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According to my vita, my first paper for the Levy Economics Institute, “Unemployment, Inflation, and the Job Structure,” was first published almost exactly thirty years ago, in May 1995.[1]  It was a categorical dissent from the micro-market framework, dominant then and still, of mainstream economics. The abstract reads: In this working paper, James K. Galbraith rejects the analytical construct within which many economists currently operate – that is, the construct in which, in the extreme, macroeconomic behavior is identical to the behavior reflected in microeconomic demand and supply curves.  He rejects it on the theoretical and practical grounds microeconomic categories (supply, demand, prices, quantities) “have little bearing on important policy questions.” The markets that have a bearing on policy either are asset markets (for which the rules are dramatically different from those for flow markets) or are not really markets at all, but rather a set of deeply structural social relations. I mention this not to exaggerate my role but to illustrate how the Levy Institute has nurtured, over four decades since its founding in 1986, critical alternatives to the entrenched 18th century worldview of academic economics. Over the years, Levy has offered a home to major intellects otherwise shunned – Hyman Minsky, Wynne Godley, Jan Kregel. It has fostered entire movements that would otherwise have had little institutional foothold… Read More

What if Household Production is recognized as a necessity? Imagine if unpaid work done at home—cooking, cleaning, childcare, eldercare[1]—were recognized as part of basic needs as, for example, a minimal quantity of food and clothing? Would it change how much poverty we find? An upcoming study by the Levy Economics Institute suggests it absolutely would. The study augments the traditional poverty line by considering the minimal time required for unpaid work. Families that do not have enough available time to set aside for unpaid work requirements will have to purchase market substitutes to maintain a budget reflected in the traditional poverty line. Adding the cost of such market substitutes to the standard poverty line results in a time-adjusted poverty line which underpins our flagship metric the Levy Institute Measure of Time and Income Poverty (LIMTIP). Through a series of studies, we have developed LIMTIP estimates for Argentina (2005), Chile (2006), Ghana (2012–13), Korea (2009), Mexico (2008), Tanzania (2011–12), Turkey (2006), Ethiopia (2015), and South Africa (2015).   We estimate LIMTIP for the United States for the first time and the measure reveals that poverty in the U.S. is far more widespread than conventional, official poverty measures suggest, and in fact exposes inequality across multiple dimensions: gender, race, class, and family structure.   What is Time Poverty — and Why Does… Read More

There has been a lot of discussion about the birthright citizenship clause of the 14th Amendment recently. But there is another little-known clause that says that “the validity of the public debt of the United States, authorized by law … shall not be questioned.” In this Roundtable discussion, Institute President Pavlina R. Tcherneva discussed how COVID relief was the most recent teachable moment about how the government pays for any federal program. The US embarked on wartime-level spending in just 12 months under both Republican and Democratic administrations and clearly demonstrated that the US government is self-financing and does not depend on borrowing or wealthy taxpayers to fund its expenditures. Elon Musk’s discovery of the so-called “magic money computers” shone light on how the US financial architecture was designed precisely to give the government monopoly powers over the issue of the currency, to ensure its solvency, and to guarantee the full faith and credit of its debts. Government payments are typically made via electronic means by issuing electronic payments on an as-needed basis, yes ex nihilo or “out of nothing”. As a practical matter, it is virtually impossible for the government to run out of cash. The drastic federal cuts by DOGE are politically motivated and have nothing to do with US government solvency. Discussion starts at 1h04min:

Originally appeared on Levy-affiliated project, the Economic Democracy Initiative. The spectacular government spending post-2008 and post-2020 appeared to upend the neoliberal logic of the past decades, enabling bold public action and opening the door to a more just and democratic social order. Specific policy choices stamped out this opportunity. These pivotal moments did, however, point to policy levers that can facilitate a breakthrough.   It was widely believed that the Great Financial Crisis damaged the core ideology of neoliberalism, and some hold that the response to COVID-19 finished the job. This view is mistaken. Instead, the extraordinary measures that pulled the global economy from the brink in both episodes not only revived neoliberalism, but also consolidated it. To see why, one needs to look at the nature of modern money and the use and abuse of public finance.  The 2008 crisis did shake the economics profession. Mainstream equilibrium models do not account for the role of money and finance and had failed to predict it. Hamlet without the Prince is how Jan Kregel described this state of affairs a few decades earlier. Studying a market economy without its principal actor – money – was a farce. Meanwhile heterodox traditions, drawing on Keynes’s seminal work on money, were able to explain the crisis and the chronic failures of capitalism: mass unemployment,… Read More

The taxpayer narrative is pervasive. It is present in the budgeting process, in the framing of government policies and in daily political life. Issues and debates about the public purpose are all cast in terms of the financials. The first thing asked about a proposed spending policy is “how are we going to pay for it?” and the first question for a proposed tax policy is “how much money will it raise?” A spending proposal that is not budget neutral is dead in Congress. A tax policy that is not expected to generate much revenue is irrelevant, one that generates less revenues than expected is a failure. Examples abound. Senator Warren’s Ultra-Millionaire Tax proposal starts with the correct premise that there is a very high and growing wealth inequality in the United States. She proposes to set a 2% tax on the wealth of households with $50 million or more in net worth. However, the effectiveness of the policy is not judged in terms of its ability to reduce wealth inequality but rather in terms of its revenue generating capacity: “this small tax on roughly 75,000 households will bring in $3.75 trillion in revenue over a ten-year period.” The impending Social Security insolvency is relentlessly pounded on the population, with proposed financial solutions to “save it” ranging from putting money… Read More

Otmar Issing can look back on a long and consequential central banking career. Even in his retirement he is still living the part, evaluating whether his successors at the European Central Bank are pursuing stability-oriented monetary policies to his liking. His most recent critique (“‘Living in a fantasy’: euro’s founding father rebukes ECB over inflation response” https://www.ft.com/content/145b6795-2d21-48c6-984b-4b05d121ba16) shows him on the wrong side of events and debates about sound monetary policy, again. Mr. Issing spent an eight-year stint at the Bundesbank as chief economist of Germany’s legendary central bank and retired guardian of European monetary affairs. Misled by M3 overshots that were the result of the Buba’s own rate hikes inverting the yield curve, Buba kept on hiking until it crashed newly unified Germany, and the ERM too. Recession-caused fiscal troubles then saw Mr. Issing’s Buba cheerleading pressures for fiscal austerity. These involved hikes in indirect taxes and administered prices that were distorting headline inflation upwards and delaying Buba easing (see https://www.levyinstitute.org/publications/on-the-burdenr-of-german-unification). The ensuing malaise in Europe was so pronounced that it almost prevented Mr. Issing from becoming a founding father of the euro. But the euro got lucky, courtesy of a last-minute push from America’s dot-com boom. And so Mr. Issing got his chance as the ECB’s influential first chief economist. Unfortunately, lessons from Germany’s debacle ten years earlier… Read More

Omicron is a reminder that the COVID-19 pandemic is still not over. This ongoing health crisis should act as a trigger for greater investments in public health in India. Public spending on health by the union government is still below 1 percent of GDP, though the estimate has increased from 0.2 percent of GDP in 2020–21 (revised estimates) to 0.4 percent of GDP in 2021–22 (budget estimates). Strengthening investments in the healthcare sector is crucial at this juncture, as another lockdown can accentuate the current humanitarian crisis and deepen economic disruptions. In India, the lockdown was announced on March 24, 2020 by invoking the National Disaster Management Act of 2005. As per the Seventh Schedule of the Constitution, healthcare is addressed at the state-level while interstate migration and interstate quarantine are in the Union List (entries 28 and 81), that is, responsibilities of the central government. While the lockdown helped to flatten the curve, an almost irreversible economic disruption resulted in many sectors. The National Statistics Office released the advance GDP estimates January 7, 2022, revealing that in the financial year 2021–22 (FY 22), India’s GDP growth rate will be 9.2 percent. In FY 21 it was 7.3 percent. However, this growth estimate is lower than that published by Reserve Bank of India (RBI) in December 2021, which was 9.5 percent…. Read More

The Levy Economics Institute of Bard College is pleased to announce it will be holding a summer seminar June 11–18, 2022. Through lectures, hands-on workshops, and breakout groups, the seminar will provide an opportunity to engage with the theory and policy of Modern Money Theory (MMT) and the work of Institute Distinguished Scholars Hyman Minsky and Wynne Godley. Intended for those who are introducing themselves to these approaches as well as those who are looking to deepen their understanding, the seminar will be of particular interest to graduate students, recent graduates, and those at the beginning of their academic or professional careers. Topics will include the history and theory of money, central bank and treasury operations, inequality and austerity, the job guarantee, MMT and developing economies, current debates over inflation, the Green New Deal, the stock-flow consistent approach to macroeconomic analysis and modeling, financial innovation and the financialization of the economy, cryptocurrency and central bank digital currencies, and more. The teaching staff will include well-known economists, legal scholars, monetary historians, writers, and financial market professionals working in the relevant topic areas. The seminar will be limited to 60 attendees. Admission will include provision of room and board on the Bard College campus. The fee for the seminar will be $3,000; a fee waiver is available for all those in need…. Read More

If the global financial crisis (GFC) of the mid-to-late 2000s and the COVID crisis of the past couple of years have taught us anything, it is that Uncle Sam cannot run out of money. During the GFC, the Federal Reserve lent and spent over $29 trillion to bail out the world’s financial system,[1] and then trillions more in various rounds of “unconventional” monetary policy known as quantitative easing.[2] During the COVID crisis, the Treasury has (so far) cut checks totaling approximately $5 trillion, often dubbed stimulus. Since the Fed is the Treasury’s bank, all of these payments ran through it—with the Fed clearing the checks by crediting private bank reserves.[3] As former Chairman Ben Bernanke explained to Congress, the Fed uses computers and keystrokes that are limited only by Congress’s willingness to budget for Treasury spending, and the Fed’s willingness to buy assets or lend against them[4]—perhaps to infinity and beyond. Let’s put both affordability and solvency concerns to rest: the question is never whether Uncle Sam can spend more, but should he spend more.[5] If the Treasury spends more than received in tax payments over the course of a year, we call that a deficit. Under current operating procedures adopted by the Fed and Treasury, new issues of Treasury debt over the course of the year will be more-or-less… Read More

Lekha Chakraborty (Professor, NIPFP, and Member of Governing Board, International Institute of Public Finance, Munich) Climate change is about risks and uncertainty. How well the monetary policy stance can incorporate such risks and uncertainties is questioned by many economists. There is a broad consensus among economists that fiscal policy is capable of dealing with the climate crisis but monetary policy is not, due to the latter’s lack of tools. It is widely acknowledged that public finance commitments are essential to lowering carbon emissions. Public finance interventions—through taxation to reduce carbon prints or through public expenditure to support green energy and technology—have proven to be effective in reducing emissions. However, such empirical evidence is absent in the case of monetary policy. India was the first to integrate a climate change criterion in its inter-governmental fiscal transfers. The macroeconomic policy channel of these “ecological fiscal transfers” works through the prioritization of public expenditure on climate change commitments by subnational governments, to make a “just transition” towards a sustainable climate-resilient economy.

November 1–November 2, 2021 The onset of the COVID-19 pandemic and the subsequent losses in lives and livelihoods are looming over Sub-Saharan Africa. As in the rest of the world, the pandemic has exposed the enduring inequalities and injustices in stark terms, including those based on gender and those intersecting with gender, such as economic deprivation. There is a growing realization that collective action to overcome the long-term and ongoing challenges requires greater engagements between researchers, civil society organizations, and policymakers. Accordingly, we are organizing a two-day virtual workshop that will feature research and policy discussions that address economic aspects of gender inequalities in Sub-Saharan Africa from various angles. Part of the research to be presented is work conducted by scholars at the Levy Economics Institute of Bard College in collaboration with scholars from Sub-Saharan Africa with the generous support of the Hewlett Foundation. The workshop will also highlight recent research by leading scholars in the region. The presentation of research will be accompanied by a free-wheeling exchange of ideas between scholars and participants. A policy roundtable with a select group of prominent members of the academic, policymaking, and civil society communities will conclude the workshop. The workshop will be held between 13:00 and 15:30 (GMT) on November 1, 2021 and between 13:00 and 16:00 (GMT) on November 2, 2021…. Read More

Research Associate Lekha Chakraborty, recently chosen to join the governing council of the International Institute for Public Finance, was interviewed for an Onmanorama podcast on the question of gender budgeting and the advantages of centering care work. Chakraborty argues policymakers in India should prioritize integrating a comprehensive care economy policy package in macroeconomic management, and laments the separation (disciplinary and otherwise) between questions of gender and of macroeconomics. In the context of the ongoing pandemic, she advocates sending monthly cash transfers to women engaged in otherwise unpaid and undervalued household work. [iframe width=”450″ height=”253″ src=”https://www.youtube.com/embed/cG-C4ECX11E” title=”YouTube video player” frameborder=”0″ allow=”accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture” allowfullscreen></iframe]