, 8 tweets, 5 min read Read on Twitter
The underlying economic orthodoxies justifying austerity are BREAKING DOWN BEFORE OUR EYES with huge implications for #MedicareForAll, the #GreenNewDeal, #CancelStudentDebt and other progressive priorities.

Lets walkthrough this @Neil_Irwin piece.

The Congressional Budget Office (CBO) scores proposed legislation by its impact on the deficit. The assumption is that the @federalreserve will respond to the government stimulus with higher interest rates to slow down the economy in order to keep inflation under control.
Meanwhile when unemployment drops, the @federalreserve assumes as the supply of available workers goes down, the cost of labor (wages) will go up. They also think higher wages will lead to inflation. So the Fed preemptively raises rates to when unemployment drops below 5% or so.
When interest rates⬆️
Job growth⬇️

Because when interest rates go up, we pay more on debt and less on what we need, and if we're not buying, the workers who provide what we need get fired. Plus ⬆️ rates make borrowing harder for new businesses harder so jobs go ⬇️
To sum up the orthodoxies:

1. CBO: if the govt spends money on necessary programs, the economy will slow down because we assume the Fed will raise rates.

2. Fed: We must raise rates when unemployment goes below 5% and/or the govt deficit spends because it will cause inflation!
But the economic orthodoxies don't match the data.

We're seeing big deficit spending and record low unemployment and ...


So the Fed isn't raising rates to slow down the economy (may even cut rates), which is THE justification against govt spending.
Why does the CBO say we can't deficit spend? Because the Fed will slow down the economy to prevent inflation.

But there is no inflation and the Fed isn't raising rates.

So what's stopping us from #MedicareForAll, the #GreenNewDeal, #CancelStudentDebt and full employment?

When you talk about the urgent need for #MedicareForAll, the #GreenNewDeal, and #CancelStudentDebt and someone asks "Yeah, but how do you pay for it?" a totally reasonable, data-backed response would be:


"hOw dO yOu pAy fOr iT?"
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