The debt hawks are to economics as the creationists are to biology.
Graph of United States income distribution from 1947 through 2007 inclusive, normalized to 2007 dollars. The data source is “Table F-1. Income Limits for Each Fifth and Top 5 Percent of Families (All Races): 1947 to 2007″, U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements.
In Closing the financial gap, I showed how direct money transfers don’t close the gap, and I asked, “Is closing the gap economically wise? That is, would our economy grow better, and would our population live better, happier, more rewarding lives overall, if there were little or no gap?”
I believe attention paid to closing the gap, by bringing down the rich, is a diversion from the real economic and moral questions that surround poverty. Concern about the rich feeds on that commonly felt class jealousy to which politicians respond with counter-productive laws, which do nothing for the poor or for the economy.
Classic example: Inheritance taxes. They have little effect on tax collections, and to the degree they would affect tax collections, they also would reduce economic growth. And they do nothing to improve the lot of the poor. These, and all other attempts to reduce the gap, by punishing the rich, tend to hurt the economy and the people who most want the gap reduced.
Punishing the rich should not be the goal, but rather we should try to lift our poorest, regardless of whether or not that closes or even opens the gap. In the previous post I suggested that just as government pays for elementary school, middle school and high school, why not have the government pay for college and even advanced degrees? This would give the poor a better opportunity to lift themselves.
One reader expressed concern this actually could have an adverse effect on the economy: “The world still needs ditch diggers,” he wrote.
My response: “The world does not need ditch diggers. The world needs ditches to be dug. Slowly, inexorably, society is moving away from dumb human labor and toward smart machine labor. Those people who do not have an education will not just be relegated to the lowest jobs. They will have no jobs at all. There simply will be no ditch-digging work available.”
While I agree with Modern Monetary Theory (MMT) in many ways, one of my disagreements is its dual goal of price stability and full employment. MMT calls for the government to be the employer of last resort, so that everyone who wants a job, has a job. But MMT ignores job quality in its quasi-charity approach. Giving jobs to everyone surely would devolve to giving money to everyone for little or no work at all.
While unemployment seems to correspond with recessionary times, I see no evidence that unemployment causes recessionary times. Some might even say that unemployment helps stimulate the prevention and cure of recessions just as hunger feelings help stimulate the prevention and cure of starvation. In fact, that is the very purpose of hunger feelings.
In short, unemployment may be only a symptom, just as hunger is a symptom of starvation. Curing the hunger symptom does not cure the starvation disease, as any anorexic should know. Focusing on the symptom may divert attention from the fundamental problem, which is acquisition ability (AA)– people’s ability to acquire what they want.
MMT may claim full employment is not a symptom, but rather a path toward the AA goal. MMT wants the government to achieve full employment by providing a job to anyone who wants one, and apparently the job can be anything. But I suspect a nation of Walmart greeters is not desirable.
So what about a nation of college grads? Is that better? Despite the typical “Who-will-dig-the-ditches?” questions, the answer may be, “Yes.”
A college grad, digging ditches, may be more likely to think of better ditch-digging methods, to the benefit of society. This is an extreme example, and I’ve left the psychology of job satisfaction out of the mix, but I speculate that education will lift the economy, meaning MMT’s focus on jobs is fundamentally wrong.
Rather than the government being the employer of last resort, perhaps the government should be the educator of first resort. That might do more to lift the poor and lift America, than giving people low level, dead-end jobs.
In summary, the problem is not specifically the gap, but poverty. The partial solution is not low end jobs, but education.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity