By L. Randall Wray
Ok, understood. We fear inflation, too. That has always been our message, too. Indeed, “price stability” has always been one of the two key missions of UMKC’s Center for Full Employment and Price Stability (http://www.cfeps.org/). Maybe you do not like our proposed methods of battling inflation. Fine. Show us yours. I realize that many libertarians and Austrians believe that the only foolproof method for avoiding inflation is to go back to gold. Again, fine. But don’t criticize our labor “buffer stock” scheme for its political infeasibility! Going back to the gold standard is less likely than alien abduction. (Oh, sorry, no offence intended.) Anyway, we (also) do not want black helicopters flying around dropping bags of cash; and we (also) oppose government “pump-priming” demand stimulus—the libertarians and Austrians and even Milton Friedman are correct in their argument that this would generate inflation.
So it is true that there is a second level to MMT: we use our understanding of the way money works to bring rational analysis to government policy-making. Since involuntary default is, literally, impossible for a sovereign government, we quickly move beyond fears about government deficits and debt ratios and all the other nonsense that currently grips Washington. Can we “afford” full employment? Yes. Can we “afford” Social Security? Yes. Can we “afford” to put wine in all the drinking fountains? Yes. The problem IS NOT, CANNOT BE about affordability. It is about resources. Unemployment is easy: by definition, someone who is unemployed is available to hire. So government can put them to work. Social Security is a little more difficult: can we move enough resources to the aged (plus their dependents, and people with disabilities) so that they can enjoy a comfortable, American-style, life? On all reasonable projections of demographics and US ability to produce, the answer is yes. The projections could turn out to be wrong. But if they do, affordability still will not be the problem—it will be a resource problem. Finally, wine in drinking fountains? There probably is not enough fine wine, but we could probably fill all the drinking fountains with cheap French wine. Again, it is a resource problem and if we convert the American prairies to wine production we could probably even resolve that one.
Perhaps the most important policy pushed by most MMT-ers is the Job Guarantee/Employer of Last Resort proposal. This provides a federal-government funded job to anyone who wants to work, at a uniform, basic compensation (wages plus benefits). Our libertarian/Austrian fellow travelers seem to hate this program, again for unfathomable reasons. I suspect that they have misinterpreted this to be some kind of Big Government/Big Brother program based on a weird combination of force plus welfare. The claim is simultaneously that it “forces” everyone to work, and that it also pays everyone for not working. Actually, it is a purely voluntary program, only for those who want to work. Those who will not work cannot participate. Libertarians and Austrians ought to love it. It is not Big Brother. It is not even Big Government. The jobs do not have to be provided by government at all. No one has to take a job. It is consistent with, I think, the most cherished norms of freedom-loving libertarians and Austrians.
So to sum up:
1. MMT is consistent with any size of government. It can be a small libertarian government if you like. But it issues a sovereign floating currency. It supports the currency by imposing a tax payable in that currency.
2. Job Guarantee/Employer of Last Resort is also consistent with any size of government. If you want a big private sector and small government sector, keep taxes and government spending low. That frees up resources to be used by the big private sector. But you will need the JG/ELR to take up the labor resources the private sector cannot fully employ.
3. JG/ELR can be as decentralized as you want. I think there are massive incentive problems if you have federal government pay wages of for-profit firms. So I would have federal government pay the wages in the program but have the jobs actually created and managed by: not-for-profits, local government, maybe state government, maybe only as a final last resort the federal government. Argentina experimented with cooperatives and they looked to me to be highly successful.
4. The problem with a monetary economy (you can call it capitalism if you like) is that from inception imposition of taxes creates unemployment (those looking for money to pay taxes). We scale this up to our modern almost fully monetized economy (you need money just to eat, watch TV, play on cell phones, etc) and we get everyone looking for money (and not just to pay taxes). It is sheer folly to then force the private sector to solve the unemployment problem created by the government’s tax. The private sector alone will never (never has) provide full employment. ELR/JG is a logical and empirical necessity to support the private sector. It is a complement not a substitute for private sector employment.
5. How can the belief that all ought to work, and contribute to society, rather than lay about and collect welfare be called socialism?