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The Three Wise Men of Fiscal Responsibility?

December 24th, 2010 . by economistmom

three-wise-men

My boss, Bob Bixby, offers this perspective on how to achieve bipartisan compromise that would reduce the federal budget deficit down to sustainable levels.  We need strong leadership from “three [at least potentially] wise men.”  From Bob’s CNBC op-ed:

If [President] Obama and [incoming House Budget Committee chairman Paul] Ryan join [Senate Budget Committee chairman Kent] Conrad’s call for a summit to negotiate a joint budget plan—building on the solid groundwork of the two commissions—they may be able to achieve a game-changing breakthrough. That assumes, however, that they want the game to change and that they could get other party leaders and partisan guardians and to go along with the idea.

The commissions showed that people of differing perspectives can reach consensus if they enter into the process with a determination to reach an agreement for the common good. Moreover, the public is willing to accept the necessary sacrifices to build a better future if they understand the magnitude of the problem and the realistic trade-offs among the options.

The missing element is political leadership. Obama, Ryan and Conrad can fill the void.

Happy Holidays!  I’m not sure how often you will hear from me over the rest of “this year” on fiscal policy issues, other than my passing along other people’s wise words.

4 Responses to “The Three Wise Men of Fiscal Responsibility?”

  1. comment number 1 by: rjs

    when you get back next year, i’d be interested in your take on modern monetary theory, as advanced by such as billy mitchell jamie galbraith, and l randall wray; i argued unsuccessfully with proponents last february & thought it to be a fad, but it seems to be gaining more traction…

    here’s mitchell’s most recent on simon johnson:
    http://bilbo.economicoutlook.net/blog/?p=12871

  2. comment number 2 by: AMTbuff

    Step one would have to be a foolproof plan to cap government spending on health care. Without that, no promise to limit government spending means anything. Without a credible agreement on spending, there can’t be a grand bargain on taxes.

    Nothing can be built without the foundation: a politically sustainable method to cap government health care spending. A crisis may be required before voters are ready to concede that the government must withdraw from its expansive commitments to pay for health care.

  3. comment number 3 by: markg

    RJS,
    You are wasting your time here. I tried to explain mmt to her. No luck. I check back a few times a year to see if she has a change of heart (brain).
    It’s quite simple but she still doesn’t get the following:
    Treasury Securities are govt debt.
    Treasury Securities are listed as assets on private sector balance sheets.
    A US Savings bond is a Treasury Security.
    Gov Debt = Private Sector Savings.
    A soverign govt that issues its own currency (like the US, UK, Japan, but not Euroland countries) cannot go bankrupt or insolvent unless the govt chooses to do so. That choice is political - not functional.
    Bixby and her need to read Mosler’s 7 deadly innocent frauds. But they will not because they know they cannot win against MMT so they choose to ignore it. I pity them.

  4. comment number 4 by: SpendingHawk

    RJS and MRKG:

    MMT afficianados don’t understand that it’s Net Worth that matters, not Assets. Assets - Liabilities = Net Worth.

    From global perspective, US Govt. issuance of debt doesn’t create net worth. Owners of debt list as Treasuries as an asset. Issuers of debt list them as a liability. Oila! Net Worth change = zero! Zero Net Worth = Zero Private Sector Savings.

    Also known as the There’s No Such Thing As A Free Lunch (TNSTAAFL) rule.

    You are wasting your time here.