Have you heard of the New Democracy Party?

It takes only two things to keep people in chains:

The ignorance of the oppressed and the treachery of their leaders.

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Reader “ejhr2015” brought my attention to the New Democracy Party (NDP) in Australia. It is based on the beliefs of Modern Monetary Theory (MMT), a close relative of Monetary Sovereignty (MS).

In reader ejhr2015’s words:

There are, world wide, several NDP’s; Your namesake, Bill Mitchell, is a dead set opponent of a UBI, hence the bias you see. Me, there’s room for both, IMO. https://newdemocracyparty.org.au/home/democracy.php

On the Australian New Democracy Party’s website you can learn that: They understand the fundamental truth of Monetary Sovereignty: A Monetarily Sovereign Government’s spending is not funded by government income. 

The fundamental economic problem facing Australia, America, and the world is the Gap between the rich and the rest.

In America, the federal government is Monetarily Sovereign, while the state and local governments, businesses, and individual people are not Monetarily Sovereign.

So while the aforementioned state and local governments, et al, need various forms of income in order to spend, the federal government needs no income at all.

The U.S. federal government literally could eliminate all taxes and every other form of income, and still continue to spend, forever. There are reasons why it chooses not to forego income, but the power exists.

The Australian government has the same power. Keep that in mind as we explore some of the New Democracy Party’s recommendations, together with my comments:

Economy (https://newdemocracyparty.org.au/policy/economy/)
No targets will be set for the government’s fiscal balance – focus is on full employment, price stability, sustainability, and well-being, i.e. as low as practicable spending gap. The resulting fiscal balance is what it is

https://newdemocracyparty.org.au/policy/employment/ A job guarantee scheme in which any person willing and able to work will be offered a meaningful job by the government at a socially acceptable minimum wage along with training, support and mechanisms for transitioning participants to the private sector if he/she wishes

This focus on full employment and price stability is the classic MMT dogma. At the University of Missouri, Kansas City, the focus of MMT thinking, there even is a Center for Full Employment and Price Stability.

We often have discussed the MMT “jobs guarantee” (JG), and have found it to be naive, impractical and counter-productive.  Although the plan has changed through the years, it has these features:

1. “Junk jobs”: Look in the newspapers and online. There is no shortage of jobs. There are millions of jobs, but they are the wrong jobs.
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   The vast majority are jobs you wouldn’t take, even if you were unemployed.  They are minimum wage jobs, in the wrong location, or have physical or experiential requirements you don’t wish to fulfill, or are unpleasant for any number of other reasons.
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   Those are the jobs the government bureaucrats of JG will provide.
2. JG bureaucrats would compete with private employment agency professional personnel or would have to create “make-work jobs” from thin air.
3. JG is based on the Puritanical assumption that work, even in “make-work jobs,” is the only moral way for the poor to receive money — “work ’til you drop,” digging a hole and filling it up. The rich, however, are not subject to that moral imperative.
4. Because JG must be minimum wage (so as not to compete with the private sector), it doesn’t provide the real financial needs of the unemployed: Enough money to lead a decent life. (“Minimum wage” is a legal term that differs according to locality.  It is not a “sufficient” wage, which also differs according to locality.)
5. And then there is the question of benefits, hours, and perks. How will those compare with “regular” jobs?
6. What happens if a person is fired for cause? Is he entitled to another job, where he again can be fired for cause? Or for no cause?
7. There are many, many other reasons why JG is a truly terrible idea; you can read about them here.

A national savings fund guaranteed by the government will be set up as an alternative to superannuation funds.

Offer accounts for superannuation funds that provide stable interest returns as an alternative to current superannuation arrangements

Somewhat confused: “. . . alternative to superannuation funds . . .” and “Offer accounts of superannuation funds . . . ” Which is it?

Anyway, I believe the above is like America’s Social Security, though no details about age or payment amounts are given.

No government debt securities will be issued

I’m not sure about the purpose of the above, but in America, T-securities assist in interest rate (i.e. inflation) control. At one point on the NDP website, there is an explanation of why the government should issue debt (!)

The assets owned by the sovereign fund (Future Fund) will be sold down in a controlled fashion unless government ownership or partial ownership is required for public benefit.

Because the Australian government is Monetarily Sovereign, and has no need for any sort of income, it also has no need to sell anything. It should give what it doesn’t want. Selling assets (“privatization”) is one way governments enrich the already rich.

Speculative behaviour in the financial markets that provides no real benefits to the population will be eliminated.

Who will determine what has “real benefits” and what does not? Most financial speculation exists as insurance for commodity pricing, or for market liquidity.

The ability of banks to sell loans on to others will be eliminated.

This is a dangerous policy, for it would tie a bank’s financial hands, increase the likelihood of bank insolvency, and reduce lending ability. I suspect this has not been well thought out.

Provide loans for business and farming investments that benefit the community when commercial loans are not available.

Provide seed capital for start up incubators that demonstrate a real potential for a benefit to the community.

Provide zero interest home loans to break intergenerational poverty

The national government never should lend. It does not need the return of capital, and lending can impoverish borrowers. America’s student-loan debacle is an example.

The national government should provide no-obligation financial support to benefit the community. In short, the government should give, not lend.

Tax: https://newdemocracyparty.org.au/policy/tax/

Create fiscal “space” for the government to enact its social agenda

One might think “fiscal space” means the government has enough money to do what it wishes. But at another place on the website, “fiscal space” is defined as allowing the government to spend without creating inflation.

This follows the MMT claim that the federal government uses taxes to prevent inflation. But, the government does no such thing. In the first place, when the government is considering taxes, it does not include inflation.

It may include rates against various income groups or rates for the purpose of trade agreements, or for “sin” taxes, but it does not include inflation. Why? Because tax changes are slow to implement, slow to take effect and almost impossible to use as an inflation cure or preventative.

Inflation comes quickly, and in unexpected amounts. No one ever is able to determine how much, and what kind of tax will prevent or cure any amount of inflation.

Instead, the U.S. Fed controls inflation via interest rates which control the demand for dollars, which in turn, controls the value of dollars. Despite MMT’s repeated claims, the government does not, and cannot, set taxes or tax rates to control inflation.

Education: https://newdemocracyparty.org.au/policy/education/

High quality public education (early childhood, primary, secondary, vocational, tertiary and post-graduate) will be free to all citizens. Existing student loans will be forgiven.

The above are good ideas, except they should not be limited to citizens. There are strong reasons why everyone in Australia should be educated so they can contribute to Australia’s economic and scientific progress.

The choice of courses to be offered in universities will be at the discretion of the respective academic board and an evidence-based clear public benefit. Public funding of private primary and secondary education institutions will be reviewed to clearly determine their public benefit.

Allowing the national government to determine whether a course offers a “clear public benefit” is dangerous. Will government bureaucrats consider courses in poetry, music, art, history, and sports as offering a clear, public benefit?

Will this also open up each course to an examination of content? For example, even if a music course is considered to have a “clear public benefit,” what if part of the course contains “gangsta rap.” Will a government bureaucrat allow it?

Health care: https://newdemocracyparty.org.au/policy/health/

Health care will be free for all permanent residents and citizens including dental, mental, psychological and emotional health care

What is the benefit to Australia, if a government that can afford anything, denies health care to those who are not permanent residents or citizens?

Welfare: https://newdemocracyparty.org.au/policy/welfare/

All citizens and permanent residents will be provided with housing and adequate food if they are unable to afford and secure these for themselves

All citizens and permanent residents will be entitled to a dignified weekly income and free public transport if they are unable to work for whatever reason

Same question as previous. What is the benefit to Australia if a government that can afford anything, denies housing and adequate food to those who are not citizens and permanent residents.

Climate: https://newdemocracyparty.org.au/policy/climate/

Investment in renewable energy research, development and implementation will be encouraged and made directly by the government to convert Australia’s economy to carbon neutrality by 2030

Excellent. There is zero reason not to do this.

The New Democracy Party has some good ideas, but sometimes it seems to forget that the Australian government is Monetarily Sovereign. The Jobs Guarantee is a terrible idea for many reasons, which we have detailed in other posts:

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
More proof Jobs Guarantee (JG) can’t work  Saturday, Jan 4, 2017

Finally, although part of the MMT mantra is “price stability,” we don’t see anything in their recommendations that deal with the price stability issue.

We believe the fundamental economic problem facing America’s and Australia’s people is: The wide Gap between the rich and the rest. This Gap can and should be narrowed by government spending that benefits the “not-rich.”

While some of the NDP’s recommendations address this issue, some do not. Surely, minimum wage, “junk jobs,” which are closely akin to slavery, are more likely to widen the Gap than to narrow it. All such jobs do is perpetuate the starvation of the slave class.

The New Democracy Party is an attempt to help the poor, by taking advantage of Australia’s Monetary Sovereignty. But it is so dominated by MMT’s mantra (full employment and price stability) it has forgotten that its stated goal is to: “Wage a war against poverty,” and often forgets the government is Monetarily Sovereign.

It mentions, but does not correctly answer such questions as:

1. “Will increased government spending drive up inflation?”
2. “Will increased government spending result in the Australian dollar collapsing on the foreign exchange markets?”
3. Then it gives complex non-informative answer to: “Will higher budget deficits increase interest rates? If the government doesn’t need to borrow to fund the deficits, why does it issue debt?”
4. Finally, there is the misleading answer to the question: “What’s to stop the government from going crazy with its spending?” Here is what they say:

The answer to the question is around the concept of the economy’s capacity utilization, also be thought of as an output gap or a spending gap, which is the difference between what the economy could be producing (in terms of goods and services) if it was operating at full capacity and what it is actually producing.

The answer is misleading, partly because no one knows what “full capacity” is. Consider the full capacity of a farm that picks by hand vs. the full capacity of a highly advanced, robot-computer operated farm. If government investment in farm automation increases capacity, what then is “full capacity”?

The question about the government “going crazy” with spending is a good one, but it is a question the government already has answered. “What currently prevents the government from “going crazy” with its spending?”

Neither the total of deficits nor of debt have prevented Congress from spending, as both have risen significantly almost every year since the Great Depression. Rather than worrying about inflation (which the Fed controls), our greatest worry should be the Gap between the rich and the rest. That is the real problem facing America.

The New Democracy Party has taken a step toward educating the public about Monetary Sovereignty (though NDP doesn’t call it that.) Though their explanations are lacking, and some of their proposals are poor, one only can hope they are a step forward rather than a step in the wrong direction.

On balance, to address the fundamental problem of inequality, we should consider the Ten Steps to Prosperity (below).

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

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

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY