Originally published May 2, 2012 on the New Economic Perspectives blog.
Ok we had a huge number of responses. I can see we will need a Blog 49 on this topic and that there are way too many comments for me to deal with tonight. I will just hit seven themes—commentators should be able to see which of these themes their comments fall under. And I will be brief. I will deal in more detail next week with a few of these.
1. Attention Deficit Disorder: A couple of comments here, and from what I can tell a huge number of comments on other “Modern Money” blogs that are not called MMT, suffer from ADD. Some people cannot read past a single sentence. I think there are now drugs that help. Try them.
So apparently a lot of bloggers (especially those who accept MMT, but without the taxes or the JG—go figure!) latched onto a sentence, plus one word. I said: “So, can we have MMT without a JG? Certainly!” Now that followed a long discussion, including an analogy to a theory of disease and a policy to fight the disease (more in a minute), and followed by the statement by me: “I believe it is a policy mistake to operate a modern money system without a JG—but that is what almost all countries do. MMT allows us to analyze them, and to offer policy recommendations. But if we leave out the JG in our recommendations, we are seriously remiss in our advice.”
And what would our ADD disadvantaged friends come away with after reading that? Oh, of course: “Wray admits MMT does not need JG! MMT and JG are not compatible! He’s a flipflopper!”
OMG. I cannot recommend anything but drugs. Education or explanation will not work. Please ship drugs to them. Massive quantities. I hear they got 6 figure dollar grants to try to destroy NEP and MMT. Please, allocate some of that money to drugs. They need drugs to counter the ADD. They’ll never be able to destroy MMT without drugs. They come across as completely dishonest and stupid. But I’m sure it is just ADD. Don’t deride them. Send help. Drugs. By the truckload.
2. Speaking of drugs. We’ve got a lot of BIG supporters (basic income guarantee). They want government to provide income so they can boff their bongs in their parent’s basement, and hand their mums fivers for bringing down sandwiches. OK, everyone should be entitled to bongs and sandwiches and subservient mums. I get it. Until we run out of mums to do all the work for us, this should work just fine. Fully employed mums.
But here’s the deal. All along I presented JG as an add-on. So, you BIG supporters go ahead and get the BIG passed. (LOL!) It is not a substitute for a JG. JG pays people to work and produces useful output. BIG pays people to boff bongs and hire their mums to feed them. Perfectly compatible. Those who do not want to lie about in bean bag chairs, relying on the charity of their mums, can go get JG jobs and contribute to society. It’s a lifestyle choice.
My argument was NOT against BIG. I like the idea of a bunch of flackers sitting in basements and collecting government money while contributing nothing to society (Jerrrrrrrrry!), and expecting their mums to feed them and clean up after them. (You go, Mom!)
I think the dystopian Wall-E movie is exactly the future we ought to aim for: everyone in recliners, doing nothing useful, and, indeed, having lost the ability to perambulate under our own power. We’ll all sit around campfires, boff the bongs, and sing kumbaya. We won’t need no stinking taxes or JG. (But we do need our mums.)
But, let us imagine (for the sake of argument) that we will have some transition period before we reach that Nirvana. Suppose we’ve got 25 million people who want full time jobs (as is the case in the US today—out in the real world, not in the bong-induced haze). They don’t all have mums to supply the sandwiches. Why don’t we give them the jobs they want? We’ll get the BIG and BONGS later. After we’ve all evolved a lot more to the point that we do not think work is important. (Except for mums.)
3. Why is employment a goal? Why not just hand everyone a Maserati? Recall that I began this section of the blog with a discussion of human rights and as well with the individual, family, and social costs of unemployment as well as the individual, family, and social benefits of employment. That was not a random error. It was linked to the JG. Employment is in itself an essential human right and is linked to many of the other internationally accepted human rights. Even if we add BIG and BONGS and MASERATI to the list of accepted human rights, these do not guarantee already enumerated human rights, such as the right to a job and to full participation in society. (Hint: beanbag chairs, basements, bongs, are not full participation.)
4. MMT and full employment. MMT explains why sovereign countries can afford anything for sale in their own currencies. (Note that I presented sovereign currencies as a continuum—from fixed to floating rates. Unlike some MMTers I want to include all nations that issue their own currencies. However, some self-impose constraints such that they must choose between a peg and full employment policy.) This is important. If governments face solvency constraints, they might not be able to afford public policy that they would like to adopt: decent health care for all; public education; a BIG; a JG. But once we understand MMT we see that all the usual arguments about financial affordability fall away. What matters is resource availability and politics. Any sovereign government can “afford” full employment. The question is how to get there.
5. MMT and JG. We can try to get to full employment through Keynesian pump priming (military Keynesianism, for example) or BIG. Now, neither of these directly hires the unemployed. Both rely on pumping up spending and incomes on the hope that higher aggregate demand will cause jobs to trickle down to the unemployed. Many of these unemployed do not have the education, training, job experience, or race and gender characteristics desired by the employers who more or less directly receive the extra aggregate demand provided by government policy. But maybe some left-overs will trickle down a bit. My argument is that it could require an awful lot of wage and price inflation in the primary sectors (those that tend to be more oligopolized and unionized) to get jobs to trickle down to Harlem. I do not know how many Drones the military would have to order before the US economy heats up enough to get job creation east of Troost in Kansas City. Hundreds of thousands? Millions? Billions? But I do have a pretty good idea of how much spending it will take to create a job east of Troost: the JG program wage and benefit package—let us say 12 bucks an hour. Further, and this point (I suppose) must be explored in more detail next week since most have not understood it: the JG is an EMPLOYED BUFFER STOCK. The BIG creates a STONER BUFFER STOCK. There is a difference! Gee, I wonder if firms would rather hire stoners out of basements, or workers in the JG? Given a choice, would you really take Jerrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrry? (Whose “career” consists of cheating government and then fighting against the JG on the argument that he defrauded government.)
6. MMT and JG. The other topic was MMT as a description and theory, and JG as a policy. I used a disease analogy. Science not only wants to discover what causes Polio, but seeks that discovery in order to fight Polio. Any scientist who figures out the cause of Polio but who then opposes the vaccination to prevent the disease would be treated as a social pariah. Similarly, any economist who understands the cause and solution to unemployment, but then argues against policy to resolve the problem should be treated as a social pariah. And, yet, at least some who do understand that affordability is not an issue when it comes to sovereign nations still want to maintain a huge reserve army of the unemployed. One of the “modern money but without taxes or JG” people has openly argued that he prefers massive unemployment “because it works for me”. I think that is far more reprehensible that someone who opposes full employment because he thinks government cannot afford to do anything about it. It is like withholding the Polio vaccine.
7. Alternative methods to achieve full employment. If an opponent of JG can offer a proposal that generates continuous full employment described as a job offer for anyone ready and willing to work, I’m willing to listen. I’ve been waiting for an alternative to the JG for almost 20 years. Please step forward with one.
On the proposed auction market run through something like PayPal. First: we’ve already got the auction market, with 25 million people standing ready to work full-time but with no one stepping up to hire them. Yes, there would be more offers if government offered to subsidize the wages of for-profit firms, who would then lay-off part of their labor force to hire the subsidized workers. I oppose that strategy. It doesn’t create jobs—just trades employees for the unemployed. Second, all these “computer money” schemes are trendy and attract the nerdy geeks. But these are “monetary systems” with no regulation, no supervision, no deposit insurance, and virtually no capital behind them. Just you wait. This will be the next shoe to drop in the Global Financial Crisis. If we do adopt such an auctioning scheme, at least run it through the insured deposit system. Ideally, we’d shut down all the banksters and revive the postal saving system—but anything is better than running it through PayPal.
OK, I know this is less than satisfactory, but it is over 1500 words and enough for now. More next week.
