This is the handout notes for a presentation made by the Modern Money Policy group in Salem, MA April 21, 2018
- We will be introducing two economic concepts:
- A Federal Job Guarantee (FJG)
- Modern Money Theory (MMT)
- The larger portion of the presentation.
- What it is, how it works, and why it is necessary.
- 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
- Family leave
- Retirement savings
- 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
- 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.
- 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:
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.
- Messenger on Facebook – Brad Sandler
- DM on Twitter – Sandler_Brad
- Email – email@example.com
- Facebook Group – Modern Money Policy
Resources for More Information
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
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.)
A collection of videos and writings by Paulina Tcherneva on the Federal Job Guarantee
An overview topic by topic on all the major ideas associated with MMT
Brings accurate and accessible knowledge of monetary and financial systems to the broader public.
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
The written source of the proposal discussed in the presentation
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