Thursday, March 11, 2010

The collapse of demand is not a stupid “macro” problem

I get emails from a reader occasionally who supports someone named Mosler, an automobile magnate, for president.  Here’s the latest:

In Defense of Deficits  Latest from Galbraith, a Warren Mosler supporter. Also Auerback responds to Rogoff nonsense

Here is my response:

If you persist in treating this as a "macro" problem, you will guarantee a bad solution, whether it's excessive deficit spending or excessive fiscal tightness.

It's a distributional problem.  There's enough to go around, it's just not going around.

The financiers will play a big deficit/inflation scenario the way they played the bubble--lever up and rip everyone else off.

You're barking up the wrong tree, just like they want you to.

Repeat:  as long as you frame it as a "macro" problem, you will get a "macro" answer, and they're all clumsy, stupid and wrong.





  1. Totally agree. Yet almost no one even comments on this issue. I think that's because it's hard to study using models, etc.

  2. As much as these new deal 2.0 people claim to be oppositionist, they are really just a foil for the powerful and corrupt. Similar to the way Obama was able to position himself as an agent of change in the face of the insanity of Bush/Chaney. Paper opposition to legitimize the damaged though still dominant neo-liberal orthodoxy and marginalize genuine discourse.

  3. what you described is a macro problem.

    we need a payroll tax holiday now!

  4. How about taking the cap off the payroll tax and lowering the rate in a revenue neutral adjustment that would (somewhat) rebalance demand?