The US is living in an economic la-la land


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It is music to the ears of Democrats as they lurch leftward under the banners of Bernie Sanders and Elizabeth Warren, and discover the irresistible doctrine of Modern Monetary Finance, or MMT to the initiated.


Everything can be paid for on the never-never: a Green New Deal, “Medicare for All”, free university, and higher pensions, backed by helicopter money from the US Federal Reserve when needed.


If Donald Trump, the president, can get away with Perónist policies and fiscal vandalism, why should Democrats hold back? If Republicans in Congress can slash corporate taxes and run a budget deficit of 5 per cent of GDP at the top of the cycle, why can’t Bernie Sanders spend 6 per cent, 7 per cent, or 8 per cent on his Swedish model? Bill Clinton ran a budget surplus of 2 per cent of GDP at this stage of the cycle in 2000 when tax revenues were pouring in, evidence of how far the US public accounts have gone off the rails.


Mr Trump’s $US1 trillion ($1.4 trillion) deficits are an unconscionable violation of economic science. They come after the output gap has already closed and the fiscal multiplier has lost its potency. The stimulus has been like a flash flood on parched soil that drains away leaving nothing worthwhile.


Article source: http://www.espncricinfo.com/ci/content/story/1137277.html?CMP=OTC-RSS

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