Episode 18 – The Job Guarantee is Core MMT with Ellis Winningham

Macro N Cheese – Episode 18 

Episode 18 – The Job Guarantee is Core MMT with Ellis Winningham 

01 Jun 2019 

Ellis Winningham [intro/music] (00:00:01): 

And it says, well, you know, a surfer can be employed to deal with water pollution. Well, while he’s out there surfing, he can be taking the samples and turning them into the office before he goes home every day. But he’s getting paid to surf, you see, but he’s also serving that social purpose. 

Ellis Winningham [intro/music] (00:00:18): 

If you strip the job guarantee out, MMT is just talking about how money works. When you try to apply to macroeconomics, you get a whole new ball of wax. If you have questions about things that have to be dealt with in theory, and then it has to be transformed through policy in practice. 

Geoff Ginter [intro/music] (00:01:08): 

Now let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine. 

Steve Grumbine (00:01:34): 

All right, everybody. It is Steve with Real Progressives. Ellis Winningham is going to be joining me here momentarily. Before we get started, I want to say thank you all for supporting us through everything we’ve been through. Folks, the 2020 election season is going full force. Every single Democrat under the sun is announced to try and throw the sun off from an actual Progressive winning this thing.  

Folks, we need you dialed in. We need you supporting us, and we need you paying attention to macroeconomics. And without further ado, I’m going to bring on the Miggity Mack, Ellis. Winningham. Welcome to the show, sir. 

Ellis Winningham (00:02:11): 

Hello, Steven. 

Steve Grumbine (00:02:13): 

So tonight we’re going to talk about that federal job guarantee. We got people that don’t quite get yet exactly why the job guarantee is not only vital to a fully functioning, fully efficient, optimized economy, but they also don’t understand why a job guarantee even matters. They haven’t quite figured out.  

And I put that on us that we haven’t maybe explained it properly. Maybe we haven’t given them enough information, but needless to say, people have not quite gotten the idea that you can’t divorce the job guarantee from MMT. It is kind of like the crown jewel of optimizing a modern money economy. What do you say that Ellis? 

Ellis Winningham (00:03:00): 

What we mean to say is the job guarantee is intrinsic to MMT. You can’t extract it, take it out and have a complete theory. You understand what I mean there? 

Steve Grumbine (00:03:11): 

Absolutely. 

Ellis Winningham (00:03:13): 

It’s incomplete. And you know, the reason why is because you need a price anchor and you need an automatic stabilizer. And I guess it’s not so much that the activist community has failed to explain the job guarantee correctly, but more or less, it’s fair to say that the activist community is doing its job.  

You know, it’s talking about the political aspects of policy; in this sense, the job guarantee is policy. You know, you have to run it through Congress. You have to vote on it. The president has to sign it, you know, but the thing is, is that the job guarantee has a duality about it. So it’s not just policy, it’s not mere policy.  

It’s actually part of the theoretical framework of MMT. And it’s not something that can be extracted. So it’s not really a choice. You don’t have a choice. And we’ll get into that. You know, I can just say it all right now, and then we’d have no show. You know, generally the job guarantee is far more than just mere policy. Okay. It’s intrinsic to MMT and you can’t take it out. 

Steve Grumbine (00:04:25): 

So we see a lot of people coming around saying that they would like very much to be able to see a UBI. And you’ve seen this push for UBI from a lot of the folks that haven’t really paid attention to MMT, haven’t really paid attention to the economics or the history of why a UBI is no bueno. Explain to us what a job guarantee is. Give the quick version. And then we can go into the deep dive. 

Ellis Winningham (00:04:55): 

Okay. Job guarantee basically creates a pool of employed workers. In other words, what the government does is it looks at the entire labor force and all those people who are willing and able to work, who want a job, but don’t have one. The government buys them up. It just buys all that labor up and pays it a fixed wage.  

And in that labor the work’s in the community doing community work that’s determined locally. And in an economic expansion, which is what we mean to say is when the economy is growing, even though that’s not a good term, but for the sake of familiar terms, when the economy is doing really well, as it’s getting better and better, better, more and more workers will leave the job guarantee for private sector work.  

Private sector employers are allowed to hire from that pool to help with production demand, right? And should there be a recession, downturn, workers that lose the job in the private sector can migrate right into the job guarantee pool seamlessly, just go right into it. So it creates a buffer stock of employed workers.  

Today, we have the very same thing going on right now, which is very interesting when you hear these people “we don’t need a job guarantee, we don’t need a job guarantee” as policy aspect. The fact is that right now there’s a buffer stock going on and it’s been going on for 40 years. Okay. It’s a pool of unemployed labor.  

What we do the way we manage the economy right now is if there’s a downtown, workers lose the jobs in the private sector and they just become unemployed, right? And in an expansion capital, right, business leaders, businesses, they are able to hire from the unemployed workforce to meet production, you see, it’s the same thing except, in this case the job guarantee proposes to actually employ these workers, put them to work, put them to good use and pay them a wage.  

That’s really the difference there, but in macroeconomic circles this job guarantee beats the current system hands down. We abolish involuntary unemployment. Never again with a job guarantee, never again will you hear someone say: “I’ve lost my job and I cannot find another one” ever. It’s abolished forever. 

Steve Grumbine (00:07:44): 

You know, the thing that I like about the job guarantee also is we’re redefining work. We’re not just talking about, I think a fundamental difference in what regular people that don’t do this every day, don’t read about it every day. The thing they see is they’re just thinking about jobs like, you know, what do we have at our disposal today?  

And they don’t consider care work. They don’t consider taking care of an elderly parent. They don’t consider volunteer work that is currently uncompensated that could be compensated. They don’t think about a lot of the nonprofit work. I mean, things that we’re doing right now, these sorts of things could fit right under the job guarantee as well.  

There’s so many things that we do that we take for granted that are really compensable and should be compensated for, but today’s model doesn’t allow for that. And what we’re suggesting, I believe, with the federal job guarantee is not only providing a buffer stock of employed people, but we’re also providing an escape hatch for people trapped in really bad situations, both at work, or maybe people that have not had a job in 30 years and have been stuck in bad relationships, bad marriages and can escape and get into a job guarantee with a living wage, with federal benefits, you name it.  

There’s so many things to this, that from a personal standpoint, I say, wow, I wish this would have been in place back in 2007, 2008, 2009. You imagine how different the world would be right now had we done such things? Well, we’re probably staring down the barrel of another situation in the not too far off future where the very, very nature of the crash previously, it’s going to show its face in the form of the stock buyback bubbles and the student debt bubbles and all the other things that they’ve screwed the economy with, where they’ve taken private debt to the hilt.  

And there’s no more credit worthy people. And all of a sudden that bubble is going to go, boom, and we’re not going to be prepared because we have yet to put this job guarantee in place. 

Ellis Winningham (00:09:53): 

We are, as you mentioned in the beginning of your commentary, we are redefining work and problem that we have here as far as work is concerned, especially in America, is we have this all pervasive ideology, this patriotic idea about what work is – part of it is a religious perspective. You know, anyway, this ideology basically says that if you’re not working for a private sector employer, clocking in and receiving a wage, it’s not valid, useful, productive work, right?  

And then you add on the right wing, which is really strange because they want people to work. But then you get a job in the public sector with government or whatnot, that’s bad because the government can’t create jobs. Government can’t do anything, right? That’s not valid, useful, productive work either.  

It’s only what can be found in the private sector that’s valid and useful and productive. So people have this market driven idea about what jobs are, even the left. Their thinking is infested. It’s tainted with this nonsensical ideology that says a person gardening is not really working. It’s not valid, useful, productive work.  

And so you hear the automation argument, you know, jobs, you know, private sector type of jobs that you’re aware of today that you’re familiar with may not be there, but there will be other jobs to replace those. What’s so hard to understand about that anyway? I’m pretty sure you’re going to get me on the automation thing sooner or later, and then my blood pressure goes . . . 

Steve Grumbine (00:11:41): 

Let’s see if we can get your blood going now. Right? Cause one of the, one of the folks made a great point because I deal with it as well. You deal with it. We all deal with it. That’s horrific. But the fact is is that the UBI clan comes rolling on through trying to tell us, they try and scold us. “Oh, you know, you Progressives shouldn’t be worrying about trying to make work.”  

They always try and come up with some slur about making it “make work” or you know, that we’re forcing them to do work for the man, work for the man. Yeah. But the thing is, is that we talked originally about a price anchor. UBI has no price anchor whatsoever. One of the things that I often use as my explainer, if you will, is the idea of school vouchers.  

We all hated school vouchers as Progressives. We all fought hard against school vouchers. You know the Mitt Romney’s of the world wanted school vouchers. School voucher is in essence a UBI. And what ends up happening is because everybody gets the school voucher, the rich still end up going off to the rich schools and the poor kids still end up in the poor schools.  

And the teachers that could teach for the rich kids still teach for the rich kids and the poor kids still get the shit teachers. And it’s just the way it goes. There is no loop around other than to fund these things the proper way. Just sitting there throwing this stipend at everyone is not the answer. And it’s status quo as Pavlina would say – it is pure status quo. Well, as, as sir, Ellie would say . . . 

Ellis Winningham (00:13:13): 

Yeah, I’ve said that like for years, too. It’s status quo, status quo. It’s a never ending status quo train. 

Steve Grumbine (00:13:20): 

There’s nothing there to it. And the other thing, and this is probably in my opinion, the most important part of this, and I felt this firsthand. You get this unemployment check and all that unemployment check is, is, I don’t know, 500 bucks, something like that. 500 bucks might get you to a couple job interviews and gas money.  

It won’t pay your electric bill. Certainly isn’t going to pay your mortgage. It won’t pay your car payment and it probably won’t pay your child support. So at the end of the day, after they garnish your wages and you’ve got next to nothing there, that right there is cash. That’s just throwing cash at the situation.  

What people need are the actual services. They actually need things – the resources. They need the real resources that cash provides them. And by providing them a job and setting the benefits with that job, number one, first of all, they’re producing something. The other thing is, is that they are putting a line in the sand with the man and saying, “Hey man, you want me over there?  

You’re going to have to sweeten the pot. You’re going to have to do something different to pull me out of the nicer situation serving my community.” It gives them a chip. It gives them something to put on the table to say, “Hey, I don’t have to work for you. I don’t have to put up with your bad management.  

I don’t have to put up with your bullshit.” I mean, there’s so many things I can’t even fathom why someone would want a UBI when the UBI itself doesn’t guarantee you anything. Nothing, nothing at all. 

Ellis Winningham (00:14:55): 

It guarantees mass consumption continues. 

Steve Grumbine (00:14:57): 

Yup. 

Ellis Winningham (00:14:57): 

It guarantees that the gross domestic product, national income will continue to redistribute to capital. It guarantees the status quo will remain such. People think that it will end poverty or bring about an end to poverty, or help bring about an end to poverty. And the answer is: it won’t. And the reason why is because these people don’t understand even the basic fundamentals of how a society functions.  

It’s almost like they don’t know what civilization is. Okay. If you, if you consider for a moment, are we hunter gatherers? No, we are not. Okay. That’s a lower form. That’s like before civilization. Okay. You just got little tribes of individual groups going around hunting and gathering. They’re hunting and they’re gathering.  

What are they doing? They spend all of their labor energy from sun up to sun down trying to find food, trying to cloth themselves. Right? And these are, we’re talking about individual efforts doing it for themselves only, not for any massive group. It’s just for a little group, a little tribe; this is my family and that family over there and then taking care of the family.  

So you’re going out and spending all of your labor power every day working to find the food and whatever and feed yourself and your kids. Right? But then when you get to civilizations, level of civilization where massive goods and people decide to cordon themselves off into separate units called nations; and they draw imaginary borders around parts of the earth and they call it a nation and they give it a name.  

Okay. When they do that, okay, you have two choices. You can either be hunter gatherers, which means you don’t really have a society to speak of, or you can have a society; but if you’re going to do that, and you’re going to enclose people in borders and create laws and have central government, all this stuff, and there’s all these laws; and especially if you’re going to have a capitalist framework, you gotta have private property and all that.  

So, you know, you can’t have little clans wandering through your backyard shooting rabbits. It’s not going to work. What has to happen is society has to devise a way to produce enough to feed and cloth and take care of the basic survival needs of the entire social structure. Okay? So it’s called mass production.  

The whole point is in a society, you go from going out and finding the food yourself and killing it and skinning the animals and making your own clothes. You go from doing that to expanding your labor power serving society. You are employed by business. You help produce. And then those goods are sold to society, to everybody else, and everybody provisions themselves in that manner in mass production.  

So what I’m trying to tell you is any modern monetary economy operates based on production. And to produce, you need human labor. It will always be required. We’re not advanced enough yet where automation can take over and even if it did, that would only mean that you have a market view of what jobs are useful, valid, productive jobs are.  

And if that’s the case, you’re flat wrong, your thinking is very cloudy. Okay? And so naturally you’re going to assume that C-3PO and R2-D2 will take over any day now and there’ll be nothing for humans to do. That’s crazy. They’ve said this for centuries, people have said this for centuries and for centuries labor has been redistributed.  

It’s been redeployed to some other useful endeavor and it will a thousand years from now, right? You need humans. Humans have to produce. They have to be involved in the production process. That’s how an economy works. But since we’re talking about 2019 right now, we need humans producing. And right now what you see is as far as the US is concerned, it’s an import economy, a little is produced, okay.  

We’re importing everything. There’s a vast market place of imports. There’s a lot of speculation on Wall Street, speculation economy going on. There’s no real production economy going on. The pistons just aren’t pumping. But when they do okay, automation will take care of some of it, but not all of it.  

All right. And it doesn’t matter; even if it did, because the market doesn’t get to define what a valid useful job is. That’s insane. The reason why it’s insane is because the idea of a private sector being an actual real thing is nonsense. There is no such thing as a private sector in real terms. There’s no such thing as a government sector in real terms, either.  

There’s just one nation. If you disagree with that, then you have show me how Walmart is not part of society. How CEOs are not part of US society and valid US citizens. And how is it that the average worker is somehow not US citizens. It’s insane. We’re all one people. And we do various different activities.  

We’re all engaged in various different activities. We simply apply the term sector to various areas so that we can separate things out so that we can do analysis and accounting. It doesn’t mean it’s real. So that’s a major problem we do is that people think. [inaudible] That would be something, wouldn’t it?  

There’s no private anything, there just isn’t. There’s society. That’s it. There’s the US, there’s the UK, there’s Australia. Okay. That’s all there is. 

Steve Grumbine (00:20:52): 

So Ellis, can you talk about what it will look like on a local level? It’s been mentioned that care work. What if you don’t want to participate in the jobs being offered? What if the federal job guarantee designs a job you like if you’re an artist or a local news journalist with your own YouTube show, I don’t want to be told how to do my job, or I’m not being considered.  

I’m not being productive enough. How will the administration be handled? And I know it’s kind of a TBD moment there because we haven’t really, you know, we don’t have the law there. So it’s subject to whoever gets it. But from an MMT perspective, let’s just answer that as well. 

Ellis Winningham (00:21:37): 

First of all, it’s a micro question. It’s inapplicable on the macro level. All right. So let’s be clear about that. It’s not something we should be talking about at this time, but to answer the question, to answer it. The job guarantee basically offers a job to anyone who’s willing and able to work who wants a job.  

Okay. You can set your own hours. You can set your own schedule. All right. So now if someone comes into the local job guarantee office and signs up, all right, they’re going to ask you basically a bunch of questions about yourself. What are your talents? What are your likes? What are your dislikes?  

What do you like to do? Ideally, a job will be tailored around that person, their strengths. Okay. Now, logically, depending on which strategy is used, are we’re going to use the social enterprise models proposed where we have nonprofits that do the job creation and the administration, or we’re going to have a local government and make it a democratic thing?  

Who knows. We don’t know because we haven’t implemented this. There’s no way to really answer that question. It’s all hypothetical. But one way to answer the question, yes, completely 100% possible to have a job guarantee set up to where, like I said, like I’ve used many times before. In Los Angeles, for instance, the City of Los Angeles, might operate the job guarantee [inaudible] and the local government let’s say, and it says, well, you know, a surfer can be employed to deal with water pollution.  

Or as Bill Mitchell would say to do a water safety class, you know. Well, while he’s out there surfing, he can be taking the samples and turning them into the office before he goes home every day. So he’s getting paid to surf, you see, but he’s also serving a social purpose. You know, he or she is collecting the water sample for pollution [inaudible].  

Maybe that’s a big deal for Los Angeles, but would this be a job that would be offered in Dubuque, Iowa? No. Because there’s no ocean there. So logically, if you’re a surfer and you were born in Southern California and you moved to Iowa and you’re an adult now, and you can surf really well and you miss it, you could always say, well, you know, there is a job guarantee option.  

You know, maybe it’s time I move back home. I don’t want to be told that I’m not doing my job okay. Well, you know, the answer to that question is you’re going to be expected to produce. You’re going to be expected to do something. But if you’re failing at the job, if it’s not something that you’re doing well with, you don’t have to, it’s not like private sector work.  

You don’t have to fear the boss man. Oh, well, I just don’t think I fit in with this particular job. You go to the person and say, I just don’t think I’m cut out for this job. Go to the administration and they will find you a new job. It’s really that simple. 

Steve Grumbine (00:24:35): 

Well, that answered two other questions that came up. 

Ellis Winningham (00:24:38): 

Okay. Usually I anticipate it because, you know. I mean, you know, I do this. I teach this stuff. So, I mean, I know that they’re coming sooner or later. 

Steve Grumbine (00:24:50): 

Here’s the next question. And this is very important one. I think this is one that you would like to take on head on, and that is why is the job guarantee considered a core part of Modern Monetary Theory? 

Ellis Winningham (00:25:04): 

Okay. It’s real simple. The reason why it is, is because any useful macroeconomic theory is going to have to have some kind of price anchor because the problem is, is if you understand economic theory, okay, I’ll just, I’ll just use these channels for the sake of facilitating and understanding with the audience.  

In macroeconomics there’s this problem called the Phillips curve. Okay. It’s been a problem for many, many years. And basically what it says is that unemployment is an inverse relation to the inflation rate. So what that means is there’s a trade off. We can’t achieve a point where every single person who wants a job can get one because before you get there inflationary pressures will rise.  

And so it happens that bottlenecks do occur in sectors. As you know, if we were doing Keynesian pump priming of the economy, let’s say, if we were doing that, we’re just pumping money into the economy hoping that spending will increase and it does, and jobs being created right and left, as we get closer and closer and closer to the point of true full employment, you’re going to get inflationary pressures building up because sectors just cannot keep up with that kind of demand.  

Certain sectors are going to lag behind other ones. This is a problem. The orthodoxy has their own way of dealing with it – it’s called NAIRU, non-accelerating inflation rate of unemployment. Okay. And basically when you take that out of theory and you put it into practice, and you translate it into policy, into practice.  

It basically operates as a buffer stock of unemployed people. Okay. So what the orthodoxy does, Orthodox economics, what it does is it lets the business cycle go into a downturn. And when that occurs, it allows workers who used to work in the private sector, it allows them to lose their job, but then they stay unemployed.  

They don’t receive a paycheck. They don’t get anything. And the stabilizer is the orthodoxy depends on things like food stamps, welfare payments, and unemployment insurance. You see? So as the downtown starts and the federal deficit automatically rises, just because you’ve got these unemployed workers now applying for food stamps and applying for TANF, applying for welfare, they’re applying for unemployment insurance.  

So the deficit begins expanding. So, there’s your little automatic stabilization. The job guarantee is MMT’s response. Where the orthodoxy has NAIRU, got it, MMT has NAIBER (non-accelerating inflation buffer employment ratio). Okay. It has a different system. It has a different thing going on. It has a price anchor and an automatic stabilizer built into one package, into the theoretical framework of MMT itself.  

Okay. So like the other day I asked someone, I said, bright, I made a post. And I said, bright, could someone please express universal healthcare to me in an equation? And you know, people, you know, they’re like, how do you express universal health care in an equation? Well, I can do it with a job guarantee.  

Okay. So that’s the point is that the job guarantee we’ve chosen to give MMT’s price anchor, an automatic stabilizer, a familiar name the public would recognize called the job guarantee. And the reason why is because the price anchor and the automatic stabilizer for it to work, to attenuate inflation, and to have a nominal price anchor against inflation; for it to work, it just so happens that you have to add human labor.  

And then the currency issuer has to buy all the labor that the market doesn’t want to pay a fixed minimum wage, a fixed wage. That fixed wage is a nominal price anchor. There it is right there. That’s the anchor. Everything now is tied to that, which means tying the economy to labor. We’re actually anchoring down the price level so that it doesn’t go way out of control, you know?  

Okay. Rather than doing what the orthodoxy does in theory, which is proposing to allow people to just fall off the face of the earth in unemployment and suffer with no income and struggle. We’re proposing instead to just buy up the labor power and put it to use in the local community, but what’s actually going on is the job guarantee is a price anchor as part of the framework of MMT.  

It’s a necessary price anchor and automatic stabilizer that you cannot remove. Because if you do, you don’t have an answer to the Phillips curve. You don’t have an answer to this stuff. Okay. So you have an incomplete theory, right? You got to complete it and just so happens, MMT completes it with this thing we call the job guarantee.  

Okay. What it does is it literally eliminates the Phillips curve entirely. It takes it completely out of play. It replaces the Phillips curve with something sensible, sensible price anchor that doesn’t harm anybody and has a more positive impact on production and output. You can’t take that out of MMT.  

Alright. Let me just put it this way. You can operate . . . can you operate an economy without a job guarantee? Yes, you can. Will it function correctly? No. Okay. So the reason why is because production, we need human labor to produce. Economies they operate based on production. Inflation is a real issue.  

Okay. So what we have to do is we have to anchor the price level. It has to be done. It has to be part of the theory. It’s no different than Einstein working on general theory of relativity and looking at energy and saying, okay, if the energy hits mass, spacetime, Oh the hell with it. We don’t have to deal with spacetime.  

I have a complete theory and just pulling spacetime out of it. It wouldn’t make any sense. It’d be an incomplete theory. It’s like taking a job guarantee out of MMT is the same thing as Einstein stopping three quarters of the way through his field equation and saying, “that’s good enough.” You can’t do that.  

And so people don’t realize that the job guarantee is actually not a mere policy. It’s part of the framework of MMT. It’s part of the macroeconomic aspect. Like Steven Hail uses this really good phrase and it’s called “MMT informed macroeconomics.” I love that. I’m using it now myself because I just adore the phrase.  

It’s so true. MMT informed macroeconomics depends on a job guarantee to make macroeconomics a valid theory – to make it real. And if you strip the job guarantee out, MMT is just basically talking about how money works. It’s gotta be applied to macroeconomics. When you try to apply it to macroeconomics, you get a whole new ball of wax.  

You have questions Things that have to be dealt with in theory. And then it has to be transformed to policy [inaudible]. 

Intermission (00:32:41): 

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Steve Grumbine (00:33:30): 

Warren Mosler, when he and I talked, one of the things that he really struck a nerve with on me was the idea of the initial unemployed person coming from the result of a tax – the tax creating unemployment. There was no unemployment before the tax. Suddenly there is unemployment because of the tax. 

Ellis Winningham (00:33:50): 

There’s no unemployment denominated in that particular unit of account. For instance, when America switched over from, won the revolution and switched over from the use of pound sterling to its own currency, the US dollar or what not, the moment the government imposed taxation, suddenly had people unemployed seeking the US dollar you see, not the pound sterling.  

So now you have unemployment, and that’s all a function of tax right at the very gitgo – it’s to unemploy people. The reason why the government wants to unemploy people is because it wants to provision itself [inaudible] in order to produce goods and services that it can then buy and provision itself with. It wants people to go out and actually do something to earn the money – production. Sorry, I didn’t mean to interrupt. 

Steve Grumbine (00:34:38): 

No, no, not at all. 

Ellis Winningham (00:34:40): 

It’s a very important point. And had I let you go, I would have ended up . . . 

Steve Grumbine (00:34:45): 

But the idea, I want people to see it at a base level for themselves, right? They wonder why we tax. They wonder why, you know, the job guarantee is very core to MMT and they wonder why this ball of stuff equals MMT. And Warren will take you back every single time to the initial imposition of the tax.  

And that this completes the circle of life, if you will. You forced the tax; you created the problem by issuing the tax. You solve the problem by implementing the job guarantee. 

Ellis Winningham (00:35:17): 

You imposed a burden and then the burden needs to be lifted, otherwise a person will suffer. 

Steve Grumbine (00:35:22): 

That’s right. 

Ellis Winningham (00:35:23): 

And at some point you want to avoid the suffering. You need to pay the tax. How are you going to do that? Well are you going to have to go out and work or find a way to earn that money, meaning you have to sell something to the government, either it’s going to be your labor power, or it’s going to be goods, services that you produce; but you’re going to have to do something.  

Otherwise that burden will not be lifted. That’s what drives the demand for the US dollar, for the Australian dollar, for the pound sterling, for the Canadian dollar, the Japanese yen. 

Steve Grumbine (00:35:48): 

So this is an important point. How can the job guarantee possibly be necessary for MMT when you tell us that MMT is already here, it’s a description of how it works, right? 

Ellis Winningham (00:36:01): 

Yeah. And a job guarantee describes how production works, how a price anchor works in a production based economy, but functions properly, how it’s supposed to function. 

Steve Grumbine (00:36:11): 

That it. And there in which lies the rub. People don’t realize that all this pain and suffering you’re feeling today, all this pain and suffering that the average American feels today is because we have an economy that is not functioning properly. 

Ellis Winningham (00:36:26): 

You have an economy that doesn’t have a valid price anchor. 

Steve Grumbine (00:36:28): 

There you go. 

Ellis Winningham (00:36:29): 

And it’s using an inappropriate buffer stock to attenuate potential inflation, to stave off potential inflation. 

Steve Grumbine (00:36:35): 

Unemployed people. 

Ellis Winningham (00:36:37): 

Yeah, exactly. So if you want to look at it from the moral perspective, you’ve got people suffering and dying. They’re drafted to fight in the war against inflation that doesn’t exist to prevent it. If you want to look at it from a macroeconomics perspective, you’ve taken human labor and you set some in reserve that’s not being used.  

It’s unemployed, and therefore it has a market value of zero. And since it has a market value of zero and nobody is saying it . . . that’s how the orthodoxy staves off inflation. Alright, well the job guarantee since you asked, how can it be intrinsic? It’s just a description. Okay. Well, let me describe for you the job guarantee in mathematical terms and we’ll use Bill Mitchell to do this.  

BER equals JGE divided by E. That is the job guarantee expressed as a description. Do that with universal healthcare. Do that with tuition free university. I dare you. You can’t that’s because the job guarantee is not just policy. It’s not just mere policy. It’s an integral part of theory. Just pull it out.  

You can’t. You can’t do it. Alright, so that’s the descriptive descriptive. Then the job guarantee is not necessary, but I can describe the job guarantee. BER equals JGE divided by E. What does that mean then? Well, what it means is the buffer employment ratio. Okay. When government uses fiscal policy to adjust the buffer employment ratio up and down, guess what happens?  

JGE that’s the job guarantee employment pool divided by total employment in the economy, the ratio goes up and down. So when the government adjusts using fiscal policy, the BER, the buffer employment ratio, as it goes up and down, so workers transition back and forth between total employment and job guarantee employment. Goes up and down. Is that an actual function? It’s not policy, not policy. Ok? Steve? 

Steve Grumbine (00:38:45): 

So if you take that away . . . 

Ellis Winningham (00:38:48): 

MMT doesn’t have a buffer stock, at least the orthodoxy does. MMT wouldn’t have any response to the Phillips curve. So, well, then you would have people like Thomas Palley instead of arguing blah, blah, blah . . . . . the way he does, you know, instead of doing that, he would just be pointing out endlessly every day.  

MMT does not have a satisfactory response to the Phillips curve. He just keeps going on and on and on. You know, you’re just opening the door for these people. You discredit something that’s actually a description of reality that needs to be applied to macroeconomics, to create macroeconomic reality, which is what MMT is. Without the job guarantee, you’ve got problems. 

Steve Grumbine (00:39:34): 

When I talked to Bill Mitchell, laid it out, he said, you know, we named the book “Macroeconomics.” We didn’t name it MMT. He goes, because this is macroeconomics. It just is. And so the idea here, when he named it Macroeconomics, then I talked to Randy Wray offline as well. And he said the same thing, Ultimately, what they were gunning for was just that, Hey, don’t think of our economy is MMT.  

Don’t think of it as anything else other than the economy, the macro economy. And if you think about that, what is missing? When the crash hit in 2009, taking it to a micro level, to some degree, people suffered massively. People were out of jobs. Were losing jobs by the millions each month. 

Ellis Winningham (00:40:20): 

Take that on the macro perspective, mass unemployment. 

Steve Grumbine (00:40:24): 

But I’m talking about for the people, individuals that are wondering how come this isn’t working, right? 

Ellis Winningham (00:40:29): 

Each individual . . . for each individual that’s wondering why it’s not working . . . 

Steve Grumbine (00:40:33): 

Exactly. 

Ellis Winningham (00:40:34): 

It’s because the economy right now does not have an adequate automatic stabilizer, okay, to deal with this ridiculous business cycle. Even if this business cycle is self-induced by the 1% conspiracy, even it literally, even if they’re deliberately creating recessions to reconfigure the economy, to keep suppressing wages and reconfigure it to underemployment and keep pushing GDP to themselves.  

Even if that’s deliberate, which it is for the most part, even if that is deliberate, you still have to have some sort of automatic stabilization. You have to have a place for these workers to go. And there’s nowhere for them to go except the unemployment line. And that’s the reason, major reason why the economy is not functioning properly.  

Also, because clearly we’re not allowing the currency issuer to issue currency. I mean, we are, but we’re not allowing the currency issuer to spend enough for anything. We’re constantly attacking – it’s deficit [inaudible], you know, like that really matters. Okay. The deficit does matter. Okay. But in a different way than people were told, okay?  

So we’ve got a lot of things going wrong, but the problem from an economics perspective, when you look at the macro economy, well, you look at the economy and say, what is the problem here? The major problem is that there is no price anchor, there is no automatic stabilizer that’s worth its salt. If you want to continue to depend exclusively on food stamps and welfare and unemployment insurance, as the default, automatic stabilizer, all alone by themselves, you’re going to keep seeing the same crap you’re seeing right now.  

And you’re going to keep asking the same question every time a recession hits. What the f— is wrong with this economy? We’re doing it wrong. We can keep food stamps. We can keep all of these programs, social security. We can keep all of these things in place and strengthen them. But the thing is, you need the superior, automatic stabilizer, the superior one. And that is the job guarantee. 

Steve Grumbine (00:42:51): 

Okay? So I want to hit something really hard, but we got somebody pulling the Richard Wolf – I’d rather be in co-ops, and this is not precluding co-op’s number one. But number two, this is about the base. This is about the minimum wage. This is the new floor. This is the new wage floor. This is the new employer of last resort.  

As Warren Mosler would say, this is a transition job from unemployed to employed. But instead of being unemployed, you’re working in your local community. If you want to go work in a co-op, none of this is preventing you from doing that for God’s sake. It is so offensive. What I see people come in that don’t take the time to learn this.  

They’ve got things to say, of course. They don’t have time to listen. They got a lot to say. And you know, as somebody who trends socialist, if you will, of course co-ops are great things, but do you want the co-op to be the floor, the wage floor? Do you want to be at the very bottom? 

Ellis Winningham (00:43:48): 

How would you create a wage price floor with a co-op? 

Steve Grumbine (00:43:51): 

It wouldn’t work, but then this is the feel’s game. This is about the feels. This is the feels. 

Ellis Winningham (00:44:00): 

I’m asking. I’m asking a general question for people to ponder and think about how can you have a co-op create a wage price floor when it’s not even the currency issuer. If the co-op is sourced around the nation, say we’re not paying any less than $18 an hour. That does not tell business everywhere else that it can’t pay 17.  

It’s not going to stop people paying 16 or 15. Come work the co-op and won’t work for private [inaudible]. No, that’s not how it works. Okay. The currency issuer sets the price. Alright. The currency issuer is the monopolist and therefore sets the price level. It sets the base initial price level, which all market variations then are related to.  

Okay? And the fact is when you have unemployment and you look at those workers who are unemployed, they are not being paid. The market does not want them otherwise they would be employed. Okay? That means their market value currently is zero. So what we do is the currency issuer, who happens to be the national government, it goes in and it buys up all this labor that the market doesn’t want – that has a market value of zero – and it changes its value from zero to 15 or 18 or $20 an hour.  

Alright, when it does that, no business in existence inside that nation will be able to pay less than that wage. In other words, if we set the job guarantee wage, if government, the price setter, set the base wage for all labor to be $18 an hour, there is no way that Walmart can pay $11.50. Why? Because no one in their right mind working in the job guarantee who can set their own hours; they can work from one hour to 40 plus hours; they got a nice job tailored to themselves in the community; they’re doing something that they enjoy; they’re getting great benefits and stuff.  

Why the hell would you want to dump an $18 an hour job to go work $11.50 for Walmart? You wouldn’t. Walmart’s going to have to up its game. In other words, it has to pay a premium. If Walmart needs help with production, it goes to that job guarantee pool. It’s going to have to offer higher than 18.  

And still people may not come out. You want me to go do what at Walmart? And it’s not even guaranteed full time hours. And it’s what 19 an hour. Uh, what are the benefits like? Cause here, man, I’ve got this and I’ve got that. The job guarantee pays me all that. What are you willing to offer me? No, you’re going to have to do it right.  

Okay. What happens is, is that base wage set by the price setter, the national government, it sets that wage price floor. Wages can’t go past it, but it actually helps to push up to the bottom income distribution, it helps to push up private sector wages up that bottom just a little bit – you see that?  

It pushes them up just a little bit. It makes the nation a better place. You see that – it helps with wage problems. Now the question, and I’ve brought this up on the show many times before whenever we’ve talked about the subject, what happens with those abusive employers? Walmart just keeps abusing its employees.  

What are you going to do? What do you mean what are you going to do? Abby is being abused at Walmart as we speak, let us say. All she has to do is give the store manager the finger, or her immediate supervisor who’s a narcissistic crap – the double finger right then and [inaudible] grab her coat and walk straight the fuck out of Walmart, get in her car and drive down the road to the job guarantee office.  

She will have a job that day. And even if she cannot be employed right away in a particular job, if they have to work on creating a job for her or the job doesn’t start for like three, four weeks, it doesn’t matter. She’ll be paid from that day. What’s Walmart going to do? Well Walmart’s going to have to change its business model.  

If it doesn’t start treating its employees very well, they’re going to leave and go to the job guarantee. And in the meantime, while they’re working the job guarantee, they’re going to apply at other private sector jobs where they treat people better, okay. And Walmart is going to have to change everything the way it treats its employees; if it wants to stay in business.  

What’s so hard to understand about that? And when we do this, we achieve this because we recognize that the currency issuer sets the price level. It sets the price of labor. That’s the base price. All market wages are therefore based on that, cannot fall below that. Okay. So what does that mean? If you’re anchoring it through the bottom income distribution, that means demand travels upward to the highly skilled, highly educated jobs.  

That’s what guarantees those jobs. So as long as we guarantee the job of the average Joe, then the educated and skilled Joe will always have a job. See? 

Steve Grumbine (00:49:30): 

This is a big deal because what I’ve seen is people saying, “Hey, we can do all these really high end jobs through the job guarantee.” And I’m like, wrong answer. 

Ellis Winningham (00:49:41): 

That’s not what the job guarantee is for. It’s not a permanent job like you get at the IRS. So the government . . . it’s not a permanent job. 

Steve Grumbine (00:49:49): 

It could be though. 

Ellis Winningham (00:49:50): 

It can be, but that’s not the point. It’s not like if I see that the Department of Agriculture is hiring at 50,000 a year . . . that’s not what that is. That’s not what the job guarantee is. The job guarantee is a pool, a holding tank for transitioning workers between the private sector and the job guarantee pool, that’s all it is.  

Someone could, yes, they could make their life the job guarantee and good on them. But the vast majority won’t, okay. They want the higher pay. They want the better benefits and the private sector is going to offer it because of the job guarantee . . . 

Steve Grumbine (00:50:25): 

Because they have to compete with it. 

Ellis Winningham (00:50:28): 

It has to, or you don’t meet production needs and you go out of business. 

Steve Grumbine (00:50:32): 

That’s right. 

Ellis Winningham (00:50:32): 

Which is what we mean, which is what we mean when we say low wage producers will vacate the economy. They will have to leave the nation and go elsewhere if they want to do business because they cannot pay below a certain wage. And they certainly can’t abuse their employees. And they will not be keeping those employees on board unless the employees really enjoy being abused. 

Steve Grumbine (00:50:52): 

Let’s touch this one other issue real quickly. And that is when they talk about the UBI cause this still comes up. Employers when they see someone just getting a UBI, everyone getting a UBI, let’s be fair. Let’s define the U before we get into the BI. The U is universal or unconditional. Okay? 

Ellis Winningham (00:51:12): 

It’s universal period. 

Steve Grumbine (00:51:14): 

And what people for what? For the life of me, I can’t understand why people don’t understand that. It drives me batty that I can’t make people understand that the fricking U means everybody from Donald Trump to Alan Greenspan to George W. Bush to P. Diddy . . . 

Ellis Winningham (00:51:33): 

Confusion, lots of confusion. It’s like, you can’t have the UBI on its own, a standalone, but you can have UBI tied to a job guarantee. No you can’t. 

Steve Grumbine (00:51:44): 

No, exactly. 

Ellis Winningham (00:51:44): 

You can’t because it’s universal. How much spending do you want? How much money do you want the federal government to spend on an annual basis? The job guarantee alone, which is the price anchor and the automatic stabilizer that the economy has to have or it won’t function right – that’s what, 690 billion a year, maybe 700 billion right there.  

That’s just one thing. That’s not including military, what the government has to spend on regularly to function and everything else that you want to do as a Progressive. Then on top of that, you want to give everybody a living wage UBI on top of that. You’re talking trillions upon trillions, upon trillions of dollars every year in spending.  

What’s going to happen? That’s going to press against the real resources. What it is going to do is it’s going to press hard against the real capacity of the domestic economy to respond with output. And then you’re going to end up with inflationary pressures because that’s what a UBI is. It has no price anchor.  

It’s just, you’re basically throwing money at the economy and saying, “Please spend it.” You could save it if you want, but please spend it. The majority of poor people and middle class people are going to spend this stuff. Okay. And the fact that you earn money is that all it is, is an aggregate demand enhancement tool. There’s no way to unwind it. Once you get going, you kind of unwind it.  

The only thing that you can do is to tax. And that’s the hilarious part. “I’ll pay for the UBI by taxing the rich,” or “We’ll put a tax on Wall Street speculation.” You’ve heard that before, right? Well now it fails to be universal. It’s no longer a UBI. The moment you tax someone, they’re getting less than other people.  

That’s not universal. Now you have an established cohort that is getting the income and the other one is being tapped. So it’s not getting, getting less than, or not at all. How can it be universal? The whole thing is a contradiction in terms. And if you don’t tax, what are you going to do about the inflationary pressures that build?  

I heard a hilarious, a hilarious argument. Why don’t we just anchor the UBI to the cost of living? So anchor the UBI to the UBI. Hey, great plan.What the f— are you talking . . . This comes from a lack of knowledge. This is too much television watching. Okay. And it’s too much reading this conspiracy theory over here or too much, too much watching Yang play with his yang.  

And what ends up happening is is people say, “Wouldn’t it be nice if I didn’t have to punch in and go to work and clock in to earn a living and stay alive?” Yes, it would be. It would be very, very wonderful, but unfortunately that’s not the way an economy operates. And you cannot extract that from it. Because like I said, at the beginning of this program, society has to provision itself. I posted just the other day, the very clothes you’re wearing is evidence of society provisioning itself.  

It’s working to provision itself. That’s why you have clothes. If this were a hunter/gatherer thing, and there was no such thing as a society or a nation, you and your children and your wife, and maybe a couple of your friends would all be going out with bows and arrows hunting deer to eat and to clothe yourself with.  

You understand that? Society has to provision its entire self. It takes mass production to do that. So that means we have to shift our focus from taking care of ourselves by going out and spending our labor power each day searching for food. Now what we do is we go to work and we produce what society needs.  

We are compensated monetarily for that and using the money, we then purchase what we need conveniently without having to hunt for it. See? It just so happens because people don’t seem to understand that society established the national government and society gave it authority to issue money. So society issues its own money.  

Okay, well then we have a monetary economy and so we produce, and then we compensate the workers with money and then they go to the store and buy the groceries rather than going out . . . “go find deer today.” You don’t have to do that, walk 8,000 miles hoping you’re going to find porn. No. So there you have it.  

If you want civilization, that’s what you’ve got to do. You’ve got to produce . . . We’ll have the robots do it . . . C-3PO and R2-D2 show up and they can do it all. I robot comes along, Hey, then we’ll start talking about a UBI and whatnot. If it is true that finally robots have eliminated the need for human labor, but you know what? I’m betting it ain’t gonna happen. Captain Kirk. 

Steve Grumbine (00:56:57): 

So one more thing on the UBI and that is for the folks that are championing this and they’re unfortunately they are legion because that’s what happens when desperate people go amongst other desperate people that are uninformed. Tell the folks what the wage people do. These fricking companies are going to subsidize shit wages . . . 

Ellis Winningham (00:57:25): 

This is where we get into the status quo argument that I talked about a couple years ago – Why status quo on top of status quo. What happens is, is the perfect example . . . .[inaudible] One or two, there was an article a few years ago. It’s on my timeline where they paid like 300 euros, 400 euros a month or whatnot or whatever the hell it was.  

We’ll just call it $400 a month. And they gave everybody one of these, you know, say, here you go. And then go and test it, see what happened. And it turned out that people said, “You know, because of my little basic income that I received, I’m now considering part-time jobs that normally I would never consider.”  

Of course you are. What a basic income that has no job guarantee, just the basic income or UBI, what it does if it’s not living wage, what it does is it subsidizes low wages. In other words, you’re having the government pay capital shit, what they should be paying. Okay. So let’s say capital should be paying you a say $20 an hour.  

Okay. But capital’s only paying you 10 bucks an hour. But what you’re doing with the basic income is you’re saying that the government should then pick up the other $10 that capital refuses to pay. Why? That’s retarded. It’s ridiculous. It’s stupid. So here listen to what I’m saying. When you start giving people money and you have no job, here’s some money – go.  

What it allows is it allows for the capital, for capital to continue to suppress wages through under employment. Instead of full-time employment, now we have a whole bunch of part-time jobs being offered. They’re grueling, they’re nasty and they’re stupid. But the interesting thing about it is . . .  

these people – it was only like a thousand dollars a month UBI, that would be fine. No, because you see a thousand dollars a month in US dollars, what would happen is that you get that thousand dollars and you have to pay some bills and whatnot. You’d still have to have a job to make up the difference so that you could afford to live.  

So guess what? There’s a part-time job waiting for you. That’s wage suppression. You go and you take that job. Okay? Not only is the government paying the part that the capitalist should be paying, capital was only paying half of what it should be paying. Government’s picking up the other tab. [inaudible] All right.  

The capitalist gets to suppress wages further with low wage part-time jobs. And then lastly, when you spend your basic income, the capitalist gets that, too. Wow! Nothing like transferring near total control, total command, excuse me, of the nation’s. . . We all lose resources over to a very tiny handful of people just because you want some money and you don’t feel like working for it.  

Really? Come on. We can create jobs around you that you would love to do, that would be socially beneficial in your community. And if it’s something you didn’t want to do, we keep working and working and working until we found something that you absolutely adore. And who knows you might surprise yourself, but guess what?  

We’ve got a little escape hatch built in your job guarantee proposal in the US if you just absolutely refused to work and don’t want to work, there’s a basic income attached to the job guarantee package. It won’t be, as Steven Hail points out, it won’t be as generous as the wage of the job guarantee, but we’re also going to strengthen disability, social security, and all of the other social safety net, food stamps and whatnot.  

So, you know, they have it. You know, you’ll get your basic needs met. Yeah. That’s all great. That’s well and good. And if you want to buy that X-Box, work at the job guarantee for five, 10 hours a week. Okay. 

Steve Grumbine (01:01:26): 

Alright, Ellis. With that. I want to say thank you very much for joining us. It’s been a while. I miss having you on. Yes, I do. Yes, I do. I will say one thing. In my mind and it’s just my mind. We already have a basic income out there, not a universal basic income, but a basic income in the social security system as it is. It already pays people disability . . . 

Ellis Winningham (01:01:50): 

That’s targeted. 

Steve Grumbine (01:01:51): 

Exactly. 

Ellis Winningham (01:01:52): 

A specific cohort gets a guarantee. 

Steve Grumbine (01:01:56): 

Absolutely. We could easily expand that existing program to accommodate any basic income need whatsoever. 

Ellis Winningham (01:02:04): 

We have to get production up though. 

Steve Grumbine (01:02:06): 

Absolutely. 

Ellis Winningham (01:02:07): 

Make sure that there are enough goods and services being produced so that the people on social security benefits and disability can consume what’s produced right along with everyone else in the nation, but you see we’ve got to get full employment. We’ve got to get the full employment so we can get output up so that everyone can partake of the fruits. 

Steve Grumbine (01:02:26): 

That’s right. Absolutely. All right. Absolutely. All right. Well folks, I really appreciate you all coming and listening. This is an important subject that ties nicely into the Green New Deal. Hopefully each of you learned something. Ellis, thank you so much for being such a great teacher, and I really appreciate your time. And with that, thank you all. We’re out. 

End Credits (01:02:58): 

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