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Stephanie Kelton

31 Dec 21, 7 tweets, 2 min read

https://twitter.com/paulkrugman/status/1476551183414312971

What follows is a THREAD, posted on behalf of Professor James Galbraith, who is not on Twitter but who asked me to share his reaction to this.

https://twitter.com/paulkrugman/status/1476551183414312971

"I'll bet that Paul Krugman has not read Isabella Weber's magisterial history, How China Escaped Shock Therapy, recommended by Adam Tooze in Foreign Policy, by Martin Wolf in the Financial Times, and by yours truly in Project Syndicate, among many other plaudits and prizes...

If he had, Krugman might be aware that Professor Weber knows a great deal about price controls and their role in a larger policy setting. And not only in China, but also in the US, which Chinese reformers studied closely in coming to their decisions...

In The Guardian, Weber provides careful parallels to the spring of 1946, when Paul Samuelson – Krugman's own chief mentor – signed a letter to The New York Times urging continued price controls, given ongoing bottlenecks and temporary shortages – precisely today's situation...

The point of strategic price control, then and now, was to prevent an outbreak of inflation, followed by loss of purchasing power and confidence. A further purpose now, not relevant yet in 1946, is to forestall counterproductive hikes in interest rates by the Federal Reserve...

By releasing oil from the SPR, and by intervening in the ports, the Biden administration has shown that it understands the critical role of key prices, and is acting directly to bring them down. Weber's argument is in full sympathy with this selective policy...

Krugman's tweets, by contrast, are the trite repetition of textbook banalities. They show no knowledge or policy imagination. His slur on Weber – and by extension on Samuelson – is shameful.
Many thanks to Stephanie Kelton for giving an outlet to these remarks." /end

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13 Apr 21

https://twitter.com/SenateFinance/status/1382015747816357889

Let’s play the “pay for” game. Suppose you want to spend $3-$10 trillion on a Build Back Better agenda. You’ve decided that you’re going to play the “pay for” game, which means you will show where every dollar you plan to spend is going to “come from.” 1/

https://twitter.com/SenateFinance/status/1382015747816357889

The whole point is to appear “fiscally responsible,” showing that you can carry out your spending without adding to the deficit. In other words, for every dollar you want to spend INTO the economy, you have a plan to rip a dollar OUT of someone’s hands. 2/

The Biden administration has put forward their plan, which mostly relies on raising taxes on corporations. The president says it will raise more revenue (over 15 yrs) than he is proposing to spend (over 8 yrs). Don’t ask me why. 3/

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9 Apr 21

@jasonfurman

Yesterday, @jasonfurman tweeted out my NYT piece on the Biden infrastructure proposal. He claimed I had ignored the most obvious way to deal with any inflationary pressures that might arise—i.e. Fed rate hikes. 1/ nytimes.com/2021/04/07/opi…

I don’t share Jason’s view that fiscal policy can safely ignore inflation risk since the Fed can always handle any resulting inflation. Congress should not ignore inflation risk when contemplating a multi trillion-dollar spending package. That’s just irresponsible. 2/

I also don’t share the the view that the Fed can easily keep inflation in check via rate hates. I think it’s complicated and not settled science that rate hikes will temper inflationary pressures by dampening aggregate expenditures. 3/

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Stephanie Kelton

@StephanieKelton

3 Mar 21

https://twitter.com/rohangrey/status/1366852449609289728

Had some further thoughts on the Orzag intervention. 1/12

https://twitter.com/rohangrey/status/1366852449609289728

The big breakthrough will come if/when Congress changes the way it approaches the use of "offsets." Right now, offsets = pay-fors. The purpose of *offsetting* spending is to neutralize the impact of the spending on the budget outcome--i.e. to keep it deficit neutral. 2/12

That is not how we should think about offsets. In MMT, offsets are explicitly about inflation. You don't need a binder full of revenue-raisers--i.e. offsets--to neutralize the impact on the budget. 3/12

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Stephanie Kelton

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2 Mar 21

THREAD
In 2007, Congress amended the Fair Labor Standards Act of 1938 to gradually raise the federal minimum wage from $5.15 per hour to $7.25 per hour. The new minimum wage was phased in over two years. How did it happen? 1/4

The bill was introduced in the House on Jan 5, 2007 and passed on January 10. All 233 House Dems voted "Aye." 82 Republicans joined them in voting "Aye." 2/4

A cloture motion in the Senate failed after President G.W. Bush said he wanted tax cuts for small businesses that might be adversely impacted included in the. 3/4

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Stephanie Kelton

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24 Feb 21

“In truth, the only bond vigilante the US faces is the Fed—Congress allows it to raise rates whenever it wants ... But even if the Fed abandons low rates, the Treasury can ‘afford’ to make all payments on debt as they come due, no matter how high the Fed pushes rates.” 1/5

“Affordability is not the issue, but rather the desirability of making big interest payments to bond holders and potential effects on aggregate demand and hence inflation.” 2/5

tandfonline.com/doi/full/10.10…

“[T]he US Fed is a creature of Congress, and Congress can seize control of interest rates any time it wants (and in WWII interest rate policy was essentially dictated by the treasury).” 3/5

Read 6 tweets

Stephanie Kelton

@StephanieKelton

23 Feb 21

“Someone” is and has been paying for the recovery from COVID-19. In the US, that “someone” is Uncle Sam. By all means, deal with inequality, but let’s not pretend that the government didn’t already foot the bill. 1/3

If you don’t already understand this, there’s a book that might help. 2/3

If you think “someone is going to have to pay for the COVID recovery,” you are absolutely barking up the wrong tree. You’re not going to end up with a wealth tax. You’re going to end up with austerity. Mark my words. 3/3

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