Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Well, I really did it this time. A few days ago, I posted Why Modern Monetary Theory’s Employer of Last Resort is a bad idea, and I feel like a guy who has kicked a hornet’s nest. The MMT folks have responded in exactly the same way debt hawks respond when they are told they are wrong (which proves people are people, no matter what their stripe).
Here is just one of many written comments I received, and this is 100% verbatim: “Are you serious, or just yet another crazy, rightwing, Austrian nutjob jacking off in public to get your jollies off?” Believe it or not, that clever note came to me from one of the most respected MMT people in America. I won’t embarrass him by giving you his name, but if you know MMT, you know of him.
In the above-mentioned post, you saw a large number of questions about the practicality of ELR, which the MMT folks have changed to JG (Jobs Guarantee). As a long-time businessman, I thought the questions were legitimate — the kinds of questions I would have about any business idea. You can read that post to see whether you agree.
I believe there is a fundamental problem with JG, and that is, it implies, then tries to solve two, completely separate problems, and one of them might not be a real problem at all:
1. How to get money into the hands of people who have lost their primary source of funds.
2. How to give people something to do.
Problem #1 is both legitimate and easily solved. Addressing poverty or even impending poverty is an important task for the federal government. The Declaration of Independence calls for a “Government, (that) shall seem most likely to effect (citizens’) Safety and Happiness.” It’s why we surrender some personal freedoms to a government.
In 2008, the federal government attempted to address the new recession by sending money to taxpayers. It was an excellent idea, but unfortunately, the effort, as I predicted, was far too little and way too late.
Had it been increased at least ten-fold, it would have put many dollars into the hands of consumers, who would have spend those dollars, thereby increasing business profits. Given additional profits, the businesses would be motivated to interview and hire additional, qualified people, who in turn would have spent more dollars, and we wouldn’t even be thinking about JG, today.
I suggest this would be a far better solution to #1 than having some government agency hire anyone — able, unable, qualified, unqualified, smart, stupid — and putting them to work in a job determined, not by the economy but by the government.
Call me a “crazy, rightwing, Austrian, nutjob,” but I believe a private business, reviewing resumes and selecting the most qualified candidates, usually will evaluate, hire and train for its own specific business needs far more productively than will a federal bureaucrat, who knows little and cares less about the business, and whose sole task is to guarantee a job for whomever drops in off the street.
Job Guarantee is an indirect, rather clumsy solution, if #1 is the problem we are trying to solve. Far better simply to give people money — perhaps by extending unemployment insurance or a similar device.
Which brings us to #2: Give people something to do. There are those who believe people should be required to work for money, rather than having it handed to them. There may be a couple of reasons for this, and I’m not sure which is overriding.
Perhaps they feel that if people are given money, they won’t look for work. But at the pittance MMT is talking about — something less than minimum wage, so as not to compete with private industry — only those least motivated and least able would settle for such a permanent placement. Skewing an entire program, just to deal with the few at the bottom of the barrel, seems like misplaced priorities. Since dollars are free to the federal government, and federal spending costs you and me nothing, I say give money to the sloths, and don’t worry about it. Even sloth money benefits the economy.
Then there are those who feel a moral revulsion against giving money to people who don’t work. I assume these good people don’t give to charity, either. The most moral of us give without making demands on the recipient, because in truth, we can’t look into someone’s mind nor understand their circumstances. You can’t feel someone else’s pain.
And of course, the rationalizers say people should work because that provides pride and a feeling of accomplishment, although the government probably would send the vast majority to jobs they never would select for themselves. No pride or accomplishment involved.
Bottom line, simply stating a problem correctly is the first step to a solution. MMT incorrectly states the problem as “unemployment,” while the real problem is lack of income. Positioning the problem as a need for a job rather than as a need for money, leads to an inefficient, unsatisfying, unproductive solution.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports