A Plan for All the Detroits Out There

By Marshall Auerback, Stephanie Kelton and L. Randall Wray

Should the federal government bailout Detroit?  That’s the question everyone is debating.  We think the discussion should be expanded well beyond this narrow question.  Detroit is the canary in the coal mine, but it’s symptomatic of a bigger problem, which is the lack of jobs and decent demand in the economy.

The problem is that President Obama believes we can cure our jobless problem by providing the proper incentives to the business community.  So we’re sure there will be all sorts of talk about “incentive zones”  for Detroit.  And here he is committing one of the few big policy blunders from Lyndon Johnson’s War on Poverty. Like Johnson, who focused on retraining the unemployed for jobs that did not exist, Obama has focused on incentivizing the businesses community to hire workers to produce for customers that do not exist. Time and again, Obama has shown that he will only tinker around the edges, relying on the same tired supply-side initiatives that will not work: more incentives to build business confidence, subsidies to reduce labor costs and to promote exports, and maybe even tax cuts to please Republicans. He told a Labor Day crowd in Detroit a few years ago that he wants to match the more than 1 million construction workers with an infrastructure-related rebuilding program to improve the nation’s roads and bridges. That is an improvement over his efforts to date, but it falls far short of the 20-plus million jobs we need.

So what should be done?  Well, the three of us (and others) have long advocated a longer term solution to deal with all of the Detroits that are out there: The government could serve as the “employer of last resort” under a job guarantee program modeled on the WPA (the Works Progress Administration, in existence from 1935 to 1943 after being renamed the Work Projects Administration in 1939) and the CCC (Civilian Conservation Corps, 1933-1942). The program would offer a job to any American who was ready and willing to work at the federal minimum wage, plus legislated benefits. No time limits. No means testing. No minimum education or skill requirements.

The program would operate like a buffer stock, absorbing and releasing workers during the economy’s natural boom-and-bust cycles. In a boom, employers would recruit workers out of the program; in a slump the safety net would allow those who had lost their jobs to continue to work to preserve good habits, making them easier to re-employ when activity picked up. The program would also take those whose education, training or job experience was initially inadequate to obtain work outside the program, enhancing their employability through on-the-job training. Work records would be maintained for all program participants and would be available for potential employers. Unemployment offices could be converted to employment offices, to match workers with jobs in the program, and to help private and public employers recruit workers.

Funding for the job guarantee program must come from the federal government—and the wage should be periodically adjusted to reflect changes in the cost of living and to allow workers to share in rising national productivity so that real living standards would rise—but the administration and operation of the program should be decentralized to the state and local level. Registered not-for-profit organizations could propose projects for approval by responsible offices designated within each of the states and U.S. territories as well as the District of Columbia. Then the proposals should be submitted to the federal office for final approval and funding. To ensure transparency and accountability, the Labor Department should maintain a website providing details on all projects submitted, all projects approved and all projects started.

To avoid simple “make-work” employment, project proposals could be evaluated on the following criteria: (a) value to the community; (b) value to the participants; (c) likelihood of successful implementation of project; (d) contribution to preparing workers for employment outside the program.

The program would take workers as they were and where they were, with jobs designed so that they could be performed by workers with the education and training they already had, but it would strive to improve the education and skills of all workers as they participated in the program. Proposals would come from every community in America, to employ workers in every community. Project proposals should include provisions for part-time work and other flexible arrangements for workers who need them, including but not restricted to flexible arrangements for parents of young children.

That’s the approach we would take on behalf of all of the Detroits out there.

84 responses to “A Plan for All the Detroits Out There

  1. I fully support this plan. One such program could be health coaching, as our healthcare crisis originates with an appalling food quality, pesticides, chemicles, and lack of exercise. There would be decades of economic benefits reaped from using otherwise spoiled labor to teach about fresh food.

  2. Auburn Parks

    This is a perfect example of why MMTers are the last true progressives remaining. Most every Dem has been turned by the dark, oops i mean supply side and worships on the mythological alter of “business confidence” and “incentives”. Businesses will do whatever it takes to fulfill demand, if its there. Thats why you can never get rid of black markets, no matter what the authorities do, there are few things that wont be done to satisfy demand, profitably. Its not really any more complicated than that, give people more money to spend and all our employment problems will be solved in short order. I guess this is just another example of the sad state of affairs that the neo-liberals have gotten us into over the last 4 decades.

  3. Sunflowerbio

    I support this proposal wholeheartedly, but what do you suggest Detroit and other cities and states do about the unfunded liabilities they have for retired and disabled former workers? Should the federal government simply pick up the tab or….?

  4. This essay illustrates how MMT is out of touch and has no plan to fix things.

    MMT supports the free trade policies that led to the gutting of Detroit. MMT’s response is to give the laid off auto workers a dead end minimum wage job.

    MMT has no plan to deal with skilled workers.

    MMT brags that “The [JG] program would operate like a buffer stock, absorbing and releasing workers during the economy’s natural boom-and-bust cycles. In a boom, employers would recruit workers out of the program.” So MMT admits that the JG would not provide a stable work environment. Instead, workers would be bounced around between temp jobs in the public sector and temp jobs in the private sector.

    At a time when the largest US employer is Walmart and the 2nd largest employer is a temp agency, MMT proposes to create even more low-paid temp jobs through it’s JG. Hello MMT, we don’t need more low-paid temp jobs, we need more permanent skilled jobs. What are you going to do about that ?

    MMT has no plan to address the pension and health care problems that contributed to Detroit’s demise.

    If Minsky were still alive today I suspect he would try to address today’s issues rather than relying on his ELR proposal that was designed to address the issues of the 1960’s, when unemployment was 4% and consisted largely of minorities and unskilled workers.

    • The idea is that the job guarantee program provides a reliable counter-cyclical source of demand, supporting businesses across the spectrum including those that provide permanent skilled jobs. The JG pool is is supposed to shrink as the demand created by JG spending stimulates private sector employment and investment. Over time the JG should become a relatively small ’employed buffer stock’ which replaces the current policy of an ‘unemployed buffer stock’.

    • Minsky saw ELR as an anti-poverty program. He saw it as the best way to prevent people from falling into poverty and to prevent work skills from atrophying, while at the same time sustaining national demand for goods and services, and limiting inequality and the high return to capital. The jobs don’t have to be crappy. And they will only be “minimum wage” in the sense that the ELR program essentially sets the wage floor. But we can choose to make that wage floor a prosperous level indeed, thus requiring private enterprises to compete aggressively for workers by offering strong wages and benefits, and by holding down the disbursements to owners and upper managers. I think he was right about all those things.

      But I agree that the ELR alone is not an answer to all of the problems related to industrial decline and dislocation, community preservation, and the need for long-term strategic national economic planning and development. And I don’t like presentations of ELR programs that see the goal as “minimal interference” with the private sector. An ELR should only be one part of a broader national strategy to develop a new industrial foundation for the US, to spearhead innovation through strategic public investment, and to revitalize democracy and community.

    • Your point is excellent, but I wish you would not have begun with a sentence that is a generalized criticism sure to upset many MMT folks. (Next time you might introduce your point with an empathy statement?) Anyway, you have made a very important point that needs to be addressed. Who are the unemployed “skilled” workers and what did they do? Are we talking doctors & nurses, machinists & mechanics, painters & carpenters? These folks do real work that helps us all. Are we talking “skilled” workers in the FIRE sector who push paper that doesn’t need to be pushed or create paper “investments” like collateralized debt obligations? Do we really need all that? Are we talking about “skilled” workers who work on oil rigs or other jobs that lead to more habitat destruction? Do we really need that? Personally, I feel that we need to start moving away from our work & produce products & then consume products at Wal-Mart lifestyle. I want to see a guaranteed income from the federal government to everyone who wants to live a minimalist lifestyle in an attempt to leave a small ecological footprint on our planet. Why is the homeless man under the bridge leaving the tiniest ecological footprint considered disgusting while the billionaire with a 300 foot yacht is considered a great man? The homeless man is helping us all with his minimalist lifestyle, the billionaire with the yacht is leaving his footprints all over the planet and mostly on everyone’s neck. The ruling class edict is that doing well is doing good. But is it really doing good to create jobs that lead to economic or habitat destruction? Do we really want more derivatives traders or oil well drillers? How about doing well is doing less? If not a criminal, the guy under the bridge is doing us all a favor with his tiny footprint. Why not give him a guaranteed income for continuing to leave just a tiny footprint, before he becomes so tired that he turns to crime? If an #OWS protester is willing to ride a bike or use public transportation, eat locally produced food, live in a small room with few belongings, etc. – why shouldn’t we collectively help him or her do that? Small footprint people are saving the habitat and helping us all. Billionaires are destroying the habitat and killing us all. Who do we want to reward?

    • I’m not sure what macroeconomic policy can address global competition, and the natural ebb and flow of any nation’s industries. If those unemployed can earn some money, given resourcefulness like living in households with larger numbers of people, then a little money can be saved, egos can be grown, and readjusting new career goals in healthier industries can take place. Even a minimum wage job allows for some walking around money which is better than sitting at home making and spending zero. That does not an economy make. Also, there is some common ground between conservatives and progressives for work-fare instead of welfare.

    • “we need more permanent skilled jobs. What are you going to do about that ?”

      Increase aggregate demand. That is not the primary focus of the JG, but it is a side effect. Proper management of fiscal policy will create the demand for permanent skilled jobs.

    • I think you raise some good points here. One thing I would mention is that the main reason people are being paid so poorly is that there is so much excess supply of labor. With this “surplus reserve of labor” in Marx’s terms, employers like Wal-Mart have all the leverage. When you put in place a jobs guarantee program (paying, say $10-12 an hour), you make labor much scarcer which in turn raises its price. The JG acts as a floor, and would shift the whole distribution of wages as a result.

    • “MMT has no plan to address the pension and health care problems that contributed to Detroit’s demise.”

      Nor should it. The costs and results of bad decisions made by big business and big labor are not to be foisted off on others, but should be borne by the risk-takers that made the decisions.

      • Sunflowerbio

        But the pensioners didn’t make the decisions, for the most part, on what was promised in retirement. How do you make the risk takers, at least some of whom are dead, bear that burden?

        • golfer1john

          True, the pensioners are mainly innocent. There is ERISA, that will pay them off to some extent. I would support something on the model of FDIC or UI, where the promiser pays an insurance premium and the promisee gets paid out of those funds, if the pension plan goes bust. Ultimately, though, the workers pay for the insurance in the form of lower cash compensation. Maybe strengthen the funding requirements for the pensions, and enforce them and the fraud laws more vigorously.

      • nicholas a. evans

        Private pensions are insured by the PBGC, but public pensions… are backstopped only by politicians promises and the taxpayers funding them. In either case, the biggest problem dooming pensions isn’t so much the actuarial formulas vis-à-vis other investments (although there are far too many risky mistakes made there too); it’s that pension managers can’t be trusted to treat their liabilities to pensioners as if they are as important as their obligations to bond-holders, share-holders, C-level bonuses, etc.

        IMHO, public pensions should have top priority in bankruptcy proceedings and ought to be insured by the federal government. If that insurance carries new limitations on pensions going forward (as with PBGC), so be it. But reneging on compensation for the people who actually did the work and now depend on the deferred income will have far greater real consequences than any moral hazard from giving mismanaged pensions a soft landing (especially since the current financial problem is not enough aggregate demand).

        Like sunflowerbio mentioned, the individuals pensioners by and large didn’t make any decisions, except the decision to entrust a portion of their compensation package to an untrustworthy system.

        • Sunflowerbio

          Nicholas, I’m sure you are aware that the PBGC is woefully under funded and is also relying on politicians’ promises to make good any shortfalls. Private pensions are really in the same boat as public ones.

    • Nathan Tankus

      Dan, do you know anything about Detroit? anything at all? Detroit’s unemployment rate is around 9% but that is misleading because of the massive amount of people who want work but have dropped out of the labor force. The WHOLE PROBLEM is a lack of jobs that you take for granted. I would pay money to see you walk up and down the streets of Detroit telling them that plenty of low wage jobs are available . Just because Walmart is a big employer doesn’t mean everyone can get a service job. In fact, Walmart has largely replaced service jobs at smaller now dead firms, not increased the share of low wage unemployment on it’s own. If a program like this had been in place, Detroit wouldn’t have had massive net emigration and would instead have developed a service sector over time. additionally, the kind of adjustments they are talking about would create a floor for low wage employment and working conditions that is desperately needed. Obviously this wouldn’t solve all of Detroit’s problems but it isn’t claimed that it would.

      maybe you would see more of the benefits if you were less obsessed with people making proposals that would directly employ YOU with the kind of job YOU want.

    • Gregory Long

      The federal government already has a mechanism to to deal with a JG and skilled workers, that is the federal government alerady operates on pay grades for its employees. The federal government could simply agree to hire every worker who applies at the highest pay grade for which that worker is qualified. For example, an unskilled worker entering the workforce might be paid $10 an hour to clean a park; but a degreed information-technology worker who last a job in something like a dot-com bubble going bust would be paid $30 an hour to work in a pilot factory developing the use of robotics in manufacturing.

      • Gregory Long,

        That wouldn’t work. To put it very simply, what we currently have is an ‘unemployed buffer stock’ policy – whereby a part of the population is kept in unemployment (even in the good times) as a way of controlling inflation. The JG idea is basically about replacing that ‘unemployed buffer stock’ policy with an ’employed buffer stock’ policy. This can only work, – i.e. achieve both ‘full employment’ and ‘price stability’ at the same time – if the ’employed buffer stock’ is not part of the normal workforce. It has to be a fixed-wage pool of workers which expands and contracts counter-cyclically.

    • Joe Firestone

      Hi Dan, Who says MMT supports “free trade” policies? Isn’t this misleading in the sense that if MMT does support them that support doesn’t extend to the present travesty of “free trade” that uses the slogan but violates free trade principles at every turn?

      Why do you think MMT supports minimum wage jobs for laid off auto workers? Isn’t this view a little deceptive since JG pay will be well over present minimums and will establish a new minimum?

      Why do you say MMT has no plan for skilled workers? Why won’t the job guarantee program define jobs that use people’s skills, especially since the people in the program will have a say in defining the jobs?

      You say:

      “So MMT admits that the JG would not provide a stable work environment. Instead, workers would be bounced around between temp jobs in the public sector and temp jobs in the private sector.”

      MMT says that the JG will be a transition job; but that doesn’t mean it will be temporary in the sense that it will last for a defined amount of time, won’t have full fringe benefits, and will be followed by layoffs. Nor will workers be forced to leave a JG job if they don’t want to. So, if private sector companies won’t offer JG employees a better deal than they get in the JG, then JG employees won’t have to leave the JG. There’s nothing, therefore, preventing JG employees from insisting on permanent jobs or insisting on temporary ones that pay sufficiently more to compensate for their temporary nature.

      On the low paid job issue, MMT has always proposed a living wage and good fringe benefits for the JG program. There are differences among MMT economists on what constitutes a living wage. Bill Mitchell, Randy Randy Wray, and Pavlina Tcherneva tend to advocate a higher living wage than Warren Mosler. I’m not sure what Stephanie Kelton, Mat Forstater, Marshall Auerback, and Scott Fullwiler propose. Warren’s worried about too high a living wage being disruptive of large parts of our present economy. But, that aside, I think there’s no consensus on the size of the JG wage, among MMTers. My own proposal would average $16.00 per hour across the country. The precise wage rate would be adjusted up or down based on variations in the cost of living, and if this proves disruptive for many businesses then let the chips fall where they may. In my view, businesses that can’t pay workers a living wage and good fringe benefits should not be in business, and if they go under, the workers will be better off with JG jobs anyway.

      Also, I don’t think it’s quite fair to say that MMT has no plan to handle Detroit’s pension and health care coverage problems. There may be no specific plan directed at that, in the post above, but certainly Warren Mosler’s Medical insurance proposal would address any Medical insurance problems for everyone, while the MMT payroll tax holiday and State Revenue sharing proposals would soon end the long depression resulting in increased tax revenues for State and local governments including Detroit. Finally, MMT would certainly not be opposed to an outright bailout of Detroit’s government pensions and health insurance guarantees, and MMT views of the Federal capability to deficit spend certainly provides a favorable backdrop for any bailout proposal by undercutting the austerity memes about Federal Government spending.

    • Scott Fullwiler

      You’ve shown again and again here and on Facebook you don’t understand MMT at all. You might start asking questions rather than making false accusations about what MMT does and doesn’t stand for–which you regularly do.

      Regarding this . . . “MMT has no plan to deal with skilled workers” . . . have you ever heard of fiscal stimulus to close the output gap???? If you don’t have a recession in the first place, then skilled workers don’t lose jobs and those that do will see others open up. The ELR is largely for lower skilled workers, true, but ELR is an automatic stabilizer, NOT fiscal stimulus. Don’t confuse the two. That’s why we have NEVER said ELR is the only thing that should be done the previous 5 years. If you’d been paying attention at all, you would have seen numerous policy proposals for sustaining aggregate demand–which is precisely how demand for skilled workers is continuously sustained–in addition to ELR. Further, it’s not as if even these are the only things that could be done to protect skilled workers–I’ve never seen an MMT economist be in favor of purely “free trade”; we’ve only said that if you’re going to do it, the only way to get the results you get in theory is with an ELR accompanying it. Finally, MMTers have actually written a good deal on healthcare–I won’t bother to link them to you because it’s gettting late and I know you won’t read any of it anyway before you write your next uninformed anti-MMT comment.

  5. I concur with this very straightforward Keynes-like countercyclical government spending proposal. Unlike the frustrating mountain of opinion out there that insists we’ve been doing this all along with TARP and QE, which are either the ramblings of people that have never really become acquainted with the subject matter, or who have and are deliberately disinforming in order to say, “see, we tried Keynes, and it doesn’t work,” this is the heart of where we should be. (Of course, they could also “mint the coin,” but that is not happening any time soon.) A couple thoughts.

    First, where it is stated that “the administration and operation of the program should be decentralized to the state and local level,” given the rabid animosity to all things federal (see ACA), how would this be addressed? The Federal government says, “thou shalt,” and the States thumb their noses.

    I know this is not what you are trying to accomplish here, as you are simply making an academic statement. However, if anything like this ever hopes to see the light of day in this political climate, what suggestions might you have to address this?

    Second, whenever works projects discussions are had they always seem to center around relatively low paying jobs. In the 1930s it may have been feasible for a laid off white collar worker earning well above average income (but still just a working stiff, and not by any means “rich”) to take a job building roads, and still provide for his family until times improved. Today, this is not the case. Their debt loads are so great, and as has been hashed out over and over at forums like this one, not because they have been living so high on the hog, but because of corrosive policies that are driving ever more of the surplus into debt service.

    The post declares that “[t]he program would take workers as they were and where they were, with jobs designed so that they could be performed by workers with the education and training they already had.” Would this mean an income commensurate with their skill levels, something approximating what they were earning (assuming these were in line with market rates)?

    • golfer1john

      Unlike ACA, the JG should not impose any costs on states that participate. One feature discussed elsewhere is that in addition to funding the JG workers’ pay, the Federal government would provide some money for overhead and supervision, perhaps 25% of the JG paychecks.

      I see JG as more of a replacement for unemployment insurance (although abolishing UI is not part of the program), certainly not a replacement for a high-paying job. It’s a transitional job, not a career. It’s not designed to provide an income commensurate with their skills. (That’s the job of the private sector.) As long as the JG benefit exceeds unemployment and does not expire, the formerly well-paid worker and family would be better off.

      Private sector debt is a different problem. With proper management of fiscal policy, aggregate private sector debt would be as large as people want, not what they are forced to accept.

    • jrm: “First, where it is stated that “the administration and operation of the program should be decentralized to the state and local level,” given the rabid animosity to all things federal (see ACA), how would this be addressed? The Federal government says, “thou shalt,” and the States thumb their noses.”

      Here is one way to deal with that problem. First, mandate a certain number of employment centers per capita, and have them located so that anyone can get to one by public transportation within one hour. Second, in case the local bureaucrats have not arranged for enough work, mandate that anyone who shows up at a center by, say, 8:00 a. m., ready and willing to work, will be paid a full day’s wages if there is no work available for them.

  6. Marshall, Stephanie, Randall,

    “the wage should be periodically adjusted to reflect changes in the cost of living”

    Couldn’t this lead to an inflationary wage-price spiral as the economy takes off?

    • Ok I’ve just looked at your MMT primer and seen some arguments for why a wage-price spiral wouldn’t ensue, however some more info in this post regarding worries about potential inflationary effects in the medium-long term would be useful, given that’s what the average person immediately thinks of whenever they read something about MMT.

      • Sunflowerbio

        As the economy takes off, the number of workers in a ELR program should decrease so those needing a ELR wage adjustment should decrease correspondingly, although wages in the private sector might begin to rise. We should have such problems.

    • Rising wages alone do not a wage-price spiral make. Employers might have to accept a smaller share of the surplus.

    • Scott Fullwiler

      In my simulations I have suggested setting the wage to increase with the inflation target–rather than inflation–plus some adjustment to enable ELR workers to share a bit in the growing productivity of the economy. So, for instance, if the inflation target is 2%, perhaps raise the ELR wage by 2.5% per year. I simulated a number of different approaches, and this was without a doubt the most stabilizing for aggregate inflation. Adjusting for inflation instead of the inflation target can be shown rather easily to promotes a bit of procyclicality in the program, which is obviously less optimal. Adjusting with an inflation target does the opposite–precisely when aggregate demand and aggregate prices fall is when ELR workers get the biggest raise relative to changes in aggregate prices . . . and vice versa.

  7. reserveporto

    I’m curious, how did the state and federal gov’ts handle the bankruptcy of Orange County? Detroit definitely has real problems rather than just problems of creative finance, but dealing with the bankruptcy means dealing with the financial problems. Is developing an employment and development strategy the task of bankruptcy proceedings?

  8. In 1996, Congress enacted welfare reform legislation that included a work requirement. This sparked significant liberal opposition, which has increased over the years.

    Why would liberals favor an expansion of workfare?

    • Auburn Parks

      liberals support methods for employing people and increasing the standard of living of the poor and working poor. Republicans hate poor people, especially if they are non-white, so it shouldn’t be a surprise that dems don’t trust republicans on their social support program proposals generally. Now I’m no democrat but I can’t imagine to many dems would have a problem with obtaining full employment, once they are convinced that the cost isnt an issue of course.

    • The JG is voluntary, not workfare.

      • Liberals oppose making people work at *below minimum wage* in order to get welfare, because that’s abusive. The Job Guarantee should be at a living wage.

    • Well, the last time I heard a liberal objection to a job requirement for welfare, it had to do with young single mothers with small children, who were not able to hire someone to take care of their children.

  9. Modeling on the WPA and CCC? What will you do when there is a half-finished dam and all your JG workers are hired away in an improving economy?

    The kind of work done by WPA and CCC needs to be done by permanent workers, regardless of the state of the economy.

    The demand for the work done by JG workers needs to disappear when the workers disappear. The perfect JG jobs are those now done by volunteers, working for charity organizations doing things to support the poor. Food banks and Habitat for Humanity are my favorite examples. When all those who want a job are working, there will be far less need for food banks.

    Of course, the JG should also support training, retraining, job search, job matching, and such. For any JG worker without a high school diploma, his primary job should be to get his GED.

    • You may be thinking more of the Harold Ickes’ PWA
      Public Works Administration
      rather than Harry Hopkins’ WPA Works Progress Administration. But it was the WPA that Minsky worked for as an (unskilled I guess 🙂 ) economist.

      In any case, the USA has been skimping on PWA type projects for 45 years. Now would be a great time for them, filling a tremendous unmet, real need that should last for a good long time. A new PWA would lessen the need for a JG /new WPA.

      • golfer1john

        I admit ignorance about the distinctions among various alphabetic programs. The point is that legitimate functions of government, such as maintaining the infrastructure for which it is responsible, are not suitable candidates for economic stimulus or counter-cyclical activities. If they should be done, they should be done always. You don’t want to let the water system fail just because the economy is good. And if they should not be done, they should not be done ever, no matter how bad the economy. There are plenty of things that should be done, and if you can’t find any, then cut taxes.

        • “Legitimate functions of government”, like building infrastructure, as the PWA and the WPA did, as opposed to maintaining critical infrastructure, can be perfectly suitable candidates for countercyclical stimulus. IMHO, the MMT academics don’t push these traditional ideas enough. And giving everyone who wants one a job is a very legitimate government function.The state refusing jobs to its citizens is a demented crime against them.

          The problem is not that there is a sharp line between what must be done NOW (like maintaining water systems) & deferrable things that could wait til when resources, above all, labor, are freed up in a slump. Between what should/ shouldn’t be done. There isn’t. The problem is a practical one of timing. It may take a while to get a project underway and the slump can be over by the time it gets going. So the countercyclical stimulus becomes pro-cyclical, and the bigger the project, the worse this problem. One of the reasons for the WPA was that the PWA’s big projects were taking too much time to start employing enough people.

          Keynes advocating planning for such infrastructure projects during booms so there would be a buffer stock of them that could be undertaken as quickly as possible when there was a slump. This idea was in all the textbooks before the fall of the dark age of economics, and was put into practice. But it is still hard to do. But the bigger the slump, the easier it becomes. So it is very easy now – and the “good times” before the Great Recession were crappy by historical measures, partly because the USA has skimped on infrastructure spending for many decades.

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  11. It’s interesting reading this because it seems to devolve into an argument about things that we don’t really understand. These systems are too complex for anyone to know all the consequences of any change. Arguing about the relative merits of a job guarantee program isn’t much different from the discussion about whether the federal deficit is good or bad or whether BIG is a good idea or not. We simply don’t know.

    But we can try things. And we should. One need not take an all-or-nothing approach to any of this. Take Romneycare in Massachusetts or the planned single-payer Vermont. These are bold experiments that are sure to be imperfect, but also likely to provide benefit to many. Taking chances on programs while remaining willing to make adjustments or totally discard any program upon failure can allow us to make real progress for people in need. Problems that occur when implementing new programs are seldom those touted most vocally by naysayers before implementation. These things are just hard.

    But doing SOMETHING is better than all the blog-bitching that could ever take place. We have to understand, though, that with any program, there are bound to be successes and failures, winners and losers. Lack of perfect outcome doesn’t mean failure and some success doesn’t necessarily imply long-term value. We need to be honest in our assessment of what we do and in the obvious fact that we really know much less than we think we do.

    • golfer1john

      I think the proponents of the JG would be delighted with a small pilot program in a few US cities. Even that is nowhere near imminent, never mind a full-blown, nationwide “big bang” implementation (which could well fail simply because of the size under current conditions). And if someone else has another idea, try that too in a few different cities.

  12. Why not just extend and fatten unemployment insurance? It would be so much easier than JG.

    • nicholas a. evans

      Long term unemployment insurance 1) doesn’t require any productive work be done, which is an unrecoverable waste of human capital (our most important resource), 2) can be inflationary for the same basic reasons BIG would be inflationary, 3) has a strong social stigma which prevents hiring by potential employers, 4) often leads to real atrophying of job skills.

      On the plus side, it is still counter-cyclical. But the cycle should be fixed faster by JG.

      • nicholas a. evans

        I suppose that in as much as fattening unemployment insurance is done like an normal insurance program (i.e. by raising premiums), it probably wouldn’t be inflationary. But that is basically the same as raising taxes on employers, and wouldn’t that introduce a pro-cyclical drag on an otherwise counter-cyclical program?

    • because the basic aim of the JG is to eliminate involuntary unemployment.

      • i.e. if you want to work, and thereby contribute to society, then you should always be able to – and be able to receive a monetary payment for doing so.

  13. Robert P. Willis

    In 1945 I was stationed at a naval training school near Detroit where I visited many well kept neighborhoods. In a 1959 visit I could not believe how rundown those neighborhoods had become. In 1981 I was introduced to land value taxation, a potential national tax not included in MMT. I suggest the following for both federal and state taxes.
    2012 Tax Reform for Iowa Jobs
    Low wage jobs or no jobs force families to face hunger, debt, homelessness and shortened lives while working families, farmers, and businesses pay job-killing sales, income and improvement taxes to support government and pay for ‘Iowa’s property tax relief’. The Iowa Dep’t of Revenue reported $10.47 billion (less $1.7 billion direct tax on land) in such taxes in 2010. In addition, rent paid by tenants to landowners for access to sites on which to reside, invest capital, create jobs and produce goods takes billions out of wages and profits. Iowa’s governments are taking $8.77 billion from family, farm and firm earnings when they could be collecting $10 billion or more in rent from landowners. States can end ‘double takings’ of earnings and spur landowners into creating jobs and producing goods.

    First, for purposes of more uniform assessments the Director of the Iowa Department of Revenue shall re-write the department’s REAL PROPERTY APPRAISAL MANUAL to require annual appraisal of building values as the residual of the annually and uniformly appraised unitary market value of each parcel less the annually and uniformly appraised market value of land.

    Second the Director shall require taxation of all classes of land (ex. buildings) at 100% appraised valuation and calculate improvement rollbacks to hold valuations of each class of property within legislated annual growth limit. For example taxing all classes of land, including agricultural, at 100% appraised value would have lowered Iowa’s 2010 rollback of taxable residential dwellings to 36.0871% from 48.5299% and commercial to 90.5592% from 100%.

    Third, the Director shall require ten year property tax abatements on new construction but not tax on land. Capitalization of savings from tax free construction raises the present value of land which, in turn, adds to tax bases.

    Fourth, Property tax rates shall be calculated for the full dollar amount of each jurisdiction’s appropriations including rates to fund full replacement of state and local sales tax, replace local public utility user charges and cover an additional $300 rise for each individual and dependent state income tax credit for all paying and non-paying filers.

    Land is the more reliable, equitable, transparent job-creating tax base. Taxing correctly appraised land collects unearned rent created by natural conditions and public spending on infrastructure. The higher tax on land does not add to the price of housing space, commercial floors, factory floors or farm improvements. Instead, it capitalizes to a lower price for sites for homes, farms, business, industry, highways, railroads and utilities. It frees markets from land owner monopolization of building sites. It eliminates taxation of wages and profits. Free-market buyers pay less for land, pay less mortgage interest and maintain property titles by paying a tax that does not add to production costs.

    I calculated savings per household with all classes of land taxed at 100% of 2010 appraised values for four jurisdictions and improvement values rolled back as above. Up to 91% of Des Moines families, 82% Ankeny, 46% Runnells and 56% Lincoln twp. would have paid less total tax. Aggregate family savings came to $55.6 million in Ankeny, $310 million Des Moines, $0.618 million Runnells, and $0.446 million Lincoln Twp., or $1,371; $1,553; $1,606 and $798 savings per family.

    Since the function of commercial, industrial, agricultural, railroad and utility sites is job creation and production of goods, owners of those sites should expect to pay more tax on the site and less tax on improvements. However, many of 309,748 individuals and businesses who collected $1.65 billion in 2008 Iowa retail sales tax rent floor space from one or more of Iowa’s 94,771 commercial and industrial landowners. They and farm tenants who farm 53%% of agricultural acres don’t pay property tax on land but do create jobs and produce goods although burdened with rent payments and taxes on earnings. Income tax cuts and repeal of sales tax would raise net incomes for tenants and offset added tax on owner-occupied land. Given consumer tax cuts, a higher tax on land and lower improvement tax from residual appraisal of building values the more intensively improved parcels would earn more, least improved earn less.

    Landowners can maintain property rights by (1) pay tax out-of-pocket, (2) pay added tax and invest capital to create jobs, produce goods and earn more or (3) sell sites at tax discounted price to others ready to invest capital, create jobs, buy materials and earn wealth producing for a growing market. Iowa can lead its sister states and the Federal government in spurring job creation and providing funds for welfare, health care and education with full collection of land rent and repeal of all taxes on wages and profits.
    -by Robert P. Willis, 2/19/12
    Tax Capitalization ‘Criteria for Good Proposals’ by Thomas F. Pogue, Professor of Economics, U of Iowa,
    progress.org Macroeconomics in One Lesson by Fred E. Foldvary, Senior Editor, June 29, 2009

    michael-hudson.com ‘Land-Residual vs Building-Residual Method of Real Estate Valuation’ by Michael Hudson, Professor of Economics, University of Missouri, Kansas City
    masongaffney.org ‘How to Thaw credit, Now and Forever/Solutions’ by Mason Gaffney, Professor of Economics, University of California, Riverside, October 2008
    state.ia.us/tax Iowa Dep’t of Revenue 2007 Annual Report, Tax Collections; 2007 Property Valuation Report;
    legis.state.ia.us 2007 Iowa Code: 441.21 ACTUAL, ASSESSED AND TAXABLE VALUES ‘rollback’
    assess.co.polk.ia.us Polk County, Residential, commercial and agricultural land and building valuations
    co.polk.ia.us/auditor 2008-2009 Tax Levies Payable Fiscal Year July 1 09 – June 30 10 Polk County IA

  14. Bobby Gladd

    Interesting commentary here. An academic debate, though, because none of this proposal is likely to get any traction.

  15. I’m in accord with Bobby Gladd. What’s a few gadflies to the behemothic machinery of embedded institutions. It’s gonna take more than good ideas to correct the bias of that machinery especially since the status quo has got it so hedged about.
    The galling thing is that there is so much white-collar cheating going on! And we let them do it! I reckon the institution of twisted-accountancy need sorting out first. For example, given the “Treasure Islands” of N. Shaxson, and the work of William Black, what good the discussing or even implementing MMT and honest property taxes if twisted-accountancy carries on?

    • Thanks, Len. They get irritated when I point this out (singing off key in the Cantada). And I take no pleasure in saying it. I’m a long-time Bill Black fan (not so much some of these other MMT people).

      “What’s a few gadflies to the behemothic machinery of embedded institutions. ”

      There you have it. Ding, Ding, Ding; we have a Winner.

      (None of which is to advocate just giving up.)

  16. If the US government fails to produce a full-employment economy, it must provide generous Unemployment Insurance to every unemployed person they have failed.

    Here’s a great piece from Ian Mulheirn which argues the same: http://www.newstatesman.com/politics/politics/2013/05/truth-about-welfare

  17. Why wait for the federal government to do anything? Right wing economic ideology and power politics have rendered them powerless to act. States and municipal governments facing bankruptcy should issue complementary currencies. They could call their currency, “the right to work or full employment currency”, “public purpose currency”, “city or state infrastructure currency” , “currency of the marginalized and dispossessed”. Currency would be issued to pay for services that the community needs and in that sense would not be created out of thin air as the currency would represent the value of labor or goods contributed to the public good. Therefore there would be no need for deficit accounting. They could foster the acceptance of this currency by accepting their local currency to pay for municipal or state taxes or as payment for tuition to local schools and other locally funded institutions that serve the public and this currency could be used to create employment at publicly funded institutions. Private enterprises could be encouraged to accept this currency by offering a tax moratorium on transaction in the local currency for a defined period of time. Businesses such as restaurants that were operating a less than full capacity could sell vouchers that could be paid for in the alternative currency to bolster their businesses. An alternate currency could set social objectives such as a minimum wage which is actually a living wage. It could give preference to public infrastructure bids in which part of the project was paid for by the alternative currency.
    Switzerland has used a complementary currency to stabilize their economy since the 1930’s. This is not an revolutionary or untested concept. When the national currency no longer serves the public interest, it is time to adopt a currency that does.

    • You are correct. The issuance of currency directly by state governments is perfectly legal. They can’t declare it to be “legal tender”, but they can issue it and accept it…

  18. The core of Detroit’s fall is not money, it is corruption – or I think so. And that is a conundrum. All over the world we can see examples of huge amounts of money put into failed nations, with no improvement. Other places we can see little money with much improvement. In Europe, Wedell (Collision and Collusion) talked about the inverse relationship between the amount of aid received by nations and their health 10 years on.

    The unlooked for problem of such monetary allocation is that it provides a focus for corruption.

    We are, indeed, past our eyeballs in corruption on Wall Street with the big banks. They have captured the White House and essentially use it like a sock-puppet. But that does not mean we can ignore corruption among officials and aid workers at the level of cities.

  19. I recommend that the authors of this paper get in contact with the Detroit City Planning Commission and their analogues in other major cities and create a coalition with muscle to get funding in Washington for the ELR.

  20. Brian Brain

    A comment on FRAMING.

    At Wikipedia, “employer of last resort” is described as follows:

    “The phrase is used in two sense[s].” The first is “undesirable jobs, often private sector, which are only taken as a last resort.”*

    Wouldn’t it be better to frame such an idea in a more positive way: public service employment, perhaps?

    One of the things MMT has got to do well is framing. The Right certainly does an effective, if misleading, job: right to work, personal responsibility, death tax, and a hundred other well-crafted labels.

    * The second sense is “a formal government job guarantee program, where the government promises to act as employer of last resort, employing all comers.”

    • Brian Brain

      P.S. Like “employer of last resort,” “entitled” has two different meanings. The Right’s framers have spent considerable effort to make sure that the negative meaning has tainted the positive when it comes to Social Security and Medicare, for example.

      By the way, has anyone noticed that “even” Obama uses the Right’s “tax relief” frame?

  21. “Funding for the job guarantee program must come from the federal government—and the wage should be periodically adjusted to reflect changes in the cost of living and to allow workers to share in rising national productivity so that real living standards would rise—but the administration and operation of the program should be decentralized to the state and local level.”

    That is the most concise statement of an excellent jobs program that I have ever seen. We need to realize that just handing people a paycheck for not working is not a good idea unless it is a temporary situation to bridge the out-of-work person to a job. Prices would eventually go out of control if too many folks were just sitting around collecting $40k/yr, year after year, for not working. The importance of having government programs administered close to the situation on the street cannot be emphasized enough, fraudsters find large centrally administered programs-where the administrator sits in a distant office- too easy too pilfer compared to a local administrator who is at least is closer geographically to the client being serviced. Not that fraud and malfeasance will still not occur but there is a better chance of control with local administering than with DC trying to run the program.

    Wages are the key here: anything less than $12 per hour ($25.5k/yr) for a person supporting just themselves is not acceptable. A family of four would need, at a comparable income level, about $71, 600 per year.

    • “Prices would eventually go out of control if too many folks were just sitting around collecting $40k/yr, year after year, for not working.” – Ray Phenicie

      I disagree. The federal government has given trillions of dollars to Wall Street and this has not produced inflation, so I find it hard to believe that giving $40k/yr to a few million people would be inflationary.

      • Wall Street isn’t spending the money, that’s why it’s not inflationary. If it had gone to Main Street instead (by the Romney tax cut, for instance), we wouldn’t be in the mess we’re in. And probably not a different mess, either.

        A few million times $40K is maybe $120B? A drop in the bucket, in today’s economy. Taxes went up by more than that just a few months ago.

        25 million (my round number guess for U6) times $40K is $1T, and that is way too much for today, if they don’t produce anything. Most of the unemployment and underemployment today has to be replaced by productive employment, not by JG or BiG.

        JG is a buffer. It is counter-cyclical. It helps stabilize things at full employment. No amount of fine-tuning, especially when it depends on an Act of Congress, can be as effective and timely.

    • I keep hearing this bit about inflation trouble if “too many folks were just sitting around collecting $40k/yr…for not working” and I’m terribly confused. Isn’t it the MMT folks (and now Krugman) who say that inflation isn’t a monetary phenomenon, but one of societal failure? Besides, why would there be inflation if there are plenty of goods, regardless of how many are “sitting around?” Say a machine could just make all the stuff that anyone could want. Are you suggesting that we should move dirt from one pile to another just to consume the stuff made by the machine?

      You need enough people to work in order to produce the good that people would like to consume and no more. Whether people work or not in order to consume is irrelevant. In the US, people retire and receive monthly stipends (inflation-linked, mind you) and consume without producing. This doesn’t seem to fuel inflation. Many people go to “work” and do nothing in the way of production (can you say “financial services”?), and yet we pay them a salary. This doesn’t seem to fuel inflation either. Expecting people to work in order to consume is a moral concern, not an economic one.

      That being said, work is important. People want to work. Creative work provides a sense of self-worth and self-sufficiency. It is fulfilling. What we need to do is provide a system in which people can do “non-productive” work while allowing consumption.

      • “You need enough people to work in order to produce the good that people would like to consume and no more.”

        I guess it depends what you mean by “would like to consume”. Usually it is stated as “willing and able”. But we have that today. There is no over- or under- production, we produce what can be sold, no more and no less. That happens whether unemployment is high or low.

        I’m sure lots of people would like to consume lots more than they can afford, and , in the aggregate, lots more than the economy can produce even at full employment. Until we get that machine, we’d better not supply enough money for everyone to consume all they would like.

        Inflation is about the aggregate, regardless of whether any individual or industry is productive. As long as aggregate demand does not exceed aggregate supply, prices will not rise. Mathematically, if the money paid to retirees, financial service employees, and others not producing were to exceed savings desires, then there would be inflationary pressure as consumption tried to exceed production. It’s just that today we’re not close to that situation. We have a shortage of demand, and anything that adds to it is helpful, not inflationary.

        • Sunflowerbio

          I think we should be careful to separate productive work from work producing tangible things. Lots of jobs are productive (produce outcomes desired by society) but don’t produce tangible objects. Doctors, firefighters, police, therapists, parole officers, mail carriers, truck drivers,etc. are all productive but don’t make things to be consumed.

          • golfer1john

            Quite true, and I didn’t mean to do that. The effect is the same, though. If we pay people for sitting around, and drive up demand for therapists too much without putting more people to work as therapists, then that would be inflationary. Just like if we drove up the demand for food without putting more people to work at farming.

            • Sunflowerbio

              I agree increasing demand without increasing supply could lead to inflation when the slack is taken out of the economy, regardless of whether the supply is products or productive workers. The solution to the shortage of productive workers is to train and employ them as public servants under a JG rather than simply giving them a stipend and allowing them to consume only.

              • Sunflowerbio

                I guess I am just making explicit what you implied.

              • golfer1john

                I think JG deals with an excess of productive workers, not a shortage (if by “productive” you mean capability, not current activity). With U6 at 15%+ there are lots of workers that are producing way less than they could do.

                Excess compared to aggregate demand. If they were put to work (or had been kept at work), their output would go unsold, for the most part. That is why they were laid off.

                Giving a stipend to anyone but the very rich or to banks or business would increase aggregate demand, because those receiving it would spend it, at least some of it. The same for reducing taxes, in particular the MMT favorite to reduce, the FICA tax. Some of that needs to be done, if we are to grow fast enough to make a serious dent in unemployment. We do pay “stipends” to people without reference to their production, but today we are nowhere near the “too much” level of stipend that would increase demand above the ability of the workforce to satisfy it.

          • I don’t understand your point. Therapists are not productive.

            Kidding aside, even if stipends are inflationary, don’t the MMT folks suggest controlling the inflation through taxation? All this is worrying about a problem that doesn’t exist or likely to exist — people not wanting jobs that need to be done in order provide desired goods. Stipends are more about reducing inequality than anything else.

        • Shortage of demand? No such thing. How can there be shortage of demand? You either want something or you don’t. The issue is when the demand exceeds our CAPACITY to produce. Sure, there can be short-term inflation due to demand outstripping supply, but as long as there are people to work and real resources available, there should be no long-term inflationary pressure. There are millions upon millions of people in the world without work. The issue is one of resources and distribution thereof.

          • golfer1john

            Shortage of demand is what we have now. Output gap. Production less than capacity. Unemployment. Low factory utilization.

    • Professor Wray has a response about the idea of paying folks to do nothing-vs. paying folks to be productive-at anything even the proverbial picking up trash on the side of the road.
      My estimate on ‘too many’ -just to respond to the comments below-is that when the cost of labor goes up-as it eventually would-someone can do the numbers by figuring out the cost of labor and than taking that number across the board to add a significant cost to the price of making goods. We already have that to some extent as labor is forcefully excluded from the job market by oligarchical forces. But think for a moment if everyone chose to stay home and collect their income and not work. So ok, the cost of the remaining goods in the warehouses soars as that last worker sinks into the recliner, not because of inflation per se, but because of a plain old shortage of goods. I think the commentators below need to study the difference between a price increase due to a shortage of labor and inflation caused by too much money entering the economy. MMT does not deny this could happen and for that reason cautions about the need for lawmakers to look carefully at the amount of government spending and how that single factor alone contributes to price increases. Not a single Congressional member or staffer understands the effects of government spending on prices.

      • golfer1john

        ” not because of inflation per se, but because of a plain old shortage of goods. I think the commentators below need to study the difference between a price increase due to a shortage of labor and inflation caused by too much money entering the economy. ”

        “Shortage” and “too much” are terms describing a condition of something relative to some different amount of it, or to some other thing. If labor is in short supply, unemployment is very low, customers buy everything on the shelves and want more, and businesses raise their selling prices and bid up wages in an attempt to hire more workers and satisfy customer demand, that is the very same condition as “too much money” entering the economy. If taxes were higher, the amount of money would be more appropriate, customers would not be able to buy so much, anticipated sales would be lower, businesses would not need to hire so many workers, and there would be no labor “shortage”. The amount of labor would still be the same, but no longer in shortage because the demand for it has dropped.

        What needs to be differentiated is a change in relative prices vs. inflation. If the weather is bad and the harvest is small, and corn prices rise because there is less corn for sale, that is not inflation, just an increase in the price of corn relative to everything else.

        • I realize I was not exact. But there is a relationship between the price of goods and the amount of labor available to make goods. that is all I wanted to point out. If the number of workers available to make goods is decreasing from month to month a certain point will be reached where that will have an influence on the price of goods, which have to go up. This is different from injections of cash via fiscal spending. See Wray’s article I pointed to please.

          • Well, our labor participation rate has been going down for 5 years now. Is that what you mean by workers “available” to make goods? If so, we should have rapidly rising prices now, with the smaller labor force.

            It is the relationship of two things that influence prices. You cannot determine the outcome by looking at only one of them.

        • How is what you’re describing any different than a “shortage in demand.” Say everyone decided that they wanted to become extreme couponers or bulk shoppers at Sam’s or Costco. That would certainly increase demand, at least for a while. But is it “good” to have people storing lots of stuff in their garages and basement that they don’t really need? There is no magic correct amount of consumption. If your measure is that we need enough consumption to give everyone a job, then so be it, but this seems very backwards to me.

          Before one describes a solution to a problem, one must describe the desired outcome. What is it? Is the desired outcome that everyone has a job? Is it that everyone owns a car? A 2500 square foot house? An Ipad? What? In the US, we can’t even agree that everyone should have healthcare (though we seem to be sneaking up on that). To say that our problem is a “shortage in demand” is really saying what? We need to stop speaking in abstractions and be concrete about the kind of society we want. You can’t create a system to satisfy needs until those needs have been identified.

          • “How is what you’re describing any different than a “shortage in demand.”

            Not sure what you’re referring to. I’ve said we have a shortage of demand now. Taxes are too high for the size government we have.

            “If your measure is that we need enough consumption to give everyone a job, then so be it, but this seems very backwards to me.”

            That’s exactly it. The universally agreed holy grail of macroeconomic policy is full employment with price stability. Government’s job in economic policy is to regulate demand so as to achieve that goal. Without a JG, they can only balance the two competing goals, and imperfectly at that.

            “What kind of society we have” is a much broader question than what level of economic activity we have. There is relatively little overlap.

            • Disagree. The level of economic activity is highly connected to the “kind of society we have.” And it’s not just the level of the activity, it’s the particular type of that activity. You must see that “full employment” is more than an economic measure. It’s wrapped in morals, equality, control and so on.

              If all macroeconomists think that all people must be working to achieve goodness, perhaps we should stop listening to macoeconomists. I, for one, would like to work a less than I do now, no matter what the macroeconomists think.

              • It’s not that all people must be working. It is that all people who want to work (and be paid for it) have the opportunity to do so. Nobody should be forced to work.

                You can have a society with lots of freedom, like in the US, and it can have a good economy with high employment or a bad one with high unemployment. We’ve seen both in just the past 10 years. There is no rule that says a free society will be prosperous, or that a prosperous one will be free. Likewise, you can have high GDP or low in societies that are quite repressive, ones that have cradle-to-grave government support, ones with very lean government, ones that are very compassionate, ones that are mean, or ones that practice slavery. You can have good or bad GDP growth where the wealth is divided relatively equally, and good or bad growth where the wealth is more concentrated. There have been monarchies, autocracies, religious governments, secular governments, and every other kind you can imagine, and all of them can have high or low economic activity.

                I agree that there are many tools of economic policy that can be brought to bear in order to change a society. You may even say that particular tools and particular changes are the only proper moral course. But that does not mean that you can’t achieve the same economic results in a different societal context, or that the economic situation dictates a certain type of society.

  22. While the JG is noble in its concept, it is an impossible one to implement in light of politics.

    The real solution would be govt spending debt free currency either through direct issue of currency in a managed fashion or even a trillion dollar coin scenario. But since most of our society has been terrorized into believing: Creating new money can only be safely done when accompanied by corresponding debt. So this won’t happen either.

    I am convinced the real and practical solution lies in creating state banks that can use the states vast financial resources to make low cost credit available indefinetley to fund state and municipal operations, projects, and services. With any small profits being returned to state coffers instead of banksters.

    The initiatives promoted by Ellen Brown at http://publicbankinginstitute.org/ Seem to be the most practical way of avoiding future municipal bankruptcies and even growing the economy. I’m surprised I haven’t seen more support for it from the smart folks who hang out here.

    We know by the 4 percent unemployment rate in 2006-2007, when there’s enough money circulating in the system, employment will fix itself.

    • Thanks, JC. The Greenbackers and Progressives understood the critical importance of control over the money printing by banks. This is why there is a Bank of North Dakota, one of their successes. And yet now, over 100 years later, so many people fail to understand the importance of it.

    • JC:The real solution would be govt spending debt free currency either through direct issue of currency in a managed fashion or even a trillion dollar coin scenario.

      This wouldn’t even be substantially, directly important, let alone a real solution. (Also: There is no such thing as debt-free currency. Greenbacks and trillion dollar coins are just as much debt as bonds are.) However: spending by printing greenbacks could be important, tremendously important, psychologically because it would end crazy mythologies around bond issuance = reserve draining.

      State banks are a very good idea, there were more of them in the past, they helped states finance their way through the Great Depression, but they simply aren’t enough. The nations of the Eurozone have their own central banks – parallel to State banks – which is a good thing – but neither they nor their governments retained the power to issue currency when they joined the Euro suicide pact. As they are part of the USA, no state can “make low cost credit available” indefinitely. Only Uncle Sam can.

      We know by the 4 percent unemployment rate in 2006-2007, when there’s enough money circulating in the system, employment will fix itself. Did it fix itself for the 4% back then? Why should they be sacrificial victims for the other 96%? What good does it do the other 96% to force the 4% not to work? Nothing.

      This gets it backwards. “Money” will fix itself if you fix the real thing: Unemployment. Fixing unemployment fixes inflation & everything else. Why on earth should anyone care about how much money other people are saving or spending, as long as they can have a decent life for themselves? As long as they can be sure being able to trade their scarce, valuable labor for scarce, valuable money that they can trade for a decent level of consumption and use as a safe store of value? And a job guarantee, a solid commitment to full employment, is the ONLY thing that can guarantee this (as much as is possible).

  23. Very intriguing stuff. I am quite interested in much of what I’ve read on this blog as well as papers by some here, but I have a few questions about some things. I am not a student of economics just interested, and I was just hoping for some more in depth talk about many of the policies and ideas discussed. They all make sense though, and I’ve never found any real answer, or even reason behind, much of our current situaiton but reading the NEP blog has done so. You guys here may be the few who really “get it”