Episode 26 – Genuine Hope: Completing the Roosevelt Revolution with Pavlina Tcherneva

Macro N Cheese – Episode 26 
Genuine Hope: Completing the Roosevelt Revolution with Pavlina Tcherneva 
July 27, 2019  

Pavlina Tcherneva [intro/music] (00:00:00): 

Now the one important commodity, that very special commodity in a market economy, are people right, as labor. And that’s the one we do not support. 

Pavlina Tcherneva [intro/music] (00:00:14): 

What we believe must happen with a job guarantee is that there are essential features that need to be there. The first one is that it has to be a permanent program. The second is that it has to be universal, open to everyone. The third is that it must establish a wage floor for the economy as a whole. 

Geoff Ginter [intro/music] (00:01:30): 

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): 

Alright, it’s Steve with Real Progressives. We have have Pavlina Tcherneva of Bard college and Levy Institute. Pavlina has been on the show in the past, but I’m very excited because the tides have shifted. We have started seeing an incredible amount of popular push, not just for a federal job guarantee, but with eyes opening about Modern Monetary Theory, and ultimately seeing people wake up to the possibilities that maybe everything isn’t doom and gloom, maybe there is a potential to live in a better, more just society.  

Maybe we, the people, hold the key to making that happen. And so, while I’m very excited to be an activist and work in media, like I do, I’m even more excited to be able to talk to people like Pavlina who have done so much incredible work producing the job guarantee. Pavlina welcome back to Real Progressives. 

Pavlina Tcherneva (00:02:29): 

Thank you Steve. Hello, everyone. 

Grumbine (00:02:31): 

People have been so excited about this. I mean, we have so few people that can say what you can say about the federal job guarantee that it’s really nice when we get the experts on. And quite frankly, you’ve been working on new work. You’ve already been working on the job guarantee for years. Now you’ve got a new working paper coming out. Times are changing, aren’t they? I mean, it looks like a lot of popular support right now. 

Tcherneva (00:02:57): 

Yeah, no it’s definitely exciting. I was talking to somebody who was running for office and I was telling them, you know, my first paper on the job guarantee was in 96, it was called ‘The Mathematical Model for Full Employment and Price Stability.’ But I remembered back then, when we were presenting the job guarantee, it was called the employer of last resort, you know, that was during the Clinton Goldilocks economy, that was during the full employment economy.  

And you can imagine the pushback that we got back then, and I kept thinking, you know, we’re in this for the long haul. So what are we like 25 years later, 22 years later. Yeah, it’s good. It’s great to see the national conversation shift. It’s a very interesting moment in time because, you see how the conversation evolves.  

You know, some of the pushback, some of the support, it has been extremely encouraging that people are starting to deliberate this idea, one more time, in the public sphere. So I’m encouraged. 

Grumbine (00:04:01): 

So let me ask you a question. I see folks like Cory Booker coming out with a pilot program, or 15 targeted areas or something like that. I see Bernie Sanders come out, and I know who’s talking to Bernie, starting to talk about a federal job guarantee. I hear Kirsten Gillibrand talking about a federal job guarantee.  

And then on top of it, I want to be real clear, we had an MMT candidate on, Rodolfo Cortez, he’s a PhD from Stanford, young millennial, 30 years old, and he’s running in a very impoverished area of LA. And he is a huge proponent of the federal job guarantee. That was very exciting. And I’m hearing you’ve been talking to Alexandria Ocasio-Cortez, is somebody who’s doing this as well.  

So there is a lot of really good millennial support. There’s a lot of good support amongst, even media people are coming out and say, well, maybe this is a good idea. So what exactly have you all been doing to be able to make the connection with them? Cause I know they didn’t come up with that on their own.  

You guys are doing the hard work. How did you guys manage to make this something that they felt like it was, this is something we want to hook up to. This is something we want to latch our wagon to. 

Tcherneva (00:05:17): 

Well, I mean, at least in the current environment, where the, you know, the conversation shifted, the first things that I was doing was actually doing some campaign training for people, and mostly people who are interested in MMT, you know. How do we communicate these ideas? How do we understand them?  

How do we articulate policy goals and how we move towards them? So like that’s number one. I mean, there’s only so much I can say, but I’ve talked to people who are working on these bills and provided input and feedback on what they’re working on. And as you know, you know, also engaged in the debates with the think tanks and, you know, in the media, again, trying to make the case for the job guarantee as a policy that is both policy for full employment, but it’s also a policy for structural reform.  

It’s really a policy that shifts the paradigm in terms of stabilization. Like what do we do with the economy? Like how do we go about dealing with specific macroeconomic problems, social economic problems, labor market problems. So there’s a lot of excitement out there. It was really thrilling to see the polling that Civiqs did, and Data for Progress.  

That was very essential piece of news, because we have had some very old information on the support of the job guarantee, but even with rather challenging framing, you know, “would you support a job guarantee, if it was paid by a 5% tax,” and that sort of thing, not quite the MMT thing, but you know, usually when you do the pay fors, and people hear taxes, they immediately changed their position on policy.  

So even despite that, the job guarantee garners a lot of support, but there seems to be a fair amount of confusion of what the job guarantee aims to address. And so I think that we need a very long and public debate on the merits of the job guarantee, ideal, to articulate that. So lots of people think that it is just another job creation program trying to patch up some of the problems in the labor market.  

Maybe it’s not even that necessary because the labor market is not, you know, tends to be close to full employment. So I think that and maybe there are other policies that are better. I mean, this is where the conversation seems to be devolving right now into, “why the job guarantee?” And the reason is because short of a job guarantee, you cannot ensure full employment.  

You cannot ensure that if somebody wants a job that they will find it. That is the first basic premise. You can do whatever you want to do to the economy. And you can pass a lot of good policies out there. You will not be able to ensure that over the long run, there’s a person out there seeking work, that they can find it. 

Grumbine (00:08:13): 

So, one of the things that we sometimes do here, and it’s my mistake, we have an audience that loves MMT. They love it, they want every bit of information they can get for it, so they can take it out and activate on it. But we have a lot of new viewers, and sometimes we skip past some of the basics.  

So, before we get too far down the path with what’s happening, in terms of your working paper and some of the things to consider, can you please just give a short understanding of the lens by which we discuss this through MMT and then just sort of give a quick Cliff Notes version of what a federal job guarantee is in the macro sense? 

Tcherneva (00:08:51): 

Alright, so there are several propositions that are important to us, the MMT group. The first is that unemployment is what we call a monetary phenomena. Somebody is seeking to earn the currency. Somebody needs to earn income, but they are unable to get it. And the MMT contribution here is that governments that are sovereign governments, that have their own central bank and treasury, that coordinate to meet all government payments, are not monetarily constrained in achieving their policy objectives.  

So the very first thing that MMT dispels is that there is no funding constraint. Once we present this, then the question is how do we go about policy? How do we go about achieving our objectives? And unemployment is an important one, because in a sense, public policy, government policy, creates unemployment.  

If you impose a tax obligation on the population in dollars, which only the public sector, the government can issue, then the population has to obtain the dollar, right? And the only source is ultimately the public sector. Now the private sector creates production, employment, income, etc., but in the end of the day, if spending is constrained, if there is insufficient amount of spending in the economy as a whole, you will find that there will be people seeking to obtain the currency, are seeking work, but not being able to find it.  

And it is the ultimate responsibility of the currency issuer to ensure that everyone who needs work, paid work, can find it. It’s not the job of the private sector to provide employment opportunities for all. It is the job of the public sector that issues the public’s money. Now that is one of the important MMT angles, understanding the currency and how the currency works.  

But another important point that we present is that when you understand how the economy works, how it moves through its cycles, you realize that we have only two options. We can either have an unemployed pool of labor that stabilizes the economy. What that means is that, in recessions, unemployment expands and in expansion it shrinks, and it is the spending on unemployment and all of the associated costs that provides the stabilizer for the economy.  

So that’s one option, the way we’re doing it right now. So you either have that option, unemployment expands and shrinks, or you can have a different option. You can have an employed pool of labor that expands and shrinks with the business cycle that will be a better automatic stabilizer to the economy.  

And the only sector that can serve that ultimate countercyclical function is the public sector, again, that has the power of the public purse. So those will be two important aspects from the NMT perspective. And then the job guarantee is a policy that basically says, “Look, this is a public option for jobs.  

You know, if somebody wants work, we will provide it. We will design a system where we will guarantee an employment opportunity at a base wage. And when we do that, we ensure that that base wage becomes the wage for the economy as a whole. And so we anchor the currency, if you will, in labor hours,” 

Grumbine (00:12:48): 

I love it. So maybe it was Fadhel or Ellis, or one or the other, said that by pegging the currency to gold, you’ve ensured full employment for gold, by pegging the economy to labor you’ve ensured full employment for labor. And in this case, that’s what you’re advocating for here is, number one, it’s cruel to intentionally leave people out of the economy.  

And number two, the economy will flourish when it has a stabilizer that is truly ubiquitous to all citizens so there aren’t people left behind unless they choose to be left behind. 

Tcherneva (00:13:24): 

You know, you probably have heard some of these examples, but look virtually every government around the world runs some sort of price support scheme for a commodity – so for example, soybeans. Producers of soybeans can be guaranteed a certain amount of money that they will earn from the sale of soybeans.  

If the market collapses, if demand collapses, the government provides a subsidy, a price support for soybeans. We do this for all sorts of commodities. And the examples that we often use, you know, Bill Mitchell uses that example from Australia that, wool, the government will buy up wool when the price falls and it will sell wool when the price increases.  

So, you know, I can give you many examples of different price support schemes for commodities. Now the one important commodity, the very special commodity in a market economy are people, right, as labor. And that’s the one we do not support. You know, the price of that commodity is effectively zero.  

And I hate to talk about labor and people as a commodity, but you know, wage labor is essentially commodified work. And so, what is important here is when we tolerate unemployment, we are saying essentially that, that commodity does not deserve to be supported, does not deserve a minimum price. Now think about it for a moment what that means.  

You know, from Adam Smith to Ricardo to institutionalists, labor has been treated, has been articulated as a very special input of production, unlike any other, not like, you know, machinery, not like other commodities. Labor is different. Cause we have consciousness, you know, we need to reproduce ourselves.  

We’ve got families, right? We have social connections. It is this one commodity that reproduces the economy and the social reality that is not supported through public policy. What the job guarantee does is essentially says, “This is it. We will not allow employment to be paid below what we consider to be a living wage. And this is the policy that will ensure that labor standard for the economy as a whole.” 

Grumbine (00:15:33): 

I love it. I absolutely love it. So let’s talk now about the current options that are out there at the moment. Who you’ve got Cory Booker who’s put forward his, and you’ve got several others. I know many people have come to me and they’re saying, “Steve, sorry, I’m not backing Cory Booker, no matter what.”  

And I’m like “focus on the policy, not the politician, let’s worry about the policy.” And they’re like, “Okay, well that’s a good question, Steve. Tell me why I should support Cory Booker’s policy or shouldn’t I support Cory Booker’s policy or what should I be seeing?” I’m telling them the good news is, is that you’re seeing the job guarantee, pushed front and center for a good hardy debate.  

You’ve got Darrick Hamilton, Sandy Darity, and Mark Paul’s positions out there on the job guarantee. You’ve got the MMT positions on the job guarantee. And now you’ve got the neoliberal version of the job guarantee. Tell us a little bit about what the differences are, and what, from an MMT perspective we should be looking for so that we can discern whether or not we’re really supporting the right thing. 

Tcherneva (00:16:43): 

Alright, so, our proposal is informed by certain macroeconomic criteria and realities. So what we believe must happen with a job guarantee is that there are essential features that need to be there. The first one is that it has to be a permanent program. The second is that it has to be universal, open to everyone.  

The third is that it must establish a wage floor for the economy as a whole. There’s some variations on the wage structure that you will see out there. The reason why these three are essential, are the following. First, it has to be permanent because, as I was explaining earlier, there isn’t another policy that can ensure full employment over the long run.  

There just isn’t. You can try to stimulate growth, stimulate investment; you can do what various other projects targeted, not targeted, etc., they may reach full employment at one point in time. They will not sustain full employment over the long run. So, from a macroeconomic point of view, this is the only way to achieve full employment was through direct means.  

And I’ve used these examples many, many other times. We understand this logic when it comes to other policies. You know, we understand that when we want to guarantee retirement income for people, we guarantee it, we give them social security. We don’t grow the economy or encourage the private sector to provide better pension plans.  

We always have a public option for social security. When we want to guarantee education, we also provide subsidies to schools, etc., but we guarantee it. With virtually every other policy that we have identified to provide an important safety net, we always do these things directly. You know, if somebody needs work, we don’t guarantee the job.  

So that is the missing piece of the safety net. So that’s why I’m saying, that it has to be permanent, and it has to be universal, because you want to be sure that people who need work, and there will be different people at different times, can avail themselves of the program. So permanent, universal, by unified I mean open-ended, you know, most people are not going to take advantage of the job guarantee.  

But what we will do is target the chronically unemployed. And so my work has been on the chronically unemployed that they tend to bear the brunt of the business cycle. I’ll give you a really nice example. A colleague of mine is writing a paper that is looking at job separations at the state level. I think it’s just Missouri.  

You know, he’s looking at the shuffling in and out of the labor force. And what he finds is that 40% of all job separations are concentrated amongst 17% of people. So what we have here is a very small proportion of the population that comes in and out of work, in and out of work, they live in this very precarious situation where sometimes they experience multiple separations per year.  

And so when you think about this, what we’re really talking about, people that are usually low skill, low wage, that are not able to keep a job for a very long period of time, are not able to build income and assets and a more stable life for themselves and for their families. And this is also where all the other social problems are concentrated, right – child malnutrition and under-performance in schools, you know, mental health problems.  

I mean, you name it. So I’ve, in my work, I enumerate all of these costs. These are costs we already bear, costs that are already paid for. And so, when you see that the economy is stabilized by essentially throwing people out of work and then maybe rehiring them in a slow recovery, you realize how really the brunt of the business cycle is borne by a very small proportion of the population; and they deserve protection.  

They deserve labor market protection. And so the next aspect of the job guarantee, I really think is very important, is to establish the floor, the minimum wage. This is key. We need to deliberate what would be the minimum wage for the economy? What is the living wage? How do we get there? And what are the essential benefits that we want to accompany that minimum wage?  

So that, that becomes the labor standard that firms will need to match. And so we propose, you know, Medicare, childcare, as some of the benefits that will go with a job guarantee, but you could do paid leave, depending on how long you’ve been in the job guarantee, as well. 

Grumbine (00:21:44): 

To me, this is just simply common sense. But when we talk to other people, the issue for them is for our left wing friends, the socialist friends, they have problems with different Marxists theories and stuff like that. This doesn’t jive with them. They have trouble understanding this. And then you have the other side, who’s more of the conservative type that don’t understand economics necessarily, or at least sovereign economics.  

And then they get tripped up on the pay-fors. And I think that we have a lot of misinformation out there, and it seems like that gets in the way of even being able to hear all these benefits that we’re laying out before us. How do you deal in socialist circles to present the same exact scenario to them?  

Cause they’re obviously friends, they’re obviously adjacent allies, in many ways, but yet they maybe don’t understand economics as well. Or maybe they don’t understand how this plays into various value theories that they hold dear. 

Tcherneva (00:22:47): 

Alright, there are three different, I would say probably three different groups that I talk to. The first group are the sort of more standard Keynesian people, you know, progressive people who believe in the public sector, you know, that we need to support the public sector. You know, I consider myself one of those.  

We need to fortify many, many neglected public sector functions. I’m fully on board on this. There’s just, let’s watch an enormous infrastructure investment program out there. Let’s strengthen our schools. Let’s strengthen social security. Let’s do all of that. At the end of the day, we will still need a job guarantee.  

We will need to find support for people who want to work. The post-work society, people, you know, people who basically argue that this is a system based on wage slavery, we need to move to post-work world, you know, I’ll tell you, I’m philosophically sympathetic, but I’m also very interested in what people want.  

And it’s not my business to tell people, you shouldn’t want wage work. Like, people want wage work. I mean, just, you know, look it up, look at the detailed Pew survey out there and you will find, you know, vast majority of people want work. And somebody tweeted at me, you know, another survey by Gallup, I think, what would you do if you won the lottery?  

Most people will keep their jobs. People like to work for whatever reason. And you know, we can sit and philosophize, you know, is this false consciousness or whatever, but at the end of the day, we need to provide in this economy the ticket to stability, to success for oneself and their children for stable life is a decent paying job.  

And there’s no reason why we cannot structure the economy to provide that. There’s also the more conservative people that we talk to that normally they buy into sort of the ethic of work a lot. And they believe that, you know, people should work for their benefits, but that’s a tricky one, because you know, there is a sense of kind of punishing the poor.  

So what are they trying to do right now? Trump is trying to put work requirements on SNAP and on Medicare. I mean, these are fundamentally inhumane policies. When you do not have an economy that creates enough jobs for all, it is just the cruel punishment to ask people to seek what they cannot find to feed themselves and their families.  

I mean, it’s completely out of control. On the other hand, we already have a lot of these punitive policies. So, there are states that require, they have work requirements for Head Start. So you can’t put your kid into Head Start unless you have a job, but if you can’t put your kid into Head Start, you can’t even look for a job.  

I mean, it’s a catch 22. And so, in a sense, so many of our policies are already punitive that we need to have a voluntary, decent employment option for people, so that they can navigate these multiple demands that they have on themselves and their families, that they have choices. And that’s what the job guarantee is, it’s just the option.  

It gives the missing option. You know, when you go to the unemployment office, you, you know, maybe there are a bunch of job offers. You know, some of them are private sector jobs. Some are nonprofits, some are government jobs, but maybe there aren’t enough. And so this is the last option. You say, Hey, look, you know, we’ve got also this public service option.  

There you go. And you get hired into it. And it’s a job like any other. You know, like, you don’t wear like a sticker that says, a job guarantee job. You know, it’s a job, you get a job at a local nonprofit and you do the kind of work that they have been doing. It’s good work. You have something to show on your resume. It’s work like any other. 

Grumbine (00:26:32): 

I love that. So I want to ask you a question. You said a few things through there, that bring up other things. And one of them is, is that we know that a sovereign nation should not have any kind of financial constraint, in terms of, they’re not restricted by the ability to pay for it. We know that there could be consequences if we spend beyond our means to consume or use or leverage real resources.  

But the point is, is that we don’t have a financial constraint. How do you answer people who come back and say, “How are you going to pay for it?” There was a Forbes article ripping this apart. There was a Washington Post article that talked about, well, he hasn’t told us how he’s going to pay for it.  

There’s all these groups coming in left, right, and center talking about, how are you going to pay for it? You know, I know Stephanie has come out and said, “Congress is going to appropriate the dollars, period.” That’s the answer every single time. But, it seems like, maybe people are either don’t get it or don’t want to get it or whatever. What is some strategies to bypass that or to explain how this is paid for? 

Tcherneva (00:27:40): 

This is how I normally say it. First, I say, we pay for it the way we pay for every other program. You know, the way we paid for the tax cuts, the way we pay for wars, the way we pay for the department of defense budget. That’s how we pay for it. But you know, then of course, some people will get tripped up and they’ll say, well, but we’ve already spent so much, and there’s just no more left.  

And then I say, look, the government has the power of the purse. What that means is that when Congress appropriates a budget, those checks never, ever bounce. We have two very important government institutions. They’re called the Treasury and the Federal Reserve and they do everything that is possible to clear all government payments.  

They are essentially the government’s bank and the ministry of finance, essentially. So they ensure that all payments are made. No government’s checks bounce, and you can be sure that the program will be supported if it is passed. So, we can’t possibly run out of dollars. You know, we can’t possibly run out of money, because the government has a bank unlike you and I.  

So people who are very new to this, you know, they immediately say, “Oh, you’re just going to print a lot of money.” And then we have to go through the extra step of explaining that we don’t print money. The Federal Reserve simply clears payments, it’s usually electronically through the banking system. They just credit the accounts of the contractors and that’s all it takes. There’s no great mystery to it. You know, the Federal Reserve just credits the account.  

You know, you get a check from the government, because you’re a defense contractor. You put it in your bank. The Federal Reserve clears that payment. So, you know, there are multiple strategies like this that we can talk to people, and we can also say, you know, isn’t it time for us to talk about how because we have countless of examples, of finding trillions of dollars overnight to pay for financial sector bailout, for a tax cut, for a war.  

We have many of those examples. Why not support the public good? 

Intermission (00:30:03): 

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Grumbine (00:30:51): 

So, what is the situation with Cory Booker? What happened here? What got him to even bring this up and help us understand what we’re seeing here? I think you said a pilot, obviously you said starting off, we’re looking for a permanent plan. We’re looking for and I believe Stephanie put a great tweet up talking about how, you know, yes, social security started out as a pilot program, and then it became… she’s like not. 

Tcherneva (00:31:21): 

That’s right. I mean, for a very long time I felt that there will be a new interest in direct employment. I mean, you know, it began really with Obama, with the election of Obama where people felt that he could be a new Roosevelt, but then it was a promise that bounced, right? And then we ended up with this very protracted recovery.  

And so the conversation slowly shifted. So I am absolutely certain that we will see some sort of direct job creation program. I’m happy the job guarantee is in the public conversation, so that we can articulate why the job guarantee is not just another employment program. And what we’re aiming for is really completing the Roosevelt revolution, really completing the safety net, you know, finishing the job, guaranteeing the basic economic rights.  

So the Booker proposal has 15 areas, distressed areas that will run pilots for three years. I read the bill, but honestly, I don’t recall language that will open it up, sort of making this a permanent program. I also believe that when you push for policies like this, you push for them for bold policies on the merits, on the macroeconomic matters.  

We don’t want to just try, here and there, because you won’t learn from pilot projects all the important lessons of the job guarantee. You won’t be able to see these programs as countercyclical programs. You won’t be able to see them establish a minimum wage. There may be some impact locally, you know, that they may have put some pressure on private sector employers in those areas, but it will not be a very clear cut case as it might be with a national, large scale program.  

So what you would probably find is what the impact of these employment programs is on people, on communities, and frankly, we have a lot of programs like this, that we can look to, I mean, it’s not like we haven’t done these in the past. We know they work. We know that they’re, you know, good economics, but you won’t be able to get at those important job guarantee questions of how will it move?  

You know, what will be the countercyclical stabilization? We claim that all of these enormous swings in unemployment that we see, we won’t see them anymore. You know, the business cycle will be a little more stable with the job guarantee. Now, if you’ve got 15 communities across the United States, that’s not going to be enough.  

You have seen it. And I’m sure a lot of the people who are watching the show have seen the video, you know, of the unemployment map of the United States. I mean, there are many communities across the United States that are plagued with depression level economics. 15 is not enough. You won’t be able really to demonstrate this only for three years.  

I’m sure there’ll be some useful lessons out of it, but it’s just not going to be a job guarantee. So yeah, I would like to see a bill that has language that says, look, you know, we’re going to pilot this and then we’re going to transition to a national program. It will not be my preference. I would go bold.  

I would go with a national plan. You know, a la Bernie Sanders or a universal permanent, some sort of plan that is there as an important policy, kind of like Medicare, like, you know, social security and all of that. And you know, I just have to plug this in, it amazes me when people say, Oh my God, how are you going to create 15 million jobs?  

How can you create the administrative structure for, you know, 15 million people. Look up how many people benefit from social security and Medicare and Medicaid. You know, we’re talking about 70, 80 million people, you know, in either of these programs. We have done bold and big things. Look how many millions of people, you know, go to public schools?  

You know, the idea that somehow we can’t create jobs for, you know, 10, 11, 15 million people, it’s just, to me, it’s really ridiculous. 

Grumbine (00:35:24): 

I couldn’t agree more. I think it’s interesting. I look at Zach Carter, he said the job guarantee wonk fight is showing two things: Socialist critics of the plan don’t have a good grasp of Keynes, and neoliberal, Democratic critics also don’t have a good grasp of Keynes. And when we were talking originally about how we would want to format the show, one of the things you came up with was the bastardization of Keynes.  

Talk to us about that. Explain this to us. 

Tcherneva (00:35:57): 

Okay. Yes. This is really, this is just, we’ve gone down the wrong path. You know, when Keynes came up with his Magnum Opus, with his big book, he talked about full employment as an important goal. And you know, I’ve plowed through the 40 volumes of writings to find what he meant by fruitful employment, because Keynes actually did not articulate what that full employment plan is going to be.  

And so, you know, I found where he talks about peace-time employment, equivalent to what we achieved during the war, that is less than 1% unemployment. So this is Keynes, for Keynes truthful employment is less than 1% involuntary unemployment for civilian purposes. Now, how do we get there? What most people understand as Keynesian policy today, is just crank economic growth.  

That’s what they think. Like just get GDP close to whatever level of potential GDP. Stimulate investment, that’s going to close the gap. This is not Keynes. It is not Keynes in method. It’s not Keynes in a policy approach. First, because he didn’t think that you could figure out what potential output is.  

We know that potential output has sort of declined because the economy has slowed down. So you could close the gap. Actual GDP can come close to whatever the potential is because we’ve crushed potential. And so you can call it full employment. But so many people outside of the labor force, so many people have been discouraged.  

That is by no means potential. So what Keynes said, “This is an impostor.” Like, you don’t think about this potential stuff. I don’t see, you can’t really do it by stimulating investment. Investment is volatile. You don’t want to stimulate the one volatile component of GDP. What you want to do is to have a more stable policy approach.  

And even if you’re able to get, you know, crank economic growth and investment to the point to create almost enough jobs for everyone, you can’t sustain it. And then he says, because you can’t sustain it, you just have to do the job directly: just go around the problem, just provide public works. So when you read Keynes, he doesn’t talk about fiscal policy, you know, aggregate demand.  

There’s nothing like that. It’s all public works, public investment, socializing, investment, taking the contract to the worker. I mean, if that’s not a kind of a job guarantee, I don’t know what is. So in my view, the job guarantee is much closer in spirit to what he had in mind because he had in mind taking the contract to the worker to the distressed area.  

And to me, that’s what the job guarantee does. So when I say, you know, “the resurrection of bastard Keynesianism,” is this idea that you just crank growth and do all these amazing things to the economy, to close the gap. Well, what do we know about growth in the United States? What we know about growth in the United States is that it brings inequality.  

Right? So, you know my chart, but come on, since the eighties, we have seen robust growth that raises the income of the handful few. Is this the economy we want? And so we need to be able to raise the floor. When we work through investment, if we try to stimulate investment, we improve the job prospects of people who are already employed.  

Those people that, as I was saying earlier, they don’t shuffle in and out of jobs. They have stable employment lives. So we stimulate these kinds of successful industries, but they have capacity. There are many reasons why those firms will not sort of reach far down to the bottom of the income distribution to hire the folks with the lowest income, the lowest skill level.  

So you just can’t do it this way. You can’t hire from the top. You can do it through investment. You’ve got to raise the floor and you’ve got to create net new employment opportunities for those who don’t have them. 

Grumbine (00:39:57): 

So all these years that we hear politicians run on job creation, here’s a literal opportunity to create jobs. Hey man, you’re a job creator now, you really are. But I look at places and I want to throw some of these things out there for people that maybe haven’t thought through this. You look up there at Flint, Michigan.  

It’s my favorite place to point to they’re still sitting there with water that is undrinkable. And these people are trapped in a city that isn’t serving them. The leadership isn’t serving them, the government, anything isn’t serving them, the economy isn’t serving them. They’re literally trapped. Many of them probably don’t have cars.  

They have no means of getting out of that place and go on finding a healthy place to live. And they’re trapped. The job guarantee, the way I see it, provides instant mobility to people who are in bad situations, whether it be domestic violence, where women who have chosen or men, perhaps that have chosen to not work, to be stay at home parents, have forsaken a career.  

Now all of a sudden are looking at well, what’s my past performance. I have none, go flip burgers at McDonald’s for $5 an hour, $7 an hour, whatever. No, we have a Federal Job Guarantee that allows them to take maybe their care-giving strength and provide local services to their community. I mean, this is a wonderful opportunity to provide what I would like to say as, freedom to people who otherwise would have never dreamed of freedom.  

They would have been trapped, locked into bad situations and with no prayer of being able to make choices that some of us consider to be just normal things, but they’re stuck with a bad choice or an even worse choice a lot of times. And then there’s somebody there pointing at them, saying, “See, you made bad choices.”  

Job guarantee gives them real legitimate choices to make real legitimate changes in their own personal existence. What do you have to say about that? 

Tcherneva (00:41:54): 

Well, I think this is a really excellent point. I mean, really, really excellent point. You know, how do you escape a bad situation? How do you escape, not just the poverty, but you might live in an area that has slum lords that won’t clean up the lead from their, you know, houses. How do you pack up and go?  

How do you get a bus ticket and, if you could get a bus ticket, do you know what is waiting for you on the other end? Like, you know, when you go to the other town, will there be an option for you? And so the Job Guarantee is there. And so in a way, whenever we talk about, you know, freedom, we need to also talk about removing the obstacles that people face to make certain choices.  

And so the absence of a job is a major obstacle to make choices. And so we essentially, you know, by providing it, we are eliminating a huge barrier. I mean, think of people who, you know, are at risk groups, formerly incarcerated people, like we know that there is an enormous revolving door. Nationally there’s about 60 to 70% recidivism rate, people go back, they re-offend within two years.  

But you look at these small programs for ex-convicts around the country, and you find that they have very low recidivism rates. I mean, these jobs help in more ways than one. And so, maybe here, I should point one difference between our proposal and some other proposals out there. You know, there are proposals for tiered wages, you know, with the job guarantee.  

So Cory Booker has prevailing wages, but you will find it in other places, right. So, you know, what do you do with that. Prevailing wage for a mechanic in the state of New York could be between 55 and $65 an hour. So what do we do with that? You know, we certainly want to create employment opportunities for all, but what the job guarantee does, is create employment opportunities for the most distressed, the most chronically unemployed people.  

We are not quite able to provide employment for everyone. So, this is the reason why I often say, you know, a lot of people want the job guaranteed to be everything, for everyone, you know, to solve every social problem. But my preference would be if we go ahead and build infrastructure, large scale infrastructure through the department of transportation, and appropriate the right budget and do the right thing.  

But the job guarantee is going to be there to essentially provide the floor, the wage floor. Tiered wages can be extremely difficult to implement. We know during the New Deal this was a big sort of contested issue: are these employable or unemployable people, are they taking away jobs from skilled tradespeople?  

If we do prevailing wages, what do we do? We place people with private contracting companies that are already doing construction work. That would not be my preference. My preference would be small infrastructure projects that are essential. Like you said, you know, there’s . . . we can deal with the storm water runoff, right, and create important infrastructure, but we don’t have to promise you a $65 an hour job.  

The private sector is going to benefit from the fact that there is, you know, just the overall economy is improving, but it’s going to be very difficult, to like plug-in people, into these subsidized private sector jobs. And you don’t know what the net effect is going to be. I mean, we have some decent evidence that there is substitution if you try to place people in private sector work.  

They cross subsidize. They would have hired however many people they would have hired anyway, but they just subsidize their wages. So, my strong preference would be that we focus on establishing a minimum living wage for the entire economy as a whole. And if you want to do some nice apprenticeships for young men and women with private firms, I’m not opposed to this.  

This will not be the focus of the program for me. And if there are some states that want to add a little more on top of the 15 cause they have different living wage ordinances, then that’s fine. But I would love to have a structural policy that provides a very sound anchor, like, a very robust, very strong minimum wage benefits package.  

So that would be one thing that I want to point out. And the second thing, I want to point out that virtually nobody’s talking about it out there, that no proposal I’ve seen has articulated this way: the job guarantee is a program of prevention, and it’s not just a program to solve the unemployment problem.  

It is a program that prevents mass unemployment, prevents these inormal crashes in the labor market, prevents, the collapse in aggregate demand. If you lose your job and you’re able to obtain a job, the way you spend is totally different than if you go on unemployment insurance. If you are able to substitute your income from the private sector job with income in a public service sector job, you can still send your kids to the after-school activities.  

You can still send them to the movies. You can still go to the restaurant. You don’t just retrench and pull back, which is sort of the snowball effect that slows down the economy. And also, you don’t get as sick, your kids don’t get as sick, right? It’s a prevention program because you prevent these awful things that happen to people when they lose their jobs, and not just them and their families.  

So that in of itself isn’t enough to do the job guarantee because it’s extremely expensive to run an economy with even a little bit unemployment. You’ve got vicious cycles, you’ve got social costs that are paid for. Let’s just do it cheaper or better. 

Grumbine (00:48:02): 

Yeah. I look at it like this. When I see some individuals out here, some of our Georgist MMTers coming out talking about tax and rents so that rents don’t end up getting screwed up as a result of a side benefit, so to speak, for the rentier class. You know, we do some rent control. We do some taxes on property, possibly a land value tax, something to that effect to prevent the abuses that might come from a robust economy and them being able to exploit the scarcity of rents, and so forth.  

But one of the things that I wanted to ask is as individuals see the value of, “Hey, I have a job at all times,” sort of like what you’re talking about, the undercurrent which you just described, which is blocking a major depression in the labor market, etc., driving our economy into the toilet, without having work to buffer it. This is another automatic stabilizer, like food stamps and any number of other programs, that have a social benefit, but they also have the unwritten benefit of preventing the entire economy from collapsing. This forces us to spend money without having to have another bill signed into law or anything like that.  

This is one of those automatic things that doesn’t matter who’s in office, it kind of comes and goes and comes and goes, cyclically to ensure that the economy never tanks. Is that something that people in regular terms, non-academic, non-economic terms, is there a way of describing that so that people can talk amongst each other at the dinner table, outside the poll booths, whatever, where they can kind of have these discussions so that it makes sense.  

Can you boil that down differently? 

Tcherneva (00:49:49): 

I will say it this way, the economy can tank, the financial sector can drive us off the cliff again. Okay. The question is why should 20 million people lose their jobs as a consequence? And, hey, who knows what can happen? There could be some other, you know, shocks or problems, could be a hurricane.  

Why should people be without stable employment and lose their livelihood because there are these extraordinary circumstances? And even if there are no extraordinary circumstances, even in the best of times, the economy simply doesn’t create jobs for all. It’s not the job of private firms to provide employment opportunities for everyone that wants them.  

But what that does is it creates these silent, you know, quiet problems in our communities, invisible problems where people fall into a trap of poverty. Like I said, families their health deteriorates, there are all sorts of other residual problems that are associated to unemployment. To me, this is kind of an inhumane paradigm.  

You know, we consider people disposable, you know, let them fend for themselves. There is no moral, ethical or economic argument that you can present to me to tell me that this is okay, that we can tolerate unemployment with all of its associated costs. And the other part of this that you are pointing out is that, like it or not, this economy is going to go through booms and busts, right, ups and downs.  

And even if we don’t have great financial crisis, investment is going to slow down and firms will lay off workers. And we are going to have a program that will take them when they lose their jobs and they want work. We will just take them. And that extra expenditure on this program and providing wages and income to those people is what the economy essentially needs to start growing again.  

And when it starts growing again, people can move back to their previous jobs, or other, better jobs in the economy. So, it is a fact that we can’t escape that the economy is going to go through ups and downs, except the way we’re doing it today is we essentially throw people off a cliff. You know, they lose their jobs and they go into this pool of unemployment, and that expands, and then government spends here and there and, you know, food support and unemployment insurance, you know, all good things, but when people want jobs, you gotta provide jobs.  

And so the expenditure on a job guarantee is going to be countercyclical, the way it is now, except it will be spending on something positive, right? We employ people. We prevent the social costs. We produce a public good, and we still serve the countercyclical stabilizer. Today, the policy explicitly says that there should be millions of people unemployed.  

The Federal Reserve, when they decide that we’re at full employment, they step on the brakes. So, they essentially are saying, “You gotta throw a few more people off work because the economy is overheating.” Obviously to me, this is a morally unacceptable policy orientation, but it’s even economically bankrupt approach. If you can employ people, and that can be your countercyclical stabilizer, why do you keep the NAIRU? 

Grumbine (00:53:16): 

So one final thing before I let you go, and I’ll let you close out with the last word, but on this particular question, this is the penultimate one that I want to bring forward. And that is, there’s always somebody, automation, automation, automation is going to take our jobs. There is absolutely no evidence of anything out of the ordinary at this point, there’s no booms of productivity that are taking away things because of automation.  

What is this fetishization of automation? What is it that people are doing with this? Because it literally ends up trying to steer every job guarantee conversation into this automation world. I don’t think people really understand that, you know, Captain Kirk was still employed when he was running the Star Ship Enterprise.  

Employment changes, as automation comes, it should benefit the people. There’s a whole bunch of benefits. Instead, we have a lot of gloom and doom, automation, automation, automation. You deal with this all the time. I’ve seen you, no less than 20 videos of you, and I’ve heard you talk personally, about automation. Explain to me what the fetishization of automation is, and kind of help me debunk this thing, once and for all. 

Tcherneva (00:54:30): 

I mean, look, I think that first we’re fascinated by new technology, right? We’re fascinated and we don’t know what to do with it. You know, when we invented the steam engine, it was the same thing. Oh my goodness. You know, we’re going to wipe out all jobs. When we invented the typewriter. Oh goodness.  

You know, when we invented the computer, Oh dear Lord, you know, jobs are disappearing. We have both a fascination with the unknown, the possibilities that it brings, and the fear of what it might do. So I have no doubt that some jobs are going to be outsourced and it will be automated, and maybe it’s good to automate some of them.  

But it’s also an indication of the limit of our imagination. Every time there has been a major technological revolution, we have created far more jobs than we had before. We had created many, multiple ways of doing things, and wanting to do other things. So technology brought new jobs as well. So, I like you, don’t buy the technological Armageddon argument.  

But the other piece that I like to say is that, you know, there is no iron law of technology that ensures that we can’t create work for people that is just by people. You know, that is the vast majority of our work, of our lives is taking care of ourselves. We care for each other, it’s whether it’s healthcare, whether it’s entertainment, whether it is education, whether it is other services, the vast majority of what to do, what we do, is taking care of each other.  

And so, we can choose what to automate. It is a social process of which technology we adopt. And if we still believe that in your hospice bed you want to be somebody to hold your hand, then we’re not going to put a robot in there, right? We’re not going to put a television set. If we believe that it’s important that there are teachers in the classroom, we’re not going to shove computers 24 seven in there in the children’s hands.  

This is a social process. And, the idea that somehow technology is going to take away the ideas that we have for caring for ourselves, for our environment, for our community, is just kind of defeatist argument – that there’s just nothing we can do. And I think, you know, we’re smarter than this. There’s plenty that we can do for ourselves and our communities. 

Grumbine (00:56:52): 

Alright. That was fantastic. I appreciate you coming on here Pavlina. What I would like to do is give you a moment to close us out, tell people where they can find your new working paper, where they can find information on the job guarantee, and basically let them know what they can maybe do to help spread the word. 

Tcherneva (00:57:12): 

Yeah. So my own personal website, so you can go to pavlina-tcherneva.net. And I have a couple of pages there, one on the job guarantee that has multiple videos and papers I have written, but I have another one that is Job Guarantee, Frequently Asked Questions. So I have like 50 questions that I’ve come across and I’m, I’m building it.  

So if people have suggestions for other questions that I haven’t answered, or that they hear from others, and that would like to answer them, email me, and I’m going to fill up that page with more answers. Also, I want to direct people to the Levy Economics Institute. You know, in fairness, the Levy Economics Institute has been publishing for more than 20 years.  

You know, we’ve probably published the most on job guarantee programs. Now it’s hip, and everybody’s sort of, you know, producing a version of their job guarantee proposal. But you know, we’ve tried to work out the macro issues here as we were developing the proposal. So levy.org, you know, look up job guarantee and you can find a lot of work there.  

I have to also direct you to Bill Mitchell’s website, Billy blog, and Warren Mosler’s work on the transitional job offer, because, you know, if you’re looking for the nuts and bolts on the macro aspects of the job guarantee, then I think this is kind of the most serious work that has been done out there on it.  

And of course I have to say, you know, our compadres, Sandy and Derek and Mark, they really add a lot of texture and richness to the social, multiple deprivations that are concentrated, especially in the communities of color. So that is a really very rich literature there that students need to be, the students, as students of the job guarantee, and want to be informed about. 

Grumbine (00:59:00): 

Alright, this was amazing. I hope I can have you back sooner. I really love every time you come on here, our team really, really enjoys everything you do. So from my heart and from my team’s heart, we thank you for your time. We thank you for the hard work you’re doing, and it gives us a lot of hope and that’s why we’re fighting. So we’re right there with you, right behind you. 

Tcherneva (00:59:23): 

My pleasure, without you guys, we know our message will be siloed in the academia. So I really, really appreciate what you’re doing. 

Grumbine (00:59:32): 

You’ve got it, thank you so much. We’ll see you later. Folks, that was Pavlina, and I’m thanking you all very much. Please join us again. I will see you soon. 

 
Ending Credits (00:01:35.280)  

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