[lbo-talk] Galbraith: Entitlement cutting can't cut the deficit

Barry Brooks durable at earthlink.net
Sun Jul 18 09:23:20 PDT 2010


Michael wrote...


> Your post seems orthogonal to mine.
I didn't mean to ignore your main point. Yes, the part about how transfer payments are not government spending is very good, and my post ignored that main point Galbraith was making.

In your post, not clipped, his testimony did have the odd sentence that I was responding to.
> The only way to reduce a deficit caused by unemployment is to reduce
> unemployment.
The confusion of transfers with spending is a brother of the confusion about spending being the main cause of g. debt, as if revenue has nothing (only) to do with it. It smacks of the dominant agenda to starve out poverty justified by social Darwinism using austerity.


> Your idea that tax rises on the rich have zero deflationary impact is
> novel. I don't know of any economist who takes that position, but
> if
I didn't even imply that tax rises on the rich have zero deflationary impact. rather taxing idle money to put it back into the loop would tend to be inflationary. I did say that tax cuts that lead to borrowing and increased government debt are not necessarily inflationary. The borrowed money will go into demand of some kind, but the bonds sold to the lenders, representing about the same amount of money that was returned to demand, may not be spent. That may double the quantity of the surplus, but just holding bonds is not inflationary.

I think whether borrowing has a limit or not is important, and money not being spent can't cause inflation. Galbraith:
> But if there is no dumping of money, the inflation will not generally
> occur.

Barry



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