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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Modern Money Policy

For a few years now, I have written from time to time about a subject called Modern Money Theory (MMT). Which is an objective, apolitical approach to describing macro economics. In particular, I have written about what the approach means in countries like the US, Russia, The UK, China, and Japan. Those countries named and many others, all have a currency that are called sovereign, fiat currencies. Issued solely by the government and used to make all payments, any payments due to these governments can only be made in their own currency. While there are other approaches for a nation to take regarding their currency, and MMT in each approach defines the limits of spending and taxation, issuing currency or collecting payments, I have only concerned myself with US and the limits MMT defines for a nation with a sovereign fiat currency.

The problem is that despite the explanations of how the US can benefit by understanding MMT from what myself and thousands of others have been explaining, many persons still have not even heard of MMT. Others dismiss it as foolishness or even a psyop.  Meanwhile, those of us familiar with MMT keep plugging away.  We are not all economists, but some are. Not all MMT economists are liberals, but most are.  Some MMT economists are even gaining fame and beginning to achieve recognition for their work.

I am not an economist, just one of thousands that have taken the time and spent the energy to learn about MMT and try to explain it to others.  The reason is simple, the awareness of MMT and it’s explanations of how the macro economy operates is gaining in academic acceptance. MMT economists have over the past few years have been able to reach out and be heard by many politicians and economic policy makers. Perhaps, many have not accepted the descriptions, but some do but are concerned the general public will not accept it.

So, in order to help these leaders understand the policy possibilities of exploiting the principles of MMT to spend public money for policy that serves a public purpose a new Facebook group has been formed; Modern Money Policy.

The focus will be on what can be done in the public purpose arena and by deepening the understanding of how MMT can be used to create a more stable micro economy, the economy where we all live.

Many are already being asked to join, but don’t wait for invite – join us.

WAKE UP! Economics Lecture Underway!!

When somebody starts talking about economics do you gaze off into the distance wondering, if he will ever get back to discussing something more engaging like why curve ball hitters tend to reach their peak later than fast ball hitters? If that describes your take on economics then you need to pay attention. NOW!
Economics is a way to discuss policy and how it impacts each and every one of us. Like any social science (bet you snoozed through social studies in the 7th grade!) it is unequal parts science, history, guess-work, math, bull shit, and of course engaging repartee. Your economic view-point is built up from your political leanings, as well as your social priorities. So why pay attention to details, NOW? Pick a political philosophy and let the economists who adhere to that philosophy determine how the economy works. That is what people have always done why is NOW different.
The difference is simple, and it is well-known, and politicians and economists to varying degrees are pretending to tell you they have it all under control. But they don’t. Much of that is because they are comfortable with working things out the way they used to be. Others, mostly politicians, believe they get more votes when the discussion of economics centers around taxpayer money. At the Federal level, there is no such thing as taxpayer money. Until the Federal government spends money; no money exists. Once taxes are collected, no money exists. poof! gone!
Perhaps you may realize that when money only exists after government spends it, changes entirely the paradigm about how we look at economics. It is a powerful revelation and our politicians need to know NOW that we know it.

GOPTaxScam – Democrats are shooting at the wrong targets

The #GOPTaxScam has finally brought up the subject of economics into the mainstream. People are paying more attention to that dreary science. And in 95% of the stories most people hear or write about the #GOPTaxScam they are wrong about it, whether they like the policy or not. Nearly every MSM and the MSM wannabes review places the impact that the policy will have on our debt and our deficit. The other common denominators are calling the policy a transfer of wealth, or a boon to corporations. From the plan’s detractors you hear how this policy is going to crash the economy and trash the Republican chances of holding their majority in Congress. From it’s supporters you hear how the lower taxes on wealth will spur investment, add jobs, increase salaries, and maybe even balance the budget. Both sides are wrong, and even worse on many points both sides are lying.

But they also both speak some truths. The supporters note that the Middle Class especially will see lower taxes. And that is true. But it is also true that taxes on wealthy people and corporations will be lowered even more, by any mathematical measure. The detractors point out that the higher tax rates return in 2025 for the Middle Class and that the Middle Class will lose some deductions, which are not tied to inflation effectively raising their tax rates at a proportionately higher rate than on wealthy people.

Here is what that means. Initially the Middle Class and to a lesser extent, the poor will have more money to spend, businesses who already have enough reserves to meet the increased demand will likely expand, add jobs, and even increase pay. Still the vast bulk of their tax savings will go to shareholders and offshore untaxed accounts. As the effective taxes on the Middle Class increase each year, there will be slower growth until by 2025, growth will be back to our current level of stagnation. That is, unless inflation such as we have not seen since the Nixon years takes hold; and this plan puts the US at risk for that to happen.

Additionally, there will be so-called deficits. This is the lie that both sides agree on. These deficits will be used by supporters as an excuse to cut back nearly every single social benefit funded by the US government. Again, the initial boom will make it appear that the deficits are not as bad as predicted, but by after 2019 election, the deficit numbers will put pressure on Congress to impose austerity. This is an actual lie which is at the heart of the #GOPTaxScam.  That initial boom potentially could kick off a round of inflation since there are no tools that I am aware of in this plan for managing that risk.

There is no deficit, there hasn’t been since Richard Nixon took us off the Gold Standard. Money is created into existence. Taxes serve two primary purposes, and neither one is to fund the federal government. Money is created by the US spending. It is not recycled as revenue, it is destroyed. When we, the users of money spend, the money is recycled so it’s value to the economy is greater that its nominal value. That is why tax cuts for the wealthy are useless, their money is not recycled rapidly if at all. But the Poor and the Middle Class spent nearly all their income. Taxes force the US Dollar to have value and be universally accepted. Taxes also remove excess money from the economy to regulate inflation. More money does not create inflation but less money slows inflation.

Last of all, there is no such thing as taxpayer money. All taxes are destroyed, not used to pay for wars, not used to pay for Presidential vacations, legislators benefits, or even your Social Security. #LearnMMT

United We Stand – Divided We Get Trampled

So many, many people are upset. Some are Democrats, probably most Democrats. but Republicans are as well, but probably not most. Last of all, every single person that does not pledge allegiance to either the Democrats or the Republicans are upset. Of course they are upset that in an era with a reported low unemployment rate, jobs are scarce, for those with jobs their pay is barely keeping up with inflation. They are upset because we are at war all over the world, and once a month we hear about a soldier or two being killed in a country that many Americans never heard of. They are upset because every week another mass shooting takes place, or an unarmed black youth is gunned down by the police. They are upset because on the news all they hear about is how horrible the President is, and so they believe it. But they are also upset that their health insurance rates are skyrocketing, the Russians have taken over our elections, and oil is being spilled in our oceans and in our water supplies.

Anger and frustration is expressed by every single American. Sure, some of these things anger different people. Perhaps you don’t believe Russia is controlling our elections, but instead you are angry that our election vote counts are unreliable and unaudited. Our anger at the status quo exposes the common line of thinking that we are a nation divided. We are not divided. We may not all be angry about the exact same things, but we are all angry that the status quo is not working for the American people. We are united on this fundamental issue. We are united in the knowledge that most of what see and hear on the TV news and opinion shows only tells us half the story, and nobody reads more than one newspaper – if that, radio is over flowing with sports talk and heavily biased opinion, and who can tell what is true on social media. But on all that mishegas we are united.

This is what happens when resume trumps truth. We saw that in our last Presidential election. With only two candidates that we could choose from with the knowledge that one of them would win, their main credential for the job was their resume. Republicans refused to look into the basis of Donald Trump’s boasts of accomplishments, which in hindsight it seems impossible that he personally accomplished anything. Democrats took the list of jobs that Hillary Clinton did within government service and never dug very deep into her accomplishments. Resume trumped truth. (pun so very intended)

But here we are on the verge of losing unfettered access to the web’s cornucopia of information and entertainment, implementing tax reform that will accelerate all the wrong things and as a result it will not bring back a strong and large middle class or create pathways for the poor to improve their lot, starting a potential nuclear war with a second-rate nation in a real world reenactment of the Marx Brother’s “Duck Soup”. This all, to be blunt, is caused by the complete takeover by a single party. Democrats abdicated their participation in choosing to follow the republicans lead in both domestic and foreign policy. All they do to separate themselves from Republicans is a more tolerant social policy. And even that has withered into a shadow of what it needs to be. But even then, it is sufficient to keep Republican voters hating on all Democrats. Take away the labels, and we become united.

When someone tells you how divisive Donald Trump is, or that the nation is divided, remember that we, the people, are united. We want prosperity and we want peace. We may have disagreements about what to fix and how to fix it, but we agree that fixes are necessary; the rest is called democracy.

Hung Upside Down – It Ain’t How to Design Tax Reform

The Senate Tax Reform package will eventually become the text book model for how to do all the right things wrong. Reducing taxes is a good way to increase economic output, the Republicans accomplished that. Modifying deductions and using progressive tax rates as a tool to reallocate income distribution. Done. Using taxes or lack of taxes to discourage or encourage certain behaviors? They do that as well.

Sound, economy boosting tax reforms would have all of the attributes of the Senate tax plan. Reducing taxes does do exactly what Republicans say it does. It allows more money to remain in circulation, thereby increasing economic activity. Individual deductions are part of the income tax code to account for living expenses, increasing personal deduction moves us somewhat towards that goal, but any improvements on that intention were erased when state and local taxes became limited on the amount that could be deducted from gross income. Likewise many deductions such as homeowner mortgage interest, charitable contributions, and medical deductions were further limited than they had been in the Reagan era. These events ultimately impact middle class taxpayers from seeing any significant decrease in their tax bill; which by the way the tax rates are all scheduled to expire. And lets not forget that by eliminating the Health Insurance mandate only increases the cost of living for those that have insurance. that made up,were given limits they did fail to add a metric for it to keep pace with a hopefully rising. Very little will come from the Middle Class to help stimulate the economy, except for maybe in the 2019 tax season in 2020.

Progressive tax rates is one of the best tools that the managers of macroeconomic policy have to make certain that individuals that are living below the cost of living are not taxed, and persons whose incomes are exorbitantly beyond the cost of living, even after considering that a higher pay scale usually means a higher cost of living, pay a share of their excess income in order to totally remove that money from circulation. The harm to the individual is close to nil, since it is money they were not ever planning on returning into circulation. In other words, they are hoarding.

But, if the Republicans put in place a tax plan that eliminated any taxes on persons that earn the cost of living, with unlimited and unrestricted itemized deductions for those earning less than the average wage, higher taxes that eventually exceed 50% of income on the wealthy and restricting the amounts that they can itemize, we got a plan that will make America into a haven for the middle class, the poor will not be held back by the use of wage slavery and virtual poorhouses, and the wealthy will still earn outrageous sums.

So please do not talk about the Federal Debt, or deficits, keep your eye on the prize. The plan passed by the Senate is a great start, but it is upside down, and will work that way in the economy. What will happen is this; trickle down has never worked, it won’t this time. Austerity will spread like a disease throughout the entire economy forcing entire populations into poverty, all the wealth generated will remain at the top and coalesce there.

Republicans Have No Fear of the Underdog

What is wrong with the Republicans finally getting to implement the agenda they have been carping about ever since Ronald Reagan left office? In a word, everything.

Of course, even though they have not gotten everything they wanted since Reagan, the economic policy followed by Bush I, Clinton, Bush II, and Obama still adhered to the general themes laid out during the Reagan years. Minimal taxation for the wealthy and corporations, decreasing overall deductions for the middle class, expanded deductions for corporations with lowered tax rates for capital gains. There has been an on-going outsourcing of government services at all levels of government along with a near total deregulation of banking. And last of all a new common denominator for how government structures trade agreements and government projects, both are designed to improve the profitability of corporations.

The new tax plan proposed by Republicans is built on the foundation of the above Reagan era economic thinking with exactly zero thought about what the problems are in our economy that need to be addressed. And how can the tax code be used to help solve the problems.

Our economic problems are multiple, but the most pressing problem is our debt. Not the nation’s debt. The debt of the people who live here. Is there any provisions to reduce debt. especially the debt owed by the 99%? Nothing, in fact the plan exacerbates individual debt. Wage stagnation is a huge problem. For the 99%, their wages have stagnated, for the 95% their real wages have actually dropped when measured against inflation. There is a tool that has been used in the past to help wages keep pace with inflation, it’s called taxes on the wealthy and corporations. Employers would rather raise wages and pay a lower tax rate than pay lower wages and pay a higher tax rate. These two issues, personal debt and wages, combine to keep our economy on a dual track where the wealthy and the corporations are gathering up all the available money supply. They are not investing in expansion, because the demand is not there. Demand is not increasing enough to push up wages and add jobs. And, at the end of the day, demand drives the economy. We increase demand by putting more money in the pockets of the 98%, the people who will by necessity spend it all.

Flipping the GOP tax plan on it’s head, restore full medical deductions for everyone and restore full interest deductions for everyone. Dramatically increase taxes on the wealthy. End lower tax rates on capital gains. Introduce a job guarantee, free public college tuition, tax deductions for all post high school education in the private sector, a living wage for a minimum wage, increase SS retirement payments and eliminate family ceilings, and of course Medicare for All.

These things and more will fix our economy so tat it can grow organically. Instead of thinking about the Federal debt, think about the debt of families all across the nation. If their debt is lowered, if their wages are increased, if their opportunities for jobs and education are real, then maybe, just maybe we can have resurgence of a Middle Class.