April 21 Federal Job Guarantee & Modern Money Theory

 This is the handout notes for a presentation made  by the Modern Money Policy group in Salem, MA  April 21, 2018

Presentation Overview

  • We will be introducing two economic concepts:
    • A Federal Job Guarantee (FJG)
    • Modern Money Theory (MMT)
  • FJG:
    • The larger portion of the presentation.
    • What it is, how it works, and why it is necessary.
  • MMT:
    • Modern Money Theory describes the funding mechanism that makes the Federal Job Guarantee possible.
    • Understanding MMT is essential when advocating for and implementing progressive policies.
    • It provides the answer to the inevitable “How are you going to pay for it?” question.

Questions Will be Answered After the Presentation

 

 

!

 

Federal Job Guarantee

Voluntary – Nobody is Required to Apply

  • Anyone without a job can apply and get a job full time or part time.
  • Jobs will be real, productive jobs.
  • The program is federally financed, locally run.

All FJG Jobs Are Paid $15/Hour

  • Every job has full benefits
    • Healthcare
    • Family leave
    • Retirement savings
    • Vacation
    • Childcare
  • Examples of FJG jobs:
    • In abandoned or areas of high industrial pollution, jobs can be created to restore the natural environment.
    • Setup and run public gardens in urban food “deserts.”
    • Create, protect, and expand networks of public trails.
    • Create public art including performances.
    • Assist public schools to help teachers and lessen their work loads.

▪ This is just one example where people can use their existing skills to learn about other careers.

 

  • Jobs that are not part of the FJG:
    • Private sector employers, in general, cannot submit requests for FJG employees.
    • Public sector jobs being performed by competitively hired persons cannot be replaced by FJG employees.

▪ Some FJG jobs may prove themselves as critical and in that case the jobs will move into the job market.

  • Work that does not produce something of value to the local community.

The FJG Sets the Minimum Wage

  • Current proposals are to start at $15 / hour with 100% paid for benefits.
  • Creates a competitive market for labor.
  • Universal Basic Income (UBI) does not enhance labor’s market position or add to the commonwealth.
  • Employers must meet or beat the FJG package.

All Economies Are Cyclical—An FJG Can Prevent a Downturn from Becoming a Serious Recession

  • Once the mechanism is in place to provide jobs, the impact of jobs lost is minimized.
  • Benefits are preserved.
  • Can be used to acquire new skills or keep existing skills sharp.
  • Unemployed people are at a disadvantage when private sector jobs return.

▪ Private sector employers tend to want to hire people who are already employed in another job over someone who is unemployed.

Lessens the Negative Social Impact of Joblessness

  • Universal Basic Income (UBI) cannot, by definition, do this.
  • Individuals are less likely to commit crimes when jobs are readily available.
  • Suicide risks increase among the unemployed.
  • Social benefits of working.
  • Does not force unemployed to take a job – respects individual preferences.

The FJG Serves as an Auto Pilot to Control Inflation

  • The Fed has a mandate to maintain unemployment at the lowest level that does not generate inflation.
  • With an FJG, employment is always at its highest level.
  • By adjusting the FJG base wage periodically based on productivity and actual living costs, it will not generate inflation.
  • Each time the wage is adjusted up, a small short one-time jump in prices may occur. Inflation is a steady increase in prices.

Anyone Can Still Use All the Existing Supports that Currently Exist

  • Food stamps, unemployment compensation, housing, and heating assistance, for example.
  • Most of those on the FJG may not qualify for some supports, but depending on their personal circumstances they may.
  • It is expected that shortly after a FJG is fully implemented, expenditures on safety net programs at all levels of government will begin to lessen.
  • There are no income requirements to enter the FJG program, anyone can apply.

The FJG is Fully Funded by the Federal Government, but is Managed at the Local Level

  • Current unemployment centers can become a full service employment center.
  • When someone becomes unemployed, they go to their local employment center where they can select a FJG that suits their skills.

 

  • Local charities, government agencies and non-profits can all submit lists of jobs that the FJG can fill:
    • The lists are reviewed, and then sent for approval to make sure the jobs are meaningful and do not replace existing jobs.
    • Jobs will be local to the workers and will allow them to participate and help generate private sector jobs.
    • Studies have shown that for most people the paycheck is not the primary reason for seeking a job. The social aspects and feeling of self-worth are rated higher.
    • Providing jobs for anyone that wants one is the primary purpose of the FJG. There are multiple incidental societal advantages:

▪ Less crime

▪ Less drug addiction

▪ Less suicides

 

FJG Impact on the Federal Budget

  • As noted, one impact is that existing programs for assisting unemployed will continue but will see less usage. Those funds can be redirected to a FJG program.
  • State and local programs will also have less “customers,” freeing up funds for their needs.
  • Since FJG workers will protect a down economy from a major recession, private sector jobs will likely return quicker, reducing the spending on the FJG program.
  • The FJG must be fully federally funded. States do not have the capacity during downturns to increase funding, while the federal government is not restricted at any time from increasing funding as needed.

Modern Money Theory

MMT alters the purpose of a federal budget from restricting expenditures to making priorities.

It raises the ceiling of what can be done, allowing moral choices to drive the process and sends austerity to the dustbin of history

 

 

 

Modern Money Theory

Gold Standard

  • Use ended in the US in 1971; the rest of the world followed shortly thereafter.
  • US began issuing Fiat money.
  • The US is Monetarily sovereign.

Describing MMT – Modern Money Theory

  • MMT is a description of how fiscal policy operates without a Gold Standard.
  • It is NOT Modern – It is NOT a Theory.
  • Federal government is the issuer or creator of all US Currency whenever it spends.
  • Everyone else including all other levels of government, banks, people, businesses and foreign entities are users.
  • Provides a job guarantee to smooth economic swings.

Taxes

  • Primary purpose is to create value for the US dollar.
  • Other functions:
  • Discourages social negatives
  • Reduce Income inequality
  • Controls the $$ supply
  • Slows inflation

 

 

Constraints on Money Creation

  • Full Employment
  • Resources such as land, raw materials, energy, knowledge, and infrastructure are unable to meet demand.

MMT and Mainstream Economists

  • US cannot go broke:
  • Greenspan
  • Krugman
  • Stiglitz

MMT Heterodox Economists

  • Leading Advocates:
  • Stephanie Kelton
  • Warren Mosler
  • William Mitchell
  • William Black
  • D. Alt
  • James Galbraith
  • Randall Wray

MMT and the Progressive agenda

  • Why Progressives should embrace MMT:
  • Eliminates the “how do we pay for it” argument
  • MMT is agnostic when it comes to political philosophy
  • Provides a common economic platform and disrupts stale mainstream thought.

Future Plans for MMT Advocates

  • Ongoing meetings to introduce activists to MMT and related policy initiatives.
  • Modern Money Policy – discussion groups.

 Questions?

 

 

Contact Me:

  • Messenger on Facebook – Brad Sandler
  • DM on Twitter – Sandler_Brad
  • Email – sandler@comcast.net
  • Facebook Group – Modern Money Policy

 

 

 

 

 

Resources for More Information

http://neweconomicperspectives.org

The go to place for all matters MMT. Archive of articles and blogs by numerous MMT proponents.

https://www.youtube.com/watch?v=CLrOKbhEhdY A video detailing what MMT is NOT

https://www.youtube.com/watch?v=d57M6ATPZIE Stephanie Kelton’s Angry Birds Presentation

https://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

A free PDF version of Warren Mosler’s 7 Deadly Innocent Frauds of Economic Policy (When you open the link, you may need to scroll down to see the text.)

https://www.pavlina-tcherneva.net/job-guarantee

A collection of videos and writings by Paulina Tcherneva on the Federal Job Guarantee

https://modernmoneybasics.com/facts/

An overview topic by topic on all the major ideas associated with MMT

http://www.modern moneynetwork.org

Brings accurate and accessible knowledge of monetary and financial systems to the broader public.


 

elliswinningham.net

Always informative, Winningham uses simple language to make learning MMT easy.

Real Progressives Group on Facebook

Multiple FB groups touching on all facets of MMT at all levels of knowledge

https://www.facebook.com/groups/MMTforRP/ Modern Monetary Theory for Real Progressives

Modern Money Policy on Facebook

The Eastern MA based group doing this presentation

http://www.levyinstitute.org/pubs/pn_18_2.pdf

The written source of the proposal discussed in the presentation

https://www.pavlina-tcherneva.net/job-guarantee-faq

Recently created online FAQ put together by one of the authors of the above FJG proposal

New Hampshire Modern Money Group (MMT) on Facebook

A group from our Northern neighbor

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MMT Discussion – Part 3 – My taxes paid for That!

BRADFROMSALEM

If you have not read Part 1 and are unfamiliar with the concept of Modern Money Theory [MMT], click here for a brief introduction. In Part 2 I cover 4 of the 5 reasons taxes are still necessary even though MMT explains that taxes do not fund Federal spending, click here to read about the first 4 reasons. Below, is the 5th reason for collecting taxes in an economy that honors the MMT economic descriptions.

The most popular feature of the MMT description of how money is created, circulated into the economy, and then ultimately destroyed is undoubtedly the approach to taxes. In the previous entry I described 4 reasons why taxes are collected even though the MMT description does not require tax receipts to fund government activities. Instead government activities are funded by money creation and taxes are ultimately destroyed. But MMT’s description of money creation limits that act to funding government expenses that serve a public purpose. Currently, in the news we have an expenditure that cannot be described as providing a public purpose. I use the example of the cost of maintaining a lavish and separate lifestyle for Mr. Donald Trump and his wife more for its notoriety than its dollar amount.

If we were funding government expenditures solely by creating whatever is required to pay for everything that is an expense, what is the public recourse? While there is little truth to the near myth that printing money will cause inflation, there is as my language indicates a path to that occurring. Also as I noted in the previous blog, should inflation start to accelerate, then raising taxes would brake that situation. To take the Trump example a little further, without a lever that the public can exercise to prevent extravagant spending by not just the President, but by all elected officials; who would gladly use that power to enrich each other along with their friends and others as well. It becomes evident that eventually the power will be abused and even with a remedy at hand (raising taxes) a better approach would be to allow tax receipts to be “allocated” as an accounting trick to certain government expenses.

This will allow taxpayers the right to proclaim, as they do now, that they do not want to pay taxes for Trump’s lifestyle choices. Taxes to serve the public purpose of maintaining citizen sense of ownership. In fact it’s more than a sense of ownership, it is real ownership. Something that rounds out the public purpose of spending. The question is then, how are public purpose expenditures separated from operational expenses that will not enhance serve the public purpose? One possible way is to fund all maintenance costs from tax collections. This would be items like road repair, upkeep of National Parks, along with salaries and expenses of Federal office holders and their direct staff. One critical expense would be all military spending, unless there is a true declared war.

Spending via money creation would be on all capital expenses. New infrastructure, Health Care, Social Security, Federal Job Guarantee, Basic Income Guarantee, and Public Education come to mind immediately. These are all items that serve a public purpose. Under the present arrangement these are the costs that are deferred, cut back or never even considered because it is believed we cannot afford it.

There are political advantages to restricting some expenses to be budgeted according to tax revenues. Using the model of assigning maintenance costs to those revenues is not perfect. There will be public purpose spending happening, but since the maintenance areas are the ones people care about the most means there is less push back from taxpayers when they have well maintained parks, roads and power grids.

There is one last caveat to the capital expenses that must be understood. The MMT descriptions only apply to the Federal government’s expenses, states, counties along with city & towns still must collect taxes to pay their bills. With an MMT model we do get more done with less taxes, but as I have shown taxes are a necessary and critical component of a healthy economy and a component essential to a dynamic democracy.

(I plan to write some more on other MMT aspects such as the Basic Income and Job Guarantee along with why it describes money so well and other descriptions are lacking.)