“Fiscal Solutions” with Majority Leader Steny Hoyer Today!
April 1st, 2010 . by economistmom
No longer is Concord in “wake up” to fiscal reality mode–we are trying to discuss “solutions” now. Today’s event at the University of Maryland, with House Majority Leader Steny Hoyer, is a prime example. (You’ve heard how much I admire “Steadfast Steny” before.)
As the Concord announcement explains:
Date and Time:
Thursday, April 1, 2010 - 4:00pm - 5:30pm
Address:
University of Maryland
- Samuel Riggs IV Alumni Center
- Orem Alumni Hall
- College Park,
- Maryland
The Concord Coalition and the University of Maryland School of Public Policy’s Saul I. Stern Professorship of Civic Engagement will be hosting the Fiscal Solutions Tour on Thursday, April 1, 2010 at the Samuel Riggs IV Alumni Center on the Unviersity of Maryland campus in College Park, Maryland. This public discussion about our nation’s fiscal future will feature United States House of Representatives Majority Leader Steny H. Hoyer.
There will be panel discussion featuring:
David M. Walker, former Comptroller General of the United States and President & CEO of the Peter G. Peterson Foundation
Robert L. Bixby, Executive Director of The Concord Coalition
William D. Novelli, former President of AARP, and Professor at the McDonough School of Business at Georgetown University
Andrew G. Biggs, former Principal Deputy Commissioner of the Social Security Administration, and Resident Scholar at the American Enterprise Institute
This panel of nationally recognized experts will discuss the urgent need to address our nation’s unsustainable fiscal outlook and propose potential solutions.
For more information click here: http://www.publicpolicy.umd.edu/sppupdate/fiscalwakeup.
And note the event will be live-streamed (we hope) from this page. Please tune in if you can’t join us in person!
Hoyer seems better than most in Congress on fiscal responsibility (very low bar, mind you), but if I see an update to your post later today that he actually acknowledged and endorsed some reasonably specific set of budgetary sacrifices (on tax and spending sides) on the scale needed to seriously address our long-term fiscal imbalance, I’ll guess it’s probably an April Fool’s Day joke.
Yep. There’s a plethora of articles on the deficit but not a one that actually proposes specific solutions. I’ll cross my fingers though.
I was interested to hear David Walker say toward the very end of the event that “I.O.U.S.A.: Solutions” was coming out in a couple of weeks and that it would be free. At this link, I found the following reference to it:
They are in the final stages of production on I.O.U.S.A.: Solutions, a sequel to their award-winning documentary I.O.U.S.A., an examination of America’s national debt. I.O.U.S.A.: Solutions will air on CNN this April.
EM,
Im sure everyone here is well meaning. But no one here seems to understand modern money and it’s effect on Federal Government “finance”. If they did, they would see that Government spending is NEVER revenue constrained, and Treasury bond issuance is NOT a financing, but rather is a banking system reserve drain. Tragically, even high level elected officials such as Rep. Hoyer do not understand this reality and the Country continues to suffer for it. The following is something written by a Tom Hickey which I think does a pretty good job of pointing out some concepts of our nations true fiscal operations. IF anyone here is objective, they should seek to understand Modern Monetary Theory (MMT).
Resp,
“Tom Hickey Reply:
April 3rd, 2010 at 12:38 am
MDM, the key here is the MMT concept of vertical and horizontal in relation to money creation. This is sometimes called exogenous (outside) and endogenous (inside).
When the government “spends,” the Treasury disburses the funds by crediting bank accounts. Settlement involves transferring reserves from the Treasury’s account at the Fed to the recipient’s bank. The resulting increase in the recipient’s deposit account has no corresponding liability in the banking system. This creation is called “vertical,” or exogenous to the banking system. Since there is no corresponding liability in the banking system, this results in an increase of nongovernment net financial assets.
When banks create money by extending credit (loans create deposits), this occurs completely within the banking system and results in a liability for the bank (the deposit) and a corresponding asset (the loan). The customer has an asset (the deposit) and a corresponding liability (the loan). This nets to zero.
Thus vertical money created by the government affects net financial assets and horizontal money created by banks does not, although its use in the economy as productive capital can increase real assets.
The mistake that is usually made is comparing what happens in the horizontal system with what happens at the level of government accounting. At the horizontal level, debt is the basis for horizontal money creation. Therefore, it is often assumed that debt must be the basis for the creation of money by government currency issuance. This is not the case.
Reserve accounting uses the standard accounting identities, but the meaning of “liability” is not “debt.” The husband-wife analogy for CB-Treasury accounting relationships is apt. Since a husband and wife are responsible for each others debts, neither can be indebted to the other. That is to say, reserve accounting is a fiction that does not represent real relationships, such as exist between a creditor and debtor in the horizontal system.
Moreover, government debt is not true debt either. At the macro level, the reserves that are transferred to banks through government disbursement are used to buy Tsy’s. That is, when a Tsy is bought, this involves a transfer of reserves from the buyer’s bank’s reserve account at the Fed to the government’s account (consolidating CB and Treasury as “government”).
When the Tsy’s are sold or redeemed, the reserves that were “stored” at interest are simply switched back, creating a deposit again. It’s pretty much the same as buying and redeeming a CD. It’s just a switch from demand to time back to demand in a bank account, and a switch between reserves and securities at the government level. That is to say, the government doesn’t have to draw on revenue, borrow, or sell assets to cover its “debt,” as households and firms do. It’s just a matter of crediting and debiting accounts on the (consolidated) government books, even though it may appear that there is a financial relationship occurring between the CB and Treasury due to the accounting. However, it’s just a fiction.
Therefore, the key to understanding MMT is this vertical-horizontal relationship. When one understands this, then Abba Lerner’s principles of functional finance become obvious. (1) Currency issuance through government disbursement is used to increase nongovernment net financial assets, and taxation withdraws net financial assets from nongovernment. (2) Debt issuance by the Treasury is a monetary operation for draining reserves to permit the CB to hit its target rate.
These principles are then applied to Y+C+I+G+NX to balance nominal aggregate demand with real output capacity in order to achieve full capacity utilization, hence, full employment, along with price stability. This is based not on theory requiring assumptions but on operational reality that can be represented using data, standard accounting identities, and stock-flow consistent macro models.
All of this and much more is explained in considerable detail at Prof. Bill Mitchell’s billy blog”
B. Davis, in response to your comment:
In fact, there will be a CNN special on “IOUSA Solutions” which they expect to air as soon as next weekend. I’m traveling to NYC tonight to participate in the taping tomorrow morning (I am part of the “panel discussion” in between clips from the sequel)! I have a teeny part in the new movie and don’t yet know what teeny part that is (haven’t seen it yet). Will keep my readers posted.
Thanks for the info. I’ll get my DVD recorder warmed up!