Modern Monetary Theory (MMT) and Monetary Sovereignty (MS) are united by the understanding that a Monetarily Sovereign government cannot unintentionally run short of its own sovereign currency.
Thus, the U.S. federal government, unlike state and local governments, which are monetarily non-sovereign, neither needs nor uses tax dollars to fund its spending.
Federal taxes may find purpose in helping to direct the economy by making some products and services more or less attractive, but federal taxes do not provide spending funds.
Even if federal tax collections were $0, the federal government could continue spending forever.
Further, being sovereign over the U.S. dollar, the federal government has the unlimited ability to set the value of the dollar i.e. control inflation.
Yet a leader of MMT, Professor Randall Wray has written: “Taxes or other obligations (fees, fines, tribute, tithes) drive the currency.”
This forces one to ask, “Specifically, what does ‘drive’ mean?” Does it mean:
1. When taxes are reduced, the value of money falls?
2. If taxes were zero, the value of money would be zero?
3. Do cryptocurrencies, which are not supported by taxes, have no value?
The answers: No, no, and no.
Professor Wray also claims, “the Jobs Guarantee (JG) is a critical component of MMT. It anchors the currency and ensures that achieving full employment will enhance both price and financial stability.”
Specifically, what does “anchors” mean?
1. Since JG does not currently exist, is the U.S. dollar “unanchored”?
2. Does providing college graduates with low-intelligence, ditch-digging jobs enhance price and financial stability?
3. Is forcing people to work morally and economically superior to giving them money and benefits?
Again, no, no, and no.
We often have criticized the JG here, here, here, and elsewhere. JG is an impractical, obsolete concept, more suited to the Industrial Age than to the current and future Artificial Intelligence (AI) age.
Reader John Doyle wrote, “Professor “Bill Mitchell (no relation) goes to considerable lengths to diss most ideas of what passes for a Jobs Guarantee. I feel one should take careful note of his views:” http://bilbo.economicoutlook.net/blog/?p=40464#more-40464
The essence of Bill Mitchell’s article can be found in this line:
“The MMT Job Guarantee . . . is a buffer stock mechanism which unconditionally hires at a fixed priced in order to redistribute labour resources from an inflating sector to a fixed price sector or from a zero bid state to a fixed price state.“
Translation: JG sets salaries at a single, low level, where raises are not allowed, but provides jobs at those levels where none are available.
Is this what our nation needs?
According to Randall Wray, the essence of MMT is JG, and according to Bill Mitchell, the JG is a buffer stock (of human labor) mechanism to control inflation.
Thus Modern Monetary Theory adherents believe the central economics problems addressed by MMT primarily involve employment and unemployment.
Supposedly, the Jobs Guarantee (JG) and a “buffer stock” control over inflation are the key solutions to what ails an economy.
By contrast, Monetary Sovereignty (MS) suggests that providing a job to each person who wants money already is an outmoded view, as robotics augmented with Artificial Intelligence (AI) increasingly demonstrates every day.
The notion that humans must labor in order to receive the fruits of an economic system reflects a combination of biblical work ethic applied to increasingly obsolete manufacturing methods.
On the horizon lurks the day when very few people will be “employed,” as we now understand the term. Machines will do the vast majority of the work, and people will reap the benefits, without human labor.
Why focus on work when we should focus on benefits?
In short, employment is not what people crave. Rather, they crave money, or more specifically people crave what money can buy.
The central economics problem addressed by MS, is the widening income/wealth/power Gaps between the richer and the poorer, and it is the Ten Steps to Prosperity (below), not JG, that addresses those gaps.
(There’s an old line that goes something like this: “Not many people die whispering, ‘I wish I had spent more of my life in the office.'”).
JG doesn’t address fundamental human desires. It ignores them.
Here is Wray’s summary of his JG version:
1. The JG should pay a living wage with good benefits.
In line with other progressive proposals, the JG wage should establish a national minimum wage at $15 per hour, with free Medicare-style healthcare. It should also provide free childcare to enable parents to participate in the program.
A “living wage” is not, and never can be, “a national minimum wage” of any specific amount. A “living wage” (whatever that term may mean) in Manhattan or San Francisco is considerably different from a living wage in a Mississippi town.
Further, while adding Medicare and childcare makes JG more palatable, they are not intrinsic parts of JG. They are parts of the Ten Steps to Prosperity.
What about free education, and why not offer “Medicare-style” benefits to those not participating in JG? Is there a moral objection?
2. Congress will appropriate the necessary funds to pay program expenses. No additional taxes will be levied.
Correct: Federal taxes do not fund federal spending. No federal program ever requires taxation.
3. The JG should be universal in the sense that it serves every community, offering jobs where people live and providing real benefits to their communities.
Here is where the academic ignorance of reality comes to play.
Exactly how will the government be able to “offer jobs where people live”? How will JG offer jobs in every city, every town, every village and every hamlet in every state in the U.S.?
I may have missed it, but I have not seen an MMT description of the department structure and mechanism by which the U.S. government can accomplish this task.
It’s a pie-in-the-sky wish, not a plan.
4. The JG should not devolve to either workfare or welfare. The social safety net should not be dismantled; no existing social services should be eliminated.
Individuals should be able to continue to receive existing benefits if they do not want to work in the JG program.
But workfare is exactly what JG is. You must work at a minimum-wage job, to get money and many social benefits are contingent on employment and income.
All those laws would need to be changed, somehow.
At the same time, the JG should not provide income support to those that do not work in the program. The JG should be seen as an employment program in which workers are paid for work.
The program should have visible benefits to communities so that the workers in the program are recognized as making positive contributions in return for their wages. The program’s purpose is to provide paid work, not welfare.
Do communities really feel that minimum-wage workers — street sweepers, fast food workers, Walmart greeters — must make “positive contributions”?
Workers can be fired for cause—with grievance procedures established to protect their rights, and with conditions on rehiring into the program
Visualize millions of minimum-wage workers spread all over the 50 states, each working in different jobs. Who will supervise each of them? What are their rights and who will protect their rights? What are the conditions for firing and rehiring them, and who will do the rehiring?
It’s all very nebulous, as though these human “details” don’t really matter.
5. However, there should be room in the JG for time-limited training and education.
While on-the-job training should be a part of every project, proposals can be solicited for specific training and basic education programs that will prepare workers for jobs in the JG — and, eventually, for work outside the JG. It is important that these are time-limited and that the training is for jobs that actually exist.
Who will do the training?
Who will train and supervise the trainers?
Who will create and conduct the basic education programs?
Why “time-limited” and what is the time?
And this is the big one, visualize trying to figure out which jobs “actually exist” and are wanted by each trainee in America.
6. Project implementation and management will be decentralized. There should be diversity in the types of employments and employers —- to help ensure there are projects that appeal to workers and their communities.
Projects should go through several layers of approval before implementation (local, state or regional, federal) and be evaluated at these levels once in progress.
Decentralization helps to protect the program from whatever political winds emanate from the du jour occupant of the White House.
The above is so ridiculous it was difficult to keep from laughing as I read it. Think about bureaucrats making sure there is:
–Diversity of types of employments
–Diversity of types of employers
–Several layers of approval (local, state, regional, federal)
Surely, this cannot be serious. It describes the largest bureaucracy in American history. It would dwarf the military. In of itself, it would eliminate unemployment in America.
7. Where possible, proposals should scale-up existing projects with proven track records and with adequate administrative capacity to add JG workers. Federal spending should not subsidize administrative expenses.
Scale up existing projects? That’s like growing companies. Who in the U.S. bureaucracy would do that?
How would these government funded businesses not compete with the private sector that is not blessed with federal funding?
And if administration is not federally funded, who would do the administering?
8. The JG should not be used to subsidize the wages of workers employed by for-profit firms. This distorts markets and is not likely to generate substantial new employment.
Private business is already heavily subsidized by all levels of government. The JG should not be used as yet another corporate welfare program.
However, private firms will benefit indirectly (and greatly) from the program as it provides a pool of hirable labor and as it contributes to economic growth that improves markets for firms.
Are the workers employed by the government or by private industry. If by the government, that competes with private industry.
If employed by a private industry, that subsidizes the wages of that industry.
The notion that private industry is “heavily subsidized” by the government, is mysterious. Does being “subsidized” mean being a vendor? I wouldn’t call that a subsidy.
Or does being subsidized mean receiving tax credits, i.e. being penalized less, which also is not a subsidy.
9. Direct employment by the federal government for the JG should not dominate the program. Most employment should be administered at the local level -— where the workers are, in the communities where they will work.
So, it’s partly government workers and partly private workers. So who will hire for the government and in what departments?
And who will be the employment agency for private jobs?
Who will “administer” employment at the local level, in the thousands of communities across this vast nation?
The JG program will probably need to create 15 million new jobs—six times greater than the number of federal employees today.
The federal government is going to supervise 15 million new jobs all over America?? Who is qualified to do that? How will they do it?
If all 15 million were to join the federal workforce, supervision of all these new workers would, alone, require hiring a large number of additional federal employees. This would be politically difficult even if the massive scaling-up of the federal workforce were administratively possible.
“Politically difficult” is the understatement of the year. It would be functionally a disaster.
The federal government’s role in the direct provision of jobs should be focused on providing projects to underserved communities and workers—after not-for-profits and state and local governments have employed as many as they can.
“Underserved communities” are communities with few jobs. But Professor Wray wants the government to find most of the nonexistent jobs in the private sector.
10.Inclusivity and experimentation should be encouraged. The federal government should solicit proposals for novel approaches to job creation. For example, workers’ co-ops could be formed to propose projects in which wages, benefits, and limited materials costs would be covered by the federal government for a specified time period.
I have no idea what this means, and I suspect Professor Wray is similarly at sea.
11.Consistent with point 10, project proposals put forth should not be summarily dismissed simply due to political bias.
You’ll have to go to the original proposal to figure this one out. I can’t.
12. With decentralization, the types of projects permitted would take account of local laws and rules, including prevailing wage laws and union wage rates. With the JG paying $15 per hour, this means that in many states and localities, rules and laws will prohibit various types of work, including construction. In those areas, JG workers will not build infrastructure, for example.
As if the job weren’t complicated enough, the federal bureaucrats would have to keep track of, and follow, “local laws and rules.” That should prove interesting.
13.Exceptions to the uniform wage should be considered, but this should not become the norm. For example, state or local governments might want to subsidize (at their own costs) the federally paid wage of $15 per hour in order to increase wages to some higher level. This might be because of high living costs locally. Or some JG employers might want to offer additional benefits (at their own cost) to workers, including housing allowances for high rent areas.
And of course, the federal bureaucrats would be expected to allow for these exceptions when offering federal jobs in each locality. What could possibly go wrong.
14. Limited pilot programs that experiment with different models deviating from what is described above might also be considered. For example, a pilot program run by the federal government, with all participants hired as federal employees, might be tried before the JG is imple-mented on a national scale
According to the the 2012 US Census Bureau there were 90,000 local governments of all types in the United States, each with different sets of laws that an employer must consider.
Learning, keeping updated with, and following those myriad laws should be quite a challenge, something the JG folks have not even begun to consider.
Bottom line: JG is a program created by economists who are hoping that “some devil” will be able to figure out the details because these business-ignorant folks don’t bother with such trifles.
The sad part is the thousands of hours MMT people have devoted to the academic side of economics, without understanding business realities.
I personally have spent 50 years managing and owning businesses. The MMT professors, some of whom know me, could have asked for my thoughts before wasting all those years on naivete jobs and “buffer stock,” rather than on human needs.
I resent all those brilliant men and women, who are blind to the facts that jobs are not a human goal, and that no one wants to be buffer stock. These economists have focused on their charts, graphs, and mathematics, and have overlooked the personal element of their science.
The human problem is not jobs; the problem is the income/wealth/power gap between the rich and the rest. Not only does JG not solve the gap problem, but it exacerbates the gap by enticing people and families into a minimum-pay existence.
I have only two good things to say about JG:
- It would be expensive, requiring the federal government to pump many billions of stimulus dollars into the economy.
- It wouldn’t cost taxpayers one cent, because no federal spending requires or uses tax dollars.
Otherwise, the Ten Steps to Prosperity (below) is a far better, and easier-to-implement program, than JG, and it would narrow that damn Gap.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
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
3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)
The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.