Quote of the Day — February 7, 2017 — Government Spending

Image credit.

We shall figure out the fuller context of the quoted proposition in future posts. 

[Der Kern des Zitats (vom Standpunkt meiner  Interessen im Augenblick) in aller Kürze: Formale Regeln zur absoluten Beschränkung der Staatsausgaben, wie z.B. die Forderung, dass sie x% des BIP nicht überschreiten dürfen, sind unsachgemäß. Die Funktion von Staatsausgaben besteht darin, die vollständige Nutzung der volkswirtschaftlichen Ressourcen und Kapazitäten zu ermöglichen. Die Höhe und der Grad der Vertretbarkeit eines dabei entstehenden Haushaltsdefizits können sinnvoll nur relativ zum erreichten Grad der Ressourcennutzung bewertet werden. Solange produktive Ressourcen noch ungenutzt bleiben, ist eine weitere Ausdehnung des Defizits zwecks Mobilisierung dieser Ressourcen vertretbar. Ist hingegen eine maximale Ressourcenauslastung (Vollbeschäftigung) erreicht, würden weitere Staatsausgaben inflationäre Folgen zeitigen, die nominelle Nachfrage würde das reale Angebot übertreffen. Eine Beschränkung der Staatsausgaben wäre nun durch den konkreten Kontext der Wirtschaftslage gerechtfertigt.]

... the government’s budget doesn’t matter; the real resources of the UK are what matter at all times.

 

“Affordability” for national governments like the US, UK, Canada, Japan, Australia is always in terms of real resources (iron ore, agricultural capacity, water supply, labor supply, etc.) and never “money”.

Forty years of neoliberalism and nonsensical mainstream economic policy errantly focused on the finances of these governments, which do not possess hard financial constraints, while ignoring their real productive capacities, leaving vast resources idle. Persistent recessions, high unemployment rates, expanding income inequality, high private debt levels and financial instability have been the end results of these policies and so, political unrest is rising as world populaces are no longer willing to tolerate these deplorable conditions. At the root of the problem is the erroneous belief that these governments can run out of “money”. That incorrect viewpoint causes you to miss the reality: Pounds are infinite. Real resources are finite.

Consider: If you have £1,000, you can only buy so many goods with it. When you’ve completely spent the £1,000, you cannot buy any more goods. Now let’s assume that you can create pounds at will anytime you so desire. How many goods can you buy? You can buy anything for sale that is priced in pounds, both in the short run and the long run. Money is no longer of any concern to you. And that applies to the UK Government. Money is not a concern to the UK Government because it alone has the authority to create pounds. Its finances are of no concern. Its budget does not need to be balanced. It does not tax to fund its spending. It does not borrow to fund its spending. When it spends, it simply creates a pound and spends it. The only concern of the UK Government is the real resources available that its pounds access. In other words, a pound is just a voucher that we use to obtain goods and services.

Since the UK Government can issue an infinite amount of pounds, getting enough “money” into everyone’s hands so they can access goods isn’t the problem. The problem and the real question is, “Is the economy capable of producing enough goods and services to meet everyone’s needs?”

The problem with the NHS is not money. The problem is making sure that there are enough doctors, nurses, ambulances, medicines, surgical equipment, hospitals, etc., to meet the healthcare needs of the entire population.

So, affordability for you personally might be in terms of pounds. That is precisely because you do not issue pounds. You use pounds. Therefore, you need to quickly come to terms with the fact that your situation does not apply to the UK Government and when you persistently vote for candidates who propose to “find cuts to pay for” spending or slash the deficit, you are actually voting to cut your own income, to reduce your quality of life and to shorten your lifespan.

[...]

Expanding budget deficits are necessary up to the point of full employment, which is the point of maximum production capability; a condition we call “macroeconomic efficiency”.

The source.