Presidential Lecture Series: Stephanie Kelton

[Music] please welcome the president of Stony Brook University dr. Samuel L Stanley jr. thank you so much everyone and welcome to the first presidential lecture of the year I'm so pleased to have one of Stony Brook's own stars here to challenge and inform us this is particularly this is going to be a particularly timely view of our nation's economy particularly as the midterms draw near dr. stephanie kelton is a professor of economics and public policy in our College of Arts and Sciences she's an expert in fiscal policy Social Security International Finance and employment policy and is a leading voice in the urgent national conversation about economic reform her economic ideas based on the modern monetary theory she helped found are driving new concepts and influencing the direction of the Democratic Party she is often cited as one of the leading economists in the country before joining Stony Brook in 2017 she shared the economics department at the University of Missouri Kansas City where she taught for 17 years she serves as chief economist on the US Senate Budget Committee in 2015 and was a senior economic adviser to Bernie Sanders 2016 presidential campaign in 2016 Politico named her one of the 50 people most influencing the public debate in America in her talk professor kellton will cast a different light on the on coin views over the budget deficit arguing that Democrats and Republicans are both missing the bigger picture when it comes to paying for our future Matt Basler a Bloomberg recently noted that if you watch only one lecture on economics it should be dr. Kelton's take on the deficit well this is your opportunity for that one lecture please join me in welcoming dr. stephanie kelton to the stage thank you thank you very much thank you very much Thank You president Stanley for the invitation to deliver presidential lecture here at Stony Brook this year I am very very happy to be able to do this and thank you to all of the staff and the many people who worked with me for the last month or so as we organized and planned for this event so a lot of people worked very hard to make this an afternoon that I hope we can enjoy together so and thank you to you for coming out on a sort-of rainy foggy Monday afternoon to listen to an economist that you also deserve a big round of applause for doing that so I'm gonna jump right in I only have about 20 minutes to get through some pretty weighty arguments and so I'm gonna try to do it with some levity I hope this will be kind of a fun talk but I hope that I can also be provocative and maybe get you to think about some pretty big questions in a way that maybe nobody has presented them before for you so the big question is how do we pay for it it's really the trillion dollar question whatever the agenda item is whatever the policy proposal is whether it's infrastructure or free college or medicare for all or a green new deal you get a politician who goes on a television show or sits down with a journalist and says I've introduced legislation to do this thing and the journalist responds by saying what how are you gonna pay for it how are you gonna pay for it as if that's the most important question to begin with right you're not debating the merits of the proposal will tell me about Medicare for all what is it that you think is broken with our current health care delivery system and why do you think moving to Medicare for all those aren't the conversations we end up having it becomes the pay-for question first and then we get bogged down in whose taxes have to go up and by how much and all of that stuff right so we never end up having the really important debates because of this question so why do we always start with this question what's behind the question because there's an ideological framework behind that question the question presupposes certain things like for example that the government doesn't have the money to do these things where would the money come from right there's implicit in the question a concern about the budget right there's all this stuff behind that question so we have to talk about that and then I want to see whether it's possible for us as a nation to move beyond this question to have better debates to have better dialogue to talk about the things that really matter and stop focusing always and everywhere on this one question what is the impact on the deficit or the national debt going to be how are we going to pay for it so getting beyond the money question is the goal here's the problem okay this is what in a sense we're up against in trying to get there so this is a very short video it's a couple of minutes but it sets up the rest of the talk so here we go our [Music] children take out a credit card from the Bank of China in the name of our children driving up our national debt that we are gonna have to pay back that's their responsible it's unpatriotic the government's irresponsible spending is turning us into slaves you might well literally lock us into Chains at least our children we've got to deal with this big long-term debt problem or it will deal with us and it is a I think it's I think it is I'm asking you join us to stop this fiscal train wreck join us to protect our children from an inferior standard of living from a crushing burden of debt and taxes okay I don't believe in any of the tax cuts I didn't unpack those words I didn't even want to hook the middle class okay cuz I ate you know why because it was a four hundred billion over budget we just can't afford and as we discuss deficit reduction which is clearly a major issue for decades we a pile deficit upon deficit mortgaging our future and our children's future and the deficit thing is real and the debt thing is real we are really in trouble wanted at something is their need for comprehensive deficit reduction the answer is not only yes but hell yeah this debt that hangs over our had a government that spends more money than it takes in that's not sustainable now you cannot cut taxes or increase spending unless you can pay for it the math of federal spending does not add up and we are spending money we do not have a Burton that that's crushing us to me this is more of a moral issue you can't steal from your kids and grandkids we think the deficit and the national debt are right amaro what national debt is America's biggest problem Wow right bipartisan if you watched the video the way that it was put together it essentially went Democrat Republican Democrat Republican Democrat Republican this is a bipartisan chorus when it comes to this issue I know they say that Washington can't agree on anything that's baloney there is widespread agreement when it comes to the national debt and deficit spending right both parties now they'll blame each other for who's responsible for having a national debt but both of them at least rhetorically will tell you that this is a this is a disaster for the nation right bad things are gonna happen as a result and what I want to do is remind you that it's always been this way okay this isn't new the rhetoric isn't new you saw Reagan but it goes far back in history before Ronald Reagan this is a cartoon from a newspaper in 1937 okay this is when oh my god the national debt is 36 billion with a B billion dollars right hi is a skyscraper taller than Mount Everest and all that kind of stuff right so then from 1937 moved through the 1940s financing World War two the national debt grows all of a sudden it's 49 true 49 billion with an expectation we're going up to 65 billion oh the water's fine don't worry right it's all a big joke gloom and doom Ronald Reagan finishes and they erect a monument in this cartoon this is Reagan's legacy 1.5 trillion now with a tea and then three trillion and then when Clinton leaves office five point seven trillion and then it's seven and a half trillion and then it's up to nine and then 10 and then 13 14 the poor child 15 it's eating through the country 16 trillion the monsters are upon us 17 trillion the Democrats and Republicans are kicking the can down the curb 17 trillion in on our children and grandchildren 18 trillion now so big it no longer fits on earth it is an interstellar problem 18 trillion dollars 19 trillion a cancer on America 20 trillion the Titanic catastrophe ahead and where we are today gross national debt 21 trillion dollars all along the way year after year after year the debt continues to grow the cartoonists the pundits the warnings the hysteria it's always been with us it's always been with us okay the sky is always falling and so what I would like this afternoon to be is essentially a form of group therapy because we need it okay because they're scaring us with these stories about how it's unpatriotic how it's burdening the next generation how its dooming us to a future of higher taxes catastrophe for the nation right and I want to try to lower the temperature get us to the point where we can at whatever age it's legal to do so open a nice bottle of red wine read the newspaper see the headline national debt isn't an all-time high and have that nice glow about us and feel at peace with the world right there's no reason to panic and I'll try to walk you through how I think we should be looking at some of these things but it does require a change in the way we think a paradigm shift right we have to begin to see these things not as problems but in a different light and so that's what I want to try to do I think the biggest mistake that we make is thinking of the federal government like a household it's that household analogy it's the idea that Uncle Sam is just like one of us right the federal government operates like a household I have a budget I have a budget constraint I can't spend more than I make year after year I can't continue to take on more and more debt and end up okay at the end of the day therefore the federal government can't do that either right i analogize from my individual personal household to the nation as a whole and i say if i can't do it they can't do it if it's bad for me it's for everyone right the government's budget is nothing like a household budget this is the problem they're not like us their budget doesn't work the way our budgets work deficit spending by the federal government isn't the same as you and I spending more than we make year after year borrowing by the federal government isn't the same as you and I going out putting money on a credit card one of us issues the currency they do the other one of us you and I are merely using the US dollar so we have a distinction to make between currency issuers and currency users the issuer of the currency the federal government in this case can never run out of it can never go broke can never have bills coming due that he can't afford to pay can't become insolvent can't end up like people you may know right who took on too much debt and got into trouble and were forced into bankruptcy so this is the biggest hurdle is getting beyond thinking the go of the government as a household like you know personalizing it so I want to try and the time that remains to tackle five big questions I'm going to try to do it in close to five minutes it's going to take a little bit longer but these are the five big questions that I want us to look at first what is the deficit most people who have very strong emotional reactions to the idea of a government deficit can't tell you what it is okay so we want to talk about that same thing goes with the national debt in fact people often conflate the two the deficit and the debt so what is this deficit what is the national debt what is this obsession with China you heard it again and again borrowing from China take out a credit card and Bank of China in the name of our children China China China so let's talk about China don't we eventually have to pay it back and if 21 trillion becomes 22 then 23 then 25 and 30 then how are we ever gonna retire this thing right do we have to eventually pay it back and then the question which is what I organized the talk around what can we afford right what can we afford if we have all of these ambitious things that we as in a might like to do if there's broad support for programs for repairing and rebuilding crumbling infrastructure do we have the resources to do it and how do we pay for it what can we afford to do okay so those are the five big questions the first one is the deficit question what is the deficit so I want us to suppose that I'm the federal government and I'm going to spend ten of these into the economy and you're gonna be my economy so I'm gonna spend these ten into the economy and this handsome young man my husband it's gonna take these ten right and so I just spent ten into the economy so there they are right they're there and they're here with him but now I'm the government so I'm gonna tack some of those away so give me back four I'm going to take four one two three four okay thank you for participating I have taxed away four okay so this is a government deficit that's what the deficit is it means the government spends more into the economy then it taxes back out so I did this thing called deficit spending and my record my budget is going to record a deficit minus six right that is my deficit but guess what the economy has a record as well and the economy's record is going to show what plus six show me that six there it is it's real that's the surplus that was created as a result of my deficit spending so my deficit my red ink is your black ink okay here it is with actual historical data for the u.s. going back to 1960 the red line is my account balance okay the red line is my financial balance the black line is the private sector in the u.s. it's all the households it's all the businesses in the US combined and what do you notice I'm almost always in the red my budget is almost always in deficit and yours is almost always in surplus and not only that they tend to move opposite one another meaning when I run bigger deficits you all end up with bigger surpluses okay so my reading is you're blacking so when you see a headline like this one right from The Wall Street Journal just a few days ago trillion-dollar deficits could be the new normal this is meant to shock and frighten trillion dollar deficits could be the new normal but take a breath and read it this way watch the word deficit don't you feel better don't you feel better trillion dollar surplus this could be the new normal oh all right I'm down I'm okay right maybe that's not a bad thing is what I'm suggesting look at the problem or is it a problem from a different angle okay I see a surplus I see a deficit well stand over here right because if you see a deficit you're looking at it from the perspective of the federal government but look at it from your perspective you're in the private sector if you look at it from your perspective you don't see the deficit you see the surplus okay because that's what's accumulating as a result so whoops want to back up just one so now let's talk about we know what the deficit is we know that my deficits become your financial surpluses let's talk about the national debt what is the national debt so remember I ran this thing called a budget deficit I spent 10 into the economy I only taxed for back I left him with 6 but when I run deficits I borrow ok that's how the federal government currently does things and so if I deficit spend 6 then I borrow 6 so I've got six of these things yes I do six of these things and I'm gonna sell him these things called Treasury bonds so he's gonna give me the money that I gave him and I'm gonna give him the Treasury bonds so that that cash now is gone and we have swapped it for Treasury bonds and that's what the national debt is the national debt is all of the outstanding Treasury bonds that the government spent the money into the economy didn't tax it back and then traded the cash for a different financial instrument called a security a government bond okay so the entire national debt is nothing more than a record a historical record of all of the dollars that were spent into the economy not taxed back and are currently being held in the form of US Treasuries that's all the national debt is alright so if you happen to hold some of those things they're your assets they're in your portfolio if you're investor you might have some of those things okay they're very nice to have they're safe they're liquid they're default risk free they help you diversify your portfolio you can take risks elsewhere but you can hold some Treasuries right and they pay interest and so if you see this clock up here I took a snapshot yesterday so this thing runs in real time and it's meant to scare people right the national debt tick tick tick tick tick tick those numbers just keep getting bigger and bigger and bigger well look now that you know what the national debt is nothing more than the historical record of all of the dollars that were spent into the economy and not taxed back currently being held in a form of Treasury securities you can look at that debt clock and watch the name it becomes the US dollar savings clock so now we don't have to get so anxious because it doesn't have the word debt any longer now we know it's just an asset clock okay it's recording all of the dollars that are currently being held in the form of Treasuries as somebody savings so now don't you feel better ok see I see smiles and heads nodding so we're already making progress in group therapy number 3 China what are we gonna do with China so here here's the question people say I don't China holds so much of our debt though and then they just leave it there as if that's supposed to automatically explain why that's a bad thing say so ok China holds some US Treasuries currently so where did they get them where did China get US Treasuries so I'm going to show you so China I would like to buy I would like to buy some of the things that are made in China hey and I'm gonna pay with US dollars this is my daughter she plays with these they're squishies they're made in China so we import things from China they manufacture they put on containers they ship to us we get them we import them they export them to us we pay with dollars so I have the stuff right China's people the Chinese are working in factories manufacturing giving their time using their resources producing this stuff they don't keep and consume and enjoy for themselves they ship it to us and we pay with dollars so now China has a checking account at the Federal Reserve okay they have dollars in their account at a bank here in the US called the Fed so now China has a decision to make I can sit and hold my dollars in my checking account or I can spend them right I could buy some of the stuff that US manufacturers I could buy real estate or other things priced in dollars or I could buy Treasuries because Treasuries pay interest so maybe I don't want to keep my dollars in a checking account maybe I would prefer to transfer my dollars into a savings account which is nothing more than a securities account at the fetch so this is borrowing from China watch I'm borrowing from China there I did it I borrowed from China okay now China has the Treasury bond I have the stuff and I've borrowed from China okay that's what borrowing from China means so the question that becomes what if they won't buy our bonds any longer what if they because we think that somehow everything is made in China including the US dollar and to get more dollars to spend we need China right no we don't okay so what if China decides I don't want to buy Treasuries any more well that's perfectly fine China could decide to just keep their dollars in their checking account at the Fed it'd be kind of silly to give up the interest you know they could decide to do that with that harm the US would it prevent us from you know being able to finance other projects infrastructure and so forth the answer is no okay I think we're gonna get to explore that a little bit more maybe in the QA but I just want to give it away here is secretary minuchin Treasury secretary just the other day in Reuters article this is just from three days ago minuchin is asked are you worried about China refusing to buy Treasuries and so forth he says I don't lose any sleep over it okay and he's right not to what do we really owe China so I have a friend who's a bond trader is he's a fixed income guy trades government bonds and his name is Warren Mosler and Warren will often say the only thing we owed China is a bank statement okay it's he's being a little bit funny but essentially at the end of the day that's about it okay what are we gonna Bank statement we already got the stuff we traded it for a Treasury and at the end of the day as long as China wants to orient its economy around exporting in order to grow in order to create jobs then we're the beneficiary in this bargain right and we can talk as I said we can talk more about that so there are politics involved in all of this and look when it comes to the national debt both sides do this and the deficit too you blew up the national debt you did this bad thing that added to deficits the Democrats are doing it to the Republicans now because of the tax cuts that were recently passed right you added to the national debt you blew up deficits and all this kind of stuff when the shoe is on the other foot the Republicans do the same thing to the Democrats so it is again it's both sides pointing fingers when I was working on the hill in the Senate one of my favorite things to do was to ask elected officials or their staffers if you had a magic wand and you could wave the magic wand and eliminate the national debt tomorrow would you do it everyone said what do you think of course yes I would eliminate the national debt with my magic wand no hesitation whatsoever and I say okay what if I give you a different wand and I ask you if you would like to you can wave this magic wand and you can eliminate US Treasuries they'll just be gone from the face of the earth tomorrow how many people do you think would wave the wand how many members of the Senate would wave the wand to eradicate the world of Treasury securities and you just get a total look of like why are you I I don't understand the question you said that's okay you already answered it right eliminating the national debt means eliminating all of those safe securities called US Treasuries that people like to hold in their portfolios because that's what the national debt is you pay off the debt you eliminate the debt there are no more Treasury securities anywhere they're done all right so here is a historical lesson there have been seven times in our nation's history when we have when the government has begun to run budget surpluses and pay down the debt seven times in our nation's history we did it from 1817 to 1821 the federal government's budget was in surplus it's collecting more in taxes than it's putting back into the economy by spending and so the national debt is being paid down and we did it for a period of time what happened had a depression that started in 1819 we did it again from 1823 to 1836 under Andrew Jackson actually paid off the national debt what happened depression in 1837 then we did it again began to pay down the national debt depression depression not recession depression deep protracted write contraction in the economy bad situation the last time we did it was under President Bill Clinton 98 through 2001 the budget was in surplus the government began to pay down the debt what happened the economy went into recession in 2001 and we ended up with a great recession just a handful of years later so why does that happen why does something that sounds so good and fiscally responsible budget surpluses and paying down debt why does it tend to coincide with bad economic consequences why do we end up with depressions in the great recession and very quickly because we could talk for an hour just about I could about this picture but I would just show you this is where this is where we were with Bill Clinton that is the government's budget moving into surplus you can see the red that's the government's deficit government's almost always in deficit but there were those four years right there under Bill Clinton when the government's budget moved into surplus and there was great celebration right this is the first time in generations that the budget has been in surplus this is the fiscally responsible thing to do you know Democrats delivered this well yeah but guess what look what happened to the private sector's financial position right that it was the built on the backs of the private sector the private sectors financial balance went deeply in the red and that's what allowed the public sectors balance to move temporarily into the black but it didn't last and it can't last why because it was driven by primarily households spending more than their income borrowing on the back of a dot-com bubble and then a housing bubble and eventually the whole thing unravels too much debt mostly for households okay and so it's unsustainable when the private sector does it with households driving but it's perfectly sustainable for the federal government's budget to remain in deficit for a period of decades it's the last question here what can we afford this is how we think government spending works we think that the government is broke we think that they need our money we think that they come first to us either to tax or to borrow the tab taxing and borrowing the government raises revenue by taxing us and by borrowing money then it has money that it can then spend into the economy so the fight is always who's gonna pick up the tab who's gonna pay for it because the financing has to come from somewhere the money has to come from somewhere and it will be the taxpayers or it will be borrowing which is the same as saying deficit spending which is the same as saying putting it on the credit card adding to the debt okay because this is how we think it's gonna this is how it's supposed to work and so the fights are all about who's gonna pay for it whose taxes are gonna go up who's gonna be paying for it right so you get somebody like senator Sanders who put forward an ambitious economic platform right wants to do a trillion dollars of infrastructure wants to make public colleges and universities tuition-free wants to transition to a health care system based on built around medicare for all want to be in it you've heard right this ambitious program and his opponent in the Democratic primary you know kind of in her book this is from her book what happened she says you know it was like every time we tried to offer something he offered something bigger and it was like you know hey I think you know Bernie's saying I think America should get a pony and Hillary says how are you gonna pay for the pony because it's also fantastical it's so out of reach it's a pony right it's not realistic so in DC where I worked on the budget committee there is a great deal of pressure to pay for things there's a lot of pressure for people especially when they're running for president to show that they have the money to make good on whatever policies they're putting forward so if you say you're going to make public public colleges and universities tuition-free somebody wants you to draw a line to the source of revenue where's the money coming from and so senator Sanders did that and he said well we'll pay for it with a tax on Wall Street speculation of financial transactions tax Wall Street will pay for it he did it with infrastructure and with other programs when he said well we'll close tax loopholes or we'll have you know raise the cap on FICA withholdings and we'll find the billionaires and corporations and the rich will pay for it right when we talk about the wall President Trump did the same thing Mexico will pay for it right there the money has to come from somewhere and so everybody's trying to pay for it so here's where I wish we were and this is very close to the end where I wish we were was having an entirely different conversation and a very different national debate and if I had a little bit more time I would show you this video clip but I've seen it so many times I'm just gonna tell you what it does so that is Alan Greenspan who was chairman of the Federal Reserve for a period of time before Ben Bernanke right you may remember so here's Alan Greenspan under oath before Congress answering a question from Congressman Paul Ryan and Paul Ryan is asking him a question about Social Security because whenever these discussions and debates come up about the national debt and our budget picture national budget people say it's entitlements that are the problem it's Medicare it's Social Security it's Medicaid these are the real drivers of our long-term fiscal crisis or challenge right they point to entitlements so here's Greenspan sitting there under oath and he's asked this question by Congressman Paul Ryan don't you agree with me that now is the time to begin to move toward a system of personal retirement accounts this is privatizing Social Security now is the time to begin to transition to a system of personal retirement accounts because we all know Social Security's going broke and we can't afford to make good on promises okay that's what Ryan asked Greenspan and Greenspan said no I don't agree with you I don't agree with you at all and then he goes on to say and the quote is here all right so the first part is here there's nothing to prevent the federal government from creating as much money as it wants and paying it to someone whoa when did anybody ever go on TV and tell you that right there's nothing to prevent the federal government from creating as much money as it wants to in paying it to someone so he has completely taken the affordability question off the table we don't have to ask whether we can make good on promises to future retirees their dependents and the disabled we can we can make good on every promise in perpetuity nothing to stop us from doing that then he goes on to make the really important point that we should be having an entire national debate around and his next cent next sentence is this the question is how do you set up a system which assures that the real assets are created which those benefits are employed to purchase what does that mean it means that we have demographic changes taking place in this country more and more people who are today working are going to be moving into retirement this year next year the following year the boomers right they're already leaving the labor force and moving into retirement and that's going to continue for some time and it's gonna leave behind fewer and fewer people who are working and producing the stuff but the boomers once they retire they don't stop consuming they continue to consume they just stop helping us to produce the stuff so Greenspan's point is how do you set up a system which assures that the real assets the stuff is created so that when those benefit payments go out to future retirees their dependents and the disabled they can do what spend that money into an economy that is productive enough there is enough stuff being produced that we don't get what kind of a problem inflation I heard it because if the economy is not productive enough five years ten years twenty years thirty years from now and the checks go out then we're all going to be competing for a limited a smaller and smaller quantity of actual stuff and we're going to create an inflation problem and inflation is every central bankers public enemy number one that's what he's worried about okay so can you imagine if instead of saying Social Security is going broke we have to cut benefits the system is unsustainable forget all of that if instead of that we were saying what are the things that we can do today what are the investments we can make today to increase the odds that in five ten twenty years the US economy is productive enough that we can make good on all of those promises without causing an inflation problem the Republicans would say what tax cuts and deregulation are the best ways to produce an economy that is you know maximum growth and high productivity the Democrats would say what education infrastructure R&D but at least we would be having the right debate right at least we would be having a good constructive productive debate over the real issues that matter instead of this phony you know where the money is running out sort of debate so that's where I wish we were the US government is never going to run out of the US dollar the US government is the scorekeeper for the dollar it can't run out of dollars any more than a carpenter can run out of inches or the scorekeeper here at Stonybrook can run out of points when the football team is putting up 77 points in a game and all the fans are sitting in the audience going oh my god what happens if they score again they're never gonna have enough points to put up yes they will they can't run out the stadium can't run out of points the US government can't run out of dollars it's a unit right the government spends by instructing its bank to change the numbers in someone's account upward that's how we pay for things it's not actually by physically printing money and making payments it's all done electronically okay so that's how it really works the spending comes first Congress authorizes a budget that's how it's supposed to work the House and the Senate write a budget there's a budget resolution the president signs the budget and there's authorization is given right budgetary authorization comes through appropriations and the agencies are told this is how much money you have to spend and the government begins spending I the spending happens first and once people receive income from the government's spending people start paying taxes and now there's money to also buy those bonds remember I spent it before I taxed it back or sold the bonds so this is from a talk a series of talks I gave just over this summer in London one at the British public library and one in the house Lorde's this is the debate I wish we were having instead of getting bogged down in the pay for a question focus on the real things that matter what can we afford the answer isn't in financial terms the answer is in real terms if we want to do a trillion dollars of infrastructure and somebody says how are you going to pay for it you should say I'm gonna pay for it by hiring 300,000 construction workers by using X tons of steel by using 2 or 3% of our unused spare capacity in our factories by mobilizing this many machines and heavy equipment and so that's how you pay for it real resources and if you don't have them if the economy is already operating at full employment and everybody's being used all the workers are already employed all the resources are currently being used then you can't afford it right but if you have spare capacity if you have idle people if you have idle machines if the recent raw materials are there then the government can step in and say now would be a good time because we can mobilize these resources in a responsible way that means without causing inflation without competing for those resources with other people who are currently using they're not being used we can hire them put them to work and improve the standard of living right in the interest of the public of the public good so thank you very much so thank you so much that was spectacular and I think my head's still spinning a little bit and trying to get my rounded all the way who's listening I mean this is obviously a novel idea who's listening and are you seeing progress as you're putting these ideas out yes well lots of people are listening so I think you know just in the last I would say a year and a half to two years there seems to have been a real lurch forward with these ideas both in terms of you know the media interest cover stories headline you know pick kind of feature pieces just on the ideas themselves then people running for office who are trying to find a better way to dialogue with their constituents they're going to debates and they're running for public office or elected officials who are just reaching out and saying look I want to talk about this stuff in a better way can you help me find ways that you know I can be comfortable with but recognizing that it's a departure from the way they've been doing it so I think lots of people are listening so to go back to one of your central points if the deficit is really not the right guide and you kind of answered part part of this question but what really should policymakers be looking at when they're trying to make a decision I think again in your wrap-up I think you kind of manage of some of their other things besides just understanding what the costs are going to be interesting so yeah so one of the things I mentioned inflation but that's not the only consideration so I mean you know right now legislation is run by the Congressional Budget Office and that's the sort of Washington scorekeeper they look at legislation that's been proposed and they give members of Congress feedback and they try to help them figure out am I going to vote for or against this piece of legislation but most of the feedback they give is this will be the impact on deficits going forward and this will be the impact on the national debt what I'm suggesting is that it would be useful to have CBO go beyond and maybe not even do that but certainly to go beyond and say look you want to expand the Earned Income Tax Credit this is how many kids would be lifted out of poverty if you were to do that this is you want to provide these tax cuts and you know look at the Republican tax cuts and say there's this measure called the Gini coefficient it's a measure of income inequality or wealth inequality in the country let us talk about what that might do to inequality if we pass this legislation so that I think that would be useful feedback so the u.s. obviously has the still I guess he wasn't trying to now have the dominant economies in the world but can any sovereign nation adopt this policy in terms of you know your your producing the money you're going to spend it or is it constricted by you know the markets for currencies things like that in terms of who can do this I'm thinking of Greece for example clearly they ran into problems in the U with the overspending and so on so can any nation do this yeah so you use the magic words which are sovereign currency and so what happened with Greece is that Greece was you know operating with the drachma they had a sovereign currency until they didn't until they gave it up in favor of this new thing called the euro and once Greece gave up the sovereign currency and started borrowing in a currency that's essentially foreign to them it invites all kinds of problems but the US has a sovereign currency the UK does Japan Canada Mexico so those countries could could make maximum use of their domestic resources they can afford to buy whatever's for sale in their domestic currency so we've been hearing for years and years obviously and you showed it so well in your video this the debts terrible the deficits terrible and so on how do we do a better job of educating the public on monetary policy because you're really it's different what you're talking about it's quite different Julian tasks because there's so much disinformation that it takes to coin a phrase or to turn a phrase it takes a village sense to combat this I mean you really do need it's not enough for just academia to come aboard you know I think that part of what helped push this message forward was when financial journalists in particular came became interested in mmm tea and started writing about these ideas so you know people putting better questions to our politicians writing better articles for people to digest telling better stories on the news it's gonna take a lot of work so you mentioned and I think I mentioned my introduction that you were an economic advisor for the Sanders campaign in 2016 how did that happen how did you get engaged with it I had well so I didn't start advising the campaign until after I left the Budget Committee so it was a what two weeks there's my husband two weeks before Christmas 2014 and I got a phone call from him and the Democrats had just lost the Senate and so the Senate was going to flip and he was going to be the ranking member of the Budget Committee starting in 2015 and he needed to hire a chief economist to advise members of the Democratic caucus on the budget committee so he called and we had a conversation and then he called two days later and we had almost the same conversation at the end of that call he asked if I would come in and do this job in Washington so just a couple of weeks before Christmas with kids that were much younger I picked up and moved to Washington and worked on the budget committee so we knew each other from from that time and then when he decided to run for president and I finished my year and a bit on the budget committee then I started advising the campaign but it sounds like from what you said it was still difficult to get him at least in the current political environment to not point to ways in which things would be paid for is that fair yeah and and it's tough because you know I show up in January and I think he announced he was going to run for president in May so and you know this is someone who I think has prided himself on consistency in message for many many years and and there's so much pressure as I said in the talk there's so much pressure to show everyone exactly where the money is going to come from and if you don't do that they say you're not serious and then when you do do that they tell you the math doesn't add up so it's just sort of can't win what are some of the other constraints kind of in getting this done and and what are some of the incentives that you know you can give to people to try and adopt this in leadership well the constraints I mean there's they're all self-imposed that's the worst part of this is that the constraints aren't real they're just you know and there's their self impose they're sort of you know this is the way we these are the expectations of people who put forward legislation that there will be a pay for attached and I think that you know one of the funny things that happened is with the Republican tax cuts I think it pushes the door open for the Democrats and so a lot of them are calling me now and saying things like well if they don't have to pay for anything we don't have to pay for anything and so in a way I think the Democratic ins kind of advanced the agenda here with their tax cuts do you think the the infrastructure argument is is stronger or versus the tax cutter and sent as incentive argument for economic growth I mean have you have you thought about that or that because obviously you talked about that could play out now in a public debate which would be much more productive than talking about the idea of the deficit but you have a so economists will say they're the multiplier effect how much bang for the buck so if government does a trillion dollars of infrastructure investment what are the benefits to the economy as a whole in terms of where does the money go in whose hands does the money find itself and then how much of it do they respond in to the economy and so you get a multiplier effect versus tax cuts that are skewed disproportionately to the people at the top who then turn around and spend you know only a very little amount back into the economy so you know if you're comparing a trillion dollars of infrastructure alongside a trillion dollar tax cut most economists would say the infrastructure is more bang for the buck so so you mentioned one of the the risk being inflation potentially in terms of this and so and of course inflation more acutely affects lower income lower asset individuals so how does that risk kind of weigh in to the monetary fiscal policy as you think about it so the point that I'm trying to make here is that you want to make efficient use judicious use of the budget and efficient use of the resources that you have without putting a strain on the economy and so really the goal is to avoid the kind of inflation that can be punishing I mean that's a good question to note that people low income people can feel the pinch the worst as prices especially food prices and and rent to those sorts of things accelerate but the whole point is to be sensitive to the limitations and to avoid that kind of inflating off that kind of inflation as a result of government policy so it's a one last question from our registers it's been said that the governor could pay government could pay for things like universal health care for example by simply increasing taxes on the richest one is that really enough and is that is the vision that bernie sanders had plausible without resulting without with by just tax increases without resorting to a different approach to monetary policy so you know what he'll say with respect to jet you asked about healthcare inversion yes yeah so you know right now he would say that we are already paying people say well how are you gonna pay for Medicare for all and the answer really is we're already paying for it we're just paying more than any other country in the world so moving to a system of medicare for all means paying less than we're already paying and you know getting to the point where you say right now people are paying in the form of co-pays and deductibles and premiums and instead of doing that they're gonna make some other type of payment whether we call it a health care premium or a tax and there it does matter by the way why do you call it but that we would end up paying less for it at the end of the day and whether taxes have to increase or not is again it comes down to the real economy it's can you do it without creating an inflation problem and if you can't then there's an economic reason for cooling things off by taking some income away from people by taxing well again this has been fantastic I think many in the audience for you know hopefully your are feeling a little more optimism perhaps than they were coming in which is wonderful I think in these times and I look forward to learning and hearing more as you put forward these very provocative but also very important um conversation for our country please join me again at Thank You Jessica you

Channel: Stony Brook University

Views: 119,040

Keywords:

Id: WS9nP-BKa3M

Length: 50min 43sec (3043 seconds)

Published: Thu Oct 18 2018

Reddit Comments

[u/Tadanga2]

Very informative and revealing approach to how things actually work in government financing.