[Steve_American]

Key economic policy organisations [the Congressional Budget Office] still claim that public spending undermines private spending.

Prof. Bill Mitchaell's blog today says =>
. . Note: Bill was a founder of MMT in about 1993.

Bill wrote: Tuesday, February 15, 2022
It is hard to imagine that so little progress has been made in dismantling the mainstream macroeconomics paradigm over the last decade within the institutions of government. We have had the GFC, and now, the pandemic to disclose what does and does not happen when governments engage in relatively large fiscal shifts, yet the fictional world that is taught in mainstream university programs and echoed in policy making circles keeps being rehearsed. While researching the literature on rates of return on public infrastructure spending for a project (book chapter) I am working on at present, I came across the starkness of the mainstream deception. They are still claiming that public spending damages private spending.

Bill links to about 8 studies that have shown that the opposite is true.

And, he again asserts that bank loans create deposits in the banking system as a whole, that then allow more bank loans. That US bond sales do *not* reduce the amount of money available to banks to make loans. Banks (of all advanced nations) can't, by law, lend reserves.
. . . [I'll say, that US bond sales can reduce the amount of corporate bond sales, but how important is that? Also, because the deficit spending always happens about 1 to 2 weeks before the off-setting bond sales; the deficit spending has already added to the incomes of people and corps so they have more money to buy corp. bonds. If you don't know the time relations then don't doubt me, blame those who taught you lies.]

Bill concludes: Conclusion

Organisations such as the CBO continue to run the mainstream line and influence government policy adversely, as a consequence. While the report analysed here was written in 2016, more recent material published by the CBO reveals they are still pushing the line that public spending damages private spending.

It remains a long haul to change this institutional inertia.

http://bilbo.economicoutlook.net/blog/?p=49226

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