Bad news for MMT’s Job Guarantee Saturday, Oct 7 2017 

 

Image result for escaping the prison

 

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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Modern Monetary Theory (MMT) is a close cousin to Monetary Sovereignty (MS), the theory espoused on this site.

Both recognize the fact that federal finances are unlike state and local government finances. The federal government uniquely has a sovereign currency, the dollar, which it can create endlessly. Thus, federal spending is not funded by taxes or borrowing.

Fundamentally, MMT and MS are identical, but one important detail concealed by the devil has to do with MMT’s “Job Guarantee” (JG).

We have discussed JG many times, and continue to do so, because MMTers claim it is one of the most important parts of MMT.

They even have established a Center for Full Employment and Price Stability at the University of Missouri, Kansas City.

Here are excerpts from an article in The Nation:

The Job Guarantee: A Government Plan for Full Employment
There is no economic demand more urgent than putting Americans back to work. The government can do this by creating an “employer of last resort” program.
The Nation, By L. Randall Wray, June 8, 2011

There is no economic policy more important than job creation.

JG is a scheme only a university economist could love.

The idea is this: A federal government bureaucrat will create (or find in the public sector; that never has been clear) a job for anyone who wants a minimum wage job.

MMT refers to such job seekers as “buffer stock” or a “pool of employable labor.”

To be part of “buffer stock” or the “pool”:

  1. You will accept any minimum wage job you are offered, wherever in America it may be.
  2. You are qualified for any minimum wage job you are offered.
  3. Or, a federal government bureaucrat has the ability to find you the minimum wage job you want, and for which you are qualified, in a location convenient to where you live (even if you live in a small town in rural America).
  4. You prefer to work a minimum wage job, rather than not work, because you find such labor to be more emotionally rewarding than not working. (This doesn’t apply to wealthy people, of course.)

The whole thing is based on the MMT economist’s belief that the primary goal of you “buffer stock,” “pool employables”  (sometimes known as “people”) is to labor, or if that isn’t your primary goal, it morally should be. Apparently, you cannot be happy unless you have some minimum wage job, somewhere.

If the MMT professors merely would open a window in their ivory tower, they might see this:

Why Can’t the Middle Class Find Good Jobs if There Are So Many Job Openings?
Money & Career Cheat Sheet, Sam Becker, October 07, 2017

Job vacancies and job openings are exactly what they sound like — open jobs waiting to be filled. These positions represent needs from employers, and as such, employers advertise them as jobs to be filled.

As mentioned, these openings are at the highest levels on record, which goes back to the year 2000 when the government started keeping track.

Bureau of Labor Statistics, show there are more than 6 million job vacancies in the U.S. economy.  Why are employers unwilling to dip into the pool of 6.9 million unemployed people?

The answer, it seems, is a “skills mismatch.”

What does that mean? Those unemployed Americans out there don’t have the required skills or experience to be successful in the open positions.

A more obvious issue is the fact that many employers are reluctant to pay workers more.

Labor, like any other commodity, is subject to the rules of the free market. When there’s a shortage (as there appears to be right now), prices go up. But businesses don’t want to increase spending, and as a result they are allowing positions to go unfilled.

It’s not merely a matter of not being able to find quality employees. It’s that businesses are reluctant to pay more for them.

Pause for a moment to consider what you have read: There are millions of jobs available, but unemployed Americans don’t have the the skills to do them and employers are reluctant to pay what applicants want.

This doesn’t mean no one in America can do the job. It means:

Convenient to this location, there are no people who know about the job, can do the job, or who want the job, or who want the pay the job offers.

There are five crucial faults — job location, job awareness, job ability, job desire, pay acceptance — that separate JG from reality.

If the unemployed are looked at as mere “buffer stock,” these may be non-issues, but if they are considered to be human beings, these are killer issues. MMT economists, with their charts and graphs, fail to understand that.

If you have millions of workers who don’t have the skills needed to fill your positions, one option is to train them. But that’s something fewer and fewer businesses are offering these days.

More jobs than ever require college degrees, and many entry-level positions expect you to come in with some sort of certification or experience. This, of course, is at odds with the “entry-level” designation.

The fulcrum point of all of this is many employers simply aren’t offering attractive enough compensation packages to get the people they want. Yes, there’s a skills gap out there. But even that can be solved with high enough incentives.

How does the above square with MMT’s desire to pay minimum wage? Of course, it doesn’t.

That brings us to another (issue): The South and Midwest are where the most open jobs are.

And it’s not just areas of  the nation. It’s not even which states have jobs. It’s not even which cities. It’s a question of transportation cost and time. Most people will not accept a job that is much more than an hour a way and/or costly to reach.

Someone living in a northern suburb of, for instance, Chicago, would not consider a job in most of the Chicago business area — especially for a minimum wage job. Too far away and too costly to reach.

When employers can’t get people to work for the wages they’re offering, what are they supposed to do? The answer is to offer higher wages — and keep raising them until people start to bite.

Or mechanize, so live employment is less necessary.  Machines are a tempting option: No absences, no complaints, no labor problems, no errors, no salaries, no benefits, no lunch breaks.

A lot of employers are willing to let the 6 million unfilled jobs sit there rather than offer higher wages to fill them. That is why we have a record number of job vacancies and why we have millions of unemployed people who aren’t interested, or, as employers say, aren’t qualified.

MMT’s view of people as eager pegs to be dropped into holes, is at odds with reality.

Image result for ditch digger

Do you want this minimum wage job?

And here is another reality: The future is not more working hours, but fewer.

The goal for most people is to be able to do what they want, when they want — to live a happy life.

For some, this means being productive. For others it means reading, vacationing, being healthy, having friends, raising children, etc.

To each his own.

MMT’s professors repeatedly have stated, “There is no economic policy more important than job creation.”  They are wrong. Slaves in the South were fully employed. They were not happy.

People want happy lives. Minimum wage jobs are not the road to happy lives. There’s an old line, “No one ever says, ‘I wish I had spent more time in the office.'” Working for money seldom is a goal. The real goal is money and what money can buy.

Ask any retired person.

Monetary Sovereignty says “The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.”

While narrowing the Gap between the rich and the rest cannot be accomplished by JG’s minimum wage jobs, it can be accomplished, beginning with Monetary Sovereignty’s Ten Steps to Prosperity (below).

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

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The 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

–Financial frauds who give exactly the same advice to every client, no matter what the situation. Friday, May 27 2011 

The debt hawks are to economics as the creationists are to biology. Those, who do not understand Monetary Sovereignty, do not understand economics. If you understand the following, simple statement, you are ahead of most economists, politicians and media writers in America: Our government, being Monetarily Sovereign, has the unlimited ability to create the dollars to pay its bills.
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We all are aware of the euro nations’ financial problems, especially the problems of the PIIGS – Portugal, Italy, Ireland, Greece and Spain. We have discussed the fact that because these nations, in surrendering their Monetary Sovereignty, surrendered their control over their money supply. They are unable to create the money necessary to support their economies.

I predicted in a 1995 speech at the UMKC,Because of the Euro, no euro nation can control its own money supply. The Euro is the worst economic idea since the recession-era, Smoot-Hawley Tariff. The economies of European nations are doomed by the euro.” However, not all European nations surrendered their Monetary Sovereignty. Among the nations choosing to remain Monetarily Sovereign are Poland, Romania, Sweden, Norway and the United Kingdom.

Here are some sample news items:

Bloomberg; 5/25/11: “Poland’s economic-growth forecast was raised to 3.9 percent from 3 percent at the Organization for Economic Cooperation and Development

5/27/11: According to Capital Economics, a British research group, Romania’s economy will grow by 3% this year compared to a previous forecast of 1%, followed in 2012 by a 2.5% advance. The recovery will be fueled by private consumption, but also by the resumption of investments. Also the research group states that Romania has the second best potential for economic development in the region, along with Bulgaria, Poland and Russia.

OCDE:1/2/11 – Sweden is expected to continue to recover strongly from the recession as high saving, low interest rates and an improving jobs market encourage consumers to step up spending, according to the OECD’s latest Economic Survey of the country.

Bloomberg: 5/26/11: The mainland (Norway) economy will expand 3.3 percent this year and 4 percent in 2012, after growing 2.2 percent in 2010, the Organization for Economic Cooperation and Development said yesterday.

The Monetarily Sovereign nations are doing better than the monetarily non-sovereign nations. No surprise there for those of you who have been reading this blog. The key, of course, is for a Monetarily Sovereign nation to realize it’s Monetarily Sovereign. Not all do.

Why the British economy is in very deep trouble, Financial Times, Posted by Neil Hume on May 26, 2011

Here’s something for the Chancellor and the Office for Budget Responsibility (OBR) to chew on: a warning from Dr Tim Morgan, the global head of research at Tullett Prebon, that the deficit reduction plan won’t work and the UK is headed for a debt disaster.

Morgan says sectors that account for nearly 60 per cent of UK economic output are critically dependent on debt (public or private) and set to contract rather than expand. This will render economic growth implausible and means the burden of public and private debt will prove too heavy for the nation to carry:

Over the past decade, the British economy has been critically dependent on private borrowing and public spending. Now that these drivers have disappeared – private borrowing has evaporated, and the era of massive public spending expansion is over – the outlook for growth is exceptionally bleak.

Sectors which depend upon either private borrowing or public spending now account for at least 58% of economic output. These sectors are now set to contract rather than expand, which renders aggregate economic growth implausible. And, without growth, there may be no way of avoiding a debt disaster.

The UK, wisely avoided surrendering its Monetary Sovereignty, then forgot why it did so. It thinks, “the era of massive public spending is over.” Why? It has no idea. It believes it’s monetarily non-sovereign.

This puts the UK in the same position as the U.S., whose politicians, media and old-time economists do not understand the implications of Monetary Sovereignty. Read any article or listen to any politician, and you will not be able to tell whether the subject is a Monetarily Sovereign nation or a monetarily non-sovereign nation. They say exactly the same things about both.

What would you think about an investment advisor who gives exactly the same advice to a wealthy, married old man with no children, as he gives to an impoverished single, young woman supporting five children? If someone says exactly the same things, makes exactly the same predictions, and offers exactly the same advice regarding two diametrically opposite monetary situations, that person is a fraud.

I have just described the debt-hawk media, politicians and old-time economists.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com


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No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetary Sovereign, , and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.

Remember that the next time you’re tempted to ask a dopey teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it screwed up my future.”

MONETARY SOVEREIGNTY

–Deficits: The Possible vs. the Certain Friday, Oct 30 2009 

An alternative to popular faith

Human beings have difficulty distinguishing threat levels. Despite the absolute fact that airline travel is safer per mile than auto travel, some people drive, even long distances, because they fear the safer air travel more than the dangerous auto travel.

Then think of the people who won’t vaccinate their children against the H1N1 flue, because they fear any unknown, possible adverse effects of vaccination more than they fear the known, deadly effects of the flue.

I was reminded of this human failing when I read an article in which the author claimed the economic recovery was not “real,” because it relied on government funding rather than on private funding. The author seemed to feel government funding was, in some way, artificial – as though we were using saccharine, rather than sugar, to sweeten our coffee.

Of course, money is money, and federal money is indistinguishable in effect from private money. But I suspect the author had something more than artificiality in the back of his mind. He probably understands that the federal government has the unique and unlimited ability to create money from thin air, and repeatedly has proved it never can run out of money. So, what is his concern? He must fear two things: Federal deficit spending might cause inflation and our grandchildren might have to pay for deficits.

As for inflation: Despite current, massive deficit spending we do not now experience an unacceptable level of inflation, and are unlikely to soon. Moreover, in the thirty-five years since we went off the gold standard, large deficits never have caused inflation. Clearly, something is askew with the deficits-cause-inflation hypothesis.

Even if deficits did cause inflation, private spending is identical with public spending; both add money to the economy. So the author should fear the supposed inflationary effects of private and public spending, equally.

As for grandchildren, I am a grandchild of the adults who saw the gigantic deficits of WWII and of President Reagan. Yet, because tax rates have gone down, I never have paid one penny toward those monster deficits. Similarly, if tax rates continue to stay level or decline, as they should, my grandchildren will not pay a penny toward today’s deficits.

What has this to do with the human difficulty distinguishing threat levels? The debt hawks know with certainty, that many millions of people now suffer the devastating effects of unemployment and loss of homes and lifestyle. People are dying, financially, emotionally and yes, even physically.

These same debt hawks believe that at some unknown time in the future, their children, grandchildren or great grandchildren may have to pay some unknown amount toward today’s debt. Yet they fear unknown future damage more than the certainty of today’s. That is why you see people rail against deficits. In essence, they are so afraid they one day may run short of water, they will let a home burn to the ground rather than allowing the fire fighters to save it.

The shame is that many professional economists, who should know better, foster these misguided fears, leading to misguided actions.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com/

–Fool’s gold Wednesday, Oct 28 2009 

An alternative to popular faith

I always am puzzled by the mystical faith in gold.

First, gold has minimal utility. Yes, some is used for jewelry and a bit for dentistry and electronics, but essentially gold is useless. At one time, its value was based on the same faith that supports the dollar bill. Today, its value is based on less faith than that, because the dollar at least, is supported by the U.S. government’s full faith and credit. Gold is backed by nothing.

Second, the Great Depression occurred while we were on a 100% gold standard. Some have argued that was one cause of the Depression. In any event, gold did not prevent that Depression, nor did it prevent any of the prior depressions.

Third, the current recession is being cured by the government’s unlimited ability to pump money into the economy, something that would be impossible if we were on a gold standard or on any other standard based on a physical product or “basket of products” as has been suggested.

Fourth, the U.S. government can control both the supply of, and the demand (interest rates) for, the dollar. That control over supply and demand gives the U.S. complete control over the value of the dollar. The U.S. would have little to no control over the value of gold, a serious problem when trying to control our economy.

In short, gold is one of those commodities, the value of which is based solely on faith. Just as there have been real estate bubbles, stock market bubbles, oil bubbles, tulip bulb bubbles, sugar bubbles, coffee bubbles and diamond bubbles, there have been gold bubbles, the biggest coming in 1980 and perhaps again, today.

Gold Price Chart 75-09
                        Is this the picture of another gold bubble?

The fact that people traditionally have coveted gold is irrelevant to today’s world economy. It also is irrelevant to the future safety of gold, which could disappear with the discovery of, for instance, a massive undersea or antarctic gold vein.

Because gold is supported by no nation, it is less safe than the dollar. Worse yet, it is expensive to own. While saving a dollar will earn you interest, saving gold will cost you for storage, insurance and shipping. In essence it is a wasting asset, the value of which is based on the “greater fool” theory (“A fool buys it because he expects to sell it to a greater fool.”).

We finally went off the gold standard in 1971 for a good reason: A growing economy requires a growing supply of money, and basing money on gold prevents that money growth. Had we stayed on the gold standard, the U.S. today would be bankrupt – unable to pay its bills.

Those who yearn for the good, old, gold standard days, should be careful what they wish for.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

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