In my last post, I discussed the first part of Beowulf’s post entitled: “(MMT − JG) + Medicare for All = MMT,” and also some dialogues between Jamie Galbraith and both TomThumb and Beowulf related to the MMT Job Guarantee at one of FiredogLake’s Book Salon’s featuring Jamie’s new book Inequality and Instability: A Study of the World Economy Just Before the Great Crisis.

In Beowulf’s post, he highlights replies by Jamie to a question about the JG including this point:

“. . . the federal government handles *insurance* extremely well. Social Security and Medicare are functional, efficient programs. That is why they are so hated by some people – and prized by others.”

Beowulf then remarks:

“I rather agree with his last point. As I’ve suggested before, Congress should dump universal healthcare funding onto the Fed’s lap. This would have the side benefit of providing the Fed with a fiscal policy tool; they could periodically adjust the rebate’s ratio of seigniorage vs transaction fee revenue depending on economic conditions.”

Beowulf then follows with more details of one of his way out-of-box proposals illustrating an unequaled talent (and I mean this in the best possible way) for policy wonkery, that puts the likes of the unjustly celebrated Ezra Klein to shame. Before I get to these details however, I’ll note that the general idea would require Congressional legislation and also legislation that gives the undemocratic Fed more authority than it has now.

In my view it would reinforce the Fed’s position in the Government, and since I think that position both violates constitutional separation of powers and also provides the financial industry with undue influence over the operations and policies of the Central Bank, my first reaction to Beowulf’s proposal is that it incorporates a big negative to begin with.

Beo goes on with the details:

“To take a few minutes to unpack my last paragraph (you can punch out if you don’t want to go into the weeds)… While Obamacare was being debated in 2009, Anthony Weiner went on the Morning Joe show to make a ridiculously strong case for a single payer system (Part I, Part II). Congressman Weiner was promised a floor vote on a Medicare for All bill he drafted but Pelosi and/or the White House pressured him to drop it so people would pay less attention to how flawed Obamacare really was (but I digress). Unlike the HR 676 Medicare for All bill that you often see touted, Weiner’s bill was actually vetted by the CBO so its additional expenditures were matched by additional taxes… A LOT of new taxes (approx $1 trillion a year, that’s over and above current govt health spending that’d roll over into the new system). Raising taxes seems rather unnecessary since Congress could accrue this revenue without taxes or inflation simply by mandating the Fed deposit an equivalent amount in TGA every year.”

So, there’s the Congressional action necessary for universal health care. Congress has to legislate Medicare for All, and then has to mandate that the Fed deposit an equivalent amount without either taxing or borrowing. So, where would the money come from? Beo goes on:

“The Federal Reserve Act was amended in 1980 to give the Fed governors (and NOT the FOMC) the authority to levy and adjust bank transaction fees. Of course this is completely different from bank transaction taxes, after all, only Congress can levy taxes! In 2005, UW-Madison Econ professor Edgar Feige proposed to President Bush’s tax reform panel a bank transaction tax (of approx. half of one percent) that would generate $1.8T in revenue (in 2002 dollars). My reading of the FRA is that the Fed could enact Feige’s plan on its own (though Congress can always push them if they won’t jump). In perhaps the most wonderful example ever of “its a feature, not a bug”, economist Bruce Barlett complained of Feige’s plan,

“Since GDP equals the money supply times the turnover of money—what economists call velocity—a fully effective transactions tax will presumably reduce velocity. Consequently, it would be severely deflationary unless the Federal Reserve substantially increased the money supply to compensate. It also means that the tax base will shrink as soon as the tax is imposed.”

“So this is the plan, the unstoppable force of $1 trillion in inflationary Medicare spending would meet the immovable object of $1 trillion in deflationary transaction fees. Of course we only need spending and revenue to match at full employment (and even that assumes no trade deficit demand leakage). At other times, The Fed could use this as an adjustable fiscal policy tool (the Board of Governors can amend their fee schedule at any time). When the economy falls short of full employment with balanced trade, the Fed could fund Medicare by cutting transaction fees and filling the deficit by way of the Mint with coin seigniorage (I’ll just note in passing that ordering, say, a $1 billion platinum coin seems less wasteful than a billion $1 coins, reasonable minds can differ).”

So, Beo has advanced an ingenious proposal for passing Medicare for All with perpetually mandated Fed funding coming from 1) bank fee revenue collected by the Fed and then deposited in the TGA, and 2) US Mint coin seigniorage profits generated by high face-value platinum coins during those years when recessions make it desirable for the Fed to back off some portion of its fee revenue for covering Medicare for All spending. Funding health care this way would not come up against the debt ceiling problem, and it would likely save the non-Government sector at least $800 B per year, or $8 Trillion over a decade, which it could use for other things besides health insurance/out of pocket spending, by putting the private health care insurers out of business and by disciplining the providers through cost negotiations with the Government, now acting as the single-payer.

An elegant proposal, right? But there are a few problems with it.

First, it makes the Fed always very subject to bank influence in the position of deciding what the bank fees will be. No doubt the banks will continuously push for reductions in the fee revenue and more reliance on seigniorage for Medicare funding.

Second, as indicated earlier, it increases the authority of an undemocratic institution that is already too powerful.

Third, why would Congress agree to mandate the Fed to go this way? The fees involved will be viewed as taxes by the banks, whatever they are called, so they will oppose them and will require their allies in both parties to defeat such a proposal.

Fourth, isn’t the fiscal tool given to the Fed in the proposal relatively ineffective and also unnecessarily generous to the financial sector in hard times? That is, backing off the transaction fee revenue will feed bank gross profits which will be transmitted disproportionately to wealthy executives and stockholders. So, isn’t the fiscal multiplier associated with backing off fee revenue and using coin seigniorage to fund Medicare for All likely to be relatively ineffective since we know that multiplier is likely to be similar to the one associated with tax cuts for the wealthy, which is roughly 30 cents on every dollar cut?

Fifth, isn’t this proposal unnecessarily complex from a political point of view? That is, if Proof Platinum Coin Seigniorage (PPCS) (the method of getting around the debt ceiling originally suggested by Beo some time ago) is going to be used anyway, and the Executive is going to be brought into the picture, then why start with the Congress to try to get this done?

Why not do what I suggested in this recent post and earlier? Namely let the President start with a $60 T coin, pay down all the intra-governmental debt within a week, have the executive pay off all the debt subject to the limit held by the non-Government sector as it comes due, and then have roughly $45 Trillion in unappropriated funds sitting in the TGA, waiting for Congress to target them at specific programs.

The $45 T sitting there would serve as a very visible reminder that the Government has the money to do whatever it needs to do to help solve America’s many problems; and certainly much more than enough needed to fund the full cost of Medicare for All for many years to come, in addition to State revenue sharing, payroll tax holidays, and a Job Guarantee program to entirely end the Great Recession and enable full employment at a living wage. I think this plan is much simpler than Beowulf’s new proposal, and it has the advantage that it can generate unremitting pressure on the Congress to create Medicare for All, which it could no longer easily turn aside by pleading that the US is running out of money with $45 T sitting in the bank, and the capability to generate still more money at will if needed. No one would be able to tell the lie that the US was running out of money ever again.

Finally, it should be obvious that “(MMT − JG) + Medicare for All = MMT” is false, because even if PPCS is used for Medicare for All, its substitution for the JG still falls short of MMT objectives. Adding Medicare for All to other MMT initiatives, without implementing the JG will bring the economy closer to FE, than would have been the case without Medicare for All, but that wouldn’t change the fact that we would still be relying on a buffer stock of unemployed persons to contain inflation. That’s not an MMT prescription, because it is less in conformance with public purpose than relying on a buffer stock of employed persons for a host of reasons reviewed in many posts here.

But, in addition, and just as important, the JG program in its MMT context makes real for the first time FDR’s proposed economic right to a job for all who are willing and physically and/or mentally able to work. I think that right is an essential aspect of the idea of public purpose, and that’s why the JG program ought to be, and is, so closely tied to MMT.

In short, (MMT − JG) + Medicare for All ≠ MMT, and the only way someone can believe that it does, is if they either don’t believe that the goal of economic policy in a democracy is to fulfill public purpose; or alternatively, if their ideas about public purpose don’t include the right to a job offer at a living wage. Do all who call themselves MMTers believe in this right? I don’t know.

But I do think that in the future, as more people in economics come to recognize that there are no value-free economic systems, and that MMT cannot be free of values and normative commitments, MMTers will come to recognize that they can’t avoid making their normative commitments explicit. And when that day arrives, I think most MMT supporters and practitioners will decide that the normative commitments to real Full employment and FDR’s right to full-time work are part and parcel of MMT, as is the JG itself, because it is the best method yet devised for fulfilling these aspects of public purpose.

And also because if MMT is anything at all, then it is surely the Economics for the Public Purpose that John Kenneth Galbraith wrote about in the 1970s. MMT is the modern embodiment of the tradition named by Galbraith in that fine book. Many of us still, and will always, revere the vision expressed in that book. To those who feel this way, Economics for the Public Purpose is the only economics we will practice, because it is the only economics worthy of the name.

(Cross-posted from Correntewire.com)

A few days ago my friend Beowulf decided to exercise his wry sense of humor with this title of a post he offered for our consideration: “(MMT − JG) + Medicare for All = MMT.” Beo then goes on to talk about some details of a comment exchange with Jamie Galbraith at one of FiredogLake’s Book Salon’s featuring Jamie’s new book Inequality and Instability: A Study of the World Economy Just Before the Great Crisis.

Dialogue 1, Jamie Galbraith/TomThumb

Beo points out that Jamie has been closely associated with the approach to economics called Modern Monetary Theory (MMT), most recently in a pretty good Washington Post article by Dylan Matthews, someone who clearly has little familiarity with who’s who in MMT world. After setting the stage by pointing out that association, Beo goes on to quote part of Jamie’s comment giving his reply to a previous question about what he thinks of the MMT Job Guarantee (JG) proposal.

Here’s that reply:

“. . . To come back to the job-guarantee approach, I think asking the government to create jobs directly is not a robust solution. The problem is that the program goes right into the budget firing line, where it will get chopped up. That was the experience with CETA, the Comprehensive Employment and Training Act, back in the 1970s.

“So I prefer to think in terms of how to get decentralized institutions doing useful things, with their own funding streams, so that you can create jobs that endure. Education, health care, social services, home care, neighborhood conservation.”

Later FDL commenter TomThumb replied this way to Jamie:

“I worked under CETA as a Social Worker Assistant and then went right to Social Work graduate school when that ended in 1977. CETA works!

“Seems like you are giving up without a fight.”

To which Jamie replied:

“Good for you. I was on the congressional staff at that time so I still have some scars from the previous fight.

“But I think there are ways to get jobs funded — you just have to put a few degrees of separation between the program and the budget-cutters.”

TT quickly shot back:

“No. I disagree. I enjoyed it when you used to call for a direct frontal attack on their weasel words about creating jobs. Anything else is caving. In my opinion. Call them out for being do nothings. That is better than watching people get hurt every day and not making any changes.”

To which Jamie replied:

“Point taken. It’s a tactical issue and there are mornings when I agree with you.”

This exchange with TomThumb shows that Jamie is of two minds about direct Government job creation, and suggests the possibility that he might well prefer it if a Job Guarantee program could be structured as “. . . . a robust solution.”

I think it can be, but that discussion will have to wait for later in the post.

Dialogue 2, Jamie Galbraith/Beowulf

At this point Beowulf entered the discussion asking Jamie what he meant by the idea of getting jobs funded by putting “. . . a few degrees of separation between the program and the budget-cutters.”

To which Jamie replied:

“Well, I like the non-profit sector in this country a lot. Health care, education — these are useful things. Paul Samuelson once said to me “Health care is 15 percent of GDP, and it’s the best 15 percent of GDP.

“The thing about these sectors is, they have multiple funding streams. Higher ed has state money, federal money, tuition, philanthropy… This buffers the institution from cuts.

“If you go to (say) France, and look at what happens when you rely entirely on state funding for universities, you’ll see what I mean.

“That said, the federal government handles *insurance* extremely well. Social Security and Medicare are functional, efficient programs. That is why they are so hated by some people – and prized by others.”

To which Beo replies:

“That’s an interesting point, from a political standpoint, multiple sources of funding makes it more difficult to starve the beast (to say nothing of the politically powerful stakeholders in education and healthcare who won’t take losing their funding lightly).”

This dialogue is really interesting from an MMT point of view. Here’s Jamie Galbraith and Beowulf, both of whom have more than a passing familiarity with MMT, talking about job creation in the non-profit sector through funding that doesn’t derive from Government deficit spending.

Now, that kind of job creation isn’t impossible provided the fiscal multiplier trades involved are favorable, but both Jamie and Beowulf know very well that, assuming multiplier trade-offs are equal, without deficit spending by the Government sector, or the non-Government sector decreasing its total savings and perhaps increasing its debt, raising funding for non-profit sector jobs is likely to cost jobs elsewhere in the non-Government sector. They also both know that from a purely economic/fiscal point of view there’s no problem in funding a JG program. The problem with it is political. Namely, that in the current political climate a JG program, however structured, is very difficult to legislate (a point all three of us agree on).

Apart from that shared judgment of political difficulty, Jamie and Beowulf appear to diverge. Jamie says that not proposing a JG program is the best tactical choice right now. But Beowulf, who now favors the Modern Monetary Realism (MMR) approach, is opposed to the JG on strategic grounds because the MMR position is that the JG will not work as advertised by MMT, specifically, MMR believes that it will not produce full employment at a living wage with price stability, even if implemented as part of a broader MMT-like program including full payroll tax holidays and State revenue sharing.

The Upshot of the Dialogues

So, the upshot of these two contrasting dialogues is that both Jamie and Beowulf are talking outside of the MMT paradigm. And they are not acknowledging, or evaluating the implied MMT view that more “robust” job creation done in the non-profit sector without Federal deficit spending backing it, will in the end, either not be robust at all, or, alternatively will decrease the robustness of other non-Government sector employment.

Put another way, the lack of robustness critique of the JG policy idea based on the notion that JG funding will always be in the line of fire from deficit hawks and Republicans applies equally well to funding job creation in the non-profit sector, because ultimately that funding too, just like JG funding, can only be based on Federal deficit spending if it is to create new jobs, at least if we assume that imports will exceed exports, and that the non-Government sector will want to increase total savings during the period when new jobs are to be created.

Also, it looks like TomThumb, has it right. Jamie is giving up on the Job Guarantee idea too fast, because his view of its ultimate political fragility applies equally well to his proposal that the non-profit sector ought to do the job creation with non-Federal deficit funding. So, where do we go from here with the Job Guarantee proposal for direct job creation? Here are a few comments that contrast with Jamie’s doubts and his views on the lack of robustness of JG job creation.

First, from my point of view, none of the MMT recovery proposals are likely to be accepted in today’s political climate. So, the political feasibility criticism of MMT’s JG proposal isn’t any more weighty right now than similar criticisms of its payroll tax cut, and State revenue sharing proposals.

If any of them are to be passed, it will be necessary to overcome the ideology of austerity and get people in Washington to accept the fact that the American Government can’t have solvency problems. Doing that is job no. 1.

When and if that is done, and people really believe that the Federal Government can afford the social safety net and all sorts of other spending too, then we can consider whether the whole MMT program including the JG is politically feasible or not. My last post outlines some things the President can do to take austerity off the table and bring the day when we can do this with a real feel for feasibility closer.

But these are not to the point here. The point, instead, is that when it is off the table, then there will be no compelling reason why permanent automatic annual Federal funding of FDR’s right to a full-time job offer at a living wage, for every person if she/he wants to work, could not be funded through Federal spending, whether deficit or otherwise.

Second, Jamie says he prefers that the non-profit sector create the new jobs. However, the current MMT JG proposals are formulated so that even though the Government is the funder JG jobs, the work itself is actually defined, structured and supervised by the non-profit sector with the participation of local stakeholders who would define jobs that produce societally valued outcomes. Pavlina Tcherneva has been doing a lot of writing about this lately, (See also recent posts) as has Randy Wray. (See posts 38, 42-45 and also the response posts following each one.)

So, even though, the funding for an MMT JG program would come from the Federal Government, the non-profit sector would be heavily involved in specifying the jobs for the JG program. The result should be a program incorporating many of Jamie’s ideas about non-profit capabilities, based on Federal funding that might have no robustness problems at all, provided that the ideology of fiscal austerity is politically defeated by the time the MMT program, including the JG passed.

Third, Golfer1John, a commenter on one of Randy Wray’s recent JG posts suggested that the JG be renamed as The “Employment Insurance” program. I think this is a good name for it, because it describes what it offers to individuals who have been caught up by economic forces beyond their control, and it can also be marketed as part of an economic bill of rights.

In an environment where austerity has been defeated and the government is revealed as being able to fund anything that isn’t so expansive that it will cause inflation, it ought to be no problem to justify both an employment insurance program to guarantee a job offer to people who want to work, and also a universal health care program based on the idea of Medicare for All. So, we can have recovery, Job Guarantees, Universal Health Care, and Reconstruction of our severely damaged economy and society without having to worry about “running of of money.”

Beowulf’s Proposal

After highlighting Jamie’s view on the JG, but failing to review Jamie’s exchange with TomThumb, Beowulf goes on to offer a proposal of his own about Medicare for All, playing off Jamie’s remark that the Federal Government “handles ‘insurance’ very well. I’ll discuss that brilliant, but ultimately undesirable, proposal in a future post. And that’s when we’ll get into the humor reflected in the title: “(MMT − JG) + Medicare for All = MMT.”

(Cross-posted from Correntewire.com)

By

Pavlina Tcherneva

A few weeks ago I called for a technocratic debate on the merits of the JG, relative to other fiscal policies. A number of bloggers took the charge but the debate was not immune to ideological biases, which proved the starting point of my piece that one cannot separate fact from theory or ideology (and by ideology I do not mean the derogatory use of the word, but that which signifies ‘ontology’ or a ‘world view’). What I didn’t expect is for friends and sympathizers to resurrect one particularly invidious charge we have long heard from MMT deniers, namely that MMT is pushing authoritarian policies.

Oh, boy. How did we even get here? I thought this was going to be a technocratic debate.

Let me deal with just a few issues here: 1) the seeming resurrection of status quo fiscal policies, 2) the merits of JG compared to other fiscal policies, 3) some additional real-world evidence on the benefits of direct job creation, and 4) offer a vision for a JG in a free and democratic society.

1) Why defend the status quo?

The criticism of JG boils down to unproven claims that it will impose hidden costs on firms and competition, have a negative impact on incentives to work, wealth creation and productivity, and will lead down the path to socialism. After all, great prosperity had been achieved under the old system, so why change it? 100 years ago the same arguments were made in opposition to 8-hour workdays, 5-day workweeks, child labor, mandated vacation and today they are made against paid family leave, living wages, etc. So there is nothing new in the critics’ claim that JG would reduce incentives, productivity or growth.

Indeed these are not arguments against the JG. They are arguments for the status quo. Those who support MMT, but not the JG, say that they favor more deficit spending in the form of pro-investment, pro-growth, pro-productivity policies, coupled with strong public infrastructure and education investment and income support to the poor and unemployed. But all of these policies are the status quo, even if proponents are demanding more funding for them. They are the status quo because they have been tried with generous funding at one point or another in the postwar era and have still failed to solve the most important problems of modern society like poverty, income inequality, short and long-term unemployment, instability, deteriorating incomes and on and on and on.

I am baffled why JG critics who nevertheless sympathize with MMT have embraced the neoclassical definition of full employment in the presence of volumes of literature on the problems with this definition and the fundamentally flawed theory behind it. They are suggesting that policy should target a ‘full employment’ rate consistent with 4% unemployment. Note that for MMT scholars, full employment is a condition where everyone who wants to work has a job, not a condition where 4% of the population wants to work but cannot find employment. With respect to policy, JG critics have been arguing that government spending should be based on ‘new’ fiscal rules that deliver the desired unemployment rate.

Why are we reinventing the wheel? There is 80 years of literature deriving from an approach known as Hydraulic Keynesianism that already thinks that full employment is equal to some level of bufferstock unemployment (known as the NAIRU), thereby assuming away much of the problem of unemployment. Priming the pump up to that bufferstock unemployment level based on some version of Okun’s law is the hallmark of the ISLM approach and all of its modern neoclassical descendants who favor fiscal policy intervention (btw, Okun himself cautioned that the link between output and employment growth is very tenuous). We have volumes and volumes of analysis critiquing the macro-theory underpinning the Hydraulic Keynesian approach but suddenly we are resurrecting it?

What is the new contribution in the proposed policies by critics of the JG? The idea that governments can spend without facing budget constraints? That’s not new. The ISLM economists of the postwar era who took Lerner seriously knew this all too well. Even modern New Consensus economists seem to understand this (see Woodford and Bernanke’s work). Or is it the idea that we can spend on a ‘new’ fiscal rule that fine tunes the economy? That’s just old wine in new bottles. Automatic hydraulic fiscal policies that adjust spending and taxation throughout the business cycle are the trademark of postwar fiscal intervention that has not delivered long term stability or full employment.

Priming the pump, whichever way you dress it, works extremely poorly. It is trickle-down Keynesianism, which erodes the income distribution and fails to address unemployment and poverty, no matter how well intentioned it is. If you want to get a job done, you do it directly. If private sector sales are too low, you provide demand. If the private sector still fails to create enough jobs for all, the public sector fills the gap through direct hiring. If firms pay poverty wages, the public sector establishes an above-poverty wage floor (minimum/living wage). If companies fail to provide health insurance for all, the public sector does. Fine-tuning is an inferior policy that is akin to shooting darts blindfolded—some of them will hit the target, some won’t, but a whole lot of time, effort, and resources will be wasted in the meantime. This was well understood by Minsky and Kalecki and anyone who reads them seriously understands the difficulties with fine-tuning policies, especially those that are pro-investment, pro-growth.

2) How direct job creation and the JG/ELR compare to other fiscal policies

In a recent Levy paper I use the insights of Minsky and Kalecki to demonstrate why alternative policies are inferior to direct job creation in general, and the ELR in particular. The paper augments the conventional Post Keynesian markup model to study the effects of different fiscal policies on prices and income distribution. Minsky often argued that in the modern era, government is both ‘a blessing and a curse’ – it stabilizes profits and output by imparting an inflationary bias on the economy, without stabilizing it at or near full employment. In this paper, I consider several distinct functions of government: 1) government as an income provider, 2) as an employer, and 3) as a buyer of goods and services. The inflationary and distributional effects of each of these fiscal policies differ considerably. First, I examine the effects of income transfers to individuals and firms (in the form of unemployment insurance and investment subsidies, respectively). Next, I consider government as an employer of workers (direct job creation) and as a buyer of goods and services (indirect job creation). Finally, I modify the basic theoretical model to incorporate fiscal policy a la Keynes and Minsky (JG, ELR, “on-the-spot-employment”), where the government ensures full employment through direct job creation of all of the unemployed unable to find private sector work, irrespective of the phase of the business cycle. The paper derives a fundamental price equation for a full-employment-economy with government. The model presents a ‘price rule’ for government spending that ensures that the ELR is not a source of inflation. Indeed, the fundamental equation illustrates how in the presence of such a price rule, at full employment, inflationary effects are observed from sources other than the public sector employment program.

Critics of the JG have to make a really good case why the status quo should be defended, how conventional fiscal policy should be packaged under the guise of a new fiscal rule to deliver stability and better socioeconomic outcomes than the JG. They need to explain why higher markups and worsening income distribution from pro-investment, pro-growth policies are preferable to giving jobs to the unemployed in a productive project. But please make your case like engineers would—on the technical and not on the political merits of these rules (there is no such thing as one policy being ‘less political’ than another), and not by making unsubstantiated claims that the ‘the JG is politically disastrous’. You also cannot falsely claim that we know nothing about how direct job creation policies work in the real world and what impact they have on the economy or the beneficiaries.

3) Benefits from direct job creation: new evidence from Argentina

The literature on the New Deal, the Swedish model, industrial policy and direct employment around the world is voluminous, even if it’s not ‘mainstream’. We know a lot about direct job creation. MMT has focused on Argentina’s Jefes program because it was modeled after our ELR proposal. We have shown which features of the program worked the way we said they would and which didn’t and why. We have also illustrated some of the benefits of Jefes on the macro-economy and the beneficiaries themselves. But recently JG critics (and skeptics) have questioned the effect of the program on the poorest members of society and have argued that income support programs may be preferable. This is not a new claim either. In fact it is precisely the argument that drove the reform of Jefes in Argentina.

If you’d like to learn about this reform and the impact Jefes had on the very poor, you can read another Levy paper of mine, which examines several surveys (in addition to the ones conducted by Randy Wray and me) of poor women from different municipalities in Argentina. The surveys tell a very important story about the benefits of job creation on the poorest members of society. The paper also addresses the debate on job guarantees versus income guarantees.

Though the literature on the JG and the ELR often emphasizes their macroeconomic stabilization effects, these policies can also have profound social transformative effects. For example, MMT has advocated a Green New Deal. In this paper I show how the JG can help address enduring economic problems such as poverty and gender disparity.  The survey evidence and fieldwork I consider reveals that poor women overwhelmingly want paid work opportunities and that policies such as the JG or the ELR not only guarantee full employment and macroeconomic stabilization, but can also serve as an institutional vehicle that begins to transform some of the structures and norms that produce and reproduce poverty and gender disparities. I look at the transformative features of public employment policies by turning to the capabilities approach developed by Amartya Sen and elaborated by Martha Nussbaum—an approach commonly invoked in the Post Keynesian, Institutionalist and Feminist literature. The paper examines how the access to paid employment can enhance what Sen defined as an individual’s “substantive freedom”. Any policy that fosters genuine freedom begins first with an understanding of what the targeted population (in this case, poor women) wants. It then devises a strategy that guarantees that such opportunities exist, and finally it removes the obstacles to access to these opportunities.

In sum, if you’d like to learn about the impact of these programs on the poor, it is best to go on the ground, study the programs, and ask the poor themselves. I encourage you to read and think about the narrative of these poor women about their experience in Jefes. It’s all good and well to sit around puffing one’s pipe debating the problems with the JG, but unless one takes the time to study specific direct job creation programs and talk to program participants, all criticisms will remain in the realm of armchair philosophy. The paper above shows that the poor want jobs, not handouts, and demonstrates how the JG fosters participatory democracy.

4) The Job Guarantee fosters democracy: A proposal for the US

I especially object to the claim that the JG leads us down the path of socialism or some authoritarian system. Any good idea in the wrong hands can turn deadly. It doesn’t mean that it’s not a good idea. Splitting the atom can produce cheap energy for all, but someone decided to build an A-bomb instead. So do we reject the science behind the splitting of the atom, because it can be put to terrible uses?

And why even go there? I find JG to be entirely consistent with the wishes and desires of a free a democratic society. Indeed, I think that it is a crucial but absent component for any participatory democracy. If a citizen wants to work, contribute, show initiative, innovate, participate, do something/anything for the public purpose, why not provide the opportunity?

In my research funded by the Institute for New Economic Thinking, I have argued that part of the JG needs to be done on the basis of a grants-based approach (especially in normal times, during normal business fluctuations), where the communities, nonprofits, and the unemployed themselves can participate in designing, proposing and executing the projects that would be performed in these communities. This is a model fully consistent with the entrepreneurial American spirit.

The grants will be allocated to non-profits that are on the ground and are already doing many of the jobs that the public sector (yes, the government) has failed to do. These are the same nonprofits which fulfill crucial social needs but lack adequate resources. Plus new nonprofits pop up in an entrepreneurial fashion all the time to fill new needs–e.g., environmental cleanup, sustainable agriculture, urban farming. They are better organized, more familiar with local needs and resources and can surely use more helping hands to do what they need to do. I’ve been suggesting this grants-based approach after observing how some projects in Argentina were done this way. You may think that those uneducated, poor, and ‘unemployable’ men and women have no good business ideas, no entrepreneurial spirit, or ability to figure out what needs to be done and you’d be dead wrong. We don’t need big government planning and authoritarian decision-making about placing certain people into specific jobs—the nonprofit market can figure this all out, so long as it has the resources. Government only needs to make the calls for proposals, assess the projects the way it would with any current private sector contract, perform the due diligence in reporting and quality control, and allocate the funding for worker wages and materials (and in many cases the funding need not be 100%). All the JG does is add the explicit objective to employ the unemployed at a base wage into these projects. Nonprofit work is highly countercyclical, which is why it is well suited to providing the automatic stabilizer we’ve been discussing. As the economy slumps, we can use the existing unemployment agencies to provide placement of the jobless into these nonprofit projects. As the economy recovers the same agencies will provide job placement into higher paying private sector work. We have the infrastructure to execute a JG.

Where mass infrastructure improvements are needed they should be done. It’s a no brainer. Some projects will be executed by private companies which pay prevailing wages, some projects will be low skill already and will hire at a base wage. The non-profit model I describe above does not preclude doing much needed large-scale infrastructure investments or improvements.

No MMT scholar has ever argued that designing JG is easy, that there are no kinks to work out or that it is a panacea to all social ills that plague modern economies. To those who have only been able to envision an ‘unproductive’, ‘authoritarian’ version of the JG, and not a ‘democratic’ one that advances the public purpose, I say “Leave the job to us. We will design a policy that supports the aspirations of a free and democratic market economy.” To the rest who have your own bold visions and practical ideas about how to make it happen–we want to hear from you and let’s get to work.

(Cross-posted from New Economic Perspectives with permission of the author and the NEP blog)

After opposing the Job Guarantee proposal as part of the broader MMT policy program in service of the goals of public purpose, full employment with a living wage and price stability, and for many weeks now, combining with Mike Sankowski and Carlos Mucha to found “Monetary Realism” and also saying:

“You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. They were invaluable in retrospect. If I’d been able to apply for a JG job I might not be half the man I am today. Maybe it’s just personal entrepreneurial experience speaking here, but I know what it means to hunt and kill for ones dinner. Very little, aside from great parenting and education, was handed to me in life. My psychological development through having to earn things has been a building block that no govt program can ever provide. Ever.”

And then later saying that he’s for: “prosperity, increasing living standards,” and says that subsidiary goals are innovation, increasing productivity, and a “real goal” of “full productivity.” And also saying that:

“. . . . massive increases in living standards come from increases in innovation and productivity (which are MOSTLY pvt sector and profit driven). So my thinking is rather basic. Why obsess over FE (I am referring to low unemployment here) when the real goal is full productivity (which is a vague concept I know)?”

Cullen Roche, in a post entitled “I Am For Full Employment” says today:

“That’s All.”

To which I say: that can’t be all because:

The MMT normative structure is: JG in the context of payroll tax cuts, State Revenue Sharing, and selected anti-inflation measures such as higher taxes → Full Employment at a living wage with price stability → Public Purpose

while MR’s normative structure based on Cullen’s various posts appears to be:

Payroll tax cuts, State Revenue Sharing, other as yet undefined productivity enhancing measures, along with selected anti-inflation such as higher taxes and interest rate targeting by the Fed → Innovation → Full Productivity with Price Stability → Full Employment → Increased Prosperity, which appears to be MR’s top-level goal.

I think the MMT normative structure posits a much more direct connection between policy and FE with PS than the MR normative structure does. Also, the quotes above seem to indicate that MR values FP, Innovation, and Increased “Prosperity” much more than FE which we should not “obsess over.”

So, with all due respect I’d have to say:

That’s not all!

Update: After I posted this Cullen replied, in part by pointing out that he had “rescinded” the first quote I provided above in reply to a comment of mine saying:

“I shouldn’t have even bothered with the anecdotal. Lesson learned. It totally distracted from my main point which was not to say that we don’t need full employment, but that we should seek full productivity (and hence FE). The personal experience doesn’t prove anything….”

And he went on to claim that I was taking him out of context by not noting his reply. My response was and is:

I’m happy to have your amplification above and to acknowledge your further reply.

However, your reply doesn’t say that your previous comment about the virtues of unemployment is wrong, or that you prioritize FE over FP and are not advocating a variant of MMT that will not maintain an unemployed buffer stock rather than a full employment buffer stock. Nor do you question my characterization of the MR normative structure above. As I’ve already said to you in correspondence:

So, here’s a challenge. I say that your goal structure as so far stated is as I represented it in my post above. If you think I’m wrong then state what your goal structure is explicitly. Locate FE within it and prioritize FE relative to FP. I’d be very interested in seeing that and if you prioritize FE over FP then I’ll be happy tp admit I’m wrong, and agree with you that you favor FE even if you don’t favor the JG. Then I’ll further admit that you and I have very similar goal structures but only disagree on the means of achieving it.

Then we can go on to argue about means. In making such an argument however, I recommend that you tell us all what you mean by “full productivity.” As i said in another post to you:

So far, at least, I’ve not even seen a definition of FP from you. So how can I possibly tell whether FP will lead to FE, let alone whether it would be more effective than the JG at accomplishing that.

Finally on this bit:

“I am really stunned that you keep using that comment to try to prove your argument. It proves nothing and was rescinded in direct response to you because you and others kept taking it out of context.”

Readers can judge above whether your comment above “rescinded” your previous comment or not. I do not consider it taking back your previous comment that:

“You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. . . . “

That part of your comment says that unemployment is needed, and implies that an unemployed buffer stock is more valuable than an employed one. I see your reply comment as saying that your anecdotal statement was a tactical error which distracted from your main point that we “should seek FP (and hence FE).” You have not shown us in anything you’ve written that FP implies FE either logically or empirically. That, right there, is a main point of the disagreement between us.

At this writing, Cullen and his new MR group have not clarified the goal structure of their MR knowledge claim network (KCN) nor have they explained why they think that FP leads to FE either logically or empirically.

This is an introduction to a series of 16 posts I wrote in reply to a number of posts by John Carney at the CNBC blog and Cullen Roche at Pragmatic Capitalism, and comments replying to them. The posts by Carney and Roche criticized the MMT Job Guarantee (JG) proposal. They did so by calling into question whether the JG would be effective in achieving Full Employment (FE) and Price Stability (PS), and also by calling into question the MMT goals of “Public Purpose”, and “FE with a living wage” as appropriate. The critics proposed that “Full Productivity” (FP) and PS be goals of MMT, and that “prosperity” be the higher level goal. They also proposed that MMT concentrate on description and avoid policy prescriptions, and that it deal only with “facts” and not with “theory.”

The first 13 posts in this series refute these proposals, and also discuss the question of the appropriate hourly rate for the JG program. They also discuss various fallacies of composition inherent in many of the objections made to the MMT JG program, the issue of whether an FE or an unemployed “buffer stock” is more in line with public purpose, and also the issue of whether it’s possible to deal only with “facts” and not with “theories.” In the 14th post, I introduce the idea of the MMT Knowledge Claim Network (KCN) consisting of Social/Value Gaps, Knowledge Gaps (problems), Descriptive Knowledge Claims, Prescriptions, and Narratives. I also argue that the MMT KCN is a fused fact-value network with important value commitments, that it was developed holistically by its originators. that it is not focused on descriptive aspects of economics alone, that it offers explicit value claims, and that it’s normative aspect is clear.

I also argue that many of its practitioners, offer policy prescriptions rather than simply concentrating on the way the world is right now. I note further that the social/value gap, problems, and prescriptive aspects of the MMT KCN are progressive and Second New Deal oriented, and that is why many people who are persuaded by parts of the descriptive aspect of MMT want to do what they can to place these aspects into a secondary role and drive them out of the KCN altogether.

In the 15th post, I offer my view of the current components of MMT in its five categories of knowledge claims as preparation for the concluding 16th post in the series, which answers the questions I posed at the beginning of the series; namely:

– What is part of the MMT core right now? and

– how ought we to change it in the future?

Since I finished the series, its importance as a resource was underlined by new posts from Cullen Roche and Mike Sankowski (Trader’s Crucible), and by Cullen’s revision of his earlier paper on MMT which is now an introduction to a new approach called “Monetary Realism.” Here’s Cullen on MMT and MR.

”As many of you now know, the divide within some of the MMT thinkers has grown fairly substantial. The schism over the Job Guarantee revealed several points of disagreement that lead to vastly different conclusions than those espoused by the primary MMT thinkers. Several commenters and vocal proponents of MMT have made it clear that my positions are not those of the MMT economists and founders and are in fact something different. I won’t do the developers of MMT the disservice of pretending that my ideas are completely in-line with theirs. That would only serve to confuse those learning MMT and could undermine the efforts of the MMT developers.

I feel that the core operational aspects of MMT are among the most important ideas in the world and my goal here has always been to help promote those ideas. Because I believe in those ideas I will not stop promoting them. So I’ve been working with Michael Sankowski, Carlos Mucha (who most of you probably know as reader Beowulf) and several others to help formulate our thinking. I’ve also been in detailed talks with Warren Mosler over the last several weeks hashing out some differences. It’s safe to say that we have his blessing even though he’s not 100% in agreement with all we’ve concluded.”

I’m not sure I agree with the claim that Cullen, Mike, and Carlos have “Warren’s blessing” beyond his wishing them luck in pursuing their orientation, which I also have done. Certainly, Part Seven of my series doesn’t indicate to me that they have his blessing in the normal sense of this term, and I also think that no group that departs from the core value of “public purpose” as the goal of Government economic policy would ever have his full blessing.

”Importantly, I want to be clear that I do not view Monetary Realism as a competing idea to MMT. Rather, it is merely the form of Mosler Monetary Theory that I wish to promote (without confusing readers into thinking that I am promoting the exact MMT ideas and prescriptions). After all, Warren is still the father of the theory and it’s incredibly important to note that he is, by far, the most influential thinker in this offshoot of MMT. If anything, I hope that by focusing on the operational realities of MMT via Monetary Realism that I will bring even greater credibility to MMT and its operational realities. The fact that we have differences regarding prescriptive uses, in my opinion, gives the idea even greater credibility. But in the end, it should be clear who gets the credit for these ideas – Warren and the other developers. Monetary Realism is merely standing on their shoulders.”

And Cullen also goes on to state that he has revised his introduction to MMT, so that it is now an introduction to MR. In that paper, he also has added “innovation” and “growth” to the goal structure of MR, and also stated that: “The core value of Monetary Reality is transparency of the global monetary system.” He also states that a new web site is being created to promote MR. Two posts have also appeared at the Trader’s Crucible web site here and here, announcing the new development.

My take on MR is that even though it tries to minimize the differences between MMT and its “offshoot,” these are at the core of the two systems and that if they were not there would be no MR. If MR proponents still accepted ‘public purpose” as the highest level goal in their KCN, and had not replaced it with “prosperity,” if they had not replaced FE with FP as a key second-level goal, then there would have been no split.

The replacement of FE as a goal indicates that MR doesn’t consider a job at a living wage as a right of every individual. That is a huge difference between the two approaches that cannot be minimized, as the MR adherents are trying to do.

Beyond these explicit differences there is the further implicit difference that the MMT commitments to public purpose and to FE are commitments to greater equality in American and global society. The abandonment of FE and the JG suggest that the MR proponents are much less concerned about social and economic justice than are the MMT founders and others who practice the MMT approach. In a time when democracy is threatened by plutocracy throughout the world, that difference between the two approaches is fundamental and will shape their future development.

In the future, I’ll try to clarify further the differences between MMT and MR and illuminate some of the foundational problems of MR that are already apparent.

The various posts in the series have been previously published on this blog. In addition, the series is available in blog book form with convenient sequential links among the various parts of the series.

This is the concluding post in this Job Guarantee and Modern Monetary Theory (MMT) series. After evaluating the specifics of the posts by John Carney and Cullen Roche criticizing the MMT Job Guarantee (JG) proposal in the first 13 posts in this series; in the 14th post I introduced the concept of the MMT Knowledge Claim Network (KCN) consisting of Social/Value Gaps, Knowledge Gaps (problems), Descriptive Knowledge Claims, Prescriptions, and Narratives. I also argued that the MMT KCN was a fused fact-value network with important value commitments, that it was developed holistically by its originators. that it is not focused on descriptive aspects of economics alone, that it offers explicit value claims, and that it’s normative aspect is clear. I also argued that many of its practitioners, offer policy prescriptions rather than simply concentrating on the way the world is right now. I also noted that the social/value gap, problems, and prescriptive aspects of the MMT KCN are progressive and Second New Deal oriented, and that is why many people who are persuaded by parts of the descriptive aspect of MMT want to do what they can to place these aspects into a secondary role and drive them out of the KCN altogether.

In the 15th post, I detailed my view of the current components of MMT in its five categories of knowledge claims as preparation for this post, which will answer the questions I posed at the beginning of the series; namely

– What is part of the MMT core right now? and

– how it ought we to change it in the future?

How Do we Tell What’s Part of the MMT Core Right Now?

I think the way we do this is to read the literature produced by the founders and their students, look at their videos, presentations, graphics, listen to audios, and then make an assessment about the components that capture most of their attention. In addition, one should look at writers who’ve entered the field after the founders and see where they are focused. But, of necessity, their concerns will initially have less weight simply because they haven’t defined the direction of the MMT movement, and will be viewed as proposals for changing it, to be evaluated by others.

So, what is the core of MMT right now? My assessment follows.

Social/Value Gaps:

– The goal of public purpose as a general organizing ideal;

– Closing the output gap;

– Closing the employment gap;

– Achieving price stability; and

– closing the gap between the minimum wage and a living wage.

I think these goals are part of the core because of their intrinsic value. And also because, if we reach them the MMT founders think the other social/value gaps will be greatly alleviated.

Knowledge Gaps/Problems: All the problems listed have solutions relating to the core social/value gaps, so all of them are part of the core.

Descriptive Components: All of these either are, or contribute to, solutions of the problems listed earlier, which, in turn, are related to the core social/value gaps.

Policy Prescriptions: Most of the policy prescriptions offered by MMT founders are core to MMT because they are closely related to the goals of Full Employment (FE) at a living wage, at least, along with Price Stability (PS). According to MMT, moving the Fed under the Treasury isn’t essential to FE/PS, or to getting around monetary constraints imposed by Congress. Proof Platinum Coin Seigniorage (PPCS) can be used to get around constraints on debt limits. It can also be argued that ending debt issuance isn’t essential even if PPCS isn’t used, as long as Congress gets rid of statutory debt limit constraints.

We can also say that: fixing the health care system, the energy crisis, and the housing crisis, are not, in themselves part of the MMT core because FE with a living wage and PS don’t require these proposals. However, a counter-argument to this is that all three categories of proposals are essential elements of Public Purpose, that they are part of the MMT core for that reason. This line of argument also suggests that such items could easily be added to the core if MMT writers start paying more attention than they have so far to these three issues.

Narratives: All of the narratives named in Part Fifteen are part of the MMT core, because they set the context for MMT’s descriptive components about how the financial system relates to Government fiscal and monetary policy.

How Should the MMT Core Change Over Time?

The posts by John Carney and Cullen Roche calling out the MMT Job Guarantee proposal raised the issue of what’s in the core of MMT, and also the issue of change in MMT’s knowledge claim network. How should MMT change over time?

Carney and Roche both delivered criticisms suggesting that the JG wouldn’t create FE and PS, but suggested that various unanticipated side effects would make the program unsuccessful. I replied to those criticisms in earlier posts in this series. But the significant point here, is that the first line of attack was to question whether the JG would be effective in meeting the MMT objectives. So, their objective was to move the JG out of the MMT core by refuting it through argument.

This is a THE BEST way of attempting to change the MMT knowledge claim network, but one has to present evidence that really calls the JG or any other conjecture one is trying to refute into question.

Carney and Roche, also tried to question Full Employment and Price Stability as appropriate goals for MMT. In doing this, they never mentioned Public Purpose but instead asserted that “prosperity” should be a primary social value that should be realized through attaining “full productivity” (in Cullen’s words). Cullen also claimed that the continued existence of the possibility of unemployment was needed as an incentive to reach “full productivity.”

Without arguing against this view here, it’s pretty clear that this goes after the JG program, by going after the higher level goals that make it desirable. It’s not a criticism of the truth of the proposition that the JG will facilitate FE and PS, but a criticism of whether FE is a desirable goal. Judging from the absence of any mention of public purpose, along with the assertion that “prosperity” should be the higher level goal justifying possibilities that would support the continued existence of an unemployment buffer stock, it also seems to be a proposal to replace “Public Purpose” with “prosperity” as the highest level goal in the MMT fact-value knowledge claim network.

Again, there’s nothing wrong with an attempt to change MMT this way from my point of view, since I think that MMT goals and objectives should be just as subject to criticism as its causal or prescriptive statements or designations of problems. However, in raising such questions, critics should be very direct in what they’re doing and should explain why they think that “public purpose” should be subordinate to some other high level goal such as “prosperity” and why prosperity is better served by an unemployed buffer stock rather than a fully employed one. Also, if they still consider “public purpose” the highest level goal in the system, and also think that “prosperity” is a better way to achieve it than FE with PS, then I think that they have to explain why that is and subject their views to critical attempts at refutation.

In his post on the difference between “theory” and “fact.” Cullen Roche says:

“. . . . we should focus on giving the world a better understanding of modern money by focusing on the proven factual pieces of MMT (monetary operations, monopoly supplier function, etc). If we offer policy proposals then that’s fine, but that’s secondary. I would expect the MMT economists to do that and it should be encouraged that they use their expertise in doing so! . . . ”

I think Cullen is here on the point of suggesting that MMT should restrict its core to those components in its descriptive category that he considers to be “fact.” John Carney also seemed to be suggesting something similar in his posts on MMT. He likes MMT’s description of fiat monetary operations, but he doesn’t like its policy proposals. So, he’d like to broker closer relations between Austrians and MMTers. But to do that he’d like to change MMT by restricting its core to its description of monetary operations, and ignore its social/value gap, knowledge gap, descriptive theoretical, and policy components. So, he wants to change MMT by cutting most of its core components out, so that Austrians and MMTers can agree on something.

This, however, isn’t a legitimate way to evolve MMT, while still retaining its identity. You can’t take a KCN, eliminate its social/value gap, problem, much of its descriptive theoretical, and also its policy context, and still claim that it is the same system, simply evolved over time.

For better or worse, MMT has a core that cross-cuts all of its categories of components. It can be changed, while maintaining its identity, by refuting claims in any of its five categories of components. But if one changes it by eliminating whole categories of components, or by changing the core aspects of its social/value gap or problem components, or the core aspects of its descriptive and policy components, then it is simply not the same KCN, framework, or approach, anymore

When Cullen Roche and John Carney critically evaluate the JG on grounds that it will not work, the kind of change implied by that kind of criticism is the right way of “evolving” MMT. Even their criticisms of Full Employment and “Public Purpose,” though more far-reaching in their implications for MMT’s KCN and its identity, may, perhaps, still not be so significant as to change its essential character. But at some point, a pile of sand grains becomes a heap, and likewise, a proposal about how to evolve MMT becomes not a proposal for its evolution, but a proposal for its replacement by something entirely different.

This is the case with the proposal that MMT be restricted to a core of descriptive propositions that Roche and Carney think are “facts.” Such a proposal simply rips MMT out of its entire developmental context, as well as the heart out of MMT, and the resulting network is no longer Modern Monetary Theory at all, but something offering an entirely different understanding of the world and how we ought to act in it.

In this post I’ll list the primary components of the MMT Knowledge Claim Network (KCN) classified under the major categories: the Social/Value Gaps; the Knowledge Gaps (Problems); the Descriptive Components (including Solutions); the Policy Prescriptions; and the Narratives.

The Social/Value Gaps mentioned by MMT developers

– Failure of Economics to contribute to the Public Purpose as defined by the failure to close the other social value gaps listed below;

– the gap between actual output and projected “full” output;

– High involuntary unemployment vs. full employment;

– Price stability vs. inflation or hyperinflation;

– No right to a living wage;

– No operative right to health care for everyone;

– social exclusion and the loss of freedom;

– skill deterioration due to unemployment;

– psychological harm such as sense of identity, self-respect, and sense of empowerment;

– much greater ill health and reduced life expectancy than necessary;

– loss of motivation to live a full empowered life;

– deterioration of social relations, communities, social networks, and family life;

– increasing racial and gender inequality;

– increasing educational inequality;

– decreasing equality of opportunity;

– loss of social values and sense of individual responsibility;

– increasing economic inequality over time;

– increasing poverty;

– increasing crime rates including increasing use of control frauds by important economic institutions;

– Failure to prosecute and punish people who commit control frauds;

– The collapse of real estate values and the destruction of the wealth of working people after the crash of 2008;

– increasing anger against economic and political elites that get more and more and more wealthy, and more and more immune to the rule of law;
– increasing political inequality undermining political, social, and economic democracy;

– increasing political unrest and threats of political violence both from the privileged and those seeking change.

The Knowledge Gaps/Problems Formulated and/or closed by MMT Developers

– How do we, using Fiscal and Monetary policy, create Full employment (FE) with a living wage and Price Stability (PS) and maintain it the face of periodic business cycles?

– How does a Government with a Sovereign Currency create and destroy high-powered vertical money?

– How does a fractional reserve banking system create and destroy horizontal money?

– Why is fiat money valuable?

– What Are the Basics of Macro Accounting?

– What Is the Sector Financial Balances Model, and what are its implications?

– How do we design and create public sector jobs that will add value to the economy?

– How do we train people for those jobs, if necessary?

– How do we tax to avoid demand-pull inflation?

– How do we combat and control cost-push inflation?

– What are the causes of inflation?

– How do we reform the money creation/destruction system to remove unnecessary Government Budget Constraints (GBCs)?

– How can we build stock-flow consistent models of the economy?

– How can we build valid impact models of changes in Government fiscal policy relative to the social/value gaps?

– How can we prevent control frauds leading to extreme economic boom-bust cycles and political domination by wealthy elites and the financial sector?

– What is the origin of money, and how has it developed over time?

– What are the different types of money?

– What is Government debt and how is it different from the debt of currency users?

– What are the different kinds of Government debt?

– What is the impact of “printing money” on inflation?

– What would be the impact of very high profit coin seigniorage on inflation?

– What are the key programs that can produce and maintain FE and PS?

– How can we reform the banking system to remove its speculative aspects and orient it to public purpose rather than private gain?

– How can we reform Wall Street to minimize the creation of real estate bubbles, commodity bubbles, and bubbles in other economic areas?

– What are the effects of current account balances on other sectors of the economy?

– Are Government deficits endogenously or exogenously determined?

– What is Fiscal Sustainability and how can the Government maximize it?

– What is Fiscal Responsibility and how can the Government achieve it?

MMT Solutions: Descriptive Components (Generalizations, Theories, Models, “Facts,” etc.) offered by the Developers Aimed at Understanding and Solving Problems

– An account of the origin of money

– The nature of credit money

– The State theory of tax-driven money

– The endogenous money approach

– Relations between horizontal and vertical money

– The functional finance approach

– The theory of the Government Budget Constraint (GBC)

– The role of the central bank in providing horizontal money and draining reserves

– Modern money = Endogenous money + state money + credit money + functional finance

– Heterodox approaches to money

– The sector financial balances model of aggregate demand applied to closed and open economies

– The State as the currency monopolist

– Stock-flow consistent modeling

– The Theory of a Sovereign Currency

– The Theory of the causes of inflation

– Theory about regulating the Financial System

– Theory about Minimizing Control Frauds

Policy Prescriptions Offered by MMT Developers

– Zero Interest Rate Policy (ZIRP)

– The Job Guarantee (JG)

– Payroll tax holidays

– State revenue sharing

– Banking reform proposals

– Proposals placing the Federal Reserve Under the Treasury Department

– Proposals for Federal deficit spending without debt issuance

– Proposals for guaranteeing annual entitlement spending without regard to “trust fund” balances

– Proposals about law enforcement for removing control frauds from the economy

– Proposals for containing demand pull-inflation

– Proposals for containing cost-push inflation

– Proposals for regulating the Financial System

– Proposals for Minimizing Control Frauds

– Proposals for Reclaiming Currency Sovereignty and Exiting the Eurozone

– Proposals for Fixing the Health Care System

– Proposals for Ending the Energy Crisis

– Proposals for Ending the Housing Crisis

The Narratives

– The story of the origin and history of money

– The story of the development of fiat money

– The story of the development of MMT from Marx, Keynes, Veblen, the Institutionalists, the Post Keynesians, Chartalists, and Functional Finance

That’s It!

I’m not certain that this list of MMT KCN components is complete. It’s not intended to be authoritative, and even though I’ve read a lot of MMT by now, I don’t have the background in its KCN that the developers or their current graduate students have. So, there’s plenty of room for error in my specification of the components of MMT.

Since I’m sure that many of my readers this can improve on my list; I’d really like to “crowdsource” it. Please feel free to offer revisions/corrections, or complete reconstructions if I’ve made errors.

This list isn’t gospel. It’s a tool to try to get a broad view of the subject matter of MMT, provide some understanding of its range and scope, and prepare us to consider questions about “the core” of MMT. So, I want to sharpen it, and I hope you’ll help me do that. My next and final post in this series will deal with the MMT core right now, and how it ought to change in the future.

The recent extensive blogosphere discussion on the JG and the MMT core began with a post by John Carney that stated his opposition to the Modern Monetary Theory (MMT) Job Guarantee proposal and claimed it either wasn’t an essential component of MMT, or that if it was, then MMT was wrong. Cullen Roche, a well-known popularizer of MMT at his Pragmatic Capitalism blog then asserted:

”It’s not that I think the JG “cannot” be a component of MMT (Bill drew a very clear line in the sand saying that the JG is “central” to MMT and not “peripheral”), but that our knowledge, understanding and implementation of modern money need not involve the JG. The JG might be central to the idea the founders had when creating MMT, but that just means it’s central to the original concept of MMT as they saw it. . . .

This is true as far as it goes. But, it’s also true that the JG is still part of the MMT core, because MMT is committed to Public Purpose, the MMT developers have tied Public Purpose to Full Employment (FE) and Price Stability (PS), and the best knowledge we have at this point, after years of study of the JG, is that in the context of a program also specifying full payroll tax cuts and State revenue sharing, it is the policy that is most likely to produce FE and PS.

But Cullen is proposing that the JG should no longer be considered part of the MMT core because:

. . . they have by no means proven the JG to be the optimal usage of the government’s monopoly currency supplier powers (despite substantial evidence and persuasive arguments) . . . . and in fact could come at substantial long-term cost. Instead, I think there are better options which can also lead to price stability and full employment.”

In earlier posts in this series I’ve criticized the specifics of Cullen’s and also John Carney’s arguments against the JG, and, I hope and expect, that I’ve shown that there is little merit to them, and that they mainly consist of pointing to low likelihood side effects of the JG, disagreements with the objectives of FE and PS, and apparent lack of concern for the overall goal of Public Purpose.

Here I’ll add that MMT writers can’t possibly “prove” that the JG program is “the optimal usage of the government’s monopoly currency supplier powers”, because they’d have to prove that a better policy than the JG can’t be formulated, and proving this would be proving a negative, an impossibility.

Of course, it’s possible to “prove” that the JG program is not optimal for its purpose, since this can be done by proposing a single policy that works better than the JG. However, my previous posts have shown that rather than come up with such a policy, Carney and Roche have offered reasons why they think the JG won’t work, and then have moved on to attack the objective of Full Employment with Price Stability as less desirable than other goals, in Cullen’s case the goal of “prosperity” through “full productivity,” which Carney later concurs with.

My purpose now, however, is not to rehearse my earlier critiques of the views of Carney and Roche. It is to address the more general and important issues of how the core of any approach to economics, including MMT, emerges; what is part of the MMT core right now; and how such a core ought to be evolved over time. I’ll begin in this post by introducing the idea of holistic knowledge claim networks in economics and its general implications for what should be included in such networks and MMT’s knowledge claim network. My next post, will present my assessment of the components of the MMT network right now, and the concluding post in the series will state my view of what’s in the MMT core right now, and how MMT ought to be changed in the future.

The Knowledge Claim Networks of Economics Emerge Through Iterative, Incremental Value-impregnated Decision making

It’s worthwhile to reflect a bit on how economic Knowledge Claim Networks (KCNs) — networks of statements about the way the world is, works, ought to be, will be in the future, and how knowledge of it can be developed — for research and policy emerge.

First, the people who form them come to the task with ideas about the differences between the world as it is and the world as they want it to be. Let’s call these the social/value gaps motivating activity.

Gaps like these always exist. People meet them with action when they know how to close them. Where they think they need more knowledge to close them, they consider which social/value gaps accompanying these knowledge gaps (“problems”) they see are important enough to devote their attention to, and which aren’t worth their effort to try to close.

A choice like this, the selection of a knowledge gap to be addressed and closed, requires a decision, relying on the values people hold and the importance they attach to those values. There is nothing value-free or value-neutral about a decision. If an existing social/value gap seems particularly important to people, and if they have the resources to address the knowledge gaps associated with it, then they will select those as “problems” to be solved by the KCN, they will be creating.

Once problems are selected, the people formulating a new KCN create and select the categories, conceptual frameworks, hypotheses, models, facts, data, and “theories” that they will use in creating the solutions for those problems. Some of this activity will occur in conjunction with their attempts to formulate and choose the problems they will address, or activity in this area may motivate them to return to problem formulation and selection activity.

In other words, there’s no hard and fast temporal distinction between defining problems, conceptualizing and formulating categories and arriving at hypotheses, facts, models, etc that people use to solve, or try to solve, problems. The conceptual distinction between these different types of activities is important for understanding and analysis, but it doesn’t indicate that distinct stages, unmarked by overlaps and feedback relations exist in the actual process of creating a KCN in economics.

It’s important to notice, as well, that this process of conceptualizing categories, frameworks, theories, etc. is in no way a value-free process. Of course, it’s constrained by one’s ideas about what the important knowledge gaps are. So, the values affecting the problem phase of development certainly pass through to this one. But, additionally, when one considers that formulating categories, frameworks, theories, etc. always involves consideration of multiple alternatives of each of these things, then it’s also clear that there are decisions in other parts of the process of inquiry that values must effect. The formulations that intrigue people, that use categories resonating with them, that seem to speak to their moral and ethical concerns, or reflect on them, will certainly effect decisions people make about what theories, models, etc will be selected for attention in later investigations and testing.

Objectivity here is about fairness — the willingness to consider major conceptual frameworks (including value propositions), theories, and hypotheses bearing on a particular problem or problems that compete with and contradict each other, regardless of which alternatives one wants to consider. There’s also a balance between the need to cut down on all the competing notions that might be considered to a set of manageable alternatives, while still emerging with a set of competing theories that is reasonably complete and doesn’t exclude serious formulations that might prove to be true (from the descriptive standpoint), or legitimate (from the value standpoint).

The objective of this phase of the process is ending up with a fair comparison set of KCNs and their accompanying theories, hypotheses, data, etc. But there is never any guarantee that one has done so. It’s like the idea of maximizing profits in a business. One may try do that, but one can’t possibly tell whether one has failed after the fact, until others or yourself come up with counter-examples showing missed opportunities for making greater profits. On the other hand, if there are no counter-examples, that still doesn’t mean one has succeeded. That, you’ll never know, because nobody can exclude the possibility that the necessary counter-example won’t suddenly appear.

After conceptual categories, hypotheses, models, facts, data, and “theories” get formulated then the issues of testing competing formulations arise. In an open KCN situation everything is subject to criticism and refutation including even reconsideration of the important social/value and knowledge gaps. The issue here is arriving at a KCN that has been most successful in meeting critical attempts at refutation. It’s not ideological defense of it against all comers as a lawyer would defend a client that counts. Instead, what’s important is subjecting it and the alternatives to it in the fair critical comparison set, to the strongest attacks possible to see if the KCN is strong enough to withstand “the slings and arrows of outrageous fortune.”

When people do that they are generating their new KCN using a fair critical comparison process. To the extent they fail to meet that standard, the resulting KCN is likely to be of lesser quality and to have less adaptability to the challenges it will inevitably face. Of course, in reality, most approaches don’t emerge through a process of fair critical comparison. They deviate from this ideal in varying degrees.

But whatever the deviation, the main point is that even if the ideal of fair critical comparison is approached very closely, the process of critical evaluation still involves value judgments because decisions choosing one approach over its alternatives always involve value judgments about whether the critical grounds for preferring one alternative over all the others are strong enough, and whether the risks of selecting that alternative are low enough that one is making the best decision one can in choosing to rely on the KCN one ends up selecting.

So, there’s no escaping value judgments in arriving at KCNs in economics whether or not one is trying to be objective. Not that objectivity in a meaningful sense is impossible. I’m NOT claiming that. But, I am saying that value neutrality is impossible. It is a sham that denies the reality of the need to make decisions in developing knowledge including new KCNs in economics.

Our real choice in describing a particular KCN is whether we want to view and evaluate it only in terms of its descriptive aspects or whether we want to view and evaluate it as a holistic knowledge claim network, a fusion of fact and value claims, including social/value gap, problems, conceptual frameworks approaches, theories, models, measurement models, data, narratives, policy prescriptions, data, and also the whole track record of criticism, evaluation, and testing of various aspects of the network. I think the growth of knowledge is better served by a holistic approach that subjects everything to continuous criticism and evaluation, rather than an approach that restricts evaluation to the descriptive aspects of a KCN, considers a portion of that aspect of the network its core, and “pins down” the rest of the network as beyond criticism, evaluation, and test because it is assumed as a given.

So, the KCNs that emerge from the interrelated sequential and sometimes iterative decision making processes that produce them, assume not only singular and universal knowledge claims about the world, but also knowledge claims about intrinsic and extrinsic value. Such KCNs also contain prescriptive knowledge claims that combine claims about value with claims about the way the way world is and works. To understand those networks we have to understand all three. The value claims, the claims about the world, and also the prescriptive claims combining the two.

So What?

I’m sorry about all the meta-theory in this post, but I think I need it to make some very important points:

First, even though one can state a purely descriptive KCN in economics, that network will be taken out of context and so will be incomplete. Specifically, it will be missing

1) the context of value assumptions accompanying selection decisions relating to social/value gaps, knowledge gaps, hypotheses, models, theories, measurement models, and data;

2) the prescriptive propositions combining the descriptive and value portions of the KCN; and

3) any narrative or historical context that isn’t purely descriptive but contributes to the understanding of the KCN.

Second, one can’t easily decide what parts of the descriptive aspect of the KCN are at its core, if the value, prescriptive, and sometimes even the narrative portion of the network are missing. The reason for this is that some descriptive knowledge claims may not seem central to the KCN unless one can see their relationship to the value, prescriptive and narrative components of the network. That is, the full context of the descriptive portion of the network may be necessary to assess what is important to the full network and what is not.

– So, people having access to the descriptive portion of the network may decide to deemphasize development of parts of it that are not as interesting to them as other parts of greater theoretical interest.

– Or they may import their own private values into decisions about the way in which the network ought to be developed.

– Or, most importantly, they may fail to include attributes, properties, or variables in the network that are critical from the viewpoint of anticipating/measuring/evaluating side effects of private actions or public policies based on the purely descriptive “knowledge” offered by the network.

– Or finally, people developing the descriptive part of the network by testing and selecting among theories and hypotheses, may not be able to assess the relative risk of error in accepting a hypothesis or theory in preference to its competitors.

Third, decisions about what parts of a KCN are part of the core will be heavily affected by one’s value perspective on the network. In the history of science, the effort to banish values from inquiry and to isolate the descriptive aspects of science from the value and prescriptive aspects has resulted in people importing their own values into scientific processes and outcomes without being explicit about what their value knowledge claims are. These claims influence inquiry and its outcomes without having to face criticism, evaluation, and refutation.

In particular, they often result in decisions to write certain elements out of the descriptive aspect of the KCN because their implications may conflict with or expose implicit value commitments that people don’t want to fight about. The result of all this is greater subjectivity in inquiry than would be the case if value knowledge claims were explicit and their relationship to prescriptive knowledge claims was easily traced. The further result of it is the growth of unbalanced KCNs whose descriptive aspects are developed in distorted ways, whose value and narrative aspects are very under-developed, and whose prescriptive aspects are very partial, ignore consideration of side effects, and are all about continued vulnerability to “black swans.”

The MMT KCN has been developed holistically by its originators. It is not focused on descriptive aspects of economics alone. It offers explicit value claims, it’s normative aspect is pretty clear. Many of its practitioners, offer policy prescriptions rather than simply concentrating on the way the world is right now. In my next post we’ll take a look at its components. But for now, I’ll note that the social/value gap, problems, and prescriptive aspects of the MMT KCN are progressive and second New Deal oriented, and that is why many people who are persuaded by parts of the descriptive aspect of MMT want to do what they can to place these aspects into a secondary role and drive them out of the KCN altogether.

In a piece called “More Questions About the Job Guarantee,” John Carney provides some links to the continuing debate on the Job Guarantee (JG). All the links are to posts critical of the JG idea except a link to one of my four posts critical of Carney’s earlier work and supportive of the JG. The four posts are all at Daily Kos, but also at MyFDL, ourfuture.org, and correntewire.com. The correntewire.com links are here, here, here, and here.

Here’s Carney’s casual take on my critical efforts:

4.Over at Daily Kos, I get taken to task for “bias towards private sector employment.” Well, yes. I certainly do have a bias toward that.

But, as Randall Wray’s comments to Roger Mitchell make clear, so do the MMT economists. So does everyone who knows anything about economics and politics. Except, it seems, this guy at Daily Kos.

Well, thanks John, for noticing I’m out here. I’m glad you’ve deigned to notice. Too bad you’re too busy to pay attention to a pretty comprehensive critique of your entire position, though.

But wait, I forgot that the best way for a guy like you to handle a guy like me is to throw a little ridicule my way and never, never discuss the real issues I’ve raised.

Your coverage here ignores all the issues I’ve raised in the four posts, except my charge that you’re biased towards private sector employment, and it’s easy for any reader who checks out the link to see that your answer to that charge is completely inadequate, considering the context of my criticism and its full detail.

I’ll quote that charge with its full context of quotes from you and my replies, so everyone can plainly see how ridiculous, superficial, and inadequate your little drive-by reference is.

Does the JG Really Solve the Mismatch Problem?

”The Job Guarantee gets around one of these problems: it guarantees that anyone who comes to the government employment office ready, willing, and able to work will be able to get work for pay and benefits. The problem of mismatch is seemingly solved since the government will just supply the demand for something the unemployed can do. Direct hiring works better, in this sense, than trying to jigger the knobs of monetary policy.

But is the problem of mismatch really solved? I do not think it is.

The jobs created under the Job Guarantee are specifically not supposed to compete with the private sector, which means that they supply goods and services for which there is not a market demand. The total output of the economy might increase, but much of this output is non-productive—that is, it doesn’t actually improve our lives.”

Comment: This statement really reflects John Carney’s bias towards private sector employment, and is simply ridiculous and outrageous on its face! We all know that Government work produces valuable goods and/or services that improve our lot in life, everyday. We also know that a lot of Government work is valueless or produces negative real value. But we can equally well say the same things about private sector work. Much of it has zero or negative real value from the viewpoint of those of us who aren’t getting paid for doing it, and I won’t trouble to even provide the very obvious examples of this. There’s also much private sector work that adds real value to our lives and is well worth doing.

My point is that whether JG work produces real value has nothing to do with markets or whether businesses in markets believe they can make a profit from certain kinds of activity. But it has everything to do with whether Americans are likely to and, in the event, will value the goods and services produced by JG work. Whether the output of the JG program is “productive” will be judged by the people that will or will not benefit from it, and not by the private sector market that it will not be competing with.

“Now some people will say that this is fetishizing the market. Aren’t there things that improve our lives other than what the market will pay for? I don’t want to argue that there are not. I do not think, for instance, that these days we could pay for the Sistine Chapel but our lives are greatly improved by its existence. The problem is that there is no reason at all to think that people laboring in Job Guarantee positions will supply meaningful improvements rather than holes in the ground.”

Comment: I’m sorry, but the quote just before the disclaimer does “fetishize the market.” It clearly does make the a priori assumption that what the market values is much more valuable than what the political system or society or people value. And this is a generalization that John Carney cannot establish with any scientific tests or data. It is an ideological view coming out of Austrian economics and Randian ideology. It is not an assertion that should be taken at face value.

Actually, also, contrary to John’s view, there is plenty of reason to think that people laboring in JG positions will add value to the economy. We know that many non-profits add value to American life. We know that New Deal project outcomes added lasting value to American life and continue to do so. We also know that many government activities add value today. But, most importantly, we have plenty of reason to believe that the people who run the JG program will be able to design it so that JG workers will be very likely to produce value. We have the years of research on the JG by MMT researchers to show that many good ideas already exist for JG projects that have value. All we have to do to assure ourselves that this is true is to read that literature.

I know that John says that he has read the MMT JG literature and that he hasn’t any reason to believe that value will be produced, so he wants to be cautious before implementing the JG. But I’ve read that literature too, and I totally disagree with John and think his view is colored by the bias I called attention to above. He is predisposed to think that the JG cannot add value, so therefore, no examples of projects that might produce value will persuade him.

I can’t say for sure whether this view of mine about John is right. To see whether it is, readers of this post should read the MMT literature themselves and decide. Don’t take my word for it, and don’t take John’s. Decide for yourselves! I’m confident that you will decide that John’s claim that “The problem is that there is no reason at all to think that people laboring in Job Guarantee positions will supply meaningful improvements rather than holes in the ground,” is just false.

“The Job Guarantee folks seem to think that there are plenty of meaningful jobs that aren’t getting done but that could be done by the unemployed. I don’t think this is correct. In fact, I cannot really think of many at all. Sometimes things like caring for the elderly or constructing bridges and roads are nominated as candidates. But these are not jobs that can be done just by anyone. They require a certain sort of person with a certain set of skills. Most jobs do.”

Comment: This is the same claim as the one made above. Read the literature! Decide for yourself! It’s easy to think of productive work for people to do. I’ll bet you can do it for yourself. Here’s one, start a JG project to provide the SEC with 50,000 new investigators to ferret out the control fraud in the private sector that led to the crash of 2008. That one will certainly add value to American life; specifically a value it is lacking now – namely the value of justice and fairness under the law. Of course, the 50,000 new investigators will need some training; but I suspect Bill Black could design a brief educational program teaching the basics of investigation that wouldn’t require more than two weeks of intensive training to complete.

There’s a lot more critical evaluation in the rest of that Part Five post and also in the other three that Carney chooses to ignore. But as the title of this post says, his effort to criticize the JG is full of talking points and no serious reasoning. It is highly ideological, and is simply an attempt to cut a very important plank out of the MMT policy platform. The JG policy in the context of other MMT proposals like the full payroll tax cut and State revenue sharing is intended to produce Full Employment and Price Stability in the broader context of practicing economics for the public purpose.

Carney’s real problem is that he neither believes in public purpose nor in FE with PS. His attack on the JG is just a way of getting at these higher goals and objectives. John Carney wants MMT to merge with Austrian economics to create an alternative to neo-liberalism that he likes. The real problem with MMT is that if its historical values, prescriptions, and policies remain in place, then he won’t be able to get that done. MMT, as it now stands is progressive economics whose normative orientation is the same as John Kenneth Galbraith’s. Carney needs to change that to get his new synthesis.

After reviewing the terrible state of our economy and the need to reconstruct it so that people can find work and a vibrant middle class can be rebuilt, Bob Borosage suggests that Congress go back to first principles. he briefly reviews the post- WWII history of employment legislation and says:

That debate was revisited in the 1978 Humphrey Hawkins Full Employment Act, which initially sought to revive the mandate to full employment, and the right to a job. In the end, it too was diluted, offering five ultimate goals: full employment, growth in production, price stability, balance of trade and balanced budgets. It was this act that gave the Federal Reserve the dual mandate of pursing both full employment and price stability. Needless to say, over the last decade, the goals were distorted in practice, with price stability becoming primary, while trade deficits soared, manufacturing was shipped overseas, and budget deficits rose — before the collapse.

Glad to see an "access" progressive talking about this, but I think these goals have been "distorted" for a lot longer than the past decade. In fact, I seem to remember that the Federal Reserve never tried to pursue its mandated full employment goal during any of the Carter, Reagan, Bush 41 and Bush 43 Administrations. And even during the Clinton Administration, when full employment was approached, it is debatable whether this was due to Fed actions taken with the intent of getting to full employment. I think the history of the Humphrey-Hawkins act is one of continuous violation of its mandate to place price stability and full employment on an equal footing. Borosage goes on:

It is time to reassert that full employment is the primary measure of our economy: "Continuous and useful employment for those willing and seeking to work." Mass unemployment is an unacceptable failure. We will not learn to live with it. We will keep pushing until we eliminate it. Government will strive to create the conditions for the private market to create the jobs we need. But it will act as an employer of last resort for those unable to find work over a long period of time.

Welcome to the fight Bob, others have been calling for Federal Job Guarantees for a long time now. It’s good to have you aboard with a good direct statement of the need and its basis in US Law.

It is easy to scorn such admonitions. Congress excels at setting high sounding goals that it is certain to ignore. But we’ve got an economy where corporate profits are up, bank profits are up, inequality is rising — and there are no jobs. This cannot become the new normal. However naïve it may sound, it would be good for the congress and the president to have the debate. Commit clearly that full employment is the measure by which their actions should be judged. Or alternatively, admit that full employment is no longer plausible, so we will build a strong social contract — of training, guaranteed income, health care — for those discarded from the workforce. Let’s have the debate — for the one choice that is socially ruinous is the one we seem to be drifting towards — mass unemployment without a safety net.

Let’s indeed have the debate, but let us not have it take too long, and while it is happening, let’s have no more trouble from the Republicans about extending unemployment insurance for people who can’t find work. In particular, let’s have no more trouble about legislation that will give a break to the ’99ers. They are most in need, and none of us ought to have a bit of patience for the Hooverite BS of some Republicans, saying that they don’t want to to work, or they’d find a job.

You say, what about the filibuster?

Well, the Democrats need to get rid of the filibuster tomorrow. What is the filibuster worth? The filibuster is not worth the job of a single laid-off American.

Finally, for Borosage, it would be good if he started to give some recognition to those hard-working prophets among us who have been advocating for a Federal Job Guarantee for many years now. People like L. Randall Wray, of the University of Missouri at Kansas City, and Warren Mosler, Independent Candidate for the US Senate in CT, along with Bill Mitchell of the University of Newcastle in Australia, in particular, have been advocating for a Federal Job Guarantees program and illuminating the issues connected to it for many years. Bob Borosage never seems to get much beyond Paul Krugman, Joe Stieglitz, Dean Baker, and perhaps Yves Smith when he writes about economic recovery.

Perhaps it’s time he looked into Modern Monetary Theory (MMT). It might free him from having to agree with the deficit hawks and other deficit doves that: Of course, the US has a long-term deficit problem, so eventually we’ll have to cut some Government programs before we run out of money, or cause hyperinflation.

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).