On the Sustainability of Budget Deficits and Public Debts with Reference to the UK

Frontiers of Heterodox Macroeconomics

2019

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Government can always finance its expenditure with the co-operation of the central bank. Key issue should be the desirability of proposed expenditure, resource and funding implications. It is argued that 'people's quantitative easing' does not contribute beyond what traditional fiscal policy could achieve. The 'golden rule' whereby borrowing is permissible for public investment is critiqued. It is argued that the target budget deficit should be set to secure macroeconomic objectives and focus on 'full employment', noting the difficulties of defining full employment and capacity. The budget constraint coming from full employment is set out. The structural budget balance alternative is critiqued and argued to be in general infeasible. The possible role of interest rates is discussed. It is then argued that a debt arising from budget deficit along the lines indicated in this contribution is sustainable. It is argued that governments should operate where there is no fiscal space left.

“…This is consistent with arguments (e.g. in Arestis and Sawyer, 2014) that the apparent relationship between government expenditure (budget deficit)…”

Section: On Multipliers and Expansionary Austeritysupporting

confidence: 93%

Section: Sustainability Of Debtmentioning

confidence: 99%

Approaching Budget Deficits, Debts and Money in a Socially Responsible Manner

Frontiers of Heterodox Macroeconomics

2019

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“…Policies on the demand 23 See Harndon, Ash and Pollin (2014) for critical assessment of work, which purported to show that there was a 'tipping point'. Arestis and Sawyer (2014) provide an extensive discussion of the points mentioned in the text. side which are a combination of restraining the overall rate of investment and restructuring investment in a much 'greener' direction are required.…”

Section: Discussionmentioning

confidence: 99%

The Macroeconomics and Financial System Requirements for a Sustainable Future

Fontana

Finance and the Macroeconomics of Environmental Policies

2015

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The paper develops a macro-economic analysis along broadly defined Post Keynesian and Kaleckian lines, which incorporates ecological constraints on the pace of economic growth. Since growth is viewed as demand-driven, this involves bringing demand into lin . A simple model of demand-driven growth is constructed from which some basic conclusions are drawn of the consequences of slower growth and lower investment including those for the rate of interest and the rate of profit. The macroeconomic policy to deliver full employment is indicated. The growth of the effective labour force and the -driven rate of growth explored. The macroeconomic analysis has to be embedded with analysis of the monetary and financial system. For this purpose a circuitist analysis is presented. The paper considers the ways in which the monetary and financial systems should be re-structured to be consistent with sustainable growth and low unemployment. The major aims of this re-structuring would be to underpin financial stability, and more importantly to focus the financial sector on the allocation of funds into environmentally friendly investment.

Section: Government Debt Scaresmentioning

confidence: 99%

Six Simple Propositions on Budget Deficits, Public Debt and Money

2019

CEPEC

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The paper sets out and elaborates on six propositions on budget deficits, public debt and money which should inform debates on fiscal policy. The propositions are:Money availability is not a limitation on government expenditure as the central bank is able to provide any required finance. The key considerations should focus on the issues of the social desirability of the proposed expenditure and the eventual funding of the expenditure.Phrases such as ‘magic money tree’ are designed to confuse and mislead.Proposals such as people’s QE do not enable any stimulus which cannot be obtained from conventional fiscal policy and is anti-democratic putting expenditure decisions in the hands of unelected central bankers.The golden rule’ of public finance (borrowing only for public investment) suffers from the fallacy of treating government like a firm and is comparable to the ‘government is like a household’ fallacy.The target for budget position should be to secure full employment and capacity. Funds would be forthcoming to underpin such a position.Public debt should be judged sustainable (and not excessive) by reference to the level of debt which results from a budget position as forthcoming from proposition 5. Public debt is to be considered as less of an issue (when government can cover interest through taxation and through money creation) than private debt and foreign debt.