First, Ralph welcomes Washington Post tech journalist Faiz Siddiqui to discuss his new book "Hubris Maximus: The Shattering of Elon Musk." Then, our resident legal expert Bruce Fein stops by to explain how Elon Musk and DOGE are breaking the law.
Elon Musk is not an innovator; he is simply another version of Bill Gates. While he is often considered a Tesla founder, he is not. He was the angel investor chosen by the company's founders. Additionally, he has not revolutionized the space industry; SpaceX can be seen as a copycat of Jeff Bezos' Blue Origin.
Always a thought provoking treat to listen to your Radio Hour, but I have my usual constructive criticism.
One of your guests was outrage that Trump threatened to remove Harvard’s tax-free status because it would not implement his demands. Certainly I don’t agree with blackmail, but changing Harvard’s tax-free status might be a good idea. My reasons for saying this is based upon the recent reporting of Matt Taibbi on Substack.
As I understand the approximate facts, Harvard has a tax free endowment of over $130 billion, which it invests primarily in hedge funds and private equity. A conservative estimate would be that it makes 10% tax-free money on the endowment or approximately $13 billion per year. Running the entire university cost considerably less. One can reach several back of the envelope conclusions based on this.
First, according to Forbes, if Harvard were a person, it would be the eighth richest person in the world and of course, due to its tax-free status, it doesn’t have to pay any taxes. That hardly seems fair to me, especially given Ralph’s criticism of billionaires, paying very little taxes, a sentiment virtually everyone agrees with.
A person with a taxable income of $11,500 per year pays a federal tax rate of 10%. Imposing a similar minimal tax of 10% on Harvard would result in over $1 billion in extra tax revenue per year.
Imposing a minimal tax on all universities would, of course, raise considerably more. For instance, the IRS ‘s basic annual budget is less than $13 billion a year. A 10% tax on all college endowments would pay for the IRS and then some by a considerable margin. Or earmark it to raise teacher salaries in our underfunded K through 12 schools.
As Mr. Taibbi describes, Harvard’s endowment is basically a giant tax free hedge fund. It’s a big fat fund for hedge funds and private equity.
Hedge fund managers get a fee equal to approximately 2% of the value of the hedge fund and 20% of any profits. So in Harvard’s case, the fee would be 2% of 130 billion or $2.6 billion per year and another $2.6 for 20% of the annual profits for a total of $5.2 billion in a year.
The 5.2 billion a year is not taxable to the hedge funds and private equity funds because they are “pass-through” entities. This means they pass the taxes onto their investors, but in this case, there are no taxes for Harvard University so it’s all tax-free.
It’s a sweet deal in another way. Grateful hedge fund and private equity managers can allocate a portion of their tax free income to the endowment for a tax break on their personal taxes, growing the endowments and endearing themselves to their alma maters for future business!
So there seems to be quite a tax exempt racket going on here— at least according to my back of the envelope calculations. It would merit investigation and possibly, changes in our tax laws. It is not an outrageous idea.
While I don’t completely agree with all of your statements, you do bring up some very valid points, Erik. Thanks for that, these need to be discussed and, unfortunately, I think it can only happen here in the comments and not on the show itself.
First off, let’s not forget that Harvard University was once, not too long ago, under the leadership of Lawrence Summers. Larry Summers, along with Robert Rubin, were operating the US federal government DOGE of the 1990s when they were running the Treasury Department when they were pushing massive austerity which was implemented by Clinton, Newt Gingrich, and company. In other words, if Elon Musk is the source of criticism, why not criticize Harvard for keeping Musk types close to their leadership? And why not criticize the source of Musk’s ‘government efficiency’ scholarship, which comes from the likes of ‘academics’ like Summers?
I believe you are correct in criticizing the tax-exempt status of universities, though I disagree on the reasons why. The federal government does not need tax receipts to be able to fund anything. The federal government is not on a gold standard, they can fund any spending and it doesn’t require tax revenue, which ends up just being canceled money as all federal government spending comes from new money. State and local government entities are a different story, and in that regard, funding local schools through taxing universities on a state/local level, especially private universities, might fit your argument.
The reason I see for challenging the tax-exempt status of universities is that universities act in a capitalistic manner in a way that is boosted by their tax-exempt status. In some ways, this isn’t different from your argument, but I want to add to it. Universities have significant real estate and other holdings and act in a capitalistic manner with these holdings. For example, here in Houston, Rice University owns some land in Midtown (next to downtown) which is in a generally low-income area. The Fiesta Mart supermarket operated a location on land owned by Rice University. This was the only supermarket for a large number of low-income residents. Rice evicted Fiesta Mart from their lease, and the neighboring Sears also on Rice-owned property, and instead built a private-sector technology innovation hub on that property. What public benefit is a private-sector technology innovation hub for the residents of that area when they can’t even buy groceries without taking a bus to get to a different neighborhood? And how are taxed supermarkets, for example, supposed to compete with tax-exempt entities if they wanted to buy their own property to run their stores?
The ability for universities to control real estate and construction materials/labor tax-exempt is potentially inflationary. Further on the inflationary front, universities are defenders of the status quo in terms of healthcare. Universities profit greatly from privatized healthcare as they run their own hospitals/clinics/healthcare systems and get sponsored research which leads to large private-sector pharmaceutical profits. Universities are a large political barrier towards a public Beveridge-model healthcare system like the United Kingdom has and that has strongly detrimental results on public health and on the economy. Where is the focus on ‘economic efficiency’ on this front, especially as a healthier population is a more productive one?
Like with a lot of things, the top universities are doing better and better, even with their recent highly-publicized political challenges, and the struggling ones are struggling even more than usual. Small liberal arts type colleges focused on teaching are struggling, and many are shutting their doors, but the corporate universities keep growing and growing. Universities are largely unchallengingly trusted by the American public. Universities are generally not the subject of media scrutiny, but perhaps it is time for the American public to see what rôle universities and other non-profits have and how they contribute to the neoliberal status quo and all the corrosive toxicity which comes from that. As mentioned at the beginning about Larry Summers, higher education has plenty of their own Elon Musks and they are pushing the same neoliberalism as Elon Musk since it comes from their academies. Why is higher education and other non-profits above reproach then?
Hi Erik, I am not an economist, but I study macroeconomics very closely because forming progressive policies on economically-sound ground is of paramount importance. We'll never be able to achieve progressive reforms of environmental, education, health, military industrial etc. policy without being able to assure labor and price stability. Without that economic base, progressives like myself are reduced to Shylockian 'Pound of Flesh' politics and, and we've seen, that does not get us anywhere except further behind.
I'd like to hear your questions as I'm sure they are very important, as economic questions typically are. Hopefully I can provide good answers while explaining my reasoning, but if not, perhaps I can at least point you towards someone who might know the answer. I think it is very important that we have these discussions!
Thanks, here’s my questions and tentative opinions, although I don’t know that they are important.
From your response, I surmise you are a person who supports Modern Economic Theory. I refer to the following statement:
“The federal government is not on a gold standard, they can fund any spending and it doesn’t require tax revenue, which ends up just being canceled money as all federal government spending comes from new money.”
My question is what happens if we don’t institute the policies supporting the theory? What I understand, perhaps erroneously, is the government can spend and if inflation gets out of hand, the government increases taxes to decrease consumption and prevent runaway national debt and inflation. But it doesn’t appear we are following the theory. What we do is decrease taxes and increase interests rates, which adds to the debt and results in our expendable money going to pay interest on our debt. So to me, raising revenues is relevant and especially in times like the presence, taxing non-profits and otherwise increasing taxes would be helpful and appropriate to keep things in balance.
The second question is more of suspicion. Being skeptical, I suspect Trump’s ‘s tariffs are more designed to offset his ongoing tax cuts for the rich than they are to spur domestic production. It is a regressive tax that robs the poor to make the rich, richer. Your thoughts?
You’re correct, I do believe that Modern Monetary Theory offers an accurate way of describing the monetary system.
As for the first question, given that tax receipts are cancelled money, taxation can be viewed as a form of inflation control. However, for many reasons, including political ones, taxation is not necessarily the best tool to solve all inflationary issues. I’ll return to this point.
You do bring up an interesting point with the interest rate and national debt. Warren Mosler, one of the founding figures of MMT, has speculated for many years now that relatively high interest rates, ones like we have now, and a high national debt could lead to an inflationary risk even though the Fed’s purpose, stated purpose at least, for the high interest rate is to control inflation. The notion is that those who can buy government debt instruments (Treasury bills, bonds, etc.) are getting significant risk-free interest earnings given the current situation. It is basically free money for those who already have money. Those who have more get more. And, of course, universities and other non-profits invest heavily in government debt instruments since they are low-risk investments. Now, how inflationary this interest rate policy is can be debated (there isn’t a clear answer since the very wealthy have significant buying power even without the interest payments), but it does show just another reason why there is such a large disparity of wealth in this country.
Economically speaking, this is a very correctable problem. Since the US has a floating-exchange rate policy for the Dollar, there is no practical reason why the US even needs to issue government debt instruments. The issues ensuring that they remain are purely political, and a large part of that is almost certainly because non-profits benefit from government debt instruments and politicians don’t want to challenge that system. There is also no real reason why the US needs to even have a monetary policy lever (changing the interest rate). Japan, for example, has a much higher debt-to-GDP rate than we have, but has maintained a near-0% interest rate and Japan does not suffer from any of this. It is quite the opposite really. The federal government could set a permanent 0% rate policy, or something else low like 2%, and then this source of disparity is reduced/eliminated while the spending capacity of the federal government has not been reduced.
Back to taxation and taxation of non-profits/universities in general. Universities might well be contributing to inflation, especially when they invest in real estate and such, but I don’t view that as being the biggest problem. The bigger problem is that the public has not afforded universities with special privileges for the sake of these institutions to pursue capitalistic goals. The reason the public is supportive of universities is because the idea is that universities help educate future generations and help develop the arts and sciences. The mission drift of these large universities is one that has influenced the democratic process such that it favors institutions who run capitalistic-style healthcare operations and such. The public should be greatly concerned about this and it deserves great scrutiny.
Taxing universities might be one way to get universities to stick to the goals the public wishes them to follow. On the other hand, taxing them for the sake of helping raise money for, say national healthcare, is a bit of a folly because then the argument is that universities need to engage further in things like private healthcare so that the government can afford public healthcare. This is contradictory policy, and it is unnecessary. And, of course, universities can be regulated in a more direct manner outside of the tax system, and that might be a more logical fix in many cases.
As for the second question, I don’t necessarily buy that is exactly what is going on. If it is the thinking behind the policy, well, it is extremely faulty thinking. The cost-of-living increases caused by increased tariffs are likely to change consumer behavior far more on the lower income side of the population than the relatively small tax cuts will change consumer behavior for the highest earners. The same is true with things like interest rates.
Another founding theorist of MMT, Bill Mitchell of Australia, posted a blog post just today talking about Trump’s tariff policy and analyzes it from the perspective of the white paper on tariffs issued by the Chair of Trump’s Council of Economic Advisors, Stephen Miran. Mitchell does a pretty good job breaking down the Administration’s likely thinking and then discusses the likely flaws with the policy. It is a worthy read. Link: https://billmitchell.org/blog/?p=62510
Now, as flawed as Trump’s trade policies likely are, that does not mean progressives should scuttle discussion of trade in general and the pros and cons of it as it pertains to labor policy, environmental policy, and all of that.
Thanks for the discussion. I’m a semi-retired lawyer trying to be a knowledgeable citizen. I’m also doing some grassroots organization in my state of Montana re: too much money controlling government policy.
I’ll read your recommended article. Still skeptical Trump’s motive is to help the working man. Still mightily confused by Modern Economic Theory, although I read a book on the subject a few years ago.
Ryan Grimm a good journalist in my opinion, shares the same opinion re skepticism, but has not suggested Trump is trying to enhance revenues. He argues Biden’s build back better contained some measures that would have helped our industrial capacity, after which tariffs made more sense.
Tariff war has doubled the price of some of the Chinese (even Taiwan) products I have been thinking about buying. Decided to stock up on some lumber fearing Canadian imports are next, but what do I know.
“Ryan Grimm a good journalist in my opinion, shares the same opinion re skepticism, but has not suggested Trump is trying to enhance revenues.”
If you go off of the statements in Stephen Miran’s white paper, then yes, it absolutely appears that the Trump Administration views their tariff policy as a way to raise revenues. However, many economists have known for quite a long time that deficits don’t really have to matter. There is that Dick Cheney quote from years ago regarding tax cuts saying something like ‘Reagan proved deficits don’t matter’ (though maybe he was purely talking about this from a political perspective and not an economic one). Of more relevance, John Yarmuth, the former chair of the US House Committee on the Budget earlier in this decade, spoke freely along MMT lines, but did so only after he decided not to run to keep his seat in the House. It seems only once he left politics could he be honest about his economic knowledge.
I suspect the Trump Administration is trying, and perhaps with a poor effort, to give off the perception that they are ‘fiscally responsible’ by reducing the deficit, or at least limiting the growth of the deficit, while also enhancing US manufacturing. The need to reduce the deficit is dubious and based on an incorrect assumption that a country with a floating currency is similar to a household or business, but as long as people perceive it to be a real problem, politicians will be eager to act as if they are ‘responsible’ in that matter, especially when it benefits their political backers who benefit from austerity.
In many ways, this goes back to what I was saying earlier about Clinton and Larry Summers. They pushed the same narratives, albeit in a very different form in that they were pushing globalism while also engaging in austerity. The reasoning for supporting globalism was that it would greatly benefit the consumer. Well, in very many ways, globalism has given great benefits to consumers, but with many drawbacks as well on environmental policy, labor policy, and so forth. Some of these drawbacks don’t need to exist to the extent that they do, but it is hard to eliminate those drawbacks under the neoliberal framework and so they persist. With those drawbacks, it gives space for the likes of Trump to push the narratives that he pushes. The likes of Clinton and Summers are replaced by the likes of Trump and Musk, but yet, somehow we end up with the same austerity.
I suspect you must have read Stephanie Kelton’s book. It is a very good one. Kelton is working on a new book about inflation and I’m sure it’ll be excellent as well. There is also a documentary involving Kelton called ‘Finding the Money’. I have not seen it, but I’ve been told it is available to watch for free online. Aside from that, I recommend searching for lectures from Kelton, Warren Mosler, Bill Mitchell, and Randall (Randy) Wray.
I know that studying macroeconomics is not the easiest thing, but the more you engage with it, the easier it gets to understand things. It really isn’t that hard to study as long as one is studying empirical economics. Macroeconomics really isn’t as complicated as it is made out to be, but the study of it is complicated by the fact that the study of economics is often more like studying religion than it is studying something empirical. Thus, it is important to consider whether the sources of your information are basing their narratives on empiricism or on faith-based beliefs which they cannot really explain as is what happens when many economists try to explain matters like the deficit.
Are the impeachable offences that Bruce Fein has documented accessible in an online format? As the days pass, these are becoming more critical in discussions with fellow citizens, and in town halls.
Thank you, Steve! I did want to mention that I spent some time poking around on the Radio Hour website -- but came up empty so far. (I would not be asking for help if I did not try to help myself first. Please count on that.)
I will look for Ralph Nader’s book in the local library or ask for it. The “Next Door” forums are localized and are quite good on raising awareness on important community oriented issues. However as expected politics, religion, sex and money are not to be discussed as they tend toward divisiveness on these forums.
Why is it that because someone is good at one thing he or she should be good at all other things ? Einstein was good at explaining the relationship between energy and matter via the square R of light, and he introduced us to wave theory in relationship to time, but did he really know the best way to peel a potato ?
Elon is one of those I can do it all guys,) showcase time ) dribbles between his legs on the basketball court until someone steps in and takes the ball away. And so we have Mr Musk in politics.
I think Elon is a pretty nice kid,, we get to say things like that when you reach 80+ ,, and are a Vietnam Veteran U S Army 66-69.
Elon reminds me of the old duffer,then young Henry Kissinger, you know the guy that said when we left everything behind in Vietnam in 75 ( within 2 weeks) he was surprised when north Vietnam military moved in from Hanoi so quickly to take over Saigon and he hoped the people we left behind would be,,, ok ? ( 50 years ago April 29 ,,, does history repeat itself? )
Political statesmen and intellectual guys like Henry and Computer geeks like Elon should stay out of politics,it only shows how hurbis they are.
Maybe we should we should let Elon play music for the Greek God Applo and then Applo should play his own music and then afterwards Applo should have his way with him.. remembering my Greek theology..the words on the streets of Athena was , they skinned him alive,, Hurbus maximus?
Elon Musk is not that smart; he’s been an opportunist. He’s a futurist, an atheist that fundamentally does not want to address the suffering of the vast majority as he lives off the plaudits of other technology nuts who have no problem pushing more and more dehumanizing circumstances for the majority. Civil servants are called “ministers” in their roles in much of the rest of the world.
Gluttonous overconsumption is at the heart what is wrong with American society; in the 1970s there were conscience-driven books on consumerism. Where’s the Emersonian ethic? You may be out of touch with how out of control consumerism is; go to local supermarkets, to “Home Depot” and “Costco” and similarly mindless box stores where people are going mad wallowing in gluttonous excess, eating pig slop junk food, dumping pesticides on their lawns, driving monstrous and ugly vehicles.
On taxes, at least with the “volunteer” tax help at the libraries, etc., what I’ve encountered is an almost servile attitude toward the IRS, where “volunteers” try to get everyone to pay something so they are hurting in some way. I’ve used “Freetaxusa” for years, that and similar software are sufficient for most people. Remember that HR Block came about not just as a profit driven company but as one that the IRS welcomed with open arms to actually help people. At the high end the manipulations and exploitation of the tax system is just a complete rip-off at David Cay Johnston showed in his book “Perfectly Legal” about all the loopholes.
I want to send a Shout Out at the article on Page 18 of the Feb/March edition of Capitol Hill Citizen. "Budget reconciliation: Another dagger at Separation of Powers." by Bruce Fein.
Thank you, Bruce -- for clearly showing how FAR we have gone off the path.
Elon Musk is not an innovator; he is simply another version of Bill Gates. While he is often considered a Tesla founder, he is not. He was the angel investor chosen by the company's founders. Additionally, he has not revolutionized the space industry; SpaceX can be seen as a copycat of Jeff Bezos' Blue Origin.
PS I’ll check make certain that me public library adds your book 📖 📕to it’s stacks (we need more none fiction)👍🏻
Dear Ralph et al,
Always a thought provoking treat to listen to your Radio Hour, but I have my usual constructive criticism.
One of your guests was outrage that Trump threatened to remove Harvard’s tax-free status because it would not implement his demands. Certainly I don’t agree with blackmail, but changing Harvard’s tax-free status might be a good idea. My reasons for saying this is based upon the recent reporting of Matt Taibbi on Substack.
As I understand the approximate facts, Harvard has a tax free endowment of over $130 billion, which it invests primarily in hedge funds and private equity. A conservative estimate would be that it makes 10% tax-free money on the endowment or approximately $13 billion per year. Running the entire university cost considerably less. One can reach several back of the envelope conclusions based on this.
First, according to Forbes, if Harvard were a person, it would be the eighth richest person in the world and of course, due to its tax-free status, it doesn’t have to pay any taxes. That hardly seems fair to me, especially given Ralph’s criticism of billionaires, paying very little taxes, a sentiment virtually everyone agrees with.
A person with a taxable income of $11,500 per year pays a federal tax rate of 10%. Imposing a similar minimal tax of 10% on Harvard would result in over $1 billion in extra tax revenue per year.
Imposing a minimal tax on all universities would, of course, raise considerably more. For instance, the IRS ‘s basic annual budget is less than $13 billion a year. A 10% tax on all college endowments would pay for the IRS and then some by a considerable margin. Or earmark it to raise teacher salaries in our underfunded K through 12 schools.
As Mr. Taibbi describes, Harvard’s endowment is basically a giant tax free hedge fund. It’s a big fat fund for hedge funds and private equity.
Hedge fund managers get a fee equal to approximately 2% of the value of the hedge fund and 20% of any profits. So in Harvard’s case, the fee would be 2% of 130 billion or $2.6 billion per year and another $2.6 for 20% of the annual profits for a total of $5.2 billion in a year.
The 5.2 billion a year is not taxable to the hedge funds and private equity funds because they are “pass-through” entities. This means they pass the taxes onto their investors, but in this case, there are no taxes for Harvard University so it’s all tax-free.
It’s a sweet deal in another way. Grateful hedge fund and private equity managers can allocate a portion of their tax free income to the endowment for a tax break on their personal taxes, growing the endowments and endearing themselves to their alma maters for future business!
So there seems to be quite a tax exempt racket going on here— at least according to my back of the envelope calculations. It would merit investigation and possibly, changes in our tax laws. It is not an outrageous idea.
Sincerely yours,
Erik B. Thueson
While I don’t completely agree with all of your statements, you do bring up some very valid points, Erik. Thanks for that, these need to be discussed and, unfortunately, I think it can only happen here in the comments and not on the show itself.
First off, let’s not forget that Harvard University was once, not too long ago, under the leadership of Lawrence Summers. Larry Summers, along with Robert Rubin, were operating the US federal government DOGE of the 1990s when they were running the Treasury Department when they were pushing massive austerity which was implemented by Clinton, Newt Gingrich, and company. In other words, if Elon Musk is the source of criticism, why not criticize Harvard for keeping Musk types close to their leadership? And why not criticize the source of Musk’s ‘government efficiency’ scholarship, which comes from the likes of ‘academics’ like Summers?
I believe you are correct in criticizing the tax-exempt status of universities, though I disagree on the reasons why. The federal government does not need tax receipts to be able to fund anything. The federal government is not on a gold standard, they can fund any spending and it doesn’t require tax revenue, which ends up just being canceled money as all federal government spending comes from new money. State and local government entities are a different story, and in that regard, funding local schools through taxing universities on a state/local level, especially private universities, might fit your argument.
The reason I see for challenging the tax-exempt status of universities is that universities act in a capitalistic manner in a way that is boosted by their tax-exempt status. In some ways, this isn’t different from your argument, but I want to add to it. Universities have significant real estate and other holdings and act in a capitalistic manner with these holdings. For example, here in Houston, Rice University owns some land in Midtown (next to downtown) which is in a generally low-income area. The Fiesta Mart supermarket operated a location on land owned by Rice University. This was the only supermarket for a large number of low-income residents. Rice evicted Fiesta Mart from their lease, and the neighboring Sears also on Rice-owned property, and instead built a private-sector technology innovation hub on that property. What public benefit is a private-sector technology innovation hub for the residents of that area when they can’t even buy groceries without taking a bus to get to a different neighborhood? And how are taxed supermarkets, for example, supposed to compete with tax-exempt entities if they wanted to buy their own property to run their stores?
The ability for universities to control real estate and construction materials/labor tax-exempt is potentially inflationary. Further on the inflationary front, universities are defenders of the status quo in terms of healthcare. Universities profit greatly from privatized healthcare as they run their own hospitals/clinics/healthcare systems and get sponsored research which leads to large private-sector pharmaceutical profits. Universities are a large political barrier towards a public Beveridge-model healthcare system like the United Kingdom has and that has strongly detrimental results on public health and on the economy. Where is the focus on ‘economic efficiency’ on this front, especially as a healthier population is a more productive one?
Like with a lot of things, the top universities are doing better and better, even with their recent highly-publicized political challenges, and the struggling ones are struggling even more than usual. Small liberal arts type colleges focused on teaching are struggling, and many are shutting their doors, but the corporate universities keep growing and growing. Universities are largely unchallengingly trusted by the American public. Universities are generally not the subject of media scrutiny, but perhaps it is time for the American public to see what rôle universities and other non-profits have and how they contribute to the neoliberal status quo and all the corrosive toxicity which comes from that. As mentioned at the beginning about Larry Summers, higher education has plenty of their own Elon Musks and they are pushing the same neoliberalism as Elon Musk since it comes from their academies. Why is higher education and other non-profits above reproach then?
Thanks Klassik for adding to my rough opinion. Perhaps you are an economist and if so I have some other questions.
Erik
Hi Erik, I am not an economist, but I study macroeconomics very closely because forming progressive policies on economically-sound ground is of paramount importance. We'll never be able to achieve progressive reforms of environmental, education, health, military industrial etc. policy without being able to assure labor and price stability. Without that economic base, progressives like myself are reduced to Shylockian 'Pound of Flesh' politics and, and we've seen, that does not get us anywhere except further behind.
I'd like to hear your questions as I'm sure they are very important, as economic questions typically are. Hopefully I can provide good answers while explaining my reasoning, but if not, perhaps I can at least point you towards someone who might know the answer. I think it is very important that we have these discussions!
Thanks, here’s my questions and tentative opinions, although I don’t know that they are important.
From your response, I surmise you are a person who supports Modern Economic Theory. I refer to the following statement:
“The federal government is not on a gold standard, they can fund any spending and it doesn’t require tax revenue, which ends up just being canceled money as all federal government spending comes from new money.”
My question is what happens if we don’t institute the policies supporting the theory? What I understand, perhaps erroneously, is the government can spend and if inflation gets out of hand, the government increases taxes to decrease consumption and prevent runaway national debt and inflation. But it doesn’t appear we are following the theory. What we do is decrease taxes and increase interests rates, which adds to the debt and results in our expendable money going to pay interest on our debt. So to me, raising revenues is relevant and especially in times like the presence, taxing non-profits and otherwise increasing taxes would be helpful and appropriate to keep things in balance.
The second question is more of suspicion. Being skeptical, I suspect Trump’s ‘s tariffs are more designed to offset his ongoing tax cuts for the rich than they are to spur domestic production. It is a regressive tax that robs the poor to make the rich, richer. Your thoughts?
You’re correct, I do believe that Modern Monetary Theory offers an accurate way of describing the monetary system.
As for the first question, given that tax receipts are cancelled money, taxation can be viewed as a form of inflation control. However, for many reasons, including political ones, taxation is not necessarily the best tool to solve all inflationary issues. I’ll return to this point.
You do bring up an interesting point with the interest rate and national debt. Warren Mosler, one of the founding figures of MMT, has speculated for many years now that relatively high interest rates, ones like we have now, and a high national debt could lead to an inflationary risk even though the Fed’s purpose, stated purpose at least, for the high interest rate is to control inflation. The notion is that those who can buy government debt instruments (Treasury bills, bonds, etc.) are getting significant risk-free interest earnings given the current situation. It is basically free money for those who already have money. Those who have more get more. And, of course, universities and other non-profits invest heavily in government debt instruments since they are low-risk investments. Now, how inflationary this interest rate policy is can be debated (there isn’t a clear answer since the very wealthy have significant buying power even without the interest payments), but it does show just another reason why there is such a large disparity of wealth in this country.
Economically speaking, this is a very correctable problem. Since the US has a floating-exchange rate policy for the Dollar, there is no practical reason why the US even needs to issue government debt instruments. The issues ensuring that they remain are purely political, and a large part of that is almost certainly because non-profits benefit from government debt instruments and politicians don’t want to challenge that system. There is also no real reason why the US needs to even have a monetary policy lever (changing the interest rate). Japan, for example, has a much higher debt-to-GDP rate than we have, but has maintained a near-0% interest rate and Japan does not suffer from any of this. It is quite the opposite really. The federal government could set a permanent 0% rate policy, or something else low like 2%, and then this source of disparity is reduced/eliminated while the spending capacity of the federal government has not been reduced.
Back to taxation and taxation of non-profits/universities in general. Universities might well be contributing to inflation, especially when they invest in real estate and such, but I don’t view that as being the biggest problem. The bigger problem is that the public has not afforded universities with special privileges for the sake of these institutions to pursue capitalistic goals. The reason the public is supportive of universities is because the idea is that universities help educate future generations and help develop the arts and sciences. The mission drift of these large universities is one that has influenced the democratic process such that it favors institutions who run capitalistic-style healthcare operations and such. The public should be greatly concerned about this and it deserves great scrutiny.
Taxing universities might be one way to get universities to stick to the goals the public wishes them to follow. On the other hand, taxing them for the sake of helping raise money for, say national healthcare, is a bit of a folly because then the argument is that universities need to engage further in things like private healthcare so that the government can afford public healthcare. This is contradictory policy, and it is unnecessary. And, of course, universities can be regulated in a more direct manner outside of the tax system, and that might be a more logical fix in many cases.
As for the second question, I don’t necessarily buy that is exactly what is going on. If it is the thinking behind the policy, well, it is extremely faulty thinking. The cost-of-living increases caused by increased tariffs are likely to change consumer behavior far more on the lower income side of the population than the relatively small tax cuts will change consumer behavior for the highest earners. The same is true with things like interest rates.
Another founding theorist of MMT, Bill Mitchell of Australia, posted a blog post just today talking about Trump’s tariff policy and analyzes it from the perspective of the white paper on tariffs issued by the Chair of Trump’s Council of Economic Advisors, Stephen Miran. Mitchell does a pretty good job breaking down the Administration’s likely thinking and then discusses the likely flaws with the policy. It is a worthy read. Link: https://billmitchell.org/blog/?p=62510
Now, as flawed as Trump’s trade policies likely are, that does not mean progressives should scuttle discussion of trade in general and the pros and cons of it as it pertains to labor policy, environmental policy, and all of that.
Thanks for the discussion. I’m a semi-retired lawyer trying to be a knowledgeable citizen. I’m also doing some grassroots organization in my state of Montana re: too much money controlling government policy.
I’ll read your recommended article. Still skeptical Trump’s motive is to help the working man. Still mightily confused by Modern Economic Theory, although I read a book on the subject a few years ago.
Ryan Grimm a good journalist in my opinion, shares the same opinion re skepticism, but has not suggested Trump is trying to enhance revenues. He argues Biden’s build back better contained some measures that would have helped our industrial capacity, after which tariffs made more sense.
Tariff war has doubled the price of some of the Chinese (even Taiwan) products I have been thinking about buying. Decided to stock up on some lumber fearing Canadian imports are next, but what do I know.
“Ryan Grimm a good journalist in my opinion, shares the same opinion re skepticism, but has not suggested Trump is trying to enhance revenues.”
If you go off of the statements in Stephen Miran’s white paper, then yes, it absolutely appears that the Trump Administration views their tariff policy as a way to raise revenues. However, many economists have known for quite a long time that deficits don’t really have to matter. There is that Dick Cheney quote from years ago regarding tax cuts saying something like ‘Reagan proved deficits don’t matter’ (though maybe he was purely talking about this from a political perspective and not an economic one). Of more relevance, John Yarmuth, the former chair of the US House Committee on the Budget earlier in this decade, spoke freely along MMT lines, but did so only after he decided not to run to keep his seat in the House. It seems only once he left politics could he be honest about his economic knowledge.
I suspect the Trump Administration is trying, and perhaps with a poor effort, to give off the perception that they are ‘fiscally responsible’ by reducing the deficit, or at least limiting the growth of the deficit, while also enhancing US manufacturing. The need to reduce the deficit is dubious and based on an incorrect assumption that a country with a floating currency is similar to a household or business, but as long as people perceive it to be a real problem, politicians will be eager to act as if they are ‘responsible’ in that matter, especially when it benefits their political backers who benefit from austerity.
In many ways, this goes back to what I was saying earlier about Clinton and Larry Summers. They pushed the same narratives, albeit in a very different form in that they were pushing globalism while also engaging in austerity. The reasoning for supporting globalism was that it would greatly benefit the consumer. Well, in very many ways, globalism has given great benefits to consumers, but with many drawbacks as well on environmental policy, labor policy, and so forth. Some of these drawbacks don’t need to exist to the extent that they do, but it is hard to eliminate those drawbacks under the neoliberal framework and so they persist. With those drawbacks, it gives space for the likes of Trump to push the narratives that he pushes. The likes of Clinton and Summers are replaced by the likes of Trump and Musk, but yet, somehow we end up with the same austerity.
I suspect you must have read Stephanie Kelton’s book. It is a very good one. Kelton is working on a new book about inflation and I’m sure it’ll be excellent as well. There is also a documentary involving Kelton called ‘Finding the Money’. I have not seen it, but I’ve been told it is available to watch for free online. Aside from that, I recommend searching for lectures from Kelton, Warren Mosler, Bill Mitchell, and Randall (Randy) Wray.
I know that studying macroeconomics is not the easiest thing, but the more you engage with it, the easier it gets to understand things. It really isn’t that hard to study as long as one is studying empirical economics. Macroeconomics really isn’t as complicated as it is made out to be, but the study of it is complicated by the fact that the study of economics is often more like studying religion than it is studying something empirical. Thus, it is important to consider whether the sources of your information are basing their narratives on empiricism or on faith-based beliefs which they cannot really explain as is what happens when many economists try to explain matters like the deficit.
Excellent advice to all of us (listeners) …thank you so much for sharing your thoughts 💭, insights…& things, all consumers need to know 😃😎🥳👍🏻👏🏻👏🏻
Are the impeachable offences that Bruce Fein has documented accessible in an online format? As the days pass, these are becoming more critical in discussions with fellow citizens, and in town halls.
Thank you, Steve! I did want to mention that I spent some time poking around on the Radio Hour website -- but came up empty so far. (I would not be asking for help if I did not try to help myself first. Please count on that.)
Eff Havahd and the "ivy" league .
Public education for ALL persons !
Bruce Fein is an evil political operator.
Why is he given space on this forum... Bill
Hey Bill -- Bruce understands and cherishes our Constitution.
PLEASE cite some reasons to base your judgment that he is "evil." I would love to read them.
btw > to readers: Please seek out the Committee For The Republic "salons" on YouTube. Great stuff.
I will look for Ralph Nader’s book in the local library or ask for it. The “Next Door” forums are localized and are quite good on raising awareness on important community oriented issues. However as expected politics, religion, sex and money are not to be discussed as they tend toward divisiveness on these forums.
Why is it that because someone is good at one thing he or she should be good at all other things ? Einstein was good at explaining the relationship between energy and matter via the square R of light, and he introduced us to wave theory in relationship to time, but did he really know the best way to peel a potato ?
Elon is one of those I can do it all guys,) showcase time ) dribbles between his legs on the basketball court until someone steps in and takes the ball away. And so we have Mr Musk in politics.
I think Elon is a pretty nice kid,, we get to say things like that when you reach 80+ ,, and are a Vietnam Veteran U S Army 66-69.
Elon reminds me of the old duffer,then young Henry Kissinger, you know the guy that said when we left everything behind in Vietnam in 75 ( within 2 weeks) he was surprised when north Vietnam military moved in from Hanoi so quickly to take over Saigon and he hoped the people we left behind would be,,, ok ? ( 50 years ago April 29 ,,, does history repeat itself? )
Political statesmen and intellectual guys like Henry and Computer geeks like Elon should stay out of politics,it only shows how hurbis they are.
Maybe we should we should let Elon play music for the Greek God Applo and then Applo should play his own music and then afterwards Applo should have his way with him.. remembering my Greek theology..the words on the streets of Athena was , they skinned him alive,, Hurbus maximus?
Good luck America have a great day my friends.
Elon Musk is not that smart; he’s been an opportunist. He’s a futurist, an atheist that fundamentally does not want to address the suffering of the vast majority as he lives off the plaudits of other technology nuts who have no problem pushing more and more dehumanizing circumstances for the majority. Civil servants are called “ministers” in their roles in much of the rest of the world.
Gluttonous overconsumption is at the heart what is wrong with American society; in the 1970s there were conscience-driven books on consumerism. Where’s the Emersonian ethic? You may be out of touch with how out of control consumerism is; go to local supermarkets, to “Home Depot” and “Costco” and similarly mindless box stores where people are going mad wallowing in gluttonous excess, eating pig slop junk food, dumping pesticides on their lawns, driving monstrous and ugly vehicles.
On taxes, at least with the “volunteer” tax help at the libraries, etc., what I’ve encountered is an almost servile attitude toward the IRS, where “volunteers” try to get everyone to pay something so they are hurting in some way. I’ve used “Freetaxusa” for years, that and similar software are sufficient for most people. Remember that HR Block came about not just as a profit driven company but as one that the IRS welcomed with open arms to actually help people. At the high end the manipulations and exploitation of the tax system is just a complete rip-off at David Cay Johnston showed in his book “Perfectly Legal” about all the loopholes.
Mine!, not me!🤪
As I have always said, and you can quote me: "advertising is the most pernicious and sinister force in modern society".
Well, so much for TORT in GEORGIA!!!
Grassley needs to retire!
I want to send a Shout Out at the article on Page 18 of the Feb/March edition of Capitol Hill Citizen. "Budget reconciliation: Another dagger at Separation of Powers." by Bruce Fein.
Thank you, Bruce -- for clearly showing how FAR we have gone off the path.