Employment for All: A Debate

Alex of Christian Economics is a thoughtful guy who adheres to some economic theories (specifically the Modern Money Theory of economics) that I don’t hold with. Thus marking out one of my rare areas of agreement with Paul Krugman.

Alex and I were looking for topics to have a sort of slow-motion blog debate over, and there seems no better place to start than one of the bigger policy proposals which many MMT adherents support: having the government become an Employer of Last Resort. Alex has a substantive post up to day making the case for an employer of last resort program from a Catholic and economic point of view. I’ll be writing and posting reply-post in the next couple days.

40 Responses to Employment for All: A Debate

  • I’ve suggested something similar in the past. Blackadder responded that it might be cheaper to hand out money without the make-work. Also, to better comport with CST, the wages would have to depend on household size and that might destroy the economic benefits of the plan than Alex talks about.

  • “It is better to light one candle than to curse the darkness.”

    Do your part.

    In 2012 vote for anybody but job-destroyer Obama and dem/progressive/tree-hugger economy destroyers.

  • One of many, many problems with the government as an employer of last resort is that the government creates no wealth. It merely is a parasite existing off of the efforts of the private sector. When government expenditures get too far out of whack in regard to the ability of the private sector to create wealth, the ill effects on the host of the parasite are rapidly apparent. A great lab experiment of this taken to the furthest extreme was the old Soviet Union where the parasite killed and attempted to supplant the host. The Soviet currency was worthless paper outside of the Soviet Union and the workers of the Soviet Union, and everyone else luckless enough to live there, except the nomenklatura of the party, enjoyed, probably not the proper term, a gray Spartan existence. The life was summed up by a proverb among Soviet workers: “They pretend to pay us and we pretend to work.” After so many disasters along these lines, I wonder when we will be free of the superstition that government has any wealth of its own for anything, other than what can be squeezed from the private sector?

  • RR — I’m not sure how it would be cheaper to just give the unemployed money, unless you gave them less than a minimum wage. Also, determining a just living wage is extraordinarily difficult. One has to take into consideration size of household, geographical location, particular needs of the family (such as a child having a disability that requires more care than say another family’s children), etc. It also requires prudence and temperance on the part of the wage-earner to use his/her wages justly. In regards to the program, I recommend a flat wage to all in the program, with any extra need covered by other welfare programs.

    T. Shaw — I’m not sure how that adds to the discussion.

    Donald — You clearly are no fan of government, and that is your prerogative, but I disagree that the government is simply a parasite taking from the private sector. The government’s initiatives often create more wealth in the private sector than the private sector would create by itself. The government can certainly appropriate all (or most) private output to itself as the Soviets did, or it can appropriate some output toward socially desirable goals agreed on by a group of representatives elected by the people. Do I think that it does this perfectly? Certainly not…there is much corruption in Washington and Wall Street, but simply regarding government as a parasite is unhelpful and also doesn’t add to the discussion. If it is ALWAYS a parasite sucking from the private sector, then tell me how and why.

    The job guarantee program is meant to give the private sector more wealth, not take it away or create it for government.

  • “If it is ALWAYS a parasite sucking from the private sector, then tell me how and why.”

    The government has no funds for its initiatives other than what is taken from the private sector. The creation of money out of thin air only has value based on the creation of wealth in the private sector. Zimbabwe can print as many trillion dollar notes as it wishes and all it will have is a heap of paper. By definition government is a parasite on the private sector. The only exception I can think in regard to this is the sale or rental of assets owned by the government, such as federal land, but the income derived thereby is minimal.

    Have private industries made out like bandits due to government spending? Of couse. However, government is merely appropriating resources with one hand, and spending it in the private sector with another. Much better, if a productive economy is the goal, to simply lower taxes and allow more of the funds to be used in the private sector, rather than have the funds take a detour through the sticky fingers of government.

    Of course when the government attempts to own industries, a la nationalization, the result is invariably disastrous for the taxpayer, with inefficiency at high cost the result.

  • Milton Friedman said it well back in 1978:

  • Alex, there would be significant bureaucratic costs that can be avoided by just cutting checks without the work requirement.

  • Somebody’s lamenting the lack of Dickensian prisons and workhouses?

  • RR: Where will Obama get the money? If you envision the government is the economy . . .

    Alex,

    Repeat after me. Supply and demand; uncertainty and volatility; action and reaction; rational individuals acting in their best interests.

    The Obama government is the problem.

    The consumer (70% of the economy) isn’t buying.

    The only bright stop exports is crash diving.

    Business isn’t hiring.

    Don’t listen to what the low lifes in the WH and senate say. Watch what they do.

    Uncertainty and volatility. Obama’s gangster Gulf drilling moratorium (one of hundreds of job killers) cost over 200,000 jobs. The EPA war on coal and electric generating utilities will soon reap its devastating effects. Business doesn’t know how much obamacare will cost and it won’t hire. Dodd-Frank and the Consumer Financial Protection Bureau will impair consumer credit supplies and raise costs.

    They are destroying the economy to save Gaia from SUV exhaust and 86 trillion bovine farts. SWAT teams attack farmers to ensure they don’t sell whole milk. The banks are starting tens of thousands more lay-offs. The robo-signing witch hunt du jour will lessen availability of residential credit and raise costs. Moronic loan modification programs and four years (12 years in the worst SMSA’s) of excess housing supply will keep housing in depression for years. Construction jobs don’t exist. Obamacare will cost millions of jobs. I could go on for about 200 pages.

    Obama and the senate are sworn enemies of the private sector and they are killing it.

  • Alex has taken the time to write a fairly in-depth post explaining his views — I want to strongly encourage people to read that an respond to it rather than responding to my couple sentence summary. (If you’d rather respond to what I write, hold off and respond when I get my response post written.)

  • I question the spiritual benefits of having a job with no accountability, which is exactly what is being proposed. If no one can be fired from these jobs then no one has to do anything for their money. If the “living wage” being offered was not that much lower than what I’m making now as a small business owner (and it probably isn’t), I’d quit. I’m especially slothful, and this would work out great. I could stay home with the kids as an “artist,” and we’d make macaroni art all day while pulling in a paycheck. If we made some lifestyle cutbacks, Mr. Zummo could stay home and be an artist too. We could become complete dependent children receiving our government allowance. For many the fear of want is the only thing that keeps them from being total lazy slobs. I suppose there are a few filled with graces who are productive without any accountability, but I certainly am not.

  • “In nations where the gov’t doesn’t fix their currency to a commodity or another currency, that is, in nations with a sovereign fiat currency, there is no constraint to government spending. The issuer of the currency defines the currency and cannot go bankrupt or default on its obligations.

    So going bankrupt or spending more than it “brings in” is not a reason we can’t have full employment. I also argue that there is nothing inherently wrong with deficits. I argue that they don’t crowd out private spending by raising interest rates (the central bank controls interest rates), they do not burden future generations, and they do not lead to financial ruin or a weak currency.”

    Could you present your arguments for this. I ask because it seems part of the concern both here and in Europe is default on govt. debt.

  • “I suppose there are a few filled with graces who are productive without any accountability, but I certainly am not.”

    No, no! I’d be happy to slave twelve hours a day in the law mines whether I needed the money or not. I’d do it simply for the privilege of seeing justice done and enjoying the warm camraderie of my fellow shar–attorneys. Nothing makes me more joyous than seeing a desk clogged with paperwork, 12 phone calls to return and 3 clients waiting to see me! :)

    (Exit Don stage left pursued by men carrying a white garment and wielding a large net.)

  • Donald,

    It’s not really fair to say that government is a parasite. There’s a whole swath of economic literature devoted to explaining the provision of public goods, and why these goods would be underprovided by the private sector. Only the staunchest libertarians would argue against this theory on the grounds that there is no “social optimum” or common good — but we’re Catholics, and we don’t buy that premise. We’re not on board with the idea that social goods are incommensurable.

    When you say that government is merely appropriating funds on one hand and spending them on the other, you’re basically describing all economic exchange. One entity provides income/revenue to another entity in exchage for some good or service. The only way I can think that gov’t transactions differ from private exchange is that taxation is distortionary to prices and introduces deadweight loss — certainly a concern, but hardly enough to call all government transactions parasitic.

    Perhaps part of your concern is that the goods and services provided by gov’t are somewhat amorphous at times and fraught with waste and inefficiency — what kind of service, exactly, is “regulatory compliance,” anyway? And am I getting my money’s worth for it? But that is a different color argument, whether we like what we get in return for our taxes. As a conservative myself, I think that’s a very good argument to have, but it’s not the same as saying that government is a parasite.

  • Back on the topic of MMT (by way of the employer of last resort issue), perhaps Alex can explain why seigniorage is not inflationary in his view? There are basically three ways government can raise revenues: taxes, debt, or printing money. The first two don’t seem to add to the money supply (unless investors acquire government debt through their own borrowed funds created by banks? And my knowledge of the Fed here is also lacking — doesn’t it create reserves to buy back government debt?), but printing money clearly does.

  • “It’s not really fair to say that government is a parasite.”

    It is far more than fair, it is accurate. Government produces no wealth of its own but lives off the wealth that it confiscates by law from others. I did not argue that nothing done by government is useful. Just as there are useful parasites in nature, government, when kept at a minimal level, provides useful functions, most notably defense, law enforcement and a legal system for resolving civil and criminal disputes. When government, like parasites in nature, grows too large, and I think clearly government is far too large today in the US and all other Western countries, it can harm the health of the host and even kill it.

  • Government produces no wealth of its own but lives off the wealth that it confiscates by law from others.

    I think the question here hinges on what one means by “producing wealth”.

    I think I’d be basically ready to get behind a definition along the lines of, “You produce wealth when you produce some good or provide some service which others are willing to assign value to — the amount of wealth you produce being equivalent to the value which is assigned to it.”

    In this sense, I think one would have to say that government does produce some wealth, in that it provides some goods and services (road building, policing, defense, etc.) that people would willingly pay for if it were not being provided to them already.

    Now, since the government is funded through non-voluntary payments, I’d argue the prices are set poorly — it may not have the right incentives in place to do only the amount of road building that people actually want, and to deliver it at the prices that people would consider worth paying if there were an actual price mechanism in place. But in that many of the services government usually provides would exist (though in some other form) as private, paid services if government were not providing them, I think we’d have to say it produces some value.

    (Of course, in your analogy, so does a beneficial parasite, so that doesn’t necessarily rebut the parasite analogy.)

  • What’s your definition of wealth? If you mean that the government doesn’t own factories that manufacture and sell products, then you’re right – it doesn’t do this (thank goodness!). But the “wealth” of the nation is measured by other real goods and services, and I would argue that the government – by marshalling the resources to produce public goods that the private sector will not provide or will provide insufficiently — does add to that wealth. Often these goods are not easily marketable, which is why we have gov’t provide them in the first place. Milton Friedman and others have suggested innovative ways to get the government out of all kinds of businesses, but the fact remains that the government still *is* in the business of providing many things, whether we like it or not.

    The goods you mention – national defense, law enforcement, and a legal system – are the typical ones that even a libertarian would agree to, but the question one should ask is, What are the attributes of those goods that make them prime targets for public rather than private provision? And the next question is, Aren’t some of those attributes inherent in other goods and services currently provided by the government?

  • An easy way to look at it Darwin is simply to ask most people to compute all of the taxes they pay each year: income tax, social security tax, medicare tax, property tax, local taxes. sales tax, taxes on utility bills, use taxes, government “fees”, etc . Then ask them if this were a voluntary transaction would they pay this amount for the services they receive. I suspect that in most cases the response would range the gamut from “No!” to “Hell No!”. The essential functions of government, Defense, Law Enforcement and the Legal System, involve only a fraction of current governmental expenditures. I am no libertarian that believes that we can dispense with government entirely, but for far too long we have lived at the other end of the exteme in regard to the role of the economy, and we have the bankrupt governments to show for it. In regard to wealth, every cent that the government uses to perform its functions, other than the rental or sale of property own by the government, comes from the private sector either directly through taxes, or indirectly, to give value to money conjured out of thin air. I think that is clearly a parasitical relationship between government and the private sector. The task for us all is to keep the host healthy and the parasite overall beneficial to the host, and I don’t think we can make either statement today.

  • Then ask them if this were a voluntary transaction would they pay this amount for the services they receive. I suspect that in most cases the response would range the gamut from “No!” to “Hell No!”

    Of course! This is how private incentives diverge from socially optimal outcomes, and it’s the reason we have gov’t tax and provide goods in the first place. I suspect the baskets passed around the pews don’t do justice to the Church, either.

    There are a couple problems with trying to make some connection between private preferences and the “price” of government services: (1) The value you receive from some government services is by design not equal to what you pay. I’m not a fan of major wealth redistribution, but there has to be some recognition of the fact that, in our history, we have chosen to use government as one way of providing a social safety net. (2) You probably don’t “see” a lot of the things the government provides to you as a citizen. You might only hear about them when they fail to do their job. There are, for example, all kinds of services in the areas of project and risk management that are basically invisible to most taxpayers, yet those services are part and parcel of delivering complex public goods like defense, law enforcement, etc.

  • Government creates wealth. It runs a mail delivery business, transportation businesses (trains and buses), health insurance businesses, annuity business, investment insurance business (AIG), and car manufacture business (GM). You can argue that it shouldn’t do those things and I would agree in most cases but “government doesn’t create wealth” is a meaningless cliche. “The government isn’t good at creating wealth” is closer to the truth.

    Government should do those things which would get done absent transaction costs but don’t. IOW, it produces a more efficient outcome than not doing it but it won’t get done by the private sector solely because of significant transaction costs most likely due to the non-excludable nature of the goods or services. This would include national defense, law enforcement, and roads.

    But that’s all irrelevant since we’re talking about welfare which is inherently inefficient but necessary.

  • Thank you for your comments! I have been very busy, but tomorrow I will have some time to respond.

  • Victor Davis Hanson, “Zero jobs last month — a net change of zero job growth?
    It was just announced that last month’s unemployment is still above 9% — despite the nearly five trillion dollars in Keynesian pump-priming, the near zero interest rates, the expanded unemployment and food stamp support, and the government takeovers and subsidies of businesses. There is a scary sort of deer-in-the-headlights look about Obama and Biden that is quite disturbing. . . . In the last 30 months, the Obama administration has created a psychological landscape that finally just seemed, whether fairly or not, too hostile to most employers to risk new hiring and buying. Each act, in and of itself, was irrelevant. Together they are proving catastrophic and doing the near impossible of turning a brief recovery into another recession. . . . Highly publicized visits to bankrupt subsidized green plants, blaming George Bush, new racially-driven invective from some congresspeople against the Tea Party, sermons about the sensitivities of illegal aliens, politically-correct tutorials about Islam — all that might rally the base or in isolation be understandable, but again fairly or not, such liberal rhetoric simply adds to the problem from yet another dimension: confirming perceptions that employers are about the last people in the world that this administration is worried about.”

    They are confiscating $25 billion (giving it to ACORN clones for campaign support) from mortgage servicers based on the robo-signing witch hunt.

    They are now suing big banks for making mortgages when the government policy was “everyone should own their home.”

    Obamacare costs – how much per worker?

    Dodd-Frank.

    The Consumer Finance Portection Bureau will stop banks from pounding on working class Americans and virtuously force them to their knees.

    The regime’s war against coal and electric generating utilities.

    Drilling bans and moratoria.
    [...]

    etc.

    Four more years of that and there could well be mass starvation and cannibalism.

  • Donald – I think I understand what you mean by parasite. I guess what I’m saying is that gov’t spending creates wealth in the private sector that the private sector wouldn’t create by itself. That is, by spending it employs people and capital to produce something that would otherwise be unemployed or unused in the private sector. Gov’t doesn’t really ‘crowd out’ the private sector until full employment.

    I don’t mind lowering taxes as a means to increase employment, but it won’t provide full employment without inflation. It will only move us toward a lower unemployment level without inducing accelerating inflation.

    I also disagree with Milton in many ways, but that is another matter.

    RR – I agree. My desire for employment over unemployment insurance is based on the Church’s teaching about the dignity of work. I recommend Laborem Exercens if you are unfamiliar with what I mean.

    Micha – I don’t understand the reference. I don’t support prisons or workhouses. That is not a part of this proposal.

    T. Shaw – I don’t appreciate your condescending argument. I don’t doubt the things Obama has done has eliminated some jobs. I also don’t doubt that what he has done has added some jobs. I am looking at big picture here and NOT at other policies. Neither Obama nor Bush are to blame for our economic woes.

    Mrs. Zummo – I agree, there needs to be accountability. My proposal is for there to be some accountability, that is, administrators of the program will need to be able to discipline or fire if necessary with conditions places on rehiring. There are no doubt going to be people who are looking to take advantage of the program just like people try to take advantage of other welfare programs and just like people try to take advantage of their situations in the private sector. It is our job as Christians to change their hearts and minds. I’m hoping that guaranteeing a job will help many individuals escape their circle of poverty and help them develop as a person.

    Phillip – I recommend reading elsewhere for more in depth arguments on why governments sovereign in their own currency cannot default on their debt. The basic idea is that a government who controls its own currency can’t default. If they go crazy spending without taxing, inflation will likely be problem but not insolvency. European Union members are not sovereign in their own currency, they gave up that ability by adopting the Euro. They are similar to State and local governments in the US. In both of these cases, the governments can default on their payments, because they do not issue their own currency. I recommend http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf, fraud #1.

    J. Christian – Those are good questions. Seignorage typically is inflationary. Gov’t spending isn’t constrained by tax revenue or bond sales. Deficit spending, all else equal, tends to be inflationary. Rising unemployment and underutilization of capital is deflationary. Taxes take away from the money supply. Bonds are used by the Fed for interest rate management. They drain reserves from the private sector, also decreasing the money supply. The transactions between the Fed and the Treasury are tricky accounting, I recommend going elsewhere for better explanations, as my knowledge here is also lacking.
    Maybe here: Stephanie Bell, “Do Taxes and Bonds Finance Government Spending?”, Journal of Economic Issues, Sept 2000

    So yes, ‘printing dollars’ tends to be inflationary, but in an economy of widespread unemployment and underutilization, it won’t be. So far deficits have managed to fight off deflation, but note that despite large deficits, bond interest rates are at an all-time low and inflation is very low. Japan has been a great example of the same thing.

    The ELR policy is designed to let deficits float so as to increase in a deflationary economic climate, and decrease in an inflationary economic climate. Fixing the price of low-skilled labor will help to stabilize prices as well (much like the gold standard…the major difference is that labor is a much more important ‘commodity’ than gold in our economy).

    DarwinCatholic – Part of what causes inflation is the government paying for goods and services at the “market price” from businesses that continue to raise prices because they know they’ll have a contract from the government and also because the government buys too much in some cases and too little in others. This contributes to inflation. Pegging an important price will help to stabilize this problem.

    I also think that gov’t spending allocates resources toward providing things that wouldn’t be provided by the private sector (or at least not enough of the good or service provided to enough of the people). If it were provided by the private sector at a price that allowed enough of the people to use it so that it was deemed ‘socially optimal’ than the gov’t would have no need of stepping in. I recognize that doesn’t stop them from stepping in, but I don’t think that much of what the gov’t provides through its spending would be deemed socially optimal if the private sector were the sole provider.

    Donald – The federal gov’t cannot go bankrupt, unless they voluntarily declare it.

    J. Christian – I agree completely.

    RR – I agree. This program isn’t meant to be welfare, however. It is meant to provide full employment and impart some price stability on the economy, which in addition to helping our overall economy has the added benefit (and perhaps more important benefit) of allowing individuals to develop as persons by providing for themselves and their families and growing in virtue.

    T. Shaw – I agree somewhat. A lot of what Obama has said and done has been unhelpful. I don’t think he or Bush are completely to blame for our economic woes, but Obama and Congress can do something. They can recognize that the federal government can’t go bankrupt, that inflation isn’t a problem in an economy of widespread underutilization, and can therefore increase deficits which add to private sector wealth which stimulates the economy and adds jobs. It does matter how those deficits are spent. They need to be given to the private sector to be spent and not saved. If people choose to draw down their private debt which seems rational, it won’t help the economy in the short run and therefore may actually hurt their long-run prospects via the paradox of thrift.

    This proposal will take some time to implement and would not be an immediate fix, but would be a long term help to our economy. For immediate help I recommend a payroll tax holiday for both employers and employees and a large amount of stimulus sent to the state governments to prevent cuts in police, fire, education, etc.

    It doesn’t seem like Keynesian prime pumping has worked because it really wasn’t big enough. Proof is the lack of recovery with simultaneously low inflation and historically low interest rates. If there were no recovery but inflation and interest rates were high, then Keynesian pump priming would be proven to be unsuccessful. EU nations can’t engage in Keynesian stimulus because they don’t issue their own currency.

    I appreciate all your comments. I would prefer that the debate be about the program and not about government in general. I think most can agree there is a role for government in our society, I’d like to debate about whether one of those roles should be as an employer of last resort. I am happy to debate it among so many Catholics and Christians who will not only argue from economic reasoning but who also care about the Church’s social teaching and see a higher purpose for government and economy than simple want/need satisfying.

  • Alex,

    I’m not sure the article you linked is persuasive. Sorry, I’m still not persuaded that your premise that allows unlimited debt is valid.

  • Fair enough, but please don’t misunderstand me. I am not saying that unlimited debt is good, I am simply saying that governments sovereign in their own currency cannot go insolvent. Inflation would certainly be an issue if spending far outpaced receipts. I am saying that we haven’t reached that point yet and that we aren’t anywhere close.

    Perhaps the Modern Money Primer at New Economic Perspectives will help.

  • If government creates no wealth whatsoever, then that paycheck I get twice a month must just be a figment of my deranged imagination, as is all that money I pay for rent, utilities, gas, food, clothing, etc. Funny, but neither my landlord nor any of the merchants and vendors I patronize has ever complained about the fact that I have been propping them up with their recycled tax dollars all these years :-)

    Seriously, though, instead of claiming that government creates NO wealth or that it is a mere parasite it might be more accurate to say that its ability to create wealth is LIMITED in comparison to that of the private sector.

    Obviously government employees get paid real money (at least for the moment!), support real live families and households, and buy real homes, cars, and other stuff so they have some positive effect on the economy. The question is whether or not the economic benefit their spending generates outweighs the economic “drag” of the taxes required to support their jobs. That answer will vary depending on what kind of jobs are involved, the level of additional taxation or debt required (if any), etc.

  • Confiscation of the wealth produced by others Elaine is not wealth creation and that is how the State pays its bills. (I mean no disrespect to public sector employees, especially since I am not infrequently appointed by courts to represent indigigent individuals and I am then paid by county funds. The system is broken and those who work for the government are just as much victims of it as those who are not.) In Illinois I think the current government of our state is doing its best to vividly demonstrate how government can kill the private sector.

    http://blogs.wttw.com/moreonthestory/2011/05/09/illinois-gets-bad-grade-for-business/

    I thank New York and California from keeping Illinois from being completely at the bottom.

    This is a completely government created disaster. Illinois is a wealthy state, but the feckless policies of our state government have landed us in de facto bankruptcy.

  • Pacem, Alex and Mac,

    Whew!

    “Opinion is not truth.” Plato. “Theory is not reality.” Me.

    Alex, I apologize. I thought you made up that nutty stuff about “modern money theory” (MMT). Google tells me it was dreamt up in the 1920’s.

    I say if it was ever implemented the economy would fall apart by the first sunset. Some blasted fact that we have been working with since the day of creation would rear up and knock it over.

    Anyhow, Krugman’s embarce of MMT may explain why he is a raving lunatic.

    MMT and “income redistribution”: they ought to shut down the entire economist profession.

    “MMT aims to describe and analyze modern economies in which the national currency is fiat money, established and created exclusively by the government. In MMT, money enters circulation through government spending; Taxation is employed to establish the fiat money as currency, giving it value by creating demand for it in the form of a private tax obligation that can only be met using the government’s currency.[2][3] An ongoing tax obligation, in concert with private confidence and acceptance of the currency, maintains its value. Because the government can issue its own currency at will, MMT maintains that the level of taxation relative to government spending (the government’s deficit spending or budget surplus) is in reality a policy tool that regulates inflation and unemployment, and not a means of funding the government’s activities per se.”

    MMT is the statist’s equivalent of winning the Lottery. It works really horridly in Zimbabwe. We better not let them try it here.

    Reality: Even with Federal Reserve Notes, “confidence and acceptance” in the “full faith and credit” are waning as evidenced by gold is now worth over $1,900 worthless Federal Reserve Notes an ounce. And, 20% of t we the people can’t find work.

    Bastiat:

    “When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”

    “Taxes must, in the end, fall upon the consumer”

    “The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.”

    “Government is not reason; it is not eloquence; it is force; like fire, it is a dangerous servant and a fearful master.” George Washington, Farewell Address

  • So the USPS “confiscates” wealth while UPS, what, merely requests it? When I get on a NYC bus my money is stolen but when I get on Greyhound it’s voluntarily handed over?

  • Alex, I mentioned the dignity of work when I proposed a similar program on this blog before. Some responded that there isn’t much dignity in picking up trash.

  • “So the USPS “confiscates” wealth while UPS, what, merely requests it? When I get on a NYC bus my money is stolen but when I get on Greyhound it’s voluntarily handed over?”

    The USPS is a government monopoly RR that is going broke. I can think of no better symbol for the parasite state’s futile efforts to foster a pretend “independent” business than the USPS.

  • RR — I’d love to read your proposal. Do you have a link?

    I think there can be dignity in picking up trash. It doesn’t seem like very pleasant work, but it does clean up our environment. I’d say it depends on how the worker was treated on whether or not he/she received dignity from such work. Do we as a society treat them as trash because they pick up trash, or do we thank them for doing work that seems quite undesirable to us?

    I think the degradation of work comes from people more often than it comes from the actual work being done.

  • T. Shaw — No, I didn’t make it up, but I don’t think it’s nutty either. You misunderstand it, and it sounds as if you do it almost deliberately.

    MMT is a description of money from a balance sheet accounting perspective, not a way to use gov’t finance. Zimbabwe didn’t “use” MMT, but the way they spent and taxed can be explained by MMT and their hyperinflation easily predicted by MMT. Understanding MMT doesn’t automatically lead to Zimbabwe. In fact, understanding it would lead to greater price stability and economic prosperity because you would understand that deficits DO matter, that is, the level of spending and the level of taxation DOES matter for determining the value of the currency. Zimbabwe had very little tax enforcement, as did the Confederacy. Their inability to enforce tax payments coupled with their spending levels led to their hyperinflations.

    Krugman doesn’t embrace MMT. I don’t know where you get that from, he’s clearly rejected several times now.

    Flight to gold often happens in recessions because people think its ‘safe’. Flight to US Bonds has also happened. Do you think that would happen if we were heading toward Zimbabwe?

    So we don’t “implement” or “use” MMT. MMT describes what is already happening. If you take it seriously then you would see that we need higher deficits right now, not a balanced budget. This isn’t a pro-big gov’t stance, it’s reality. The gov’t defines our currency, our money. We can vote and demand from our representatives what we want gov’t to do in our society. We can have a smaller gov’t or a larger gov’t and still be described accurately by MMT. If you want a smaller gov’t, great! But don’t expect things to turn around if you want to get there by balancing the budget.

  • Alex, my idea was basically identical to yours without the economic arguments. I accounted for household size but I think your idea to have a flat wage and take care of household size independently is probably a better idea.

    Sure, picking up trash SHOULD be dignified work, but society doesn’t view it as such. Given reality, can it still be said to be dignified?

  • Alex,

    “Zimbabwe had very little tax enforcement, as did the Confederacy.” Does that mean when Jeff Davis and President for Life Mugabe ordered the mints to print C$15 billion and Z$86 quadrillion, respectively, they forgot to order the CIRS and ZIRS to collect suffucient proportional taxes of the C$15 billion and Z$86 quadrillion to make MMT function efficiently in the CSA or Zimbabwe?

    Try these quotes.

    Head of Deutsche Bank, “It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels.” PS: US banks had a similar poblem with LDC debt in the early 1980’s. “There is nothing new under the Sun. ‘

    ZeroHedge:
    The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the first year. That cost would then probably amount to EUR3,000 to EUR4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.

    Walter Russell Mead: “An economic crisis is nature’s revenge on those who make and those who accept false promises; it is a holocaust of lies when the dross is burned away and only what is real and true remains. Think of cotton candy melting and charring in the flame of a blowtorch; that is what is happening to the secure retirements that ‘caring’ blue politicians and ‘committed’ blue union leaders promised gullible (Rhode Island) state workers.”

  • T. Shaw — I don’t know what the leaders of Zimbabwe thought would happen, but I am saying that those who understand MMT would have known that printing and spending so much gov’t currency would lead to inflation if it wasn’t backed by a sufficient tax increase.

    Quotes from famous people aren’t good arguments in and of themselves.

    European Union members who adopted the Euro gave up their ability to issue their own currency thereby making it possible to default in the Euro–they may actually “run out” of Euros. Note that the UK and Switzerland don’t have this scare because they kept their currency.

    I actually agree that economic crises are somehwat a result of making and accepting false promises, e.g., the enormous buildups of private debt that stimulate bubbles and financial crises. I don’t know enough about Rhode Island politics to say whether the promise made was good or bad or held up, but that is beside the point (note that U.S. states are like EU members in that they use another institution’s currency and don’t issue their own). What does it have to do with this debate?

    Your knowledge of quotes is fairly extensive, I am impressed. Try reading and learning more about money and the history of money and you will see that what I’m saying is not madness, but is, in fact, quite likely very true.

  • RR — I guess I have hope that it can. Whether it is or ever will be dignified, I do not know. Maybe if more of us spread the word that such work can be dignified our society will see it a different way. Our society once thought slavery was necessary and morally acceptable.

  • Alex,

    I misspent the past 34 years working in the banking system. In that time, I’ve seen good times and bad. I dealt with (hands on) the financial and credit solutions to the “lesser developed countries” debt crisis; the Ag and energy crises of the early 1980’s; the S&L crisis (the FHLBB magnified that massive national loss/fustercluck about 2000%); the 1990’s Com’l RE crises; and in 2005 I saw coming this housing bubble/bust.

    You have a question, I will answer it.

    You do understand this unnecessary hell/housing bubble burst in 2007. It’s 2011 and the idiots that run the Fed and Congress are nowhere near achieving a housing recovery after four years. My associates and I saw it coming. No one listened. They were making too much money, BUT no wealth was created. Plus, the ratio of housing prices to disposal income (in the USAF they called that trajectory “going ballistic”) was a (800 lb gorilla in the room) clue that no one wanted to see.

    I know who invented the gold standard, and why it was required.

    I know how money is created: I do not mean printed ala Monopoly Money. Plus, there is, believe it or not a velocity of, or turnover of, money that can be accelerated or decelerated.

    Economic growth and development are principally/simply based on fostering physical resources, (educated, trained, virtuous) labor and capital/entrepreneurship. This regime is at war with (what it views as) the evil, unjust private sector. This country, and especially its so-called leaders, suffer from surpluses of vice and deficits of virtue.

    PS: Believe it or not, I have a BA in economics.

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