This article is a grab bag of comments on the paper: “Deficits Do Matter: A Review of Modern Monetary Theory” by Farah Omran and Mark Zelmer. I have mentioned this article before, for the good reason that Mark Zelmer will be on the other side of a panel on Modern Monetary Theory (MMT) that I will be on in late May.
This is a great piece and I appreciate it. I agree, too, it's a pity Canada's 1995 austerity shock isn't better understood, even in Canada.
A good example of what's not well understood is downloading. Cuts by the Federal government were downloaded to Canada's provinces and then to its municipalities. I recently had the opportunity to review my (Ontario) municipality's taxes and they doubled in real terms between 1998 and 2005 and were then launched on a trajectory of consistent 3% growth (again in real terms) - a doubling time of just over 20 years.
The point is the shock upended government services from top to bottom and the effects are still being felt, today, particularly in Canada's health care sector - in my municipality we are heading to 40% of residents not having access to primary care, and affordable housing - the Federal and Provincial governments stopped building.
The point is that "shock therapy" is not something that quickly rebalances - it results in long-term decline.
It's long overdue that somebody does serious research about the effects of austerity - not as a quick fix but as a way of permanently immiserating society.
You pretty much have all the arguments here. One overseas episode that may be of interest (ha!): From 1996 to 2006 Australia ran budget surpluses (a mining boom allowed this without crushing the real economy). By 2006 the government debt was "paid off", yet achieving the neo-liberal wet dream caused the finance sector to freak out - there were no bonds being issued! So, who needs the bonds? The government does not "need" to sell its bonds - it is the finance sector that needs to buy them.
It's a great neo-liberal/neoclassical truth inversion that government is dependent on financial markets. This episode shows that, even in good times, financial markets are dependent on government.
If this is an indication of the quality of your opponent's arguments then you will easily 'win' the debate. Sounds like most of what they are saying has been debunked not only by MMT academics but by central bank researchers too
This is a great piece and I appreciate it. I agree, too, it's a pity Canada's 1995 austerity shock isn't better understood, even in Canada.
A good example of what's not well understood is downloading. Cuts by the Federal government were downloaded to Canada's provinces and then to its municipalities. I recently had the opportunity to review my (Ontario) municipality's taxes and they doubled in real terms between 1998 and 2005 and were then launched on a trajectory of consistent 3% growth (again in real terms) - a doubling time of just over 20 years.
The point is the shock upended government services from top to bottom and the effects are still being felt, today, particularly in Canada's health care sector - in my municipality we are heading to 40% of residents not having access to primary care, and affordable housing - the Federal and Provincial governments stopped building.
The point is that "shock therapy" is not something that quickly rebalances - it results in long-term decline.
It's long overdue that somebody does serious research about the effects of austerity - not as a quick fix but as a way of permanently immiserating society.
Such a good response that it has left me with absolutely no desire to read the original piece.
You pretty much have all the arguments here. One overseas episode that may be of interest (ha!): From 1996 to 2006 Australia ran budget surpluses (a mining boom allowed this without crushing the real economy). By 2006 the government debt was "paid off", yet achieving the neo-liberal wet dream caused the finance sector to freak out - there were no bonds being issued! So, who needs the bonds? The government does not "need" to sell its bonds - it is the finance sector that needs to buy them.
It's a great neo-liberal/neoclassical truth inversion that government is dependent on financial markets. This episode shows that, even in good times, financial markets are dependent on government.
If this is an indication of the quality of your opponent's arguments then you will easily 'win' the debate. Sounds like most of what they are saying has been debunked not only by MMT academics but by central bank researchers too