love and theft: Live on Bloomberg TV

Live on Bloomberg TV

CC-Transcript Open Close

Money it doesn't matter whether it's bills or coins or crypto money's worth. Depends on the value we give it. Goods and services are traded by that value. Savings rely on it. Debt is repaid by it. And nations can rise and fall depending on how and where they spend. In this pandemic unprecedented spending has thrown new focus on national budgets as they dip further into the red in the U.S. and parts of Europe. Debt is set to exceed the size of their economies partly the result of giant fiscal responses to the pandemic and a surge in borrowing. What that means for the future is the focus of our debate not merely as a response to the pandemic but in how we think more broadly about money and the prerogatives of those who printed. From Washington D.C. I'm John DONVAN. Your host and moderator welcome to That's Debatable. An interactive series on today's most pressing issues. The resolution this time. Stop worrying about national deficits. We hear from two teams of two arguing for and against that motion and get global audience perspective.With the help of artificial intelligence from IBM Watson the debaters take questions from me and our global audience which decides the winner by voting before and after the team that changes the most minds wins. Here are the results from the pre debate. Vote for the motion. Stop worrying about national deficits. Four fifty five percent against. Twenty nine percent undecided. 16 percent. Now the debaters. The team against the motion. Todd Bill Colts former White House director of economicpolicy under George H.W. Bush. His partner Omar is suing former chief economist of the European Central Bank. The team arguing for the motion. Stephanie Kelton professor of economics and public policy at Stony Brook University and a leading authorityon modern monetary theory. And James Galbraith economist and professor of public affairs at the University of Texas Austin.Here are their opening statements.

Galbraith:

Two large national deficits drive up interest rates in countries that pay DAX in their own currency. Obviously not. Japan has a national debt twice GDP and interest rate on government debt.That's negative. In France it's almost 100 percent. The interest rate is again negative in the United States. The 20 year constant maturity rate Treasury rate was about one point four percent just now and they had a 10 year rate is below point 9percent which is an even better deal than Pope Julius got from Michaelangelo for the Sistine Chapel. And those are market rates. Efficient markets theory tells us that they reflect the expectation of inflation over 10 or 20 years to come.

That expectation could be wrong but it is not open to economists who purport to believe in efficient markets. To question it. What about the dollar short. The dollar might decline some in the years ahead. If so in America goods Americans buy will be more expensive. American jobs will be more plentiful and they will sell better on world markets. That's an internal matter. Could the dollar collapse. The thought is absurd in every world crisis. Investors have come into the dollar not out of it. That is because there is no safer alternative. Certainly not the euro for which Germany gave up the deutsch mark 21 years ago.America's worries are unemployment climate change profit 19 inequality. For clarity the polarization of our society militarism the threat of wars America's the goals our full employment balanced growth and reasonable price stability. Those are written into law. As Cain said anything we can actually do we can afford. If you haven't started worrying about deficits don't start. If you have started. Stop. Vote for sound economics and for your mental health.

:::

Let us consider the effects. To alarge extent. The public debt figures of industrialized countries today are coming close fairly close to the levelsreached after World War 2. However these are already frightening figures. Only the tip of the iceberg. The greater part of thepublic debt is not wasted. In Germany for example the official figure for the ratio of public debt to gross domestic product isnow 72 percent. If you FTSE applications for future social spending for pensionsto health care the number rises to a stick of over 400 percent. See below racial supply. To many other countries appear simplein one of these societies arrives with a heavy load to bear on top before the future challenges arising from climate change oraging populations. High public debt implies limits to future expenditures and once interest rates rise see House of Cardswill collapse.

Kelton:

The federal government is nothing like a household. It shouldn't run its budget the way that you and Irun our budgets if it tries to do so. It almost always ends badly for the economy. It will drive the economy into recession.Governments aren't like households because governments issue the currency and households are what we want to think of as users of the currency. So I want you to think I have a very hard line that separates what the federal government can do with its budget its spending power and what the rest of us can do. We play by a different set of rules. That's the first important point. The second important truth is that every deficit is good for someone. The deficit is just the difference between two numbers. The first number is how many dollars the government is spending into the economy each year. And the other number is howmany dollars the government is subtracting back out mostly by taxing us. So a deficit means the government is adding more dollars to our economy than it subtracts away which means that someone is getting a surplus. If you like the government deficit works to blow financial resources dollars and government bonds. Those are financial assets that show up on our balance sheets.They become part of our wealth. They're part of our savings. A surplus when the government eliminates deficits balances its budget or moves it into surplus then it's operating its budget like a vacuum. It's hoovering those dollars away from the rest of us and that reduces our wealth. So think about whether you want the government to be running deficits which produce yoursurpluses or whether you'd prefer them to hoover away some of the financial assets that you call the third. Truth is thatdeficits can be too big. No one is arguing for unbridled deficit spending out of control never ending larger and larger deficits.Deficits can be too big and inflation can be evidence of a deficit that's gotten too big. But deficits can also be too small and evidence of a deficit that is too small is unemployment. That's what we have today. And that's what Dr.Galbraith and I would like to convince you of. Let's worry about the unemployment and the debt and the depressed economy not the government deficit.

:::

The motto or the mascot of modern monetary theory should not be a dollar bill. It should be earplugsbecause the modern monetary theorists refuse to listen to two thousand years of history. Let's go back ancient Greece. Citystates went bankrupt lending to the temple of Delos French Revolution. Louis the 16th loses his head. Why. Because he spenttoo much money. All right. That's old history. Let's go to modern times. Chile early 1970s inflation. Chile Brazil andArgentina in the 2000s. Bolivia in the 1980s. OK they encountered inflation depreciation. Wages fell 40 percent. Ourcolleagues say they're worried about everyday people. Wages fell 40 percent under MMT like policies. OK. Those are lesserdeveloped nations perhaps.

How about Britain. The 1970s. How could you forget that in the 1970s Britain begged the IMF forthe biggest bail out to date. And James Callahan the Labour prime minister of Britain explained to the MMT theorists of theday the predecessors to Dr Kelton and Dr David Galbraith. We can not in all candor do what you ask. OK Britain let's put thataside. Let's go to a place that's a little more socialist friendly. Sweden had a terrible crisis in the early 1990s. Haveyou forgotten that the central bank had to raise interest rates. Five hundred percent. Have you forgotten that Canada. TheCanadian dollar cratered and they could not sell their bonds in the 1990s in each case. Those countries had to slash spendingand do what is right now. A survey was recently done of top economists in the U.S. many of whom were very worried aboutinequality global warming social welfare state. None of them. Not one supported the principles of MMT. Now perhaps ourcolleagues here are like Albert Einstein a lonely Swiss clerk working by himself somehow coming up with a magical way thatbreaks shatters ideas about space and time. You may decide today whether they are the Einsteins of our day. But in the mean time I'd suggest vote to be concerned about the deficit and the debt vote because our lives depend on it. And hold on to your walletOK. That wraps up round 1. Coming up government spending tends to soar during recessions. So should we fear that politicians will disregard deficits. Most people in Washington are sensible enough to learn from history and recognize that they shouldn't have a free hand to spend whatever they want. This idea that Congress is just soeager all the time to spend money is just simply not our reality. Welcome back to. That's debatable presented by Bloomberg and Intelligence Squared. The motion stop worrying about national deficits. One concern from those against is that giving politicians a free hand to spend could be a mistake and trusting that they will cut back and raise taxes when the time is right.Rather than continuing to run at a deficit. Here's more from our debaters.

Kelton:

First of all it isn't about letting politicians do anything. Congress already has the power of the purse and we aren't we aren't endowing Congress with any new powers and authorities that it doesn't already have. Congress can already appropriate funding for whatever it deems a priority. We saw that in the CARES Act. That was a two point two trillion dollar piece of legislation that passed. Both the House and the Senate got signed by the White House and became law. Congress did not go out and find two point two trillion dollars. They didn't come hat in hand to the rest of us. Our taxes didn't go up. They didn't go to China and ask for some dollars so that we could carry out a relief package. Here in the U.S. Congress has the power of the purse. So they appropriated funding. And where did the money come from. That piece of legislation effectively orders up from the government's bank. It's fiscal agent the Federal Reserve. Two point two trillion dollars. They get created by the Fed on behalf of Treasury as authorized by the government. That is how it works today. So we're not giving the government new powers new authorities. And this premise that you have that this idea that governments will go wild if somehow they wake up and realize that they have the power of the purse and if they vote for the spending the money will be there that they'll just run run wild and spend out of control. To that I say all evidence to the contrary. Look at our economy today. We know that this economy desperately needs more spending. You turn on the news every night. You see Miles stretching of carswaiting to get food from food banks. We know that tens of millions of people are on the verge of having their unemployment insurance expire. Congress has gone home. They've gone back for the holidays. They're out. They've checked out. They're not going to spend anymore. So this idea that Congress is just so eager all the time to spend money is is just simply not our reality.

I think you've made that point very clear that you do not think that you think that that's a canard. So I want to take that to Todd. I think it's very dangerous. And I think the reason why Congress and the US deficits have not previously gotten out of hand is because M.M. tears have not won the argument. It's because most people in Washington are sensible enough to learn from history and recognize that they shouldn't have a free hand to spend whatever they want. Take a look of what's happening today in Turkey. And I know Jamie might say well that doesn't count. It's not a major country. But President Erdogan of Turkey controls the central bank. It is not independent. He's gone through four different presidents orheads of the central bank in about five years. His son in law was the finance minister. As a result Turkey today raisedinterest rates by 500 basis basis points to 15 percent because inflation has gotten out of hand. When you give governmentofficials priority to control the central bank you get higher spending and higher inflation and less responsibility. One ofthe great achievements in economic history throughout the world in the last 30 years is making central banks more independent.So they are not beholden by crass politicians. And those of you watching this who might be on the left wing of the politicalspectrum or the anti trump part of the political spectrum. Just imagine if Donald Trump had known about MMT and known that heshould be in control of the Federal Reserve Board. Even more so. What would have happened to spending. So I think these are verydangerous doctrines coming up.

Do U.S. deficits endanger the dollar.I think a country like the US leaves one to risk the stability of its currency.And does fiscal prudence make a difference in the real world. Simply saving money on the government accounts is not going toimprove the quality of life for anybody. Welcome back to. That's debatable presented by Bloomberg andIntelligence Squared. The motion stop worrying about deficits. We bring in now our global audience. People around the worldweighed in on this debate and we turned to IBM Watson to understand what matters most to them. Here's how the artificialintelligence works. First people around the world submit their arguments online.Then the A.I. assesses the quality of the arguments filtering out and irrelevant submissions and sorting the remainingarguments into for and against. Next the technology identifies the recurring key points ranking them based on their quality andtheir frequency. Finally the A.I. creates a coherent narrative of the strongest and most prevalent points for both sides of thedebate. OK. And now we get to hear what the results were. This is aselection of key points and arguments that our global audience again more than 1000 people around the world thought were mostimportant on this topic. Let's listen in. Hello the following analysis used A.I. models to identify thecritical key points made by each side on the motion. We should stop worrying about national deficits. 50 percent thought weshould stop worrying about national deficits with 17 percent of those arguing that national deficits have no direct negativeimpact on the economy. One argument said a high deficit does not mean a high risk of default. Financial institutions are strongand productivity is increasing. Thus the danger of an economic fallout is minimal. Another key point for the motion was that toan extent the national debt allows financial growth. One argument said that spending money stimulates the economy whichwill then bring the government money and lower the deficit.

People also think spending into a higher deficit is acceptableduring a health crisis. The remaining 50 percent were against the motion with 17 percent of submissions arguing that a risingdeficit can lead to inflation and cripple the economy. One argument said national deficits fundamentally weaken thenation's economy and must be arbitrated to achieve a balanced resolution. Another key point against the motion was thatnational debt burdens future generations. One argument said We cannot pretend that we have money that we don't have. It'sdisrespectful to younger generations to run up the national deficit. People also said that high public debt is dangerous.While the world is so unstable with politics wars prevalent racism and extremism also having high national deficits aroundthe world will cause more instability. Please visit the Web site to see more results. Good luck to the human debaters.One point made that we haven't brought to and that's the social impact of deficits.People were mentioning things like global instability and things like war and extremism to the team that's arguing against theresolution. I'll come to you tomorrow on this one. Our deficits are a threat to global security. We're not just now talkingabout the markets but actually to to global security. Overall I think we need stability in international relations. There are somany of this coming from geopolitics and says this this is not the background against which government shuts irresponsiblespend money. I think that trust for example in the dollar is the dominantcurrency of the world. It is based on this future stability of the currency. So I think a country like the US is the least oneto. To risk the stability of its currency and I would suppose thatif a Duke U.S. government and including the Fed would explain that they would apply MMT policies the dollar would lose itsleading position in the vote because people would be afraid that in the future their investment in U.S. dollars would not be safe enough.

Stephanie would you like to respond to that.

Kelton:

Yeah I do. Thank you. So I keep hearing this bizarre discussion about the central bank being for store cajoled or asked to do something to aid and assist government spending that somehow what we're talking about is the capacity of the government torun deficits being somehow dependent upon the central bank's acquiescence in all of this that it has to give up some independence. Nobody has said any such thing. What I described with respect to the Carers Act is the way that governments always spend. The government decides what it wants to spend and the Fed is the government's bank. The Fed carries out all payments that are authorized by Congress on behalf of Treasury always. It doesn't say no to the government. It can't. It has to clear the payments. What the Fed has independence to do is to set the price at which Congress will access those funds. Now think back to Ronald Reagan. Ronald Reagan ran massive deficits. He didn't have a friendly Federal Reserve chairman holding interest rates near zero to accommodate all of this. He had Paul Volcker. And interest rates were double digits. They were almost16 percent when Reagan was president. They never got below 7 percent. So a very high interest rate environment that did not stop Ronald Reagan from running massive deficits with two huge tax cuts and a huge buildup in the military that almost tripled the national debt. So you don't have to have the Fed behaving in a certain way to allow Congress to do what Congress can do. Republicans do it all the time. They increase the deficit for tax cuts and wars. And the rest of the time the deficit increases is because the economy goes into recession. Those are the big drivers.

:::

Let me just let your opponents respond some of what you were saying. Omar I saw you raising your hand. Did you want to jump in on that to say that says some of the big base pays the bill itself like say by big guys pay big paying my bill you guys after disposal floods which are created by the Fed.

But I think the central issue would be the pick a position towards a.Well look I mean with all due respect I think Stephanie is running away from her own writings because it's very clear although actually it's very difficult to make sense of MMT but if you struggle with it you will find that they diminish the authority of the central bank and they leave it to the Congress to decide when to tighten or loosen policy. But putting thataside the U.S. dollar today is the world's reserve currency which you don't choose to be the reserve currency of the world.The world chooses you depending on your behavior. So the extent to which the U.S. undermines its credibility by saying the debtsdon't matter and deficits don't matter. We will have a depreciated currency. We will have inflation. And will you willhave everyday people mothers and fathers and children having their standard of living drop because that that's exactly what'shappened through twenty five hundred years of history and twenty six thousand miles of circumference around the globe. You canignore that history and you can make up a new one. But I'm hoping if you're worried about people and those watching thisprogram do not fall for that. Let's bring in James Galbraith. James. Yeah. If you're worried about the standard of living ofour children and grandchildren it's good thing to worry about the way they improve it is to improve the quality of life. Nowto build back a better America a better world to deal with climate change to provide the parents with with jobs thatprovide them with adequate incomes to provide the children with a capacity for education or provide the whole population withhealth care to deal with the pandemic. Simply saving money on the government accounts is not going to improve the quality oflife for anybody. In fact it is going to make it harder and more difficult to improve the quality of life. So yes we should beworried about our children. We should be worried about what we're what what we are doing for them not what we're not doingfor them by not getting involved and tackling the problems that we actually have.Coming up the debate over deficits continues. Should governments worry more about the bottom line or unemployment lines.

We use human beings. We lock them in unemployment and we say thank you for your sacrifice. You're helping the nation guardagainst inflation risk. I'm asking you what is your sense. Deficit spending should stop untilthe ratio of unemployment. Welcome back to That's Debatable presented by Bloomberg andIntelligence Squared. The motion stopped worrying about deficits. Governments around the world have spent unprecedentedsums trillions of dollars to combat the economic impacts of the Corona virus in the US. The government increased its debt burdenby 14 percent in the first half of 2020. Europe's fiscal response has resulted in a 9 percent increase in the debt load.But what does rising debt mean for our future. Here's more from our debaters.In a pandemic we should be spending money. Nobody disagrees with that. You know Jamie I'm sure he's sincerely worried about theunemployment rate as we all are at six point nine percent. That is far too high. But let's just scroll back. February of 2020 before the pandemic hit the U.S. unemployment rate was only three point five percent the lowest I'd ever seen in mylifetime. Jamie had ever seen in his lifetime or Stephanie or Atmar.

Kelton:

So I don't think we should go into this program and saythat MMT or this story about debts is one that's solely appropriate during pandemic. We have to ask when an economy is doing well. Are you willing to give up fiscal discipline. And I think that's a very dangerous bet for common everyday people.James is doing to respond to that. I'll defer to Stephanie. Stephanie I do that sir I think that this is exactly compatible with what Jamie and I are arguing. I think we found some agreement here that in the current moment we recognize that the economy needs the fiscal support that has been provided. And I will make the case and I think Jamie as well that we aren't doing enough that in spite of the three plus trillion dollar deficit we have today it is still too small. Congress needs to do more to provide fiscal support to this economy as a branch to the other side of the pandemic and beyond that recovery andinvestment in the economy. So at what point does it become appropriate for the government to withdraw some fiscal support.That's the question. And I think we're having the right conversation. We're looking at the real economy.

It's sending us a signal. Count the number of people in the unemployment line. How many how many people remain unemployed. We'll give you apretty good idea of how long we need to continue the fiscal support and when it will be safe for Congress to begin to withdraw fiscal support. No one is saying keep deficits at 3 or 5 trillion in perpetuity. We're saying recognize the important role the federal government can play using its budget to sustain incomes to keep families whole to keep businesses from goingunder to keep people from losing their homes. Provide a bridge to the other side and the deficit is needed now. It's too smalland we're gonna need it for some time to come.

What's more you raised your hand on that one.Yes. Very short. Stephanie. Beyond a concern as Todd has mentioned about unemployment youdiscard a notion of a natural rate of unemployment. So let's see suicide. But I'm asking you what is your sense when deficits pending should stop until what a ratio of unemployment until everybody is employed at a good wages. You said in your book. Ithink this is a fantasy.

Kelton:

Well I don't think it's a fantasy and I think that what we do today is we manage and I say we central banks attempt to manage the inflation rate by finding the quote right level of unemployment right now. But they believe that there is some amount of unemployment that is necessary that you have to trap people in unemployment in order to prevent inflation from accelerating. So that is the way we fight inflation today. We use human beings. We lock them in unemployment and we say thank you for your sacrifice. You're helping the nation guard against inflation risk. I am saying in the MMT framework we're saying there is a better way to do this that we can in fact anchor prices but do it in a way that guarantees that everyone who wants to work and can't find a job anywhere else in the economy can have employment. So you do it with a buffer stock of employed workers rather than with a buffer stock of unemployed people. And you anchor the wage so that the government is providing a decent job at a good wage for anyone who can't find work elsewhere in the economy that anchors prices. And you can get price stability alongside full employment instead of doing it the way we do today which is use unemployment to try to tame inflation.

___

You hope to be of employment rate is zero.That is correct.

Coming up different kinds of debt create different kinds of problems. Our teams debate the long term consequences of deficits. Public debt is far more and far more dangerous than personal debt because it's passed on to innocent generations to come. While our resolution is about the national debt there's a question from Walter Chen who's in the audience that that isn't about the national debt. But I think that the essence of his question is sort of a sense of alarm that the foot for the argument that the foresight is making and it goes like this is public debt. If public debt does not matter what about personal and corporate debt. Could government buy all personal and corporate debt. Then it's everybody happily ever after.

And I want to take that to Stephanie because I think it sounds like a challenge to your side. And I think it's a little bit red meat for your opponents. But can you respond to what's the difference between what I understand. You don't actually call government debt. You call it something else. But what's what's the difference between that and a corporation or a household. Because you've made the argument in the very beginning that this is not like household debt.

Kelton:

So yes you're right. They're very different. Write it.When the federal government issues a bond it is making a promise to the bond holder. And the promise is in the future that bond will turn back in to currency. Right. I will pay that bond off by giving you U.S. dollars which can only come from me the federal government the United States of America. So the government is the issuer of both of these financial instruments.It is the issuer of the currency and it is the issuer of this debt instrument that we call a government bond. OK. So is therisk different when a private company borrows and takes on debt. Of course if GM issues bonds if IBM issues bonds it is raising money. And now it's on the hook to pay back what U.S. dollars. But where do these companies get U.S. dollars. Well from earnings right. They have to get the currency from somewhere in order to be able to make good on the debt service and to pay thedebt. And so it's a completely different completely different risk factors associated with these things.

::_

32:36

All right. I'm not sure that your opponents would disagree that those are different things. So I will move on unless one of you wants to.

OK. Well I would I would just say one thing very quickly comparing personal debt to government debt. Here's a bigdifference. If you're a relative. If your father is a spendthrift and spends all of his money and goes deep into debtand then dies you don't get stuck with that debt. The American legal system says the debt dies with dear old broke dad. Butwhen the government spends money it goes on forever as debt and new generations inherit that debt. So in that sense public debtis far more and more far more dangerous than personal debt because it's passed on to innocent generations to come.

Let's stay with this point and now move on to another question because I could see you Stephanie dying to anther respond to this. And Ithink that is a question that a lot of people will have. Is the generational impact. Is this chicken not going to come home toroost in 10 50 or 100 years.

Kelton:

No. The the the bonds that we're talking about are going to become the assets to people in thenext generation. And I think Mr. Buchwald said earlier. And the point is a correct one that it is always a distributionalquestion. You cannot burden an entire generation with government bonds with assets with wealth that they inherit. What doeshappen is that in the future the future will be populated. Some of the people in the future will be tax payers and some of thefuture people in the future will be bondholders. And so there is a distributional issue right. Who receives the interest on thosebonds. Who holds them as part of their wealth in their portfolios. There can be different people but for sure the nextgeneration will inherit a portion of those government securities and they will be part of their net financial wealth.

Mark.Stephanie this is very strange. Hearing for view. The budgets are mostly bought by rich people.And to build off Texas etc. has to be bored by a party. Also the poor people sell.This drama the higher public debt and the more puns I shoot the ball inequality is created by this instrument. I want to move onto one other question why we have to have a little bit of time. And it's this isn't the real argument of the deficit hawks thatthey disagree with how the surplus is distributed.

And Todd and Atmar you have not described yourselves as hawks onthis but I think this question is directed to you that that what you what you're really objecting to is where the spending wouldgo that it's a policy issue. And I'd like you to address that because I I thought I heard hints of it also in some of James'scritique of your argument. So Todd you want to take that on. Well I actually disagree disagree with that. I don't think it'sI don't have an argument with where the money is spent in principle. I think that's up tothe American people. And if they want a larger military or it's prudent to have a larger military as it might have been in theearly 1980s when we were politically facing off against the Soviet Union that might make sense today. It probably wouldn'tmake sense. No. I think the point that Atmar and I are making today is the idea that you can print money and rack up deficitswithout recognizing that that puts a pinch a strain on the economy and on families. That is a myth. Just look at it thisway. Franklin Roosevelt and his advisers are honest and smart. They created the Social Security system in the 1930s set theretirement age at 65. Why. Because in the 1930s the average 65 year old was dead. So the numbers worked out. Franklin Roosevelthimself didn't live to see age 65. In the 1950s you had about 15 full time workers for one retiree. Now in the U.S. and Germanyand elsewhere we're getting to the point where it'll be about two and a half full time workers for one retiree. The numbersjust don't work. You can try to create magic say abracadabra say modern monetary theory. But I don't see how when you have twopeople in the workforce and one person in a retirement home that that is a sustainable system. So if you care about a sustainablesociety you need I beg you to care about the long term debt and deficit.James I can give you the last word if you would like it otherwise we can wrap because we're coming to the end of thisround. Yeah the Social Security does a very good job of keeping the elderly population out of poverty. And it does an excellentjob of keeping old folks from being a burden on their working on their working children. This is a very valuable thing.

It hasreally nothing to do with with the public budget deficit of the finances of the government as a whole and everything to do withthe welfare of the community. Both the older people and the younger people as well as survivors and others have benefit fromthe system. That's one of the great successes of the 20th century in the United States.Okay. That wraps up round two of our deficits debate. Up next closing statements. And our audience vote to pick the winnerwithout constraints. Public spending run out of control finances a bookkeeping matter for our countries. It is a matter that'simportant but it is not a constraint. Welcome back to that's debatable. The motion stopped worryingabout national deficits. The U.S. budget gap more than tripled in 2020 to a record three point one trillion dollars due tomassive government spending to soften the blow from the Corona virus pandemic. And that increase brought the U.S. debt load tothe biggest chunk of GDP since World War 2. So our rising national deficits cause for concern on one side of our debate abold proposition. Don't worry about it. But the other side is far more wary. Here are their closing remarks.

Kelton:

Mark Twain famously told us that it's often easier to fool people than to convince them that they have been fooled. And I am here to tell you with my friend Dr. Galbraith we have been fooled. And you they are trying to fool you tonight. And the American people are often fooled into getting confused about government deficits. The word itself sounds like a problem. Youhear someone say the government's budget is in deficit. It almost you know on the surface presents as a problem. And what we've tried to do here tonight is to cast a different light on this thing that we call the deficit to remind you that on the other side of the government's deficit lies a financial surplus for someone who gets it and for what purpose. Those areimportant questions. The CARES Act that I brought up a couple of times already tonight was an example of a government using its deficit to send unemployed workers an extra six hundred dollars a week to help keep them whole. To send a twelve hundred dollarcheck to most Americans in the pandemic to help out with costs to help small businesses keep their workers on payroll and coverexpenses.

That's an example of government using the deficit to deliver a financial leg up for struggling people. Another example of using deficits was the tax cuts that Republicans passed in 2017 a roughly two trillion dollar addition todeficits that delivered a financial windfall to the people in our society who least need the help. So as a reminder every deficit is good for someone. The question is for whom and for what. Right now the last thing we need to do is turn on government deficits to be afraid of them to begin to worry about them. Because if we do that our lawmakers in Washington are going to pull back. They're going to refuse to provide the fiscal support that our economy desperately needs. And that'sgoing to hurt all of us. So I'm asking you not to worry about the deficit not to get fooled and to vote for the movement.Thank you.

:::

I have to be honest. Modern monetary theory which advocates larger deficits and printing of money almost in allcases is modern in the sense a Jackson Pollock painting is modern. It's colorful it's hypnotic but it's a mess and it cando damage. Let me give you a I understand the impetus for us. I understand the frustration. I'll tell you the other day I wasdriving to a friend's house with mask with my daughter. I hadn't been to the neighborhood before. And there was a roadblock. Andmy daughter said let me turn on Google Maps. And I said no I don't need Google Maps. I'll find a way to do it. I know how to.I'll figure out how to get there. And so we're driving around and snaking through the community and I'm lost. And Google Mapsis now telling me make a U-turn at the next intersection. But I'm not going to listen because I think I know better. AndGoogle Maps is again telling me make a U-turn if the next intersection. And Google Maps has the map. It has the evidence.It has the experience.

What do I have. I just have the moral superiority that I know better. Well I'm afraid with this debatec omes down to is not evidence because we've talked throughout history we've talked throughout continents we've talked throughout eras we've talked about Democratic administrations Republic administrations. And there's absolutely no evidencethat modern monetary theory would have raised the standard of living. More likely it would have depleted and possibly destroyed the standard of living of countries that adopted it. So Winston Churchill purportedly once said you can always depend on the Yanks to do the right thing after they've exhausted every other opportunity. Well we're looking at lots of different options including MMT but it is better to do the right thing and to respect the debts and deficits and understand that it is not necessarily our standard of living but our children and grandchildren. It is what is at stake.

Listen to words is human.To worry unnecessarily is neurotic. We have plenty of things to worry about. And the issue that divides professor. Turn andmyself from our opponents isn't really deficits or national debt. The issue that divides us is whether we have the capacityto address the important problems that actually face us whether we have the capacity to stabilize our economy in the face of apandemic and to deal with the public health challenges whether we have the capacity to reduce unemployment whether we can copewith climate change whether we can address inequality and the legacies of racial divide in our countries. These are the issuesthat are in front of us. Our opponents say no we can't do that. There are mysterious reasons of high finance why this isimpossible. To quote John Maynard Keynes from other epic average would rise cadaver bro would come down. But this is not the waythe world actually is. We have seen as I've said many times so far in this debate from this year's experience from theexperience of the past four years from the experience of the past 40 years that yes we can address these problems if we havethe will. The organization the capacity and the determination to do them. We can't do it if we say oh now that some mysteriousfinancial reason why we can't.

That's our opponents position that their position is really that they don't want to addressthese problems. We do. And we say once again if we can actually achieve this we can afford it. Finance is a bookkeeping matterfor our countries. It is a matter that's important but it is not a constraint. And people should stop worrying about things thatare not important so that they can focus their will and the attention on things that truly are. Thank you.

Not to worry about public deficits functions as a permit to unlimited public spending. Court I estimate stated that the ineffectiveness andfinally collapse of the Soviet economic system due to the self budget constraints or companies. The same is true for publicfinance. Without constraints public spending will run out of control. There are all this so many socially beneficial projectsthat previously elect the funding to be realized against the background of centuries of inflationary episodes in renownedGerman economists once remarked expecting puppet politicians to resist the temptation of free public spending. It's likeexpecting a dog to sit disciplined before a box of sausages. It's pure caricature symmetry of defunct currencies houseinnumerable times throughout a long history of humankind. All of them were ruined by excessive public spending beat by kingsdictators or parliaments. So proposal to ignore public deficits and debt is pure populism promising a land of milk and honey thesurest way to undermine and ultimately destroy the value of currencies.And now to the winner. Our audience voted on whether we should stop worrying about national deficits. Then they voted a secondtime after hearing from our debaters. Again it's the side that sways the most minds that has declared our winneron the resolution. Stop worrying about national deficits before the debate and pulling our live audience. Fifty five percentwere in agreement with the resolution. Twenty nine percent were against and 16 percent were undecided. Those are the firstresults. Again this is going to be the difference between the first and second that determines our winner on the second vote.It went like this. The resolution stopped worrying about national deficits.

Their first vote was 55 percent their secondvote with 73 percent. They pulled up 18 percentage points. That's gonna be the number to beat. Let's see the team againstthe resolution. Their first vote was 29 percent. Their second vote went down to 24 percent. It means this debate goes to theteam arguing for the resolution. Stop worrying about national deficits. Our congratulations to that team.But really congratulations to all four of our debaters for shedding light for doing it with spirit and intelligence andcivility for this debate in partnership with Intelligence Squared. I'm John DONVAN for Bloomberg Television starts now.
For YouLive TV

NOW PLAYING
That's Debatable: Stop Worrying About National Deficits
44:00
'Bloomberg Technology' Full Show (12/04/2020)
05:58
Expect Strong Second Half of 2021: Evercore's Altman
48:01
Wall Street Week - Full Show (12/04/2020)
09:08
Summers: Seeing a Paradigm Shift in Fiscal Policy
06:12
Damage Is Being Done to Our Economy's 'Software,' Says Tett
02:07
President-elect Biden's Economic Team Faces Covid-19 Challenge
01:59:04
'Bloomberg Markets: The Close' Full Show (12/04/2020)
07:57
What Will Remote Learning Look Like in 2021?
05:00
Logitech Sees Strong Year During Pandemic, Says CEO
06:41
Covid 'Turbocharged' DocuSign Demand That Won't Let Up, Says CEO
22:10
'What'd You Miss?' Full Show (12/04/2020)
04:45
Public Markets Rewarding Companies Embracing Cryptos, says Bitwise's Fusaro
07:24
Stock and Sector Picking Very Important Now, Says Tallbacken's Purves
03:46
Warner Bros. Movies to Hit Theaters and HBO Max at Same Time
10:48
'Bloomberg Real Yield': GSAM's Mike Swell

Stream Schedule:U.S. BTV+
U.S. BTV+
U.S. BTV
Europe BTV
Asia BTV
Australia BTV
U.S. Live Event
EMEA Live Event
Asia Live Event
Politics Live Event
No schedule data available.

That's Debatable: Stop Worrying About National Deficits
December 4th, 2020, 8:18 PM GMT+0000

Governments around the world have spent unprecedented sums to combat the economic impact of coronavirus. Is rising debt cause for concern? A new crop of economists – adherents to Modern Monetary Theory – have a bold proposition: Don't worry about it. But others are more wary. The debaters: Stephanie Kelton, Stony Brook University professor of public policy and economics, James Galbraith, University of Texas at Austin professor, Todd Buchholz, former White House director of economic policy, and Otmar Issing, Center for Financial Studies professor. (Source: Bloomberg)

Bloomberg Technology
The only daily news program focused exclusively on technology, innovation and the future of business from San Francisco. Hosted by Emily Chang.
More episodes and clips
44:00
'Bloomberg Technology' Full Show (12/04/2020)
07:57
What Will Remote Learning Look Like in 2021?
05:00
Logitech Sees Strong Year During Pandemic, Says CEO
06:41
Covid 'Turbocharged' DocuSign Demand That Won't Let Up, Says CEO

The David Rubenstein Show
"The David Rubenstein Show: Peer-to-Peer Conversations" explores successful leadership through the personal and professional choices of the most influential people in business.
More episodes and clips
24:05
The David Rubenstein Show: Disney Exec. Chairman Bob Iger
24:05
The David Rubenstein Show: GSK CEO Emma Walmsley
24:00
The David Rubenstein Show: Jazz Musician Wynton Marsalis
24:00
The David Rubenstein Show: Johnson & Johnson CEO Alex Gorsky
See all shows