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Stephanie Kelton Profile picture
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22 Feb, 5 tweets, 2 min read
Something doesn't add up here. nytimes.com/live/2021/02/2…
The weirdest bit, for me, is noting that interest as a share of GDP is "roughly the same" as during GFC, but somehow we are supposed to have more fiscal space today compared to what was available back then.
Like, if this was always the right way to think about fiscal space--and I don't agree that it is--then why didn't these people tell us that back in 2008/09/10?
Why did the most prominent economists (Obama advisors) who are now themselves pushing the *debt service* angle embrace Simpson-Bowles austerity when there was, under their own definition, ample fiscal space back then?
For the record, I don't agree that debt service is the right way to think about fiscal space. As James Galbraith put it, "the underlying economics are a mess." ineteconomics.org/perspectives/b…

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More from @StephanieKelton

Stephanie Kelton Profile picture
22 Feb
Consider this passage from CBO's August 2010 budget report:
"The amount of federal debt held by the public has
skyrocketed in the past two years: from 40 percent of GDP at the end of 2008 to nearly 62 percent at the end
of this year, CBO estimates."
cbo.gov/sites/default/…
1/8
CBO continues.... Next sentence: "Interest rates, however, have fallen to historically low levels, so despite the higher *levels* of debt, *interest costs* have not yet increased significantly." 2/8
Now consider this comment from Yellen earlier today. She seems to be invoking the sort of thinking found in this recent paper by Furman & Summers. 3/8 brookings.edu/wp-content/upl… Image
Read 8 tweets
Stephanie Kelton Profile picture
17 Feb
Suppose you grew up in Sioux Falls, SD. Your family didn’t have a lot of money. You never thought about public vs. private as you contemplated your options in high-school. You just knew you wanted to go to college. 1/8
You considered three options. (1) South Dakota State Univ, which is 70 miles north in Brookings, (2) University of South Dakota, which is 70 miles south in Vermillion, (3) Augustana University, which is right there in your hometown of Sioux Falls. 2/8
Augustana is private. SDSU and USD are public. You never gave a moment’s thought to any of this. Your family didn’t have a lot of money, so you received a fairly generous financial aid package from Augustana. 3/8
Read 10 tweets
Stephanie Kelton Profile picture
3 Feb
We could have designed something *similar* to this.
The first question is basically, Do you need financial help? Y/N
I pretended I was Canadian for purposes of this exercise. 1/9
Decided to live in Ontario. 2/9
Like many Americans, I claimed *some* lost income due to COVID. 3/9
Read 9 tweets
Stephanie Kelton Profile picture
8 Dec 20
"The underlying economics are a mess."
Empirical and theoretical problems
Right for the wrong reasons
Read 5 tweets
Stephanie Kelton Profile picture
4 Dec 20
Short thread

Anyone who has been paying attention knows that what we’re hearing from a number of economists today was laid out more forcefully more than a decade ago by those they prefer to ignore.
What, eg, did Blanchard discover that wasn’t already written up by @stf18 in 2006? papers.ssrn.com/sol3/papers.cf…
Mainstream econ has arrived at the position that we’re probably OK as long as CBO forecasts re: the future path of interest rates is off. MMT asserts that the future path is a policy choice.
Read 5 tweets
Stephanie Kelton Profile picture
21 Nov 20
MMT: The Clock that Keeps on Ticking

bloomberg.com/opinion/articl…

I’ll put the MMT record up against the stopped clock mainstream Keynesian record any day. Exhibit A brookings.edu/wp-content/upl…
If you’ve followed the headline Keynesians over the years, you know that they have twisted themselves into knots, trying to justify their ever-shifting views on fiscal sustainability.
They counseled Congress (and Obama) to steer clear of a bigger relief package, paving the way for an abysmal “recovery.” They leaned into Simpson Bowles and went on to warn that “A debt crisis is coming.” washingtonpost.com/opinions/a-deb…
Read 4 tweets

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