory language that limits testing trolls while still allowing even small lawsuits over actual harm, but a) a there's a pretty sizable portion of the support for the ADA that thinks the lawsuit heavy enforcement is a benefit, and b) it's not clear that actually would work, anyway.
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Doesn't this critique also apply to the whole civil suit edifice? If a company breaks a contract with me, it is the government that backs the court resolution with force if necessary. Which kind of highlights a problem with giving a budget per person. Currently a company might make efforts to not break a contract because I can sue them, and that should count as government spending by this metric? And if the solution applies then each person is given a contract enforcement budget, but, a big company could simply sign a contract for oil rights on my land worth a million dollars, then break the contract and I only get 5000 dollars towards trying to rectify it?
In other words your solution removes the advantage of government force against entities that are less powerful than a government but more powerful than a normal individual. The whole point is to leverage the scale of the government as the aggregate of its citizens. Which I understand is somewhat antithetical to a Libertarian, but I think your proposal is kind of the worst of all worlds. I can see an argument to take the government out of it entirely and I can see an argument to have the government do the whole thing. But where the government does it, but only to a very minor extent for each person just seems more inefficient than either.
Which isn't to say I think the ADA way is right either, I'd rather just have a mandate passed on what a company needs to do, set up a department, people make complaints and the government either finds in the companies favor and does nothing, or uses government power to force the company to comply. Then you could also measure the cost both to the company and to the government of enforcement without diluting the whole purpose of having a government.
There are obligations you agree to and obligations that are forced upon you. If I agree to deliver 10 widgets to you then back out, I've backed out of an obligation I agreed to. If government says I need to deliver 10 widgets to you then I back out, I've backed out of an obligation that has been forced upon me. Obligations that are forced upon people seem like takings to me. If I had any faith in older supreme courts I'd wonder why they weren't considered 5th amendment violations.
I would be somewhat fine with this solution if they also kept track of the costs of these mandates, possibly by allowing partial tax write offs for anyone complying with them. I'm not really firmly fixed on a particular solution for this problem, just firmly in the position that it is a problem.
A mandate without funding is just a sneaky tax and spending scheme that doesn't get added to the government balance books and has far less oversight and checks/balances than other forms of spending. Even if you are a big government liberal there are good reasons to dislike this kind of scheme. There are not unlimited resources, and unless you only care about one particular pet issue that is using one of these mandates without funding then there is less wealth available for all other issues. Take this pet example:
All businesses must spend about $10k to accommodate a particular disability. The disability can also be fixed with a surgery. Fixing the disability for everyone would average out to about $5k per business. The government in this case could tax the businesses $9k each, spend $5k paying for fixing the disability, and then have $4k in tax revenue left over. The business is happier with this solution, the disability is solved for all cases (and places that get exclusions from ADA aren't also excluding people with the disability.)
I am Libertarian, but I also was an Economics Major in college. The ADA stuff bothers my economist side just as much as it bothers my libertarian side. If I am going to have a government doing things that I don't like, can I at least ask that they not do it stupidly and waste a bunch of money?
Sure! And I think the government should absolutely be deciding how much money it should be spending on say the ADA per person (assuming we decide it should be done at all which is of course not a given!). But I think then leaving it up to the person to have to coordinate on which businesses to target, is basically wasting the reason why governments are useful at all, which is coordinating these kind of issues.
And you will get no argument from me that governments should be do much better at keeping track of what is paid for what and the costs vs benefits of x. I was in government (local and central) long enough that I am certain I have had several rants about it.
As I mentioned, not too attached to the particular solution I had. Just that this is a problem. So I don't think we disagree too much.
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"Government force against entities" assumes that the entity did something, and that the government force is being used to stop it. On the contrary; the entity didn't do anything, but the government imposed an obligation on them.
Well in both cases the government is putting an obligation on the entity right? To stick to a contract or to make accommodations for those with disabilities. The government puts lots of obligations on entities. Paying taxes, environmental regulations etc.
Like I say, if you think the government should not put obligations on entities at all, then that is a consistent position. But the government should, but it should farm that out at some rate per person and then leave it up to those people to coordinate against larger entities is just missing the point the government is there to be the coordinator in the first place. There is no point in that halfway house.
Either have the government coordinate it, or not at all, but having it collect all the tax money up, disburse it to individuals then make them coordinate action is just adding additional steps to the process.
A company would be expected to have contracts, and would commit itself to some method of enforcing them, even in the absence of government interference; this isn't true for the ADA. It's the difference between the government enforcing better coordination on something that would exist regarelsss of the government's presence, and the government enforcing something that it imposed on its own.
Your framing is that the government's major role is to coordinate an existing transaction. That would be true in an actual contract; that would be false for the ADA.
If the government said that Bill Gates had to bow down to me, it would be misleading to describe that as "the government is there to coordinate what you and Bill Gates do" or to say "the government is just letting you negotiate with Gates, who's less powerful than a government but more powerful than a normal person".
Leave aside whether the government should do A or B, I am saying ONCE we decide A or B, then it's inefficient to have it coordinate one part (gathering the resources) but leaving it up to individuals to target the entity.
The advantage of government is coordination, so making it half coordinated and half not is wasting the advantage it gives you.
As I said, there is absolutely an argument that the government should not coordinate ADA stuff at all. But once we decide it should, the making each person have to target the resources individually and thus coordinate if they want to push against a bigger entity is just wasting the leverage.
That allows you to characterize the act any way you want just by dividing it up into steps and saying "leaving aside the first step...."
You can't separate whether the government should do A or B from the government's role in the transaction of which A/B are a part.
Well we can if we are just look at how efficient solutions might be as per the OP. I completely accept that some (many?) people do not think the government should do a lot of things, and that is a reasonable position to hold!
But if it IS doing a thing (like the ADA currently), then presumably we can still explore what would be more or less effective, even if we stipulate that you might not think it should be doing that thing in the first place? I mean it's all hypothetical anyway, unless one of us is secretly in the Cabinet, then we are not going to be impacting whether the thing happens nor how it happens. So a hypothetical discussion with the stipulation that discussing the how doesn't mean you are endorsing the should, doesn't seem too unreasonable?
But I don't think the government should not be doing that thing. (Defined nontrivially.)
Helping disabled people isn't bad. The problem is that doing so through lawsuits creates problems that don't happen when the government just taxes people and pays businesses $X to have disabled accommodations.
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What if NASA functioned like the ADA? Every company with more than 50 employees could be made legally liable for failure to launch probes into space to explore the Solar System. The law could be enforced by lawsuits against companies that have "workplaces hostile to space exploration" because they skimp on how many probes they launch.
This sounds horrible and likely to lead to gaming the system.
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In this vein, I think it would be a very different world if the lines in the budget were listed as percentages, and then the overall total was determined based on a factor of tax revenue. So a simplified version would look like:
War: 25%
Social Security: 25%
Bureaucracy: 25%
Debt: 25%
Total budget: 1.25x tax revenue for 2023.
And then the actual amount of money would get calculated based on these figures. Right now the numbers are so disconnected from anything the average person can comprehend.
Edit: I don't really mean for the average person to see percentages. Of course one could calculate percentages after the fact.
I mean for the politicians to only see a percentage on each line item. I mean for politicians to argue that X program should get .01% of the budget, while that program only receives .005%. Percentages are a way of declaring priorities. And you can't exceed 100%.
And then, after the percentages are selected, the total budget compared to the tax revenue for the previous year is argued about and chosen.
This mostly seems like a way to waste staffer time preparing reports which convert percentages in actual relevant cost information. You can't actually make the legislature decide budget priorities in purely percentage terms and then decide how much revenue to raise. Whatever the nominal procedural requirements, it's going to be negotiated holistically.
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The UK government sends you a letter every year telling you what percentage of your taxes go to each thing. I don’t think it makes a huge difference because, as @EvanTh suggests, the only people who read it are people who are interested in the subject anyway, and they already know.
To be fair, I think a lot of them actually don’t know, and are totally fine with having an uninformed opinion.
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See edit:
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The IRS does publish just that, with two pie charts and text, at the end of the Form 1040 instructions!
Unfortunately but unsurprisingly, hardly anyone reads it.
I don't really mean for the average person to see percentages. Of course one could calculate percentages after the fact.
I mean for the politicians to only see a percentage on each line item. I mean for politicians to argue that X program should get .01% of the budget, while that program only receives .005%. Percentages are a way of declaring priorities.
And then, after the percentages are selected, the total budget compared to the tax revenue for the previous year is argued about and chosen.
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Somewhat cynically: actual fucking governance: 5%
Paul Krugman while he had some shred of connection to reality left called the USG insurance company with an army.
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Apparently it's not just for the average person.
To be fair, it's easy to mock people who ought to know what they're talking about but the US funding market is legitimately impossible to describe.
It says, Jared Bernstein, Chair of the Council of Economic Advisors.
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The lady in that video got on my nerve. She managed to compress so many bad economic ideas and implications into such a short few sentences.
I also had to double check the date on that video. Is someone seriously asking after the last few years why we don't just print more money? Have they been to a restaurant or bought anything recently? We did the experiment during covid of just 'printing more money' and then we had record setting inflation.
There is also the rather basic idea that if you expect to be paid back in X currency in the future then you have a vested interest in that currency maintaining its value. Its a way of signalling commitment to the future value of the currency. Its like a CEO offering to only be paid in stock options that don't vest for a few years. It would signal they are confident in the future success of the company.
Wait, she's the one who's the problem, and not him? I thought she was just trying to bring up the problem that those who profess that we can just print money and not worry about debt don't understand why we borrow, showing that there's a problem with their model.
She's the wacky MMT advocate who thinks you can just print money to get out of any fiscal problems. He is a very progressive and fiscally liberal, but mainstream, economist who thinks that printing money and borrowing money have very different effects on inflation.
I checked, and yeah, you're right.
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Together they fight crime?
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I can't even tell what the dude is saying. He is stuttering and mumbling and talking in circles.
"I'm waiting for someone to stand up and say: Why do we borrow our own currency in the first place?"
The way she phrased it made me think she was saying it is ridiculous that we borrow our own currency. But yeah maybe I am just totally misinterpreting her tone.
I checked; I'm wrong.
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The great thing about printing money here in America is that we are the USA USA USA baby! Everyone takes our dollar, they take it for oil, for oranges, for tungsten, for cars, for iphones. We print it up out of thin air and they give us real goods for it every day.
The higher the trade deficit the more they are getting ripped off by exchanging real goods for dollars. Even with all the printing we are still experiencing a strong dollar and less inflation compared to other countries that don't have the backing of the US economy and 11 carrier strike groups.
Look at any currency vs the US dollar over the last 4 years. The dollar is as strong as it has ever been. MMT is a brilliant scheme for extracting real material and goods from the rest of the world in exchange for protection and promises. It is crazy that we get away with it! USA USA USA!
Did you notice the accelerating pace of people accepting things which are not the dollar to trade internationally?
No. And neither has the dollar.
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This might run out, with devastating effect, some day.
If people lose confidence in the US dollar, suddenly they'll try to get rid of it, leading to an increase in domestic supply and dramatic inflation, and foreign goods in general will be much more expensive.
It might, when someone else has 11 carrier strike groups. It won't be in our lifetimes.
But how much does that actually matter to the value of the dollar?
My guess would be that the general value prospect to people and countries abroad of holding dollars are that:
But if 1 fails (due to, say, running out of people willing to finance US debt, meaning that we need to start printing money to fund things or pay back debtors), then some will drop the US dollar for other currencies. This will drive down the cost of the dollar, that is, cause inflation, which will lead to more of the same.
I don't expect 3 and 4 to go anywhere, but I think 1 and 2 could change, in a way that would meaningfully affect demand for dollars, and hurt US prosperity.
That said, that's mostly just from me thinking things through myself, not something better vetted, so is there some reason that I'm wrong, or something I'm missing?
Anything could happen, but it hasn't. People have been predicting the demise of the dollar for 60 years, from weird baskets of BRIC currency to crypto, to gold. It only gets stronger! It is interesting that people are always calling for the fall of the mighty USD and yet when I travel these days I can only buy more and more with the same amount of cash! Call me when that changes.
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Or if one of those gets sunk by hypersonic missiles. Or if you run out of people to con into manning them in exchange for IOUs.
I think it's quite reasonable to put a decent chance of dollar collapse happening within the next 50 years actually. Especially now that the dam of signing oil contracts in other currencies has broken. Though I'm still betting on Japanese style long term containment.
It becomes more likely if NATO decisively loses the Ukraine war. When force is the only thing backing the entire system, any large display of weakness is a potential black swan.
Lots of hypotheticals here. The dollar has only become stronger over the last 20 years despite rumors of demise. So forgive me if I take this with a huge grain of salt.
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I think his interview was taken out of context. Atleast I hope it was. The reason we borrow money instead of just printing all we need is it basically soaks up money that would end up elsewhere and cause inflation instead of being saved. And inflation reduction device.
He should be smart enough to know that so I have to assume he was just tired or wasn’t sure where they were going and didn’t feel like providing a better answer.
He might be an MMTer. That's gotten popular among the in crowd recently for obvious "we can print as much money as we want without worrying about inflation" reasons.
This is rather MMTers poking some fun at other supposed macro experts who don't actually have a correct clear grasp on how money or government funding works. He kept tripping over his words because his intuition was leading him astray, so "government prints money and then lends it" kept coming out. The correct, clear, simple answer is that government prints money in the form of bonds every day, and swaps them with central bank reserves where appropriate (like swapping between $100 bills, $1 bills, and quarters where appropriate, perhaps when trying to ride the bus or go to the arcade). The only clash is that people have pre-existing non-sensical stricter definitions of the word "money", so MMT generally prefers to sidestep a language intuition issue and just refer more broadly to what matters, financial assets.
It's already been nearly a decade since mainstream economists stopped trying to say MMT is wrong, and switched to "we knew that already", so I guarantee you MMTers aren't saying something as obviously wrong as "we can print as much money as we want without worrying about inflation". And it's MMT who has pushed better & better verbal explanations to laypeople of all those interlocking balance sheets in IGI's linked NYFed diagram.
This might also be because talking with MMT'ers is often a constant exercise of dealing with motte-and-baileying with risible radical claims and commonsense stuff described in somewhat different words from usual.
It may be the case when dealing with random commenters on the internet, but that kind of goes for everything right? I'm talking about like Paul Krugman who kept being embarrassed when going a few rounds against MMT economists over the years, and he kept exposing that he couldn't shake some fundamental incorrect starting points like a loanable funds framework.
As for different words, that's definitely a communication hurdle where people feel like they're not speaking the same language. To me it seems to be warranted to actually cut to the heart of what matters with some different terminology, to avoid some pitfalls with peoples' everyday colloquial versions of money, lending, borrowing, etc., and talk about what is actually happening with each balance sheet operation.
But it has to be said that people in finance and central banking pretty much immediately understand MMT's descriptions in a matter of minutes. After MMT started gaining popularity, there were multiple central bank research papers put out saying the same types of things, to help educate the field and wider public, and to help correct classic misconceptions still being taught in economic textbooks. The only people who really struggled with it were mainstream academic economists, who had to try to translate real world explanations into their toy model terms. 'So you're saying that in your version of my model, my drawn curve here should be basically a vertical/horizontal line pushed out over here?'
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Bingo.
I looked deep into MMT many years ago to find out what descriptive claims they made that were different from mainstream economics. I found three:
(1) Confidence in fiscal policymakers to e.g. time fiscal policy to control demand.
(2) An approximately flat SRAS curve, though many of its advocates don't realise this and haven't read about SRAS curves, because they have never read an intro macro textbook. In plain English, it's like an on/off model of how increased demand affects prices: until full employment, stimulus is more or less non-inflationary. Mainstream Keynesians used to believed this.
(3) Various Old Keynesian claims about the monetary policy or interest rate changes, though this is not universal among MMT advocates.
That's it. Everything else is motte-and-bailey, rhetoric, distractions which have performed the useful function of hiding MMT from most rigorous scrutiny, or uninteresting errors that some advocates of MMT make when they mix up normative with descriptive claims about how e.g. the Treasury works.
I'm not an economist and I don't understand much about it, so I wish you and @LateMechanic would have a discussion to illuminate this a bit. He seems to be pro-MMT and you seem to be against. You two have any thoughts on the other's view?
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MMT covers a wide range of actual policy positions, some reasonable and some not. But in general it’s a retarded third world conspiracy that leads to stuff like Turkish and Argentine hyperinflation directed by idiotic leaders who reject any link between inflation and borrowing, not merely in theory but in practice. The unique situation the US and to a lesser extent other Anglo countries are in with regards to the effect of public borrowing on inflation is unique because of their balance of trade, foreign investment, very large service sectors and so on, just like Japan’s weird dynamic, and doesn’t prove MMT in any genuine way.
The core bulk of MMT is descriptive, showing how money, banking, and government finance work, from a fundamental logic & accounting level of interlocking balance sheets. When armed with these correct fundamentals, it's a lot easier to see where actual tradeoffs and choices apply, and to avoid being upset by goofy incorrect gut notions and suffering from various types of cognitive dissonance. If anyone even talks about "public borrowing", they likely still don't grasp what is even actually happening in the accounting plumbing.
The policy prescriptions which some MMT proponents tack onto that descriptive project is probably a mistake in my view. But most of them think that once you understand the real constraints, then some choices (like implementing a Job Guarantee / Employer of Last Resort program) are so obvious and moral that they should always be pitched at the same time, and ended up with a largely progressive following who wanted more of that. You can take or leave those prescriptions though, it doesn't make the descriptive project incorrect.
There is not a single MMT economist who is confused that different countries & currencies have different challenges. By the 2010s when they were starting to get traction after a decade, they probably knew more about it than almost anyone, because this was such a common early dismissal attempt 'yeah maybe they know about the US, but circumstances are special there'. The core logic still works in any situation, and understanding real constraints vs. imaginary or self-imposed constraints is the key thing to get right. There are definitely real constraints and tradeoffs in all cases.
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That wouldn’t even be a correct interpretation of MMT
https://en.wikipedia.org/wiki/Modern_monetary_theory
I think some butchered downstream version got all deficits are fake thing perhaps from the 2010’s where inflation was low so plausibly in their theory it was fake when inflation was below 2% and we had excess unemployment.
Having a correct interpretation of MMT does not in my experience seem to be a necessary precondition of being an MMTer.
The Low-IQ version of MMT while the high IQ version is right enough it may have been a better model in 1925.
It also I don’t think generalizes as well for a small open economy that isn’t as diversified or a powerhouse in every industry.
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Isn't this clip of him trying to explain the unexplainable (i.e. mmt)? It seems like they deliberately edited out the question to make him look like a moron and the whole film seems to be mmt propaganda.
Of course it's also possible that he is a moron, he doesn't seem to have any economic background anyway.
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This statement is often not true. Lawsuits are often a more efficient and transparent way of allocating costs.
Let's say society is worried about accidents caused by self-driving cars and wants to allocate some amount of resources to fixing the problem. There are two straightforward ways to structure the resource allocation:
Pass a law specifying that victims of accidents caused by self-driving cars can sue the manufacturer for damages, or;
Pass a set of safety regulations that self driving car companies have to comply with, and if a compliant self-driving car nevertheless causes an accident, the government compensates the victim.
In scenario 1 we are causing the cost of accidents to be carried by the car company, who is in the best position to figure out how to prevent accidents. So we have given them a monetary incentive to devote a rational amount of resources to fixing or improving the problem. This is the opposite of a reverse lottery because the car company is in the best position out of anyone to try to predict and prevent accidents.
Scenario 2 creates a situation where car companies are only encouraged to comply with regulations, rather than try to figure out the best way to prevent accidents. The regulator is in a much worse position to know what regulations will actually be effective at preventing accidents, and the regulator has no direct monetary incentive to care about preventing accidents. Simultaneously, they also have no monetary incentive to care about over-preventing accidents either. So we will almost necessarily get an inefficient set of regulations that devote an incorrect amount of resources to the problem.
I'm gonna stick by my statement. I don't think the example you give really contradicts it. The actual world we live in has a mix of both systems where the American government gets to flip a coin "heads I win, tails you lose". They regulate the industries, and allow those industries to be sued by individuals. From what I understand this is actually a little strange by international standards. Russia (for traffic stuff) goes more down the route of sue anyone but very loose regulations. And most of Europe goes down the route of strict regulations, but you can't sue (for a bunch of business regulations).
In general, I think in cases of death or serious bodily injury it makes sense to have a court involved. In cases of money or social interaction its a bad idea to have courts involved. I'm not suggesting entirely doing away with courts. But courts are a terrible place for solving economic distribution questions. They are simply far too expensive (judges and lawyers are generally smart and capable people).
But people can already sue for bodily injury or death, so when I say an expansion of what you can sue for is laundering costs, I mean that generally any new thing that you can sue for. (and there are some old things you can sue for that I also think are bullshit, but I specifically listed those things.)
How would you have contract disputes resolved? Inheritance disputes?
Much of these are solved through private arbitration, with courts as a resolver of last resort. The reason they are a last resort is that lawyers will eat up most of the money in the case. Which kind of defeats the purpose of a dispute over money. Courts are mainly avenues of Justice. As in you want the person who screwed you over monetarily not just to pay you back but to suffer.
Lawyers are used in arbitration as well, and unlike a judge you have to pay the arbitrator. I'm not sure why you think that's a cheaper option that litigation.
Where are you getting this idea? Usually courts are limited to awarding actual damages; punitive damages are the exception.
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Unfortunately, if manufacturers of self-driving cars can be sued for all accidents in which self-driving cars are involved (the "caused" part doesn't come into play until the lawsuit is underway), self-driving cars are essentially banned. The cost of covering that liability is staggering.
Do you think the cost of self-driving car insurance would be higher than human-driven car insurance? If so, would that cost be spurious or would it reflect genuine harms?
Ideally it should be fine, but I don't trust that the ideal case would happen.
Human-driven liability insurance doesn't cover everything. Losses are limited. If you start a chain-reaction collision and kill a whole bunch of people, your insurance company will pay our to your maximum, and you'll lose everything you have and have to declare bankruptcy. Maybe you'll go to jail or commit suicide, but either way your victims ain't getting anything more. If a self-driving car does the same, the losses are limited to the value of the self-driving car company, which is likely far greater than any individual. And the company has far more exposure. And the plaintiffs and juries know the self-driving car company has much deeper pockets than an insured driver, so I expect you'd see more lawsuits per incident and higher judgements.
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I don't see why that's a problem, to be honest.
There has to be some sort of consequence for the manufacturer when self-driving cars cause an accident, same as how human drivers pay fines or go to jail. What's your preferred liability structure?
To the owner of the self-driving car would be another option, maybe? This seems like it would better work with cars that have a full self-driving mode, but could also be driven ordinarily.
I'm not convinced that self-driving cars would be banned, instead of just way more expensive. It would depend on how much liability they would tend to have.
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I don't know. All I know is the consequences. Once the cars become popular enough, a self-driving car company is basically going to be mostly a legal company, defending (or settling) lawsuits in all 50 states involving its cars. And that's even if its cars are perfect and never cause accidents, especially since the car company is going to look like "deep pockets" to plaintiff's attorneys and juries. The cost of all this legal defense is going to increase the cost of the cars by a ridiculous amount, and the more cars there are the more of a chance of a "reverse lottery" where a self-driving car is involved in an accident that kills a busful of kindergartners and is found liable for more than Alex Jones even was. As long as there's a fairly small number of cars they can play the odds, but a liability regime which involves a car manufacturer in every major accident one of their cars is involved in will kill the whole thing.
An imperfect analogy already exists with commercial vehicles, where the company that owns them and their insurance company is held liable for any damages caused by the driver.
The usual demands are so high as to be called the ‘ghetto lottery’.
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You're assuming the car companies are the ones footing the bill. They buy insurance for things like this, and the premiums reflect the risk and the average settlement value. This is how every company manages risk, including the car companies, who already get sued in product liability actions. Unless the risks are so high that they effectively become uninsurable, the cost of the insurance will just be reflected in the price of the vehicle. And if they are uninsurable, then self-driving cars are probably too dangerous to be marketed as such anyway. I would mention that I say this as someone who is skeptical that full self driving will be available in his lifetime.
Insurance helps individual drivers because they can pool their risk with all the other drivers. A self-driving car company selling a sufficient number cars may as well self-insure. And yes, the expected cost of liability would be baked into the cars in either case, but I expect if they got it right, self-driving cars would be prohibitively expensive. If they got it wrong they'd go bankrupt when they big verdict came up.
As a products liability lawyer, I can tell you that insurance coverage is a lot more complicated than that. Any hypothetical policy would base the premiums on the number of vehicles sold. If there's a defect that results in injury, only a small percentage of the affected vehicles are going to result in claims, and only a small percentage of the total claims are going to involve huge losses. Huge verdicts only result when the insurance companies are adamant that there is no liability and are looking to get out from under it. Once it's clear there's liability (and often not even then), they'll settle claims at standard rates. You may get a couple of eye popping verdicts but these won't become a normal thing. No Plaintiff's lawyer is going to spend 100k+ taking a contingency case to trial chasing a verdict that's likely to bankrupt the company and leave him and his client waiting 5 years in the unsecured creditor line in a Chapter 11 hoping they can recover a percentage of the original verdict. Better to take the cash now.
If Ford was fully liable for any accident in which a driver of a Ford vehicle was found at fault, but this did not apply to any other vehicles, how much more do you think Ford vehicles would cost than all those other vehicles to cover that liability? I expect it would be at least an order of magnitude; being involved in an accident with a Ford vehicle would be a potential lottery-winner (regardless of who was at fault, and that's often muddy). And I think that's true even if from some nonexistent objective observer's POV, the Ford driver was never actually at fault.
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The big downside of self-insuring for a company is probably political. If you've got a policy from Lloyd's any effort to bankrupt you through insurance payout lawfare is going to get a lot of very important people upset on your behalf.
If musk self-insured there's nothing stopping Some Judge In New York from ordering 70 billion dollar payouts every time a Tesla is involved in a fender-bender.
You need to smear the money around for self defense, and pay off enough of the Party that they at least can't unify in looting you.
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Yes this is a trivial problem to solve. We already have a massive auto insurance industry. Everything looks like self-driving cars will be safer than human drivers.
You either add it to the costs of the car as essentially pre-bought insurance for the purchaser (which should be cheaper than current policies) or work out some long-term payment plan on the buyer for yearly insurance (with some kind of termination in time after so many years etc).
The auto insurance industry works because there's a relatively low cap on liability per accident (after which they stop paying out and the driver is on the hook, but the driver is an individual who likely doesn't have much). Once the manufacturer is on the hook, that cap is irrelevant.
Commercial vehicle owners have such a high to nonexistent liability cap that there are entire sections of the insurance industry specializing in suing them, and somehow they manage.
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Ok fair enough. Average human low liability but big corporate gets $30 million a life.
Though I guess solutions can be found when it’s necessary.
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Liability also doesn't come into play until the suit is underway. It's trivially true that anyone can file suit for anything, but the plaintiff isn't going to recover any money unless they have evidence of causation and damages.
Also, my thought experiment notwithstanding, it's already totally possible to sue self-driving car manufacturers for causing accidents, yet these companies are not only in business but doing better than ever.
The expenses start immediately.
And yes, I predict that if actual self-driving cars become more common, either we will see limits on liability or the companies will be driven out of the market or out of business.
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The most famous and most 'successful' shrouding of costs related to government is tax withholding. If people had to actually pay their tax bill all at once, they would be pissed, but by withholding throughout the year, and then returning the amount that was too much, people feel like they're getting paid to do their taxes, instead of being robbed slightly less.
Don't know how true this is. Your W2 says how much tax you paid, everyone knows how much is being taken.
No, they don't know it. I volunteer with the VITA program doing tax prep for low-income people, and most of my clients don't appreciate that the government is taking money from their paychecks to pay tax. I explain it to them every year, but I'm pretty sure it doesn't stick.
I'm pretty sure half my clients don't even read their W-2's or other tax forms, except to go "this's a tax form from my employer / bank / charity / etc; guess I'll bring it when I go do taxes."
If you’re working with low income people, there’s a good chance they’re getting more back than they pay in.
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Income taxation didn't really take off until the invention of tax withholding. Even after the ratification of the 16th Amendment, Congress found popular resistance to the income tax too strong for it to actually be enforced. It wasn't until they partnered with corporations, which were growing in importance in society, to withhold taxes that resistance died down and the tax could be collected. Psychologically, it makes a big difference. You see a number at the end of the year that corresponds to what the government took, but they took it before you even knew they were taking it. You get a paycheck and then there's some accounting about how much they took which comes with a bonus for you. At least, for most people.
Your dates don't really line up though. Withholding isn't until 1943. You see higher income taxes earlier, after Roosevelt becomes president. You then see an even steeper rise in taxes in general as the USA becomes more and more involved in the war. Finally in 1943 you see withholding implemented, but this is after a decade of higher and higher taxes spurred on by the depression and war. After WW2 you see lower, but still high income taxes and finally income taxes come down after the neo-liberal revolution in the 80s. Withholding doesn't seem important in this picture.
The story I heard was Milton Friedman came up with withholding...hated the idea of it as a more small government person, but thought it was the best way to get enough money to win WWII.
No idea how true that is.
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And this is why anyone who starts their own business and, therefore, has to file quarterly immediately starts hollering "taxes are too damn high!" .... and then you also start paying self-employment tax.
Show me a person who:
And I will show you someone who wants to vote for a conservative with their mind and wallet, but may let their heart and social signaling sway them to voting for a liberal.
You're smuggling in the assumption that the reaction to paying out tax instead of having it withheld is the more "correct"/rational reaction. I could just as easily assert voting conservative for that reason is letting their heart and wallet override their mind.
No, quite the opposite. I am explicitly stating that those in the situation of which I gave a criteria (business owner, parent, homeowner) creates a shift in values that would precipitate a change in voting.
Politics is the organization and operation at scale of a marketplace of values. I'll never make the claim that conservatives are more rational than liberals. I will always make the claim that the conservative set of values is better for a functioning society and that liberal values are far more about individual level emotional validation than society level outcomes.
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On the other hand, if the tax bill were itemised in proportion to the Federal budget, it might be harder for certain demagogues to get people angry about a government program that costs them ⅒¢....
There is a pie chart of government expenses at the end of the Form 1040 instructions.
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In Australia tax bills are itemized in proportion to the budget, they give you a little chart that shows where all your money is going. I didn't even know we still did 'industry assistance' but we do. All the little fish would be put down in 'other' though.
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I mean, I think the regime you describe for the ADA satisfies all of the 1-3 points you propose for basic things you agree on, though perhaps not in a manner you like.
Of course. The ADA, and many similar pieces of legislation, contain explicit limits on what is to be covered and who must (or may not) provide accommodation under the Act.
We do this with the ADA, and many similar laws, via a combination of the private market and our adversarial justice system. Businesses talk to consultants and experts to understand what they need to do to be in compliance. Sometimes people think they're wrong about whether they are and get sued. Then a jury of their peers is going to be responsible for figuring out whether they were in compliance and how much they harmed the plaintiff if they weren't.
This process may not come up with some obvious fixed-in-advance dollar amount but it seems a very common way of determining how much "we" should spend fixing a particular problem.
Of course. The Act describes who is covered and what accommodations those covered need to make. If anyone is alleged to be in violation theirs a public judicial process to determine if they are. Characterizing this as a "reverse lottery" is absurd. Lots of businesses (probably most) manage to go without being sued under the ADA or similar laws. Who wins and loses is not random either, unless you think the outcomes of jury trials are random. In which case there's this whole thing called "the criminal law" that should be much more concerning.
The case of MIT having to delete open-access free knowledge for lack of being able to cost-justify captioning everything soured me greatly on the law, and was probably a major red pill for me in my life as it opened my eyes to the massive amount of ordinary altruistic good-doing that is suppressed by government bureaucracy and regulation, seemingly intentionally.
I remember the Berkeley online courses being ordered removed, and the switch from "that's an absurd hypothetical slippery slope that would never happen" to "of course that happened, it's how the law works idiot, why do you hate disabled people?"
But the ADA lawsuit trolls who were making millions filing thousands of suits against places they'd never been to were my wakeup call.
There's always one argument defending this stuff: "there's a procedural outcome! How can you complain about a procedural outcome? Do you not like juries of your peers?"
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I worked in accessibility stuff for front end web development. So my experience is limited. But the horror stories were numerous of companies that got sued successfully for some ridiculous ADA website violations. (things like not having alt text for images). https://www.levelaccess.com/blog/title-iii-lawsuits-10-big-companies-sued-over-website-accessibility/
The Act is not specific when it comes to the web (there are web standards for accessibility, but they aren't mentioned or referenced by the law). I assume like most acts it probably has some intense specificity in some areas for the sake of some special interest groups that were paying close attention, and then serious lapses in specificity for all other areas. Leading to the inevitable outcome of random courts throughout the country trying to decide what the legislators meant (or alternatively, what they wanted the legislators to mean).
The courts are a good place for dispute resolution but they are a terrible place for rule-making. The difference is important and vital in this context. A court is always getting a tiny subset of cases around a particular rule delivered to them. Higher courts are often getting the cases that the current rule covers worst. The people who are well served by a particular rule never see the inside of a courtroom. Courts thus end up making rules that serve to fix a tiny minority of edge cases, without having to really consider what said rules might do for the main use cases. Are legislature has become dysfunctional and slow enough that courts have been forced into a rule-making role.
Courts are also intentionally limited in scope. They are to address the current problem in front of them. Not to seek out the ultimate cause and work out a better overall solution. This is great for problems like murder where the final act is very meaningful and important, but all the things that lead up to it are probably more trivial and varied. For something like "why dont you have good alt text on your web images" the final act is kind of meaningless and all the reasons leading up to why that alt next needs to be there matter a lot more.
The problem space in the world is also not conveniently broken up in ways we would like. Sometimes it is cheaper for businesses to solve an issue. Sometimes it is cheaper if all of the people suffering from a problem solve the issue. Take nearsightedness as a simple example. One way to solve it would be to require that all text is much larger and thus more readable at a distance. The other way to solve it is to have people with nearsightedness wear glasses. The ADA often forces a one size fits all solution to these problems, businesses must solve the problem, end of story. It would be a lot cheaper if all screen reader tech was just way better and could read even crappy websites. But instead we have crappy screen reader tech and any website that doesn't go out of its way to be accessible ends up being unreadable to screen readers. Even traditional problems like ramps for wheelchairs might have had a cheaper solution, like just having a few strong men lift the chair up a few steps. Or if robotic technology advanced enough just giving the disabled better wheelchairs that can walk them up and down stairs.
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Except that's not what happens. Your program lasts forever because it sounds good to the normies and has strong built-in constituencies. So there's no incentive NOT to do this; if you do it you win.
Wild suggestion - every 50 years or so we switch to dictatorship for a while to clean up the mess.
To this and @2rafa's comment below;
Please don't slip into blackpill "debugging authoritarianism."
The solution is simply less legislation and regulation over. Less bureaucracy, less gover-nance.
One of the reasons I like to describe myself as a Willmoore Kendall conservative is because he specifically talks about the dirty trick of citizens of all political persuasions now (which is to say, in the 1960s!) taking as axiomatic a level of daily government interference in their lives that leaders from the founding fathers through to Lincoln and all the way up to (just before) FDR would have found pants-shittingly insane and illiberal.
The eager temptation nowadays is to use those evil powers for good (which is an inherent and intractable contradiction) - I.e. having an "authoritarian white boy summer" to drain the swamp or whatever. If you accomplish even those admirable ends by illiberal means, you've just set conditions for a counter-movement to swing back the other way in even greater force. "They did this, so we gotta do that!" is always a good rallying cry.
I'll admit that I don't have a great solution or even strategy for how to yield these ends with non-evil means. I think SCOTUS will help very slowly and over a very long term. I think the Federal bureaucracy may eventually collapse under its own weight and be re-organized. I can already see that the PMC factories we call universities are burning themselves down. But, "victory" (however you may define it) is still far from guaranteed. To get somehow even more handwavy, I think a byproduct of an actual kinetic conflict with China could be a revitalization in patriotic citizenship that may contribute to a larger suspicion of hyper-individualism. Then again, without a large scale draft of military recruitment effort, the war will be "a Washington thing" that is actually a fucking everybody thing. I'm starting to go in circles here, so I'll cut it off.
Liberalism and democracy are tools not goals.
I think you mistake what me and 2rafa are talking about is that a state have 2 modes - slow burn and fast. Democracy is by design made to be ineffective - especially the modern, especially the US one. And whenever you look at history - the big fast efficient strides are made usually under some form of authoritarian government. Democracy is quite good in maintaining a nash equilibrium, authoritarian government - into moving from one to another. Both have uses. A deep state problem can't be solved democratically - as is big all encompassing bureaucracy.
But right now - the authoritarian streak of the US is manifested trough courts which perverts the justice system.
Hmm, okay. There's something here.
Totally agree with your latest comment (especially like the Nash equilibrium usage) ... And also agree that the big changes do happen under an authoritarian model (especially if a crisis is involved; Civil War, WW2, 2008 Financial Crisis).
But my value assertion remains the same - we shouldn't ever really be ok with an authoritarian system.
So, I guess the question / problem becomes - I am being naive and wishful in thought that it will never happen again (probably?) If it's unavoidable, should we seek to steer towards "conservative authoritarianism", however that odd term is defined? I take it that that's roughly your/@2rafa's position?
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A good move would be to appoint a president with absolute power under the constitution (ie to make any law except that which SCOTUS rules unconstitutional) for a single 8-year term, with Congress’ sole function being to approve a new debt ceiling every 5 years and - but only with a supermajority in both houses - to dismiss the president if necessary. A secondary mechanism could involve a supermajority of state governments doing the same. That’s enough safeguards to avoid an insane dictator while allowing for high capacity governance.
Problem is that there's not enough counterweight then to keep that president from messing with the legislation or even just enforcement around voting. Eight years you're out is legible enough to create a Schelling point to unite the country around enforcement. Look at the drama in the last election around single-digit percentages of votes. That is a healthy thing, I like seeing that. I think it'd be too easy to suppress that with near-absolute power.
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Excellent post!
Another example of this is AML/KYC regulations, which basically require banks to serve as a branch of law enforcement at their own expense. From the excellent Bits About Money post on the topic:
Sorry for the giant quote-post. I don't have much to say about this topic beyond "the above article is fully consistent with what little experience I have of AML/KYC from my work". I just think that article is very very good and also quite relevant to the topic at hand.
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