Dean Baker
The Guardian Unlimited, April 11, 2012

April 2012, David Rosnick and Dean Baker

Mark Weisbrot
The Guardian Unlimited, April 10, 2012
En Français

Eileen AppelbaumEconomic Intelligence (U.S. News & World Report), April 10, 2012

I had several people ask me in comments or e-mails whether I agreed with Modern Monetary Theory (MMT) that the government doesn't need to raise taxes to pay for spending or whether I agreed with Paul Krugman that it does. I won’t claim to know exactly Paul Krugman’s view on the topic, but let me reframe the issue somewhat in a way that may cause people to see differently what is in dispute.

I think that all MMTers believe that the government cannot literally spend without limits. In other words, we can push the economy to the point where inflation is a real problem. The MMT answer is to raise taxes to prevent inflation from getting out of control.

Now suppose we are in the world where we have pushed the economy to the point where inflation is a problem and we decide we want the government to spend more money on some great project. At that point, it would seem that MMTers would have to agree that we need tax increases to offset the impact of government spending in boosting the economy.

We don’t literally need the tax increases to pay for the spending. The Fed could simply create more money to finance the spending. However if we don’t want the spending to be inflationary, then it must be offset by a tax increase.

I think the difference between the MMTers and Krugman is largely on the frequency with which they believe that the economy is up against its capacity constraints so that inflation is a real issue. I don’t want to put words in Krugman’s blog, but my guess is that he believes that the U.S. economy is typically operating near its capacity, so that the story of needing tax increases to offset spending would in general apply.

Dean Baker
Truthout, April 9, 2012

Dean Baker
Caixin Online, April 9, 2012

The following papers are highlights this week in labor market policy research:

Center for American Progress

Taking Action on Clean Energy and Climate Protection in 2012: A Menu of Effective and Feasible Solutions
Jason Walsh and Kate Gordon

Center for Economic and Policy Research

Low-wage Workers Are Older and Better Educated than Ever
John Schmitt and Janelle Jones

Center on Budget and Policy Priorities

The Impact of State Income Taxes on Low-Income Families In 2011
Phil Oliff, Chris Mai, and Nicholas Johnson

Tax Foundation Figures Do Not Represent Typical Households’ Tax Burdens: Figures May Mislead Policymakers, Journalists, and the Public
Chuck Marr and Chye-Ching Huang

The Texas Economic Model: Hard For Other States to Follow and Not All It Seems
Elizabeth McNichol and Nicholas Johnson

April 6, 2012

April 6, 2012 (Jobs Byte)