It’s no secret by now that I am a believer in the balance sheet recession.  This means that U.S. households are suffering from an imbalance where they are essentially trying to service bubble era debt loads with post bubble era cash flows.  The result is that spenders become savers as they focus on paying down debt rather than spending.  Some economists have argued that this perspective is “inadequate”, but I fear they are misinterpeting the dynamics of the balance sheet recession (see here for more).

Some notable economists appear to understand these dynamics quite well though.  In a recent article (which I recommend in its entirety), Stephen Roach of Yale and Morgan Stanley elaborated on just how weak this recovery has been for the U.S. consumer:

“The number is 0.2%. It is the average annualized growth of US consumer spending over the past 14 quarters – calculated in inflation-adjusted terms from the first quarter of 2008 to the second quarter of 2011. Never before in the post-World War II era have American consumers been so weak for so long. This one number encapsulates much of what is wrong today in the US – and in the global economy.”

Although he doesn’t use the term balance sheet recession Roach does refer to this as the reason for the current malaise:

“…The reasons behind this are not hard to fathom. By exploiting a record credit bubble to borrow against an unprecedented property bubble, American consumers spent well beyond their means for many years. When both bubbles burst, over-extended US households had no choice but to cut back and rebuild their damaged balance sheets by paying down outsize debt burdens and rebuilding depleted savings.

Yet, on both counts, balance-sheet repair has only just begun. While household-sector debt was pruned to 115% of disposable personal income in early 2011 from the peak of 130% hit in 2007, it remains well in excess of the 75% average of the 1970-2000 period. And, while the personal saving rate rose to 5% of disposable income in the first half of 2011 from the rock-bottom 1.2% low hit in mid-2005, this is far short of the nearly 8% norm that prevailed during the last 30 years of the twentieth century.

With retrenchment and balance-sheet repair only in its early stages, the zombie-like behavior of American consumers should persist. The 2.1% consumption growth trend realized during the anemic recovery of the past two years could well be indicative of what lies ahead for years to come.”

Roach’s ideas for speeding up this recovery process:

“debt forgiveness to speed up the deleveraging process; creative saving policies that restore financial security to crisis-battered Americans; and, of course, jobs and the income they generate.”

A tax cut is still the best approach here in my opinion….

Source: Project Syndicate


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • MakJae

    Cullen, As a new beginner in MMT thanks for the great info and insight in such an easy to understand way. Once again, to me it seems, your analysis is spot on! (with the evidence to back it up). Also, this may be off subject, to help my tutelage in MMT, I have classical econ friends that are trying to tell me China is buying USD to keep USD strong and their purchasing of USD is keeping inflation in check. I have explained US Tsy’s are reserve drains and monetary tools, etc. Any further education/info on this would be much appreciated. Thanks for everyone’s comments on here also, I seriously learn a LOT!!

  • Robert Rice

    Indeed, credit to Mosler here as he has been beating the tax cut drum for years. He’s right. The problem is there is no political will to get a tax cut done without also reducing government spending toward a balanced budget. Without realizing it the Republicans/Tea Party will be counteracting the stimulating benefits of their cuts. Alternatively the Dems often want higher spending and higher taxes, also partially if not entirely nullifying the stimulating benefits to aggregate demand. We have a false belief pandemic amongst our countrymen. Our fellow citizens believe the Federal Government is fiscally constrained like households/businesses/state governments: “We have to live within our means, the government needs to balance a budget just like all families do.” This false belief naturally and quite rationally creates a fear of deficits; deficits are equated with debt, which is not necessarily the case when considering the Federal Government. Too much debt when you are spending constrained is obvious to everyone to be a bad thing. Until this misunderstanding is cleared up, it’s going to be a long road.

    The solution? Be persistent; keep beating the drum. Eventually good arguments will overcome false beliefs. The pandemic can and will subside. The right people are listening. MMTers just need to be sure their arguments are damn near air tight, otherwise the buzz will fade into background noise, more obnoxious than edifying or challenging. It’ll go from relatively substantive consideration to discredited mumbo jumbo. MMT needs to be sure to have sound arguments or it’ll be DOA.

  • Robert Rice

    To put the point more succinctly, you have an audience right now, a real one, don’t blow it. There is a shot at helping an entire country, even the world. You won’t get it again. Irrefutably compel the audience. Perfection in the arguments.

  • JB


    “household-sector debt was pruned to 115% of disposable personal income in early 2011 from the peak of 130% hit in 2007″

    where do you find this kind of data? I use bloomberg but can’t find this

    I would appreciate a hint from you. Thanks JB

  • Bridge

    Debt forgiveness!! Hey honey “let’s buy too much house, put in a pool and outdoor stone fireplace, take out a home equity loan, buy a Mercedes and then sit back when I go bust. Because you know sweetie, my dumbass neighbors who are saving their money are going to cover my nut”.

  • The Other John Mc

    check out figure 1 on this page:
    the private sector still seems to have a LOT of de-leveraging to do…yikes!

    Anyone seen this data updated? the one above only goes to 2010.

  • GordonGekko

    There is also the debt to equity idea of Nassim Taleb.

    Other than that, get rid of Income Tax and increase VAT to make up the difference and scrap minimum wage. This should go a long way to encouraging small businesses and unemployed Americans to go out and get a job, or even employed Americans to get a second job etc.

  • Romeo Fayette

    How about the government foots the bill for one month of mortgage payments for borrowers, then those borrowers have to pay back the government one month after the scheduled maturity of their loans (yes, 20-30 years later in some cases)?
    Moral Hazard? Yes.
    Better than an Obama led HAMP-lite? Yes.

  • GRock

    Debt forgiveness? Just bankrupt those that took too much risk. TBTF banks with crap on the balance sheets, make them Mark to market nationalize them if are undercapitalized wipe out the share holder/bond holders break them up then reissue them with clean balance sheets. Over indebted home owners just put them through foreclosure/bankruptcy process and let the market clear the debt and the houses. Fanny and Freddie same thing. Return moral hazard back to the system. Just let the debt clear how it should no forgiveness!

  • GordonGekko

    Absolutely, that works. If this had been the action in 2008 we could well be out of this mess or far along the path.

  • GordonGekko

    I should add. A very clear message has to be sent out. Take on risk at your own peril. Losses will not be socialised. Everyone else lives by these rules, there will be no exceptions for banks.

  • ReturnFreeRisk

    I am not sure tax cuts are the answer. I am definitely of the opinion that the tax system is complicated, onerous and riddled with paid for loopholes. And it needs to be reformed.
    BUT, tax cuts are not the answer to everything. How does it help deleveraging besides putting some money in the hands of the households that are deleveraging?

  • Lance Paddock

    Cullen believes the rationale is pretty straight forward. It puts some money in the hands of the households that are deleveraging as you say. That allows them to clean up their balance sheet faster and speed up the deleveraging process.

  • DGC

    “The personal saving rate rose to 5% of disposable income in the first half of 2011,” whereas there was a “nearly 8% norm … during the last 30 years of the twentieth century.” Is this due in part to: 1) the long-term lack of growth in real disposable income, 2) the recent increase in the unemployment rate to the current 9.3%, 3) the increased proportion of part-time and contract employment, and 4) the decrease in manufacturing jobs?

    Likewise, isn’t the 0.24 “average annualized growth of US consumer spending over the past 14 quarters” and “2.1% consumption growth trend realized during the anemic recovery of the past two years” due in large measure to these changes in the employment rates and quality?


    I alway thought and still think to clean up this mess we need to help the people and not the TBTF institutions. People are basically paying off their debts and they are scared. Go ask the common person and they will tell you.

    The only way to get this economy re-started it to get the personal debt paid on so people will once again start spending. I do not think this country will ever see the spending it saw before. People have learned a very hard lesson in this and will be more careful with their spending.

  • Tom Hickey

    Let’s not forget how we got in this mess in the first place, and how those conditions still exist, setting us up for the next one, which will be bigger than this is.

    William K. Black, Michael Hudson, and Randy Wray of UMKC have documented the underlying cause of the problem as a financial sector run wild, with CEOs running their companies as control frauds. This wil not change until the criminogenic environment is eliminated, reforms instituted and incentives changed. (Of course, Black, Hudson, and Wray are not alone in this criticism and call for reform, but they are among those like Yves Smith of Naked Capitalism that are out in front.)

    This corruption would not be possible without a complicit government and media. So while the cause is traceable to the institutional structure of the financial sector, it is not limited to that alone. Moreover, it is likely to prove impossible to effectively repair the financial sector without addressing the rot in the rest of the power structure.

    Adopting a fiscal fix along the line of MMT is the right thing to do in the face of social, political, and economic dislocation. It is also the most efficient way to proceed economically to correct the opportunity cost of choosing idle resources over closing the output gap and returning to full employment ASAP through fiscal policy shaped by the sectoral balance approach and functional finance.

    However, if the causes are not addressed and corrected, then this will go for naught down the line, when the next crisis hits. The real downside, however, is the risk that this will discredit MMT’s fiscal approach and give ammunition to those who will inevitably say, “I told you so.”

    So when we speak of the balance sheet recession, which is really a depression although this time we have food stamps rather than soup kitchens, let’s not omit calling for reforms that will address the actual causes instead of papering over the rot.

    This is of special interest to traders and investors since lack of transparency and corruption undermines the efficiency of markets and reduces trust in them. Reform of the financial sector is in everyone’s interest but especially in the interest of people participating in markets.

  • ocean

    Using CPI figures, today we need $1.28 to buy $1 worth of goods/services from 2001 (10 years ago). Has our standard of living increased by 28% to equally offset the decreased purchasing power?

    If yes, then CPI is accurate.
    If the standard of living has increased by more 28%, then CPI is overestimated
    If the standard of living has increased by less than 28%, then CPI is underestimated

    For those who are unemployed, lower wage class and fixed income seniors, their standard of living has decreased. Economist tend to aggregate and not deal with reality.

    Here is some history.
    5 years by CPI implies a 12% improvement in the standard of living
    10 years by CPI implies a 28% improvement in the standard of living
    20 years by CPI implies a 66% improvement in the standard of living
    30 years by CPI implies a 249% improvement in the standard of living
    40 years by CPI implies a 558% improvement in the standard of living
    50 years by CPI implies a 756% improvement in the standard of living
    98 years by CPI implies a 2282% improvement in the standard of living

    By CPI we have a 22x improvement to standard of living today relative to 1913
    And a 2.5x improvement relative to 1981.

  • Dan Kervick

    Policy-makers should to take a closer look at distributional issues, in my opinion. We need to tap into hoarded surplus savings that are doing little productive work in the economy, and turn them into a steady additional income flow for households. It’s not all about aggregates. Where money is located has a major role in how much real economic activity it is generating. The upward distributional changes in income flows over the past several decades has now starved the American consumer of the income necessary to support a healthy economy.

    MMT offer an in-principle approach of a pure fiat money-driven fiscal expansion that is not offset by taxes or borrowing. The approach seems sound in theoretical principle, but executing it is held back by the actual institutional arrangements in the US, including central bank independence, that prevent the government from acting as a coherent and unified, fiscal-monetary agent.

  • F. Beard

    R U gonna let envy stand in the way of a recovery? :)

    But here’s what should be done since the banking system cheats savers too (of honest interest rates):

    1) Ban any further so-called “credit” creation pending fundamental reform.

    2) Send out monthly and equal bailout checks to EVERY US adult citizen equal in total to the amount of credit paid off the previous month. Continue till all US private debt is paid off.

    Since the overall money supply would not change then price inflation should not be a serious concern.

  • marparker

    Corporate savings seems to be the elephant in the room

  • ocean

    The reality is the congress will be gridlocked between making any meaningful changes to social spending, balanced budgets and tax cuts until there is a world of depressionary hurt that forces them to react. That leaves the government plus Fed to do what they always do.

    Namely, keep rates low and create prosperity via bubbles
    1. Nasdaq/Dot Com Market
    2. Housing
    3. ????

  • jjames

    in 1980, i has a decent summer while i was going to college, and was able to pay for an entire year of college from summer earnings. i check todays college costs and wages, and figured i would now have to work three summers to afford a year of college.

    in 1980 you could by a house on a typical years salary, today it would take 2-3 years salary.

    a new car might cost 3 months pay, in 1980, now it would take 6 months pay.

    does this mean standard of living has dropped?

  • Colin S.Toe

    At the end of a long discussion, I proposed abolishing payroll taxes (regressive taxes on employment)- as well as gradually phasing in a national tax on consumption (e.g. a VAT)as a replacement.

    This would put money in the hands of householders to meet basic expenses and mortgage payments as well as improve their balance sheets.

    It would also help especially small business to take on the risk of keeping or adding employees.

    I agree that tax reform is also called for – and could also put funds where they will do the most good.

    With tax cuts, as with spending, I think Cullen et. al. mean ‘targeted’, not just a blanket approach.

  • Cullen Roche

    Our std of living has been relatively flat since 2001. But I would argue that it’s not really fair to cherry pick this period given the fact that over longer periods of time our std of living has actually surged.

  • Cullen Roche

    Our real std of living has increased almost 50% since 1980. Cherry picking college costs is not an accurate reflection of the overall picture. But hey, if you’d like to go live in the 80’s then be my guest. I think they kind of sucked.

  • linhdtu

    My take on this discrepancy is the concentration of wealth factor. Whereas in the macro level, there has been an increase in income, most of it has not been distributed to the common man.
    I thought that it is a well known and documented fact that income for the middle class has been stagnant since the mid 80s. So when you factor in the inflation, things don’t look pretty.
    Also with respect to college costs, I read that college costs have been increasing much more than general inflation just because they can raise it. Hence your iimpression is correct.

  • jjames

    i gave three examples, housing, college, and auto costs. and was simply drawing from my own experience rather than using some contrived statistic.

    if you want to consider this cherry picking because it doesn’t agree with your theories, thats up to you.

  • Colin S.Toe

    Here’s another idea for a targeted tax break:

    a one-time tax forgiveness for corporations to repatriate any overseas profits (which apparently they have let pile up to avoid paying US taxes) –

    for any funds they agree to put into a ‘lockbox’ dedicated to basic R&D.

  • ocean

    That’s the point of this.

    For example the top 10% standard of living has gone up since 2001
    The bottom 20 to ?% standard of living has dropped
    The middle are stagnant.

    CPI aggregation doesn’t reflect the reality for individuals and for some individual shadowstats maybe more “true” even though on average CPI is accurate.

  • pebird

    I started to write a long comment, but then I remembered this Michael Pettis post. While he is not MMT, I have learned a lot about current account and capital account flows and their impacts him. He touches on China and the US imbalances, as well as Europe in this post:

  • Cullen Roche

    You’re cherry picking a few items. It doesn’t prove anything. And you’re taking them out of context. Today, when you buy a new home it has AC, granite counter tops, stainless steel appliances, electrical upgrades and all the bells and whistles that a house in 1980 didn’t have. It’s the same story with cars. There’s very real logic behind hedonic adjustments.

    The fact is, when you consider the broader basket of goods and services, our std of living has not declined since 1980 as you imply. In fact, it has increased substantially.

  • Cullen Roche

    Yes, I agree that inflation is generally uneven.

  • ocean

    Why not move away from “public spending” and towards negative taxing? This gets away from big government bloating and bureaucracy and special spending for lobbied interests. And allows the deficit to be targeted and spent by individuals “productively” as they see fit (consumption or ideally business investment). At worst, citizens can be no worse at malinvestment than our government.

    Payroll tax reduction is a step in right direction, considering taxes on “unproductive” speculation (leveraged asset appreciation) is another and negative taxes on domestic business expansion etc.

  • Ilya

    how about loan holders taking a haircut? is that too original? at least it presents the bill to those who entered the transaction out of free will. I know the world will crumble and GDP chart will not point up. Oh dear.

  • Ilya

    by the way MAIN STREET would be better off after the restructuring. and quick too

  • F. Beard

    … and scrap minimum wage. GordonGekko

    Are you truly that evil or are you just jesting?

  • JH

    This is not a balance sheet recession. It is a trade policy / jobs loss recession.
    In the period between the late 1980 and 2008, various trade agreements were implemented, allowing the off shoring of America’s manufacturing jobs base.
    A series of economic bubbles created bubble related employment that masked the jobs lost in manufacturing while the credit based economy allowed people to borrow the money to increase their standard of living that their wages were not providing.
    The deflation in real estate prices from 2008 on eliminated the bubble related jobs, along with the excess equity in real estate. By this time, the manufacturing jobs that were for decades the foundation of the American economy were long since exported and what is left is the hollow shell that makes it doubtful we will ever see anything that resembles recovery for many decades to come.

  • Mark

    How many feel that the Government should dictate all mortgages be reduced to 2% APR?

    And how many feel that forgiving a substantial percentage of personal debt should be mandated?

    In other words – how many feel their should be forced transfer of wealth to help reduce HH debt burdens?

    It seems every day more and more folks are putting forth such ideas.

  • ocean

    Interesting perspective so the real economy – productive manufacturing – was replaced by the bubble economy (stock and housing bubbles). But unlike Japan that had a healthy manufacturing base, at this point the US has a similar large output gap but not a direct access to end demand.

  • El Viejo

    “debt forgiveness”
    Isn’t that why Iceland has become a poster child for recovery?

  • F. Beard

    It seems every day more and more folks are putting forth such ideas. Mark

    Not me. I advocate an EQUAL bailout for savers too.

    But hey, if you prefer suffering then a bailout of just the debtors is better than nothing. Then you and the other savers can suffer alone.

  • rhp

    YEA! Glad to see you highlight this again, Tom. Without the reforms, the fiscal spending from public sector to private sector that MMT advocates will simply wind up in the upper 1% again via control fraud, still leaving the vast majority of the private sector underwater again. AND, MMT will be discredited in the process as you say.

    It is amazing to me how much the “moneyed interests” have been able to promote the old Reagan bromide: “Gov’t is the problem, not the solution.” when this crisis was mainly derived from private sector control fraud with probable gov’t complicity or at least neglect.

    Thanks for posting!


  • F. Beard

    Why not move away from “public spending” and towards negative taxing? ocean

    Actually, a bailout of EVERYONE including savers is morally justified if one considers how the money system works. It cheats savers of honest interest rates and drives borrowers into unservicable debt.

    A continuous negative income tax is probably not good since taxation is what backs fiat but a one-time bailout combined with reform is the obvious solution.

  • Colin S.Toe

    Good points. Ocean and I share your focus on the trade (current account) imbalances.

    I’m not sure this perspective is inconsistent with also labeling it a ‘Balance Sheet Recession’.

  • Walk The Talk

    can someone please explain how it makes sense to not forgive the debt (within reason with some kind of equity takeback option if the market improves)
    if you forgive the debt, they’ll stay, they’ll start looking after it and probably have a little coin to do the repairs, hence, spending a little on goods and services, likely soon because by now they’re probably needed
    if you instead force them to leave you don’t affect them only, you affect the ~8 other houses that surround them so for every mortgage you don’t write down and force departure, as a lender you increase the risk of having to take a hit on 8 more, the multipliers are staggering
    I simply see no upside there

  • Gerald P

    First, judging by their own statements, our political class is very ignorant about finance and the economy. I will give them the benefit of the doubt that they are not intentionally telling falsehoods.
    Second, our elected representatives are dependent more than ever on campaign contributors with agendas that cause a biased government.
    To solve the first problem, has anyone a solution?
    To solve the second problem, the solution would be some form of fair public financing of campaign costs. What chance this cold be done?

    Without these changes, we will continue to repeat the errors of the past, as Einstein said, “Those who repeat the same behavior and expect a different outcome are mad”.

  • Walk The Talk

    Although Iceland apparently walked away from the banks, this hasn’t helped its citizens who own mortgaged property and are under water just like their fellow Americans. It appears to be a multi-generational indenture that only goes away when people walk away from it or if the whole system gets restructured to fully realize the actual deflated property values.

  • JH

    The first problem is irrelevant, politicians know little about anything except getting themselves re-elected to their privileged positions. They simply do the bidding of those whom they work for. In this case that is Wall St, Banks, and multi-national corporations who pay for them trough our current system of campaign bribery.
    The second problem is the crux of the issue. Moreover, the chance of a solution to this problem being implemented is near zero unless there is a public awakening the likes of which none of us living today has ever seen.
    The powers that be have invested many years of carful planning in gaining control of government, schools, and media in order to peruse their agenda.
    The American public is fat, lazy, stupid, and complacent, and so long as they are appeased with bread and circuses, they will continue to be so.

  • John Zelnicker

    JH — I get quite frustrated when people talk about all the manufacturing that has been off-shored but leave out all the foreign manufacturing that has been on-shored. In Alabama we have Mercedes Benz (which has just announced another expansion), Hyundai, Toyota, Kia and Volkswagen among others. Near Mobile, Thyssen-Krupp, the huge German steel maker has just opened a $5.3 Billion facility, the largest foreign factory in the US.

    And if Boeing had not low-balled the Air Force’s new tanker (which is already showing budget overruns and they haven’t even started building it yet), it would have been built here in Mobile by Airbus. They were prepared to build a $600 million factory. They already have an engineering office here paying top salaries.

  • Colin, S.Toe

    !. Get Wray, Fullwiler, et. al. on talks shows, Congressional staff positions, Council of Economic Advisors, etc.

    2. If things get bad enough, amending the Constitution might become politically possible. Given recent Supreme Court rulings, this is what it will take to limit influence of money on politics and policy. (Figure out some principled means – e.g. legal basis for distinguishing between individuals and corporate entities in areas such as scope of First Amendment?)

  • John Zelnicker

    Colin, S. Toe — “e.g. legal basis for distinguishing between individuals and corporate entities…”

    The idea that a corporation or other business entity can be considered a person is, to me, the pinnacle of absurdity.

    And such a legal basis does exist, but I agree that a constitutional amendment might be necessary.

  • Milton Francule Schween

    RE: Cullen said:

    “Roach’s ideas for speeding up this recovery process:

    “debt forgiveness to speed up the deleveraging process; creative saving policies that restore financial security to crisis-battered Americans; and, of course, jobs and the income they generate.”

    A tax cut is still the best approach here in my opinion….”

    A tax cut as the best approach?

    Direct debt forgiveness – probably accompanied by a Swedish bad bank model to rescue TBTF institutions – would do dramatically more (and faster!) for ending the debt deflation spiral & restore the median consumer household’s spending capacity/confidence/etc.

    A couple of quarters of consumption restored to long-term trend would demonstrate sufficiently sustained agg demand needed to reignite biz investment/production, which in turn causes employment to pick up -and- business lending to accelerate. Lower unemployment and higher wages [extra overtime b4 commitments for new hires] provides positive feedback for household consumption… soon we’re off to the races.

    Tax cuts targeted effectively at new job creation (and household debt forgiveness?] can accelerate the process, and provide some stimulus (assuming the increase in deficits is not fully offset by spending cuts, as seems to be required by the screeching deficit hawks)… but they are not a catalyst for resolving the fundamental household debt/income/demand problem.

  • Milton Francule Schween

    JH said:

    “The powers that be have invested many years of carful planning in gaining control of government, schools, and media in order to peruse their agenda.”

    Amen. [Although I think you meant "pursue"?]

    Stigler’s regulatory capture on a grand scale.

    OTOH, I disagree with the assessment that appeasing “bread and circuses” will continue to work forever. Eventually the system collapses…

  • Milton Francule Schween

    OK, let’s all give a big hoo-rah for foreign on-shoring… it certanly is better than losing all those jobs to off-shoring & not getting any back.


    What’s the net effect?

    – stagnant-to-falling real median US wages/income [virtually ALL (97%) of US national income gains over the last 30 years have gone to the top 10%; the bottom 90% of us get to share the residual 3%],
    – HUGE US trade deficits [which, BTW, requires government deficits to exist],
    – massive transfer of technology & capacity to an unfriendly, undemocratic, nation that engages in protectionism, currency manipulation, capital controls, natural resource hoarding and any number of other things that make for an uneven playing field

    Oh, I forgot… we getter relatively cheaper imports.

    I’m all for free trade… I just want it to be fair trade, and I don’t want to subsidize US job losses [and lower median wages] via tax code preferences granted to MNCs.

  • Milton Francule Schween

    “That leaves the government plus Fed to do what they always do.

    Namely, keep rates low and create prosperity via bubbles
    1. Nasdaq/Dot Com Market
    2. Housing
    3. ????”


    ??? = Gold?
    ??? = Chinese Real Estate?
    ??? = Prayer Beads?

  • Milton Francule Schween

    “Here’s another idea for a targeted tax break:

    a one-time tax forgiveness for corporations to repatriate any overseas profits (which apparently they have let pile up to avoid paying US taxes) –

    for any funds they agree to put into a ‘lockbox’ dedicated to basic R&D.”

    How do I say this emphatically enough?.. NO… F#CKING… WAY!!!

    Been there, done that… don’t want to do it again.

    “One time” already happened during Bush, Jr.’s administration [against the advice of virtually all sane economists]. This would, therefore, be a “second time”… which paves the way for the third time, and so on…

    Is that the “Moral Hazard Follies” I hear playing in the background? [Sounds a lot like rag time piano from "The Sting"]

    What happened last time?

    There were similar requirements that the repatriated funds were to be dedicated to [among other things] job creation, productive investment, etc. But it wound up all going to pay dividends, finance stock buybacks, and raise C-level executive compensation.

    Don’t believe the hype: It’s a complete scam by the MNCs (and their friends at the US Chamber O’ Commerce) to avoid – once again – paying their legitimate tax obligations & enrich rentiers at the public’s expense.

    Worse, particularly on the heels of the prior capitulation during the Bush admin, it embeds the belief that such “one time” deals are to be had any time the US encounters hard economic times.

    You want to talk about a fundamental reform of the tax code to broaden the base and lower the [average] rate, OK fine. But giving gifts to the corporatist plutocrats who already extract every benefit out the American system of capitalism? NO… F#CKING… WAY!!!

  • Milton Francule Schween

    “Anyone seen this data updated? the one above only goes to 2010.”

    Yes… seen it, learned it, lived it, wish it weren’t so.

    That’s Steve Keen’s blog. Send him a post… I’ve found he’s fairly responsive, and if he hasn’t compiled it thru mid-2011, he can at least point you to his raw source(s).

    If history is any guide [and I suspect it is; see 1929-1941], I wouldn’t expect it to get substantially better for a loooooooooong time, barring a miracle in clear thinking & decision-making amongst the political class. And – given the debt ceiling debacle, Tea Party Luddites and their Republicon lackeys [Cantor/Ryan/anyone running in the primaries], and the great mewling cat herd that is the modern Democraptic Party – it is difficult to see how such an Enlightenment is going to happen.

  • Milton Francule Schween

    Cutting off your nose to spite your face, eh?

    BTW: Generally, bankruptcy IS debt forgiveness, of one form or another.

  • John Zelnicker

    Milton — I read recently on one of the MMT blogs (I think it was here at PragCap) of a study indicating that the introduction of stock options as compensation for top executives was the beginning of the widespread move to reducing employment as the way to increase profits. This is where the misdistribution of income gains began as executives became more interested in boosting their companies’ stock prices than they were in looking after the welfare of their employees. It was a very interesting study. Sorry I can’t remember where it was reported.

  • presskh

    Agree, Bridge. Let’s just reward greedy, irresponsible behavior – then we can all live like kings!

  • presskh

    So, F. Beard, we just transfer trillions more in private debt to the public balance sheet. A great idea! I’m sure China will gladly loan us the money. After all, since we are already $14.5 trillion in the hole, what is a few more trillion heaped on the pile?

  • F. Beard

    I don’t believe in US Government borrowing. The US Government should just create, spend and tax (as necessary to control price inflation) its own fiat and borrow no more. As for existing US debt, it should be paid off as it comes due with that same debt-free fiat.