Paul Levine on the 41 claiming Corbynomics is ‘mainstream’

I’ve been organising an anti-the-41 letter, which has been going slowly, the score currently 41-29.  In the course of that I corresponded with Paul Levine, a Professor specialising in macro at the University of Surrey.

Paul is a founder member of the European community of economists that started to do macro properly, following the lead of the US.  And with Pearlman, wrote foundational papers in time-consistency and control theory that I remember Nobel laureate Tom Sargent marveling at in his macro lectures.

Anyway, cutting to the chase, Paul wrote his own letter, which the Observer seem to have decided to ignore, responding to the 41.  I hope their neglect was accidental, because it does not look like it, spoiling as it does a Guardian letter that became a one-sided Guardian story about how Corby is proposing respectable macroeconomics.  Here’s the text:

“The 41 signatories (Observer, Sunday 23rd  August) writing on  Corbyn’s economic policy fail to distinguish between the quite different forms of “anti-austerity” policies proposed by opponents of the Government. These vary from deficit denial (high debt doesn’t matter); to proposing much slower consolidation involving some combination of spending cuts and tax rate increases dependent on the growth of tax revenues;  to a simple painless solution based solely on  taxing the rich, raising corporation tax and incredible estimates of  preventable tax avoidance/evasion levels.  Corbynomics is firmly rooted in the latter, whilst being vague about debt targets. IMF, current Labour Party policy and, in effect, that of the SNP (as shown by the Institute of Fiscal Studies) belong to the middle category, often denounced as “austerity-lyte”.  The mainstream position is this one, not Corbynomics.”

 

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14 Responses to Paul Levine on the 41 claiming Corbynomics is ‘mainstream’

  1. mrkemail2 says:

    “These vary from deficit denial (high debt doesn’t matter); ”
    I assume you are referring to MMT. That’s a bit of a straw man and not really our position. We claim deficits and debt do matter, but not in the way you think they do!
    http://heteconomist.com/saving-as-a-burden-on-future-generations/
    As to “mainstream” that is a bit of a Humpty Dumpty word that can mean whatever you want it to mean.
    Mainstream econ seems to deny some basic facts such as loans create deposits. Some stuff like rational expectations and the assumptions in it seem really crazy. So through the looking glass it looks like you guys are the cranks :b
    Do you agree for instance that if the govt spends and there is no saving in the spending chain, that the govt will get all its money back as tax?
    How does mainstream econ explain this?
    http://www.economist.com/news/finance-and-economics/21614221-japanese-bond-traders-say-central-bank-stifling-their-market-quantitative?
    “the Bank of Japan is buying around 70% of all newly issued Japanese government bonds (JGBs).”
    Inflation remains low and has for several decades despite attempts to create inflation by the Bank of Japan.

  2. mrkemail2 says:

    “These vary from deficit denial (high debt doesn’t matter); ”
    I assume you are referring to MMT. That’s a bit of a straw man and not really our position. We claim deficits and debt do matter, but not in the way you think they do!
    http://heteconomist.com/saving-as-a-burden-on-future-generations/
    As to “mainstream” that is a bit of a Humpty Dumpty word that can mean whatever you want it to mean.
    Mainstream econ seems to deny some basic facts such as loans create deposits. Some stuff like rational expectations and the assumptions in it seem really crazy. So through the looking glass it looks like you guys are the cranks :b
    Do you agree for instance, as a point of logic that if the govt spends and there is no saving in the spending chain, that the govt will get all its money back as tax?
    How does mainstream econ explain this?
    http://www.economist.com/news/finance-and-economics/21614221-japanese-bond-traders-say-central-bank-stifling-their-market-quantitative?
    “the Bank of Japan is buying around 70% of all newly issued Japanese government bonds (JGBs).”
    Inflation remains low and has for several decades despite attempts to create inflation by the Bank of Japan.

  3. Lyn Eynon says:

    It’s wrong to imply there is a single ‘mainstream position’ on austerity. As the ‘letter of the 41’ demonstrates there is a wide range of views within the economics profession. Jeremy Corbyn’s proposals should be debated on their merits, not dismissed as beyond the pale of respectability. Nobody thinks this will be painless but we can change how the pain is shared.

    On taxation, I’m also sceptical about our ability to recover the full £120bn annual debt, avoidance and evasion identified by Richard Murphy and referred by Corbyn in ‘The Economy in 2020’. But just £20bn would allow us to build the 100,000 extra homes a year needed to tackle the UK’s housing crisis, and that’s a target worth chasing.

    • Joe Doe says:

      Values, aims and so on are a different matter from the proposals put forward to achieve them.

      But those proposals *are* being debated on their own merits, and they have been found to be beyond the pale of respectability.

  4. Joe Doe says:

    Values, aims and so on are a different matter from the proposals put forward to achieve them.

    But those proposals *are* being debated on their own merits, and they have been found to be beyond the pale of respectability.

    • Lyn Eynon says:

      If you want to debate Corbyn’s proposals on their merits, then please explain why tightening up on tax avoidance/evasion and using the proceeds to build homes for people who need them is a bad idea. Don’t just retreat into proclaimed ‘respectability’.

      • Joe Doe says:

        Well, again, no one debates or ridicules the principle or value such an objective represents, nor do they think those sorts of objectives aren’t worthwhile.

        The “what” is simple and really takes little-to-no imagination; it isn’t hard to spot the problems at such a top-level. But the “how” is what is really at issue with his proposals.

        Again, not the morality, not the values, and not so much what the problem is, but what the proposed solutions are.

        What simply is not respectable/credible to anyone outside the Corbyn camp is the idea that by merely “closing loopholes” the many billions of pounds that he claims this will secure will be, e.g.

        It’s absurd to presume that something so simple will work to the extent claimed, or that something so superficial has simply never been tried, advocated or failed before. Just as it is absurd to treat these criticisms as merely some kind of smokescreen.

      • I don’t think anyone disputes that its desirable to tighten up on tax avoidance. As to “using the proceeds to build homes”, there is no logical reason why the amount of tax recouped from tax fiddlers has anything to do with how much extra we should spend on housing (also a desirable objective, which everyone supports).

        The idea pushed by politicians of all parties, namely that “we’ll collect £X of extra tax from source Y and spend it on Z” has great popular appeal. It’s almost always nonsense.

  5. Lyn Eynon says:

    Nobody is claiming that all the money owed/avoided/evaded in taxes or paid out in subsidies can be recovered (if you think otherwise, please share the reference) but the sums involved are now so large that recovering even a small proportion would be worthwhile. £1bn can build 5000 homes.

    Has this really been tried? Some measures have been taken recently but half-heartedly. HMRC staff have been cut (only partly reversed in the budget) despite evidence that recovered taxes exceed employment costs, and those accused of benefit fraud are pursued far more vigorously than tax evaders. Tax recovery has been offset by give-aways in areas such as inheritance tax.

    There is a strong case for a radical simplification of tax codes, to reduce both opportunities for avoidance and the economic distortions that result when tax planning dominates decision-making. Many loopholes reflect lobbying by vested interests or have ceased to be justifiable. The next Labour government should conduct a line by line audit and remove any exemption that is not clearly in the public interest.

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