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●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive, and the motive is the gap.
We previously have written about Modern Monetary Theory’s JG (Jobs Guarantee)
Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012
The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB Saturday, Saturday, Jan 25 2014
You can refer to those articles, to see the many, many objections we have to the JG concept. For your amusement, we also provide this playlet: “Life in a Jobs Guarantee (JG) World: A Dialog Between a Small-town Mayor and His Comptroller”:
Comptroller: Mr. Mayor, I have a great idea for saving money.
Mayor: Let’s hear it.
C: We fire everyone.
C: Yup, even you and me. Then we hire everyone back as JG — you know the program that says, “Everyone who wants a job, gets a job.”
M: But doesn’t JG pay minimum wage? I can’t live on minimum wage. No one can. Minimum wage people have 2nd and 3rd jobs.
C: We just give you and everyone else, bonuses on top of your minimum wage, to bring you back up to your regular salary.
M: What if JG won’t allow people to earn more than minimum wage?
C: That would be quite a problem, wouldn’t it? The federal government staffing up to make sure millions of people, all over the country, don’t make more than minimum wage? No raises. No bonuses. No promotions of any kind. Millions of minimum wage slaves, courtesy of the federal government?
M: Well, that’s the federal government. Is there a work-around?
C: Sure. We hire everyone’s wife and kids and cousins, aunts, uncles, friends, girlfriends — everyone in town — to be on JG. Get enough non-working people on JG, and the town will do just fine. And they don’t really have to do any actual work. Just sign up.
M: Great idea. We’ll save bundles of money.
C: But it gets better. You know how we’ve been trying to get Walmart to open here? Well, they already pay minimum wage, but we’ll put all their people on our JG, so Walmart doesn’t have to pay any salaries at all. That would be a huge saving and attraction for Walmart — an entire army of free employees, all paid by our minimum wage, JG. In fact, we could pay every Macdonalds, Burger King, and pizza parlor employee on our JG — the entire town could work on our JG.
M: But what if the government limits how long someone could be on JG?
C: You mean limited like unemployment compensation is limited? Isn’t the whole idea of JG, anyone who wants a job gets a job?
M: What about FICA?
C: Naturally, JG would have to cover FICA, too.
M: How do we get these people to do anything. I mean, if we fire someone . . .
C: Yah, he could get another JG job. That is a bit of a problem, I guess.
M: Any age limitation? Could an 80-year-old get JG?
C: Sure, anyone who . . .
M: Yah, I know. Anyone who wants a job, gets a job. What’s the economic benefit of starving the elderly, especially since lots of older people currently are among the able-bodied employed? But what if the government demands that people receive a “living wage” for JG, not just a minimum wage?
C: Better yet. Of course, what’s a “living wage”? Is it different in Manhattan than here in Nowheresville? There would have to be all sorts of formulas to account for different costs of living.
M: But wouldn’t the supervision of all this require a bureaucratic federal army — sort of like the IRS, only bigger?
C: Sure, that’s the beauty of it. The federal government would put a few hundred thousand more people on the payroll — more people working at minimum wage.
M: Is the bottom line, millions of people would “work” at meaningless, phony, minimum wage jobs, whether they actually show up or not, and the rest of the country would be paid for actual work?
M: If minimum wage or living wage were, say, $10 an hour plus FICA, for doing nothing, how much would a business have to pay someone to do actual work?
C: Good question. I mean, you’re not going to work 40 hours, just to make an extra $2 an hour, are you?. Probably regular paying jobs will have to add the same amount. If JG was was $10, a regular job probably would have to be about $20 plus FICA.
M: So businesses would be forced to pay a lot more, including FICA, in order to get non-JG employees. But why would they go to all that extra expense if JG employees are that much cheaper, and there are all those work-arounds?
C: Isn’t JG great! Just imagine. Millions upon millions of people in meaningless, no-raise, no-advancement, no-show-up jobs. An army of low level people, being ruled by a few wealthy overseers. It’s a 1%er’s Utopia.
M: Where did this business model come from? Businessmen?
C: No. Economists.
Perhaps, we should take one more look at the Nine Steps to Prosperity.
Rodger Malcolm Mitchell
Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)
10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt
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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports
THE RECESSION CLOCK
Vertical gray bars mark recessions.
As the federal deficit growth lines drop, we approach recession, which will be cured only when the lines rise. Federal deficit growth is absolutely, positively necessary for economic growth. Period.
54 thoughts on “–Life in a Jobs Guarantee (JG) World”
The core of the problem
The federal government already creates jobs, and could easily create many more jobs like it did during the 1930s depression, and during the world wars, plus the Apollo program, and so on.
However we make everything unworkable when we add the word “guarantee.” People who cling to the buzzword of “guarantee” become fanatics. They consider themselves geniuses as they mindlessly throw tantrums, becoming increasingly angry, and insulting everyone. They reduce the entire discussion to the equivalent of asking, “Is God so powerful that God could create a stone too big for God to move?” The same madness is exhibited by the “small government” preachers.
I myself made the error of referring to “basic income guarantee.” Hence I refer to it simply as “Universal Social Security.” The same program we have now, only enhanced and expanded. If we had that, plus Rodger’s Nine Steps, I think we’d all be better off.
Simply put, we just need to get rid of the Big Lie and have the government spend more, and create more jobs. Bloviating defenses of “guarantees” are meaningless. No one reads them anyway, and rightly so.
I forgot to mention that yesterday was the 100th anniversary of the Ludlow Massacre.
When coal miners staged a strike, and set up a small tent city, mine owner John D. Rockefeller, Jr. ordered in the Colorado National Guard to machine gun the tent city and burn it to the ground. The National Guard murdered twenty-six people, including two women and eleven children.
Such is the struggle between laborers and corporate power. (Question: if the miners had striked against dangerous and oppressive jobs they had obtained via a “job guarantee,” would they still have been massacred?)
Anyway there’s a small monument to the event in Ludlow Colorado. Foreign tourists visit it, but Americans are not interested.
That’s why average Americans are destined for the same fate.
Outstanding Treatise, Rodger! As I’ve said here before, our failed 70’s CETA experience underscores your excision of MMT’s ‘Job-Guarantee’. Ignore past failures, repeat them!
Take it from a retired GAO Congressional Investigator!
Every few years, economists and politicians get together to institute a solution to a business problem.
The results are predictable.
Are there any countries that have (or have had) a guaranteed jobs program or a guaranteed basic income?
Whoops! All of the Social Security money is gone!:
Where could it have all gone?
The article demonstrates zero understanding of Monetary Sovereignty.
Unfortunately articles like this are very common. What is even more depressing are the comments from readers who know just as little as the author after the end of the article.
Not one person in 10,000 understands how federal finances — Monetary Sovereignty — works.
And not understanding it, they reject it. That is a hallmark of the ignorant.
Rodger writes, “Not one person in 10,000 understands how federal finances — Monetary Sovereignty — works.”
I sometimes wonder how many Americans “get it.” If one person in 10,000 understands MS, then 31,790 Americans understand it. Of those, 99% have a vested interest in lying about it, because they are rich, or politicians, or hucksters (e.g. gold traders) and so on.
That leaves 318 people like Rodger, who actually tell the whole truth. However even 318 is probably too high.
Let’s be generous and say there are a hundred people like Rodger in the entire USA.
This would mean that only one American in 3.18 million understand MS, and tells the truth about it.
One in 3.18 million. That number seems to me like a reasonable estimate.
Thanks for that link, Beaker.
Actually Senator Coburn is correct: the Social Security “trust fund” is indeed, broke, empty, depleted, and drained. It always has been. In fact, it never had any money in the first place.
A US government “trust fund” is not a pool of physical or digital money. It is simply a channel used by the federal government to send instructions to banks to credit or debit various bank accounts. There are hundreds of federal accounts. If we claim that such-and-such “trust fund” has a billion dollars, it simply means that the controllers of the “trust fund” are authorized to send instructions to banks to credit various bank accounts for up to a billion (digital) dollars. No physical money is ever involved, since money itself is not physical.
Therefore to claim that a federal “trust fund” is broke is analogous to claiming that a sports scoreboard is “drained of points,” or that the bank in the Monopoly board game is depleted. (We can always make more Monopoly money.) The real translation is: “We must impose more austerity on you, in order to further widen the gap between you and the rich.”
For a second I wondered why someone would write an article so full of rubbish. Then I had my answer. The author is retired professor of economics in Illinois. He spends his days writing books and articles which claim that the sky is falling.
I know you spent a lot of time on this, but the scenario you describe is nothing like the MMT version of the job guarantee. You can see all your objections considered and mitigated in Wray’s MMT Primer, chapters 42-46. http://neweconomicperspectives.org/modern-monetary-theory-primer.html
You are correct, sort of. There is, in fact, no official MMT version of JG
Last I saw, Randy Wray’s version was for the government to find JG jobs in the private sector. I was parodying a version of JG suggested by one of this blog’s readers, in which state and local governments supplied the jobs.
He may have changed it since I critiqued it. and he got very angry.
You see, there are an infinite number of JGs, linked only by the name, JG. That’s one of the problems. Any time I critique one version, someone says, “Oh no, that’s nothing like [name goes here]’s version.”
If you take the trouble to read the 5 links at the top of this page, you may find your version there, somewhere. I’m sure you’ll find Randy’s. Then you can tell me which of my objections was “considered and mitigated.”
Tell me your version, and I’ll explain why it’s full of crap, as every version I’ve seen has been.
In my version, the JG workers would do jobs that are now done only by volunteers. Habitat for Humanity, Food banks, and like that. Besides working, they may also do education or training to develop skills, work on their resume, counseling, or just job-hunting. Whatever the administrators of the program deem the best use of their time in making them employable. Maybe everyone gets one day a week of non-working time doing one of those other things, and maybe some spend the entire week working on their GED.
The “no” rules would be:
no work that competes with private sector (including local government) employees
no subsidizing of jobs in the private sector
no work that government ought to be doing all the time, good or bad (e.g., infrastructure repairs).
Besides the wages and benefits of the JG workers, the program should include money for overhead, management of the program, and supervision of the workers. Cities, states, and employers should not bear any of the costs.
The wage may be close to the current minimum wage, but the benefits would be lots better than the typical minimum-wage job. Child care would be included, and medical. It makes no sense to offer a job to a single mom when it pays less than her babysitter costs.
JG workers can be “fired”, essentially not paid for time they don’t show up, or show up unfit for work. The program is for people who are willing and able to have a job in the private sector, but don’t have one because there are not enough available. Sort of like unemployment insurance, except you’re employed, the compensation is better, and it doesn’t expire. Ever. Nothing in the rules would prevent a person from doing it as a career, if that is their only ambition. Hopefully there would not be many people like that, and maybe counseling would help them.
Until fiscal policy is informed by MMT, that is, adjusted so as to reduce unemployment and underemployment substantially, JG should be phased in, perhaps with pilot programs in a handful of cities and towns hardest hit by the current economy (that’s partially a political judgment, partially a matter of scale). I’m thinking the JG workforce should be about 3% of the labor force, more or less, depending on the business cycle. Mosler chose that number, and I think it’s probably a good one, but subject to revision based on experience. There probably does need to be a non-zero buffer of workers, but 26 million is too many.
I think that covers all the critiques in your little story, and more.
P.S. I’ve not only read all of those 5, I’ve commented on some. You even replied to at least one of my comments.
P.P.S. Yes, there are a variety of opinions about specific details of JG. The essence of JG is that the labor buffer stock should be employed, not unemployed. There is no disagreement among JG supporters on that. If you think there is no need for a buffer stock, that would be quite a unique theory.
Nothing in the rules would prevent a person from doing it as a career, if that is their only ambition. Hopefully there would not be many people like that, and maybe counseling would help them. Why on earth would that be a bad thing, or would they need counseling? More power to such people, who will make themselves and everyone else better off. The people who need counseling are the people who are obsessed by and make far too much money – and have been ruining lives, grossly economically mismanaging most of the societies on Earth for 40 years or so..
Of course I agree with just about everything else you said.
It might be a bad thing because of the low wage, barely enough (or maybe not enough, depending …) to live on without additional safety net help. I would hope we would all want more from life than mere survival. Maybe to raise a family, and give your kids a more comfortable life?
golfer, you said:
O.K., I surmise the employer is the federal government, which is different from other JGs I’ve seen. And you don’t want to compete with anyone.
(Except for some unknown reason, you do want to compete with federal government employees). Is competing with federal government employees — with minimum wage jobs — good public policy?
But then, you didn’t say exactly what the pay would be (“close to the minimum wage”???), and that opens a whole other can of worms. We could debate endlessly about what level of wages and benefits would not compete with existing labor, but also would help the American worker.
And exactly what is the work the federal government ought NOT to be “doing all the time, good or bad”?
You’ve limited it to work now done by volunteers — i.e. non-religious charities — which in your mind, the federal government “ought NOT to be doing,” Why should the government “ought not” do food banks and Habitat for Humanity?
And are those rare jobs the federal government “ought not to be doing” really available in rural America, where virtually all charity is done by religious organizations?
You also say, “JG workers can be ‘fired’, essentially not paid for time they don’t show up, or show up unfit for work.”
Er, uh, excuse me, but that’s not being “fired.”
Apparently, all I have to do is “show up” sober and I get paid, whether I actually do anything worthwhile. But, of course, you can’t really fire me, can you, because I’m guaranteed a job (One of the thousand and one faults with JG.)
Also, workers can “do education or training to develop skills.” Does this mean JG pays for school? I like that, but it does it mean I have to give up my school JG when I get a real job? Or can I have JG and a real job at the same time.
Also, JG pays people to “work on their resume, counseling, or just job-hunting.” In other words, your JG is not ” Sort of like unemployment insurance, except you’re employed, the compensation is better, and it doesn’t expire. Ever.”
Your JG is classic unemployment compensation. Period.
And here is the best one of all: “Whatever the administrators of the program deem the best use of their time in making them employable.”
Now what could possibly go wrong with that?
Finally, you said, ” . . . willing and able to have a job in the private sector, but don’t have one because there are not enough available.”
That is the real misunderstanding. There are plenty of jobs available. Millions of jobs. Every newspaper classified section offers jobs. Monster.com lists jobs upon jobs. There is no shortage of jobs. There is a shortage of the right jobs in the right place for the right pay.
JG doesn’t address that. Instead, JG offers the wrong job, in the wrong place, for the lowest pay.
There are so many other faults in your proposal, I could go on and on and on. But why beat a dead horse?
Bottom line: You spent the last couple hours, feverishly trying to invent something that makes sense, to prove I’m wrong (your usual mission), and what you came up with makes no sense at all.
But don’t feel bad. No versions of JG make any sense, so your version is neither more nor less senseless than any of the others, probably because any businessman would (or should) see instantly that JG is nonsense. It’s a nightmare dreamed up by economists.
We would would accomplish more by beginning to institute the Nine Steps to Prosperity, and forgetting about creating a Rube Goldbergish JG.
Sometimes it seems like you are deliberately trying to misunderstand.
“O.K., I surmise the employer is the federal government, which is different from other JGs I’ve seen.”
The federal government pays them, but they work for the (I’ll lump them all together, for the sake of discussion) NGO that directs their work. All the proposals I’ve seen are like that. I don’t care which one you call the “employer”, as long as we can be consistent, and it is clear that those two roles, that are combined in private sector employment, are separated in JG.
I haven’t seen the proposal you parody in this article, where they replace regular government employees. That would serve no useful purpose.
“you don’t want to compete with anyone”
Correct. No replacement of anyone already employed, no producing the same product or service as any government agency or for-profit private firm. They don’t work at Wal-Mart, and they don’t start JG-Mart to compete with Wal-Mart.
“you do want to compete with federal government employees)”
No, I never said that. JG workers should not be doing anything that is already the responsibility of any government employee, Federal, State, or local.
“what level of wages and benefits would not compete with existing labor,”
Nothing in JG should compete with existing labor. JG workers should not do anything that other employees are doing for money.
Compensation set “too high” would compete with employers, not with existing labor. The level and mix of compensation is one of the specific features that is not universally agreed. In Progressive circles, the popular choice is “living wage”, and it is acknowledged that such a level might cause a one-time adjustment in wages throughout the economy, and perhaps the reduction or even end of certain jobs and industries that cannot afford to pay as much, and don’t provide other sorts of benefits (such as opportunity for advancement).
“what is the work the federal government ought NOT to be “doing all the time, good or bad”?”
My point is about what work the federal government ought to be doing (not “ought not”) all the time. National defense, law enforcement, courts, maintaining National Parks and other infrastructure … In short, all the things we think they ought to be doing, as our will is expressed through Congress. JG should not be used for these things. JG workers will come and go, and these things need to be done by permanent employees. They can’t stop just because the economy improves.
Whether the government should do food banks and Habitat for Humanity is a valid policy question. If government is to take over those activities, they should be done with permanent employees, not JG workers. Today, there is no shortage of work for the existing organizations to do, just a shortage of volunteers to do it. It’s a good fit for JG, because both the workforce and the need will vary in the same direction, as the state of the economy varies. Not such a good fit for a permanent paid workforce. You could use temps to match the supply to the demand, like they do with census workers, but I’m sure the public employee unions would not like that.
“in rural America, where virtually all charity is done by religious organizations?”
That’s a more difficult question. I’m not sure the legalities would work out, but if an established religious charitable organization (say St. Vincent De Paul) wanted to participate in JG, and would agree not to proselytize, I would let them. I’d be more suspicious of organizations newly formed to exploit JG. Maybe some sort of contractor relationship could sanitize it so as to preserve the “separation” of church and state. I’d rather not categorically exclude JG workers from religious charities that they would like to support, but maybe that’s the only way.
In the end, in rural areas if there are no nearby jobs then employing everyone will have to involve moving either businesses or employees. Lots of people leave the town they grew up in to find the job they want, and lots of businesses expand into underserved areas. In a healthy economy this is not an unusual or insurmountable problem.
“Apparently, all I have to do is “show up” sober and I get paid, whether I actually do anything worthwhile. But, of course, you can’t really fire me, can you, because I’m guaranteed a job (One of the thousand and one faults with JG.)”
JG is for people willing and able to work. Part of “unemployed” includes wanting to be employed. I’m retired, I don’t want a job, so I’m not unemployed just because I’m not working. If you show up and refuse to work, you are not guaranteed anything. Payment for not working is called BIG, not JG.
“but it does it mean I have to give up my school JG when I get a real job? ”
I would say so. JG is a “real job”, but it is intended for people who don’t already have jobs in the private or public sector. Many employers have programs to encourage and subsidize employees who want to continue their education.
Off track a little, but I sort of like your proposal that free public education be extended beyond high school. Many states run colleges below cost for state residents. Adding Federal funding to make that free rather than low-cost, and expand enrollment, seems attractive, and would then be outside of JG. I might then also support ending the “right” to drop out of high school.
“can I have JG and a real job at the same time.”
That’s not really the purpose, but I don’t see why not. Many people work more than one job. I wouldn’t disallow it. I’m not sure there would be much JG outside first shift, though. Maybe at breakfast and dinner in shelters and soup kitchens. Do Candy Stripers do shift work? Maybe that, too. But if the other job was first shift, the JG opportunities might be limited.
“Your JG is classic unemployment compensation. Period.”
No, there is a lot more to it than that, and it pays more, and doesn’t expire. Unemployment compensation doesn’t go away, so if someone prefers unemployment, and is eligible, she doesn’t have to participate in JG. Nobody has to participate in JG.
“There are plenty of jobs available. Millions of jobs. ”
But there are about 5 times as many millions of people looking as there are jobs. In a healthy economy, the numbers are more like equal, and the reasons everyone is not employed come down to, as you say, location, skills, and pay. JG fills the remaining gap, so that everyone who wants a job can be employed regardless of location, skills, and pay. (What is your solution to that problem?) Mosler calls JG a “transition job”, emphasizing the fact that employers are more willing to hire someone who is already employed. The long-term unemployed eventually become unemployable. JG prevents that.
“Buffer” is a technical term. It doesn’t imply equating people with numbers or things. (But I’m sure you know that.) It means that if business is to hire more workers, there has to be some workers available to be hired. JG is about the quality of life for those workers waiting to be hired.
I suspect you never have owned a business. If you had, you would realize that JG inevitably will devolve to make-work and endless unemployment compensation.
Not that that’s all bad. The bad part is that it’s so convoluted.
Just give the people the money and be done with it. Forgo the labyrinthine.
I have owned a business, but most of the time I was the only employee. Nothing in that experience has influenced my view of JG. It’s not make-work, it’s valuable work that is needed, but the willingness and ability to pay for it is missing. That’s where the federal government comes in. They have the ability to pay.
“Just give the people the money” is BIG. That works, too, except that when people are working and producing we are all better off.
Except that the BIG doesn’t work, golfer1john – it is (hyper)inflationary – if by BIG you mean the standard academic proposal – lots of free money for everyone! – wonder why nobody thought of that before.
I’ve pointed out for a while to Rodger that in running a business, he used the logic of the JG – or behaved like hardly any other businessman in history. The parallel to a business firing workers is NOT a state unemploying people – it is a state killing these people. The parallel to a state unemploying people is a business designating some employees to not do anything, forcing them from doing anything. If some contract, some plan takes less work than projected to fulfill (technological unemployment) – do businesses demand that their employees do nothing for fear of offending gods of laissez-faire – or do they just find something for the people they are paying to do?
I don’t know that it “wouldn’t work”. If inflation threatens, just raise taxes on those who have more than just the BIG. Besides, we already have a BIG in the form of a variety of in-kind benefits, and some monetary ones, in our safety net, and that isn’t causing inflation.
The problem that might arise from making BIG more lucrative is the reduction of work and GDP, which impoverishes us all.
P.S. to golfer.
You mentioned the #2 reason why JG is so attractive to some economists.
The #1 reason is it’s an easy fix to a problem:
(Of course, the real problem is the gap, and unemployment is just one of the symptoms, but let’s not digress.)
The #2 reason is what the economists refer to as “buffer stock.” You see, “buffer stock” isn’t people. “Buffer stock” is numbers.
People are hard to deal with. They each are different. They have unique desires and abilities. They don’t always obey. Dealing with people can be like herding cats.
But “buffer stock” is easy. “Buffer stock” does exactly as you wish. Just shift some numbers and voila! You have a 3% “buffer stock.”
Many economists don’t understand people, but they are expert with numbers. Businessmen, on the other hand, especially small businessmen, have to deal with people every day.
And sometimes those pesky people just won’t do what the numbers say. You can’t just slot one person in for another, the way you can with numbers.
I spent more than 50 years as a businessman, and this I learned. People aren’t “buffer stock.”
My impression of the JG is that it’s a holdover of the New Deal mentality; it worked then so it should work now in 2014. I don’t agree. There wasn’t the hi-tech efficiency then that we have now. The word computer wasn’t even in the 1930 dictionary.
Different times require different solutions. The private sector will only pick up the slack of unemployed when the economy is sufficiently stimulated by increased demand. Since the private sector won’t do it, the federal sector must. There is no other alternative.
I favor the gradual introduction of Roger’s 9 steps pegged to inflation. The goodies come to a halt when there’s inflation reported by the BLS’ CPI and resume when inflation dissipates.
So the private sector must decide how they’re going to make their money– by increasing prices or by biting the bullet and allow everyone to continue getting increased purchasing power from lower federal taxes and monthly “citizen dividends” which in turn goes back to the private sector as increased sales and profits. I would think the entire private sector would choose to hold the line in their own and everyone else’s interest.
That’s how I view it, a simple reward based feedback loop. All the machinery is in place, the stage is set, nothing new needs to be invented. Just a matter of political will as opposed to won’t.
Well, the mentality of the Progressives pushing JG is very much like the New Deal, but while the New Deal employed lots of people, it also left lots unemployed. JG aims to employ everyone willing and able to work.
There is clearly a need for more government spending on certain infrastructure projects that have been too long neglected. But that should not be a “jobs” program, it is BAU. One of the reasons these things have been neglected is that the economy was doing relatively well. That’s not a good reason for government to shirk its duties. This would be a great time to come back up to speed, but that’s not what JG should be for. You don’t stop the project in the middle because the economy improved and your workers got hired away.
MMT proposes increased demand in the current situation, as Rodger does. But increased demand by itself cannot employ everyone. There are always mismatches between the skills of the last unemployed workers and the skills in demand by businesses, even if there is theoretically enough demand for the full number of workers. That mismatch is what would cause wages to be driven up as companies compete for the scarce skills, but without additional output. That is the recipe for inflation. JG employs those last workers in useful activities that governments and profit-oriented businesses do not do.
Citizen dividends, whether in the form of tax cuts or benefit increases, is quite a valid way to manage aggregate demand. ISTM the most efficient, most direct lever on demand is to vary a tax on sales by all businesses. It would have to be done in a timely fashion, which would mean Congress is not involved, but has delegated a small portion of its taxing power to a more nimble institution.
Help! Golfer, please stop with the acronyms. I’m not cool enough to recognize them, so I’m forced to google each one 🙂
Anyway, there is a bottom line to all this, which may be the cause of all the misunderstanding:
MMT identifies the big problem as lack of jobs. I identify the big problem as the gap between the rich and the rest.
One symptom of the gap is poverty, and that can be related to the lack of a job. But the lack of a jobs in America is not an important problem. There are plenty of jobs — just the wrong jobs in the wrong places at the wrong salaries.
So MMT wants to treat a symptom, which would not be such a bad thing, if there were no cure for the disease. I take ibuprofen to treat my arthritis, because there is no cure.
But if there were an easily available cure, I wouldn’t mess with ibuprofen. And I especially wouldn’t mess with it if it involved a complex, convoluted, crazy-ass, undefined program like JG.
The Nine Steps addresses the problem: The gap. It also addresses specific symptoms, like poverty, lack of education, and yes, even the lack of a job.
I don’t have a job, but that is no problem for me. But if I were poor, that would be a big problem, only because of the gap between the rich and me. (If everyone were equally poor, and there were no gap, no one would be poor, and we all would be happy.)
My anger with MMT is that they devote time, energy, credibility and most importantly, attention, to a bad idea, when good ideas sit right in front of them.
Taking the wrong path makes it harder to get to your destination than just doing nothing.
Your “citizen dividends” is a good idea (#3 in the Nine steps.) Tax cuts (#s 1, 6 and 7) also are good ideas.
You know what JG and MMT are.
BAU = business as usual. Being in business for 50 years, it’s hard to believe you’re not familiar with that one.
ISTM = It seems to me. Widely used in blogging, texting, twitter, to conserve keystrokes. There are zillions more, I’ve found that looking them up is often quite amusing. Try TEOTWAWKI
Even if your 9 steps were implemented, there would still be people who wanted jobs but didn’t have them. Even if there were more jobs than people looking. Because of, as you have said, location, skills, and pay. None of your 9 steps provides jobs for those people. JG does.
Macroeconomic policies like your 9 steps will improve the economy, meaning more jobs and more output, which will reduce poverty. MMT advocates such macroeconomic policies. But MMT recognizes that those policies can’t do the whole job. JG is required for the last job-seekers not employed because of those mismatch factors to become employed.
Then do it last.
Last is fine with me, as long as we do SOMEthing beneficial real soon. Doing it last makes it a much smaller task. Even then, it needs to phase in, with pilot programs to demonstrate feasibility and ascend the learning curve. A gradual start is an easier sell. Trying to start doing JG all at once with 26 million workers is asking for trouble.
 Tetrahedron720 says: “I favor the gradual introduction of Roger’s 9 steps pegged to inflation. The goodies come to a halt when there’s inflation reported by the BLS’ CPI and resume when inflation dissipates.”
Unfortunately BLS figures are unreliable. They reflect the will of the rich, who own every aspect of the federal government. Just as the BLS lies about unemployment rates, the BLS can lie about inflation. In order for the BLS to become truthful, American society would have to undergo some kind of change, such that the government works for all, and not just the rich.
 Tetrahedron720 says: “The private sector must decide how they’re going to make their money– by increasing prices or by biting the bullet and allowing everyone to continue getting increased purchasing power from lower federal taxes and monthly ‘citizen dividends’ which in turn goes back to the private sector as increased sales and profits. I would think the entire private sector would choose to hold the line in their own and everyone else’s interest.”
You speak as though industrial capitalism still exists. Industrial capitalism has been eclipsed by financial capitalism, such that big corporations now make most of their money by speculating in the (rigged) markets. And with the US government covering all losses, big corporations have no incentive to offer goods and services, nor do they need employees or customers.
Smaller companies still need employees and customers, but small companies are eaten by big companies, who are eaten by still bigger companies, and so on. At the top, the rulers have the Wall Street casino. That’s one reason why we have permanently high unemployment.
I call this process “financialization,” and I consider it the doom of America. When everyone and everything exists only to serve the rich, and to sustain the casino, then no one will be left to produce food, or do all the billion other things that are part of a real economy. The rich will always need a small number of peasants to bring them food and clean their palaces, but the rest of the peasants are increasingly expendable.
If you have a viewpoint that proves me wring, then please share it, so I can feel better about life.
Roger, then why did Warren’s JG program work in Argentina 13 years ago? Two million people out of 35 million got jobs, the majority for the first time ever (single moms, and single-head-of-household).
What about the way Canada does it? http://www.servicecanada.gc.ca/eng/subjects/employment/index.shtml Also: http://www.cbc.ca/asithappens/features/2014/04/22/canada-middle-class/
So you would have canned the WPA program decades ago?
All completely different programs under different circumstances, which is the point. Anything called “jobs guarantee” is beloved, no matter what the actual program is.
Tell me exactly how your version of JG works.
(It’s like saying “Barbara is beautiful.” “Which Barbara?” “Any Barbara.”)
Here’s another one. http://conyers.house.gov/index.cfm/jobs
An unemployment rate of 2.5% was good enough for Minsky. It was his definition of full employment.
What did he think of the JG?
Today, many think there is a NAIRU of 5-6%. Compared to that, 2.5% is pretty good, but defining it as “full” ??? It’s like the 11.5 inch “footlong” subs. Saying it doesn’t make it so.
Sorry, Rodger, NAIRU is for Non-Accelerating Inflation Rate of Unemployment. 🙂
Minsky invented the JG. In my view, full employment is achieved when the long-term unemployment rate is 0%.
That never happens, because there always are people looking for jobs. Most economists think an unemployment rate of something in the neighborhood of 4% +or – 1%. Too low, and there could be inflation.
Right, there are always people looking for jobs, and 0% has never happened (so far) in a monetary economy. Some of those looking already have jobs, though, and are not unemployed while they are looking. If the 4% +-1 were working in JG, there would be no unemployment, and no inflation due to excessive demand for labor. JG labor demand is by definition equal to supply, never more.
The only thing fools can guarantee is air – and that’s if you are alive.
Does anyone on this board know what is inflation and is it’s source? Saying that “the gap” is the root of the issue is like saying water is the root of thirst.
I think if you answer what inflation is and what causes it, you will find the answer on whether we need JG, SNAP, subsidies to farmers, bankers, the military complex, the medical complex, the educational complex.
Here’s a hint: you are not going to remove a monopoly by throwing more money at it.
This may answer your question: https://mythfighter.com/2010/04/06/more-thoughts-on-inflation/
But, why do you think inflation is the biggest problem facing America?
I thought the government has been increasing spending years on in, on everything from jobs to education, food, etc… Why isn’t the gap narrower?
So, at least to me, it appears that more spending may appear as the obvious solution- but it hasn’t worked.
Whatever causes the price increases is the cause of the gap. Btw, inflation could be low, like now, and still be a huge problem if wages are stagnant. Oil may have had an impact on prices for some time, but that was years ago.
Inflation is the biggest problem in the world.
If you replace the word “inflation” with the word “inequality”, then all this becomes logically coherent, even if not compelling. Could Shish be confused, or perhaps English is not his first language?
Inequality is a tricky word simply because what’s equal to a person may not be to another. I think a better word would be justice. But either way, justice and inequality are a symptom of a good system or a bad system.
The same goes for “the gap”. With regards to oil being the cause of inflation, I get that it is a major input component, but the price volatility has had to do more with cheap currency being piled into it (thanks to the fed), than demand and supply.
Does this not mean that the cause of inflation, the root, is the banking system in general? Doesn’t this mean that this is where the focus should be. After, if a thieves was robbing my home I would focus on the thieves, not on doing make up work to keep myself busy while the thieves picked up steam. We have our priorities mixed up.
My dad always said, if you redistributed all the wealth in the world equally, the same 1% would control most of the wealth again in 10 years.
It would take at least a generation, because most of the upper 1% inherited their wealth.
Another article on a Jobs Guarantee:
My concern with just having a guaranteed basic income is that employers really do not like hiring unemployed people, especially the long term unemployed.
That article is an excellent, non-wonkish justification. I would only add that since involuntary unemployment exists only because the government has established and sponsored their currency, it is morally responsible to alleviate its ill effects. In non-monetary economies there is no such thing as unemployment.
We’d probably be at full employment if Obama and Congress had not raised taxes and cut spending since 2009.
there is an awful of of data that goes into the CPI and a lot of people involved. Call me naïve, but don’t you think at least ONE retired whistle blower would have popped out by now to reveal the lies and influence at the BLS? It would make a great story like the Pentagon Papers or sell books.
All I can say to make you feel better is that children don’t think the same as their parents. The ultra powerful of the future may decide not to go along with their parent’s business model and adopt the principles of Monetary Sovereignty in order to right the system. Also more women are getting into politics and tend to be more passionate about matters of life and death as they are the ones who after all bring life into the world. Then there’s the internet bringing immediate awareness of the problems and the myriad technical solutions. This too will provide some hope and answers. In the meantime we have to keep pounding away on the fact that if we can always find plenty of money for war and war preparation, and bailouts, and other emergencies, then what’s the big deal when considering economic justice for all.
“Call me naïve, but don’t you think at least ONE retired whistle blower would have popped out by now to reveal the lies and influence at the BLS?”
Thank you for your comment.
It’s a question of mass denial. Almost all governments lie about their unemployment rates, plus other aspects of government finances. Everyone knows this, yet everyone pretends they don’t know it. Denial is a global phenomenon, and it has occurred in all human societies. During the Soviet era, all Russians knew that state propaganda lied routinely (e.g. “Pravda,” which comically translated as “Truth”). This was taken for granted. Yet life went on.
I’m saying that if we want to peg Roger’s 9 steps to inflation as determined by the BLS’ CPI, then we must be careful. The BLS works for the Labor Secretary, who is appointed by the US President, who works for the rich, who lie in order to make themselves richer.
Your other points are interesting. Change cannot always be predicted.
For example, if you run an electric current through a quantity of liquid sodium, the result is a north and a south pole, like a magnet. The poles periodically reverse with no human tampering. Why? No one knows, nor can anyone predict when it will happen. It’s a mystery, and it applies to entire planets, including the earth. No one knows what causes pole-reversals, or exactly when it will happen again. (By contrast, stellar pole-shifts are somewhat regular. Our sun flips its magnetic poles every 11 years. The earth’s last pole-shift was 780,000 years ago.)
I’m saying I agree with you: change happens, and not always for reasons we can predict. For example, you say, “Children don’t think the same as their parents. The ultra powerful of the future may decide not to go along with their parent’s business model and adopt the principles of Monetary Sovereignty in order to right the system.”
The natural response is, “Huh? Humans have always competed for power and status. Why would the future be different? Why would the rich not push to widen the gap?”
However that response is based on what we see right now. Like a geomagnetic pole-shift, change does happen, and for reasons we may not be able to understand. Perhaps the USA will once again have a middle class in the future, for reasons that, at present, are unknown. It’s not logical or provable, but it’s certainly possible.
Anyway thanks for your positive attitude, which I think is based on sound reason.
Here’s another positive note…
The other day I had a conversation with a neighbor across the street from me. We got onto the topic of Social Security, and then government finances. When I explained MS to her, she understood it instantly, and agreed that it was correct in every detail. She understood, for example, that money is not physical. So there’s no telling when or where someone will “get it.”
Perhaps this also applies to society at large.
It’s important to get off of fossil fuel so that energy prices have no effect on inflation in the USA. We use huge quantities! The move to green fuels is starting. It’s also important to realize that government spending is really investment because it comes back as stimulus. When the wheels of industry are spinning the cost per unit of output decreases. The best way to beat inflation is with stimulus (mass production) and getting off of fossil fuels.
Energy prices will always feed into virtually all the other prices in the economy, whatever the energy source. Currently, fossil fuels are the lowest-priced of any expandable supply of energy for most uses, and as US production increases, the US trade deficit will decrease, which should help the US economy. Right now, a significant shift to something like solar or wind, with higher costs, would be inflationary. In the longer run, the price trend of solar and wind is down, while oil and gas will eventually be up again, as economically accessible supplies are exhausted, and when those prices cross, energy will become a secular anti-inflationary force. But it’s a matter of technology and price, not of will.