An MMT vs Austrian Debate Post-Mortem Part III of V: Democracy, Taxes, and the Currency Monopolist

By Rohan Grey

[Part I] [Part II] [Part III] [Part IV] [Part V]

As mentioned at the end of the preceding section, Murphy’s major outstanding critique of the MMT analysis was that it presumed the existence of a state with a currency monopoly by virtue of its taxation power – or, as Murphy’s described it, MMT was “in favor of robbing liquor stores” in order to ensure a demand for its currency. In my opinion, this critique was underdeveloped, since it did not articulate why the problems identified were worse than the problems of any other feasible system.

In fact, the closest Murphy came to articulating an alternative vision of economic governance was when he compared the government activities with that of a corporation: 

Murphy: Let me give you a hypothetical scenario . . . there is a hypothetical CEO and 60 minutes is doing an expose, and they get the guy on camera and they think they got him good, because they say  our auditors went in – he’s the CEO of a major corporation – and they said “for decades you’ve been taking ten percent from their paychecks to put aside to fund their pensions, and you’ve promised them specific payments. Our auditors came in and looked at your books and we found you haven’t been investing in outside assets, you’ve been giving it as dividends to your shareholders to boost your stock prices and giving yourself bonuses, and investing a little bit in the factory, now you’re an underfunded pension by about $10 billion. What do you have to say for yourself before you go to prison?”

Before getting to Mosler’s response, it is worth briefly unpacking this hypothetical (and in particular, the emboldened phrases), as the corporate metaphor concealed a number of highly ideological characterizations of government action that, even if accurate, warrant recognition.

First, Murphy negatively characterizes the corporation’s decision to pay dividends to its shareholders rather than investing in “outside assets.” In real terms, however, the “employees” and “shareholders” of a state are one and the same – its citizens. Hence, paying dividends means, simply, giving citizens a share of the social surplus produced as a result of state-facilitated economic coordination. This is, at least in my opinion, almost tautologically a good thing.

Second, Murphy describes the corporation using its profits to “boost [the corporation's] stock prices and [give itself] bonuses, and [invest] a little bit in the factory” in a way that implies these actions are contrary to what we would expect a corporation to do. In the context of the state, however, “boosting stock prices” is similar (if not equivalent) to maintaining the value of the currency, “bonuses” is equivalent to paying good public sector wages, and investing in the “factory” is equivalent to investing in social infrastructure. These are, in my experience, widely considered to be normal state functions.

Third, Murphy’s final question – “what do you have to say for yourself before you go to prison?” – presumes that the entity being audited is subject to a higher law than its own. However, beyond individual public officials actually breaking laws on the books, or a legislative body somehow violating the Constitution (as determined by the Judiciary, or in the final analysis, in the court of public opinion), the terms “crime”, “prison” or “lawbreaking” have no analogy when evaluating the domestic actions of a sovereign, self-governing republic.

Hence, when separated from its metaphorical clothing, Murphy’s question can be reframed the following way:

“Our auditors have come in and found that the state hasn’t been investing the real social surplus, created by the citizenry and captured by government through the monetary system, in outside assets foreign nations and businesses. Instead, it’s been distributing it as dividends income to its shareholders citizens to boost stock prices its currency value and giving yourself bonuses pay public sector workers, and invest in the factory public infrastructure. Now the state has an underfunded pension by about $10 billion insufficient spare capacity to meet all of its real resource obligations without higher inflation or without requiring a tax increase. What do you political leaders have to say for themselves before you go to prison? we vote whether or not to keep you as our elected representatives?

This framing is far less loaded than when the question presented through the metaphorical prism of a corporation – indeed, I have trouble distinguishing it from questions of budget policy that arise during the natural course of campaign politics.

Ok. Let’s pick up where we left off:

Murphy: . . .Now you’re an underfunded pension by about $10 billion. What do you have to say for yourself before you go to prison? And the CEO says “woah, woah, woah. I’ve been reading Warren Mosler, and let me tell you something. This is just a completely arbitrary thing. If the Congress would just let us print our own $100 bills, there would be no underfunded pension. This is all a fake crisis, and in fact because demand right now is insufficient, we would be doing the economy a favor if Congress would just go ahead and change the rules which make it illegal for us to run the copier and print off a hundred dollar bills.

How come the Treasury or the Fed can do it and we can’t, that’s stupid. It’s not like it has to be a piece of gold – it’s just paper with symbols on it. If Congress would just change its arcane rules saying that their money’s good and ours isn’t legal tender, all of a sudden this underfunded pension disappears like that and we create jobs, so there we go.

Of course, the 60 minutes guy is floored. 

Readers may recognize Murphy’s hypothetical as a prime example of the logical category error most criticized by MMT proponents: analogizing the role of the government to that of a corporation or household:

Mosler: I’d sentence that guy to 30 years in the electric chair. [laughter]. 

Murphy: Because why?

Mosler: He’s demanding the ability to counterfeit. He knows there’s no counterfeiting rule. He knows or should have known that you’re not allowed to counterfeit money. He’s committed fraud for his employees. He’s a user of the currency. He can’t spend it until after he gets it. He’s not the issuer. That’s how the game is set up.

You could be playing in a poker game and say “hey, this is not fair, give me the deck and let me put any cards I want in my hand” . . .

Carney: The follow-up, I guess, is – if it’s fraud when a person does it, why is it ok when the government does it?

Mosler: So let’s say we’re at a card game, and I’m the scorekeeper. It’s like, how many points do I have? I don’t have any. Well then how do I give you 100 points? I just write it down in your account. Do I have fewer points? No. And somebody else has a bad hand and I take points away. Do I have more to give to the next person? No.

And somebody in the card game says “that’s not right, I should just be able to change my own score.”

Fine, you want to have a card game where people can change their own score? It’s not going to work. It’s not going to function.

Murphy’s only response to this clarification, as far as I could tell, was to repeat his earlier claim that the coercive use of taxation to establish a currency monopoly is equivalent to theft:

Murphy: If any other entity did the sorts of things, and then tried to justify them, or just explain what they are doing the way in [Mosler's] writings he talks about what the government’s doing – whether it’s the household worrying about their financing, whether it’s the CEO who is not contributing to the pension plan – if they defended what they are doing the way Professor Mosler is talking about the government with respect to its budget, with respect to social security and so forth, clearly that would be fraudulent. . . .

The fundamental way that he came back and said “there’s a distinction here that you’re not getting, Murphy, is that it’s like there is a scorekeeper, and obviously there is a distinction between the people playing the game and the referee setting up the game.”

But then that just begs the question – why are we playing this game in the first place? Why is that guy the scorekeeper? According to his own analogy, it’s because they have guns, and are pointing them at us and saying “You’re going to play this game. The reason my business card is going to work is because you’re going to get shot otherwise.”

. . . It seems to me that it’s kind of a big deal that by his own admission the system we are already in and that he wants to tweak a little bit is one where there it all rests on the fact there are these guys with guns that set it up a certain way.

Judging from the running commentary of the debate, many supporters of “free markets” are very sympathetic to the “taxation is theft” view.

Unfortunately, it is at best, misleading, and at worst, completely incorrect.

Taxation is not theft. It’s taxation. They are distinct legal concepts. Taxation is the legal exercise of a power expressly granted to a sovereign state; theft is the unilateral act of one or more non-state actors in violation of law. The claim that “taxation is theft” this requires an extra-legal justification for the existing distribution of private property titles, whereas claim that “robbing a liquor store is theft” can be justified on the basis of the state’s own criminal and property law.

Thus, if one believes that the state’s claim to be able to tax property is illegitimate, he or she should really be leveling criticism against the rule of law itself (unless, of course, there is reason to believe the particular tax law was improperly passed according to existing rules of legislative procedure).

This point was eloquently made by prominent legal scholar Cass Sunstein in a pithy 1999 article titled “Why We Should Celebrate Paying Taxes,” part of which I reproduce here:  

Without taxes there would be no liberty. Without taxes there would be no property. Without taxes, few of us would have any assets worth defending.

Indeed, property owners are more deeply “dependent” on government than food-stamp recipients. The man who purchases several news organizations owes more to legislative, adjudicative and administrative action than the woman who sleeps under one newspaper at a time.

. . .

Homeowners . . . do not depend only on fire and police departments and competent management of the registry of titles and deeds. . . . [T]hey also depend on taxpayer-funded armies, manned largely by low-income citizens, to protect their homes from drunken and ruthless marauders.

And government does not “merely” protect property; it also defines and assigns property, setting forth the maintenance and repair obligations of landlords, for instance, and deciding whether the employer or the employee “owns” the inventions of the employee. To imagine property owners without government is therefore like imagining chess players without the rules of chess.

. . .

It may be reasonable, in some cases, to cut tax rates. What is unreasonable and, in fact, preposterous is the all-too-familiar conservative rhetoric that flatly opposes individual liberty to the government power to tax and spend. You cannot be for rights and against government because rights are meaningless unless enforced by government.

. . .

In any case, to recognize the dependency of property rights on the contributions of the whole community, managed by the government, is to repel the rhetorical attack on welfare rights as somehow deeply un-American, and totally alien or different in kind from classical or “real” rights. No right can be exercised independently, for every rights-holder has a claim on public resources–on money that has been extracted from citizens at large.

. . .

As Oliver Wendell Holmes, the great Supreme Court justice, liked to say, taxes are “the price we pay for civilization.”

Conclusion

Perhaps Murphy’s real point was that the principle of “No Taxation Without Representation,” often considered a fundamental precondition to republican government, contradicts some higher form of natural law based around an inalienable right to private property ownership. Unfortunately, however, he did not make or defend that argument.

Consequently, Murphy’s critique of taxation as coercive left me wondering “so what? If the state shouldn’t be able to use the rule of law to impose taxes on property owners, why should it be able to use the rule of law to impose access-and-use restrictions on non-property-owners?”

If Murphy had taken his anti-coercion position to its logical conclusion and denounced private property rights and, more generally, representative government, the debate would likely have progressed significantly. As it was, however, the substantive political clash ended when Mosler expressed sympathy for Murphy’s position, but conceded, along the lines of Churchill’s reasoning that “democracy is the worst form of government, except for all those other forms that have been tried from time to time,” that he could not come up with a feasible and more preferable alternative.

Perhaps it was merely due to Mosler’s exceeding politeness, but I was left at the end of the debate with the uneasy feeling that Murphy had somehow managed to place the burden of proof onto Mosler to affirmatively defend representative self-government, rather than taking it on himself make an affirmative case for his alternative system. This was, in my opinion, quite an unsatisfying conclusion to an otherwise refreshingly frank discussion of the political values that undergird so much of economic discourse.

49 Responses to An MMT vs Austrian Debate Post-Mortem Part III of V: Democracy, Taxes, and the Currency Monopolist

  1. nicholas a. evans

    Yes, this post gets at the central issue of this debate, I think. As I wrote elsewhere:

    I think the best rhetorical point that Mosler made that Murphy failed to grasp, or the biggest rhetorical failing of Mosler’s that Murphy was able to counter (depending upon your prejudices coming into the debate) was Mosler’s often repeated “business card with the gun wielding taxman at the door” analogy. I think it’s a brilliant illustration, because it really reduces down the essence of not only what state-money is, but also what taxation and government are. But from Murphy’s Austrian POV (and the libertarian or anarcho-capitalist POVs), there’s really no moral distinction between the gun wielding tax man and the gun wielding mugger.

    When Murphy kept bringing up the Austrian trope trying to distinguish the “economics” from the “politics”, I kept rolling my eyes. His entire basis for disliking state money seems to be rooted in the political notion that any coercive governance and thus taxes are immoral. But Murphy’s rhetoric plays well to your right-of-center average Joe. I don’t think that’s because most conservative Americans are convinced and committed anarcho-capitalists, but simply because they haven’t connected the dots yet. If you accept that there is any proper role for government, then you must accept some system of taxation. Once you’ve accepted taxation as a “necessary evil”, then chartalist money is unavoidable, and MMT does far and away the best job of describing the mechanics of state money.

    I subscribe to the notion that government should be constrained to promoting the public purpose only where that supersedes private purpose, which in some cases means a very small government and in others a slightly larger one. It is a very tricky thing to tease out the correct boundaries, but also a political determination (and irrelevant the main point of my comment). More importantly, I (and the vast majority of people on all ends of the political spectrum) do believe that there should be some government, and that government should be effective at what it is supposed to do. Now we need to persuade people that there is absolutely no way of having an effective government without provisioning real goods and services from the private sector, and that some sort of progressive tax system is the most just way of provisioning said goods and services. It sucks that tax collection has to be done with the threat of force, and it sucks that those holding the reigns of government (like any power structure) can pervert and corrupt that threat of force to selfish and nefarious ends. But an ineffective representative democracy doesn’t mean no government, it means that governance will be seized by the powerful (society abhors a power vacuum). So tax collection for a representative democratic government is the least bad alternative.

    If we want our debates or persuasive essays to reach the majority of Americans, we’re going to need to frame things in a way that aren’t immediate shut-down triggers for the right-of-center. Murphy’s analogy between the tax man and the mugger makes intuitive sense to a lot of Americans today, and Mosler’s gun-toting tax man plays into their fears.

    Rohan, I think this post does a great job of conveying this (better than Mosler during the debate, and better than my comment, really). But I’ll nitpick one point of rhetoric: “Taxation is not theft. It’s taxation. They are distinct legal concepts.” While this is technically true, I don’t it will win any points with the crowd who considers taxation to be immoral. I consider a great many things our state and others have done to be immoral, and just because they have been given the stamp of legality is insufficient my opinions there. You are far more persuasive when you point out that citizens are the shareholders, employees, and customers of this “incorporated” state, or when you make the case that without taxation there can be no government and without government there can be no private property rights..

    • Cory D. Hoffman (Lake Erie Liberal)

      Mr. Evans,

      I agree with your concerns about the “Tax Man as Mugger”. However, I think that Warren touches on the best response to these arguments when he briefly mentioned the “Free Market Guys” who go say “let’s do this together” when, we the public “doing things together” is what we call the “government”.

      As Paul Krugman touched on in his blog recently, you rarely see austro-libertarians getting upset at the concept of people organizing and working cooperatively in private firms as opposed to market-based, individualistic competition at all times.

      Why are libertarians not puzzled by litigators working as teams in law firms rather than competing on an open market lark Vegetable sellers at a farmer’s market? We don’t think of a Partner in a law firms contribution to the firm as a whole out of earnings from his clients as being something done with “coercion” against his will…as theft from his proper money being distributed down to associates, paralegals and staff against his will by an overbearing managing partner, etc.

      The same thought should be applied to our public administration. We the People formed a Social Contract, fully agreeing to the terms without coercion and memorialized it in the Constitution. We freely gave up our entire natural to not be taxed and to issue our own currency by granting this powers to our duly elected representatives in Congress. This is just like the contract a lawyer signs when he becomes a partner, agreeing that some of his profits that he earns will go to the firm as a whole.

      The way to beat the taxation of theft argument is not to try to do a better job of justifying the benefits of taxation but to attack the concept that the tax regimes we all live under were not voluntarily agreed upon. (IMHO).

      • golfer1john

        There are two issues here: Government is inherently coercive. We don’t have the option of agreeing to some laws and provisions and opting out of others. But we do have the option to leave, to go somewhere that has a different government that is more to our liking, or sometimes to a place with no government, and to establish our own. Or not, if you’re an Austrian. That’s fundamentally different from theft, which allows the victim no option to disengage from the transaction.

      • nicholas a. evans

        My concerns around “Tax Man as Mugger” are entirely because the people who think Murphy won the debate (and Murphy himself) seemed to find it the most persuasive bit of the debate. And it’s hogwash, unless you subscribe to a very fringe political view, but it’s persuasive hogwash if you don’t follow it through to its logical conclusion. I think I agree with Rohan that Mosler didn’t pursue this quite aggressively enough during the debate.

        On the other hand, you argue that “We the People formed a Social Contract, fully agreeing to the terms without coercion and memorialized it in the Constitution. We freely gave up our entire natural to not be taxed and to issue our own currency by granting this powers to our duly elected representatives in Congress. This is just like the contract a lawyer signs.” I’m completely unconvinced by arguments of the Social Contract, as are a great many others. The social contract is nothing like the contract a lawyer signs, because we never signed it and most of us never really have any choice about whether or not to accept it (and even emigration is not a valid option for most). And quite frankly, I’m furious about some of the things that are done by my state that might be justified as “well, you signed the contract” (and I suspect you probably are too). As a loose analogy, the social contract is not so bad, but it won’t prove anything or persuade anyone who isn’t already persuaded (or pleased with the current arrangement).

        I prefer the more utilitarian argument, which I also think is simpler: 1) Government without taxation (and coercion) cannot be effective; 2) society without an effective government sucks for most people; 3) most people want life to not suck; 4) therefore you will need to submit to some level of taxation (and coercion); 5) and some form of effective democratic government will give the best chance of life not sucking for the most people and giving them a say in how they are taxed (and coerced). Most people can be persuaded on all of those points.

        Anyway, let’s just get the basic “taxes as theft” meme out of the public consciousness anyway necessary, so we can argue about more profitable stuff. Taxes can still be unjust, because government can still be unjust. But unjust government isn’t an argument against all government; it’s an argument against bad government.

    • reserveporto

      To quibble, this comparison of the taxman as “a guy with a gun at the door” can be somewhat extreme. Clearly, the taxman does have a “gun”, in the sense that he has the power to enact a penalty should a person not pay their taxes. However, in theory, we inhabit a representative democracy. The taxman is there because we put him there. He collects the amount of taxes we tell him to collect. The coercion is not imposed by the coercer but rather by the choice of the majority of the coerced with some safeguards in place to protect the interests of the minority that did not desire that particular brand of coercion.

      • nicholas a. evans

        I agree. Personally, I like that Mosler’s analogy simplifies the role of the state to one of violence and coercion, because that is the foundation of every state’s power, and it reminds us that the existence of the state is orthogonal to the justice of the state. But once you’ve shown that the state has the power to enforce its taxes, some people need to be reminded that a (coercive) representative democracy is still a whole heck of a lot better than any other form of government. My complaint is that I wish Mosler had laid it out during the debate as simply as you just did. Only a fringe subset of libertarians and anarchists can make an internally consistent argument that all taxes are theft… and their arguments aren’t particularly externally consistent (with reality).

  2. It all comes down to whether somebody recognizes the value of having a single unified currency system run by the public as opposed to 100 different currency systems run by 100 different private enterprises.

    • Dan,

      I’m not sure that’s the crux of it – Bernard Lietaer makes a fairly persuasive case for the benefits of polyculture over monoculture w/r/t currency systems, but acknowledges that taxation and property are fundamentally linked to the state unit of account. So i’d say it’s the extra-currency potential of a fiat system that is the most important, not the single-currency simplicity per se.

      • I’d suggest that “100 different currency systems run by 100 different private enterprises” is just a fantasy and not a realistic option.

        A central currency issuer which is simultaneously the legal authority within its jurisdiction is just a fact of life, equivalent to the fact that 100% centrally planned communist economies are less productive than economies with markets and individual ownership of resources.

        • reve_etrange

          Just as a historical note, there were in fact approximately 500 different currency systems simultaneously operating in Europe during the high Middle Ages. These were run by a variety of actors including “governments” as well as clergymen or private individuals. Naturally there are some important caveats, including small currency areas in addition to the fact that even the “non-state” mint masters typically controlled some military forces and levied taxes. See “Money and its Use in Medieval Europe” by Peter Spufford, it’s an excellent read.

      • I don’t understand what that means Rohan. What is “extra-currency potential”?

        Nobody doubts that imposing a tax obligation in a currency can create demand for it. I thought the issue was whether that is a good thing or not.

        I see no benefits to multiple private currencies. We’ve already experimented with such things in the US and elsewhere, and the result was financial instability and routine crises. Private financial institutions already have enough power. I don’t want them cornering the currency system too. If the dollar ever becomes just one among several currencies, then the ability of people to pursue the common good and a national economic strategy through democratic mobilization and government will be seriously impaired. That’s what the libertarians are after, of course.

        I’m not interested in Lieter and all the other P2P cranks.

        • Dan,

          By extra-currency potential I mean the link between currency-based transactions and transfer of property titles. As the property-title enforcing entity, state taxation is unavoidable and fundamental, which is why it won’t ever just be “one among several” currencies. But that doesn’t preclude the existence and possible value of complementary currency systems where the benefits of membership are worth the additional cost of submitting to some form of voluntary taxation.

          I’m not sure where your disinterest against Lieter and P2P systems comes from, but I would suggest perhaps talking to Mathew Forstater about the complimentarity of CC systems and MMT analysis more generally. If nothing else, I think they represent an alternative mechanism to bank debt as the primary mechanism for endogenous credit creation.

          • Dan Kervick

            Sorry, Rohan, I’m just not interested at all in those escapist alt-currencies. I see the whole movement as indulging in silly and childish distractions.

            • Fair enough. Plenty of other important things for you to focus on – keep up the good work!

    • Cory D. Hoffman (Lake Erie Liberal)

      Dan,

      Very good point. I think even a lot of pretty hardcore republicans would relent on this point. Only hardcore Ron Paulistas/Austrians seem to desire a world wherein we might all try to privately issue our own currency.

      I think the more prescient issue is with the “Gold Standard” idea as conservatives seem to just think there is something corrupt about Soft/Fiat Currencies.

      I have yet to be able to be persuasive on this matter in my discussions with average conservatives.

      • It just comes down to this I think, Cory. Conservatives want the value of their financial assets to be tied to something other than government decisions. If government controls the money supply, then government could decide any time it wants to slash the value of dollar assets, and all other financial assets whose value is pegged to dollars, by jacking up the production of dollars. That’s bad for savers and net creditors , good for net debtors. The conservative nightmare is that a nation of deadbeat debtors elects a Congress that comes in and effectively forgives a big chunk of the debtors’ debts by inflating away the value of all the creditors’ promissory notes as a result of spending gazillions of dollars into existence.

        So they want to set up a system that pegs the value of dollars to something that democratically elected legislatures can’t get their hands around as easily: private stores of commodities of one kind or another. They either want the money pegged to a particular shiny, heavy commodity whose supply doesn’t change rapidly and is difficult to move around. Or they want banks to be free to issue their own redeemable and negotiable liabilities against whatever stocks of assets that might deem appropriate, in whatever denominations they deem appropriate, and then let the market decide which kinds of money work best.

        The inflation fear is one reason why conservatives they have giant conniptions about QE1, QE2 and QE3. They are convinced the Fed is trying to help the riff-raff by devaluing financial assets in real terms. Interestingly, many of the supporters of QE support it for identical reasons, because they are mistakenly convinced that QE “pumps money into the economy” and so its goal is to “inflate”. Yet, both sides are wrong, since QE takes money out of the economy in addition to injecting it into the economy .

        This is an old and longstanding political battle. It’s not an academic debate about the “nature” of money. All the interested parties understand the nature of money at least well enough to know on what side their bread is buttered. It’s a political battle over who controls the production and supply of the primary medium of exchange.

        People who think the answer is for a bunch of little guys to issue their own laissez faire P2P money, perhaps redeemable on demand into the carrots or squashes they raise in their backyards, are deluded. Anybody can issue an IOU. Anyone can make their IOU’s negotiable and redeemable on demand. Anyone can try to get their IOUs accepted. But which IOU’s will become the most widely accepted? The ones backed most reliably by the largest surplus stores of assets, and by large marketing programs, information systems and delivery systems. That is, the monies that would be produced by large financial concerns.

        This crackpot, libertarian, antigovernment, backyard do-it-yerselfism – in money or anything else – is the path to corporate domination. Because that’s how unfettered laissez faire works. You start with a competition but then the best competitors win, and use their victorious positions to control and dominate everybody else.

  3. Look, the conservative/propertied class’ real objection is not to the concept of the state itself, but to their decreasing influence over the deployment of its power. At least until Citizens United.

    • Joe Firestone

      You mean until the Carter Administration. That’s when the migration to neoliberalism and market fundamentalism began. Citizens United is only a significant event in a long process.

  4. Joe Firestone

    Hi Rohan, I’ve been following this series and I really like the job you’re doing. And I was struck by that post from Cass Sunstein, the President’s friend, you presented. It put me in mind of the even more pithy statement of Thomas Hobbes that life in the state of nature is “”solitary, poor, nasty, brutish and short.” Hobbes, and then Locke most famously developed the idea that government, to be legitimate, must be based on “the consent of the governed.” And that’s the other very pithy point here.

    Taxation in democracies isn’t theft because the Government’s right to tax comes from the consent of the governed to at least the general principle that the government has the right to tax in order to function. What’s so offensive about Murphy’s position is its systematic denial of the rights of most individuals acting through the government to constrain the freedom of a relatively few individuals who want to create economic and political hierarchies in which the many have that “nasty, brutish, and short” life, while they enjoy the full protections of force for their property either through the Government or their employment of a private security force.

    Their characterization of “taxation as theft” is just an ideological meme intended to disempower the efforts of the 99% to seek economic and social justice through their government. And you’re right on point here in suggesting that the deeper conflict between Warren Mosler and Robert Murphy is political and ideological.

    • golfer1john

      I’m not an expert on Austrian economics, but if their position is that there should be no government at all, then they truly deserve to be ignored. Anarchy is not the solution to any problem.

      I think what Murphy, or Austrians, object to is the government taking from one class of citizens simply to give to another – not to buy goods and services, not to hire police and soldiers, but just to give cash (or in-kind) payments. For nothing in exchange. One can make a cogent argument that taxation in order to pursue such a policy is indeed theft. It is exactly what Robin Hood did. It is not an argument against all taxation, or in favor of anarchy. An even better argument could be made that such policies distort the marketplace, and I suspect that is why Austrians object. Murphy was clear that he didn’t like the government “interfering” with the free market.

      In an imperfect world, though, I think even the Austrians would agree that some level of transfer payments is socially and politically inevitable, and if properly managed can even be good for the society, if not optimal for the GDP. They might even prefer the JG to the mess we have today.

      • Auburn Parks

        there is no such thing as a “free market”, and if you think that food stamps, welfare, SSDI, SS or medicaid\care are stealing money from the rich to give to the poor like robin hood, then you are not to be taken seriously.

        • Cory D. Hoffman (Lake Erie Liberal)

          I sympathize with your point but I disagree that these views should not be “taken seriously”. A lot of non-rich, average folks who vote republican or are conservative democrats…especially in towns like Toledo, OH and Cleveland, OH….disaffected whites who have been left behind by our economic policies for years have been swept up into these beliefs.

          Conservatives have successfully sold the idea that middle class working men bust their ass to pay high taxes to support welfare queens on the dole who have been “lulled into dependency” (to paraphrase Paul Ryan).

          That to me is why Minsky’s idea of “Jobs not Welfare”, the Employer of Last Resort are so important, and the understanding of the State as the Issuer of the Currency can really be world changing ideas….they defeat the arguments conservatives/libertarians make about unjust transfers from hard working producers to non-working sloths on the dole as an entirely false premise.

          The Monopoly Issuer of the currency need not tax the producer in order to transfer her money to the poor sloth on the democrat plantation (I’m doing my best Political Turing Test here). No, government spending precedes taxation. Taxation creates notional demand for the currency…not a gravy train for the poor.

          As Randy wrote on his blog, Predistribution instead of redistribution. We don’t need to tax the rich to ensure distributive justice! Nozick’s central counterargument to Rawls in Anarchy, State and Utopia is defeated by monetary sovereignty!

      • Auburn Parks

        I’m not saying you think those things John, I’m just saying that anybody who does believe those things, is to be ignored.

      • Joe Firestone

        Well, John, Murphy didn’t introduce any such qualification in his presentation. Also, as you know, so-called transfer payments, aren’t transfer payments in our fiat currency system. The Government creates and destroys net financial assets in its fiscal operations. When it taxes it destroys money and it does so for various reasons; but none of them are so it can get the money to provide needy people with deposits.

        In addition, the Austrian “theft” argument begs the most important question in our modern economy. Those are questions relating to whether the very wealthy and the large corporations earn the profits they make or actually “steal’ those profits themselves by manipulating the economic and political systems and by committing outright fraud. Bill Black posts here very frequently on control frauds. It is also well-known that large contributors stack the economic deck in their own favor by influencing Congresspeople to pass legislation taking the risk out of their business and giving them undeserved advantages in the market. To the extent, this is true, Government safety net benefits can be seen as nothing more than economic and social justice, inadequate at that, redressing in some small part the many injustices done to the 99% by the 1%. So, if “taxation is theft” how much more is control fraud, mortgage fraud and political manipulation “grand theft.” I really don’t think the Austrian should throw around that epithet so freely. Nor should they forget that Robin Hood, in the legends, is responding to outrageous “theft” by the Norman upper class visited upon the conquered Saxons. His own actions were not “theft” as much as they were an attempt to create a bit of economic justice where there was none. When someone uses the label “Robin Hood” as a negative epithet; I think that says a lot more about them and the way think than it does about Robin Hood or others who have fought oppression throughout history.

        • Yes, I know that taxes do not fund government, but few others do. In particular, Austrians seem not to know.

          So, if those who have lots of money got it by doing wrong, an offsetting wrong makes everything right?

          Fraud and bribery should be prosecuted, not taxed.

          I have found an Austrian essay on the web that, indeed, says “all” taxation is theft, seemingly leaving no legitimate role for government, implicitly advocating anarchy. There was a link to the author’s email, and I asked him about that.

        • Cory D. Hoffman (Lake Erie Liberal)

          As usual I agree with all of your points Mr. Firestone. One thing I think is worth fighting for though is that, although I disagree with their premises and moral and political philosophy, there are millions of conservatives/libertarians who cogently advance the argument that “taxation is theft”. But there arguments just don’t apply.

          When they imagine Robin Hood, they imagine Kevin Costner sweeping in to steal the Sheriff of Nottingham’s limited supply of Gold Coins, that he earned with the sweat from his brow and genuine productivity, and transferring them to the undeserving serfs in Sherwood Forest.

          I agree with your sentiment that the presumption that the Gold coins were justly acquired is false in many instances. But, why attack that premise? Robin Hood need not “steal” the Sheriff’s riches. He just needs to enlighten King Richard the Lionheart and show him that the he is the monopoly issuer of the currency!

          He can supply more means of exchange the masses of Sherwood Forest without necessarily taxing the Sheriff of Nottingham. Suddenly, the justification for taxation is to control inflation something you might argue that the Sheriff loathes more than taxation!

        • @Joe

          One last one for tonight…

          “Whether the very wealthy and the large corporations earn the profits they make or actually “steal’ those profits themselves by manipulating the economic and political systems and by committing outright fraud”

          I think most Austrians would call what you would describe in this paragraph as Crony Capitalism and would agree that this is also a form of theft/fraud and would be against it.

          Otherwise they would say the profits are justfied no matter how much they be as long as they did not come about through fraud or manipulation!!

    • @Joe

      “Taxation in democracies isn’t theft because the Government’s right to tax comes from the consent of the governed to at least the general principle that the government has the right to tax in order to function.”

      Austrians may ask…when exactly does an individual give consent and when did this right by government come into existence?? They may also ask what if I don’t give consent what recourse do I have??

      We were born into this system as it existed and no one asked if we consented or not or at least I do not recall being asked.

      In any case you may say we have the right to vote but having the right to vote is not the same as consenting.

      If we as individuals do not consent then what is our recourse??

      You may say we can leave the country but I don’t see that as a valid response, most people do not have that option to just pick up and leave.

      So there is the rub, no one actually is actually asked if they consent and if we do not consent then we have no real recourse.

      Again we could vote or get involved and try to change it but that is not the same as being able to simply withdraw our consent and be left alone.

      Hence this system is forced on us with no recourse and that is what the objection is!!

      I am not an expert in Austrian economics and they probably would not claim me as one of their own but I have sympathies for the school and know a little bit about it. However reading some of the comments about the Austrians position on the use of force via government it does not seem like many people here really know much about it either only what they think they know or what they heard others say about it.

      • golfer1john

        I don’t understand why you can’t exercise your right to leave, if this issue is of great importance to you. Millions of people throughout history have left their homes and families and emigrated to new places. They continue to do so today, in large numbers. They have no great wealth or special talents, they are just ordinary people, and many are dirt poor or uneducated. Why can you not do what they can do? Even without leaving, millions even today live “in the shadows”, avoiding the government and all its coercion. Could you not do that, too, if this were so important to you?

        • nicholas a. evans

          “Millions of people throughout history have left their homes and families and emigrated to new places” — many or most of those people emigrated under extreme duress and many more millions of people throughout history have died fighting wars to capture or defend plots of land that had emotional or economic significance to them. Is it really that hard to understand how emigration is just not a very good option for many people (even when it is their best option)? Just because people haven’t chosen to emigrate even though they “can” doesn’t automatically imply that they have signed on to the form of government they then need to live under.

          • golfer1john

            “many or most of those people emigrated under extreme duress”

            Aren’t you (or Tom) claiming extreme duress? Being forced, under pain of imprisonment (“at gunpoint”), to live under conditions to which you object? To forfeit property that is legitimately yours, for no benefit in return (or at least not something worth the price)? As if, every April, a mugger came to your door and robbed you? I wouldn’t stay in a neighborhood like that.

            And if you choose an option that you perceive as “not your best”, are you not consenting to the terms of the option you chose?

            • nicholas a. evans

              Since I’m convinced of MMT’s explanation of taxes (as best I understand it), and since I’m convinced that taxes are inevitable anyway, any objections I raise wouldn’t be on that front. I’m only under very mild duress. ;)

              And even if I did consider the April taxman to be a thief (I don’t) and I had the ability to easily emigrate, the decision to emigrate could only come after debating a long list of non-fungible pros and cons (just as with any big life-affecting decision). Plenty of people stay in horrible situations and dislike it because they don’t have the courage to change or because they are not sure what change would be better. Sometimes living with the local mafia’s protection racket is better than any other immediately available or obvious option. If that means “consent” then I hope we have different definitions for that word.

              I never consented to NSA’s warrantless wiretaps, software patents, various acts of police brutality, generous gifts to a corrupt financial sector, a variety of wars, etc that are funded by my government. These are some of the “real” taxes on society that I consider objectionable (some of which affect me directly, others not so much). I consider a great many aspects of our “democracy” to be horribly anti-democratic, e.g. first-pass-the-poll voting, gerrymandering, campaign financing as it is today. These things disgust me and give me great concern for the “legitimacy” of my government. But emigration (or civil disobedience) would not solve a single one of my complaints for society in general, and would have a negligible or negative impact on my own personal well-being. Sure, civil disobedience and emigration are options for some, and perhaps more people should consider them. But I have family to support, extended family to visit, mortgages to maintain, emotional bonds to the city I grew up in, etc, so here I plan to stay.

              If not emigrating is the same as consent to the government in power, how is that significantly different from people in “at-will” jobs who have been coerced into performing sexual favors for their employers? They should have just quit their job… except for the extremely high unemployment rate, it would probably take them several months or more to find another job, the electric bill is overdue, the kids need to eat, etc. “Choosing to stay equals consent” strikes me as a very simplistic view of power dynamics, whether you are talking about “public” or “private” power.

              The argument over “consent” is a dead-end, tangential, unpersuasive, and unnecessary. The argument over coercion is unavoidable because coercion is an unavoidable part of any social life, but it isn’t a trump card. The interesting arguments are about justice and prosperity, and how do we get there in the real world (even if it requires extra coercion on some of those who stand in the way of it).

              • Nicholas said it much better than I could although I disagree with his last paragraph.

                Also just to be clear this is not a personal thing, that is I am raising the argument and not suggesting that I personally am under any duress or am I at a point I would want to leave etc..I am personally for limited government for many reasons that Nicholas mentioned and I can live with some taxes.

                In any case @golfer1john, the only thing I could add is that we could turn the question around.

                Why is the impetuous on me to leave and to abandon my home and my property (even if I can sell them for a fair price) why should I be the one to leave??

                Your the one (not you literally, again this is not personal) that is imposing your will on me, or trying to initiate force against me (even if it is done nicely and with a smile, it is still force) so why should I be the one forced out.

                All I am looking to do is to be left alone.. so again I ask why is it on me to leave??

                In addition maybe I could find someplace to be left alone in but in todays world that is very rare. In how many places can I truely get away from the govment

                • golfer1john

                  Limited government and some taxes is libertarian, not Austrian. Libertarians recognize legitimate roles for government, and accept the “consent of the governed” criterion, even though that consent is never unanimous. They don’t equate tax collectors with muggers.

                  As for who should be the one to leave, it must be the one in the minority, no? Can one person expect the other 300 million to leave instead?

                  In 1900, the Austrians had more opportunities to found a society based on their philosophy, but they did not. Too bad.

                • nicholas a. evans

                  “Your the one (not you literally, again this is not personal) that is imposing your will on me”

                  “You’re the one” should be plural. Assuming some level of democracy, you can count yourself among the ones imposing a tiny bit of your will on everyone else.

                  “All I am looking to do is to be left alone.. so again I ask why is it on me to leave??”

                  I agree with golfer1john’s response. I’ll also add that if you are going to live within a society (and partake of the benefits thereof) you will never be left alone. That simply isn’t a stable form of society. Propertarianism is merely an adapted form of feudalism with an updated set of rationalizations. If you can come up with a more just form of democracy than what we have now, I’m listening, but (in as much as it is realistic) it will still involve some form of coercion on those who (think that they) just want to be left alone.

      • nicholas a. evans

        I’m sympathetic to much of that argument, but I differ at: “this system is forced on us with no recourse”. There will always be a system forced upon you, with two exceptions: you’ve removed yourself from society to become a hermit (good luck with that), or you are the one doing the forcing. So you’ll probably want to make sure you are the one “forcing” governance on others, and if justice is important to you that implies some form of democratic governance; i.e. democracy is the only viable recourse.

        This isn’t meant to be an abstract argument about government being innately coercive, good, bad, consented to, a social contract, etc. This is a utilitarian argument that government is inevitable, so let’s make it as good as we can.

  5. Sunflowerbio

    If there is no distinction between a gun wielding tax man and a gun wielding mugger, is there a distinction between a gun wielding mugger and a gun wielding property owner, or does might make right in all cases?

    • @Sunflowerbio…

      There is a huge difference which is staring you right in the face…

      I am assuming when you say a gun wielding property owner, that the owner is protecting his property presumable from the gun wielding mugger. If that is the case he is violating no ones rights but protecting himself from someone who is trying to violate his rights….

      A gun wielding mugger on the other hand is trying to take your property away or violate your property rights.

      I h0pe you can see the difference….that is unless you do not believe people have the right to protect themselves.

      • “I am assuming when you say a gun wielding property owner, that the owner is protecting his property presumable from the gun wielding mugger. If that is the case he is violating no ones rights but protecting himself from someone who is trying to violate his rights….”

        He’s violating the mugger’s “right” the property.

        Without government to create/define & enforce, property rights don’t exist.

  6. Joe – Thanks for the comments. I chose the longer Sunstein quote over Hobbes because I was trying to draw attention to what people currently take for granted rather than what the alternative would be. But i more generally agree with everything you wrote here.

    Nicholas – I’m aware the legal distinction between theft and taxation isn’t going to convince everyone, but i felt it was an important point to make. The aim is not to convince people that it is moral because it is legal, but rather that the immorality argument requires a lot more justification than a mere analogy to theft, because of the different legal contexts in which both actions occur.

    • nicholas a. evans

      “the immorality argument requires a lot more justification than a mere analogy to theft” — yes. I’m just passing everything these days through the filter of “is this helpful to share with some conservative friends of mine, or will they shut-down and derail before they get to the meaty conclusion”. And anyway, I really appreciated your later comment on the same point of legality: “If the state shouldn’t be able to use the rule of law to impose taxes on property owners, why should it be able to use the rule of law to impose access-and-use restrictions on non-property-owners?”

      The analogy to theft is lazy and inadequate in so many ways. Unfortunately, the taxes-as-theft analogy seems to be the one that resonated the strongest with people who think that Murphy “won” the debate. It’s a deceptively sticky meme, and it’ll require some persuasive work to dislodge it from the collective consciousness. (BTW, thank you *so much* for organizing the Modern Money Public Purpose seminars and uploading them to YouTube!)

  7. Here’s a slightly different perspective on the meme that “taxation is theft.”

    Adam Smith wove the “ur-instance” of the great classical liberal mythology: that economic specialization emerged from barter, and that money was invented to solve the double incidence of wants problem (or in the cruder version, that people started carrying gold because it’s fungible or smaller or whatever). So this is the story where use of metal currency spontaneously emerged, because everyone suddenly decided that silver was valuable for some reason or other.

    This is actually a very neat (if stupendously dishonest) rhetorical trick carried out by classical-and-neo-liberal types. By asserting (and getting people to believe) that economics emerged from an “innate human tendency” to “truck and barter,” it then appears that private property, gold bullion, and “the marketplace” is the natural state of human affairs, and that governmental (i.e., public) action is a distortion of this liberal paradise.

    You can see this sort of mythology underwriting all the Austrian claims about how life is or should be. The problem is that none of it is actually true. Money (in a form we would today recognize) has always been a creature of the state, and intragroup exchange of the sort that the Austrians deify similarly only exists in the presence of states, not least because you simply don’t get currency without states, and you don’t get trucking and bartering without a unit of account. (But more importantly, if there’s no state and no money and you live in a smallish group, there’s no reason not to run life based on trust. When everyone knows everyone else, breaking trust is a dangerous game.)

    So the trick is claiming that classical-and-neoliberal mythology is the natural state, so that any deviation from that state is bad and should be opposed. This isn’t to say that Hobbes was right; indeed, the thing that’s so wrong about this sort of liberalism is, as Maggie put it, the belief that there’s no such thing as society. Sociality is all we are, and the attempt of (classical and its follow-ons) economics to repudiate that fact is how much of this has gone so horribly awry, and how we can get people saying with a straight face that “taxation is theft” while defending private property in the same breath.

  8. I tend to agree with earlier comment that Murphy is somewhat out of his depth, or at the very least, does not have sufficient grounding in MMT to present a really valid argument. If MMT and Warren wanted a truly solid debate, I would suggest they raise a direct challenge to the von Mises Institue in Canada. That is the home of the really ardent anti socialists, anti government, and total free market advocates. Such a debate would generate a huge treasure trove of contradicions and provide fodder for a genuine debate.

    • The von Mises institute is extremely powerful. Do any random web search on an economics topic, or a search for a podcast on your iPhone, and you are likely to land on something by Mises, Rothbard or the other prominent authors of that school. They are influential because they are organized and have financial backing, and have built out a propaganda infrastructure that permeates online culture. They have hundreds of archived books and articles online. And their economics is embedded in an overarching political philosophy that has been developed over more than 100 years by some very accomplished writers.

      • This I didn’t know Although I didn’t follow the von Mises thing anyway. My basic socialist antenna are well tuned to that wavelength – I despise any miserly school of social social thinkers. We have ALEC-Watch etc. Is there watch over these misery-guts?

        • Sorry. I realise suddenly, that this is a discussion that plays by fairly straight rules. So, I’d understand if you don’t publish my comment.

  9. Once upon a time when human societies were small the size of the memory function in the human brain could rely upon direct and indirect reciprocity. Once the size of the society outgrew memory capacity the invention of money provided a work-around. For group selection to work especially to defend a society central creation of money using a taxation system was essential to avoid undermining a defense strategy by defectors who today cloak their indifference to the plight of others through a phoney philosophy of Libertarianism like Mr Murphy.