Let’s Do Lunch Again

By Dan Kervick

Josiah Neely enters into a recent discussion in the economics blogosphere about the potential impact of religious orientation on attitudes toward monetary policy. I find that discussion, which began with a partially tongue-in-cheek Project Syndicate piece by former Moody’s VP Christopher Mahoney, to be a bit tasteless for my tender sensibilities, and I have no intention of entering it myself.  But Neely doesn’t actually spend much time on religious beliefs and instead zeroes in on cultural and political attitudes:

Still, I do think Mahoney has put his finger on one reason why many conservatives and libertarians view monetary expansion with such a jaundiced eye. If there is one economic lesson the Right has internalized, it is Heinland’s aphorism that There Ain’t No Such Thing As A Free Lunch. And attempts to improve the economy by what is often derisively described as “printing money” can at first blush seem like, if not a free lunch, then at least as free lunch money.

This reference to Heinlein’s free lunch proverb put me in mind of a piece that I wrote last December called “Paying for Lunch – MMT Style.”  I began the piece by noting that:

A common criticism of Modern Monetary Theory is that it is a naïve doctrine of free lunches.  The critics grant that a country like the United States, which issues its own freely floating fiat currency, can always make the policy choice to issue whatever quantity of that currency it deems appropriate.  The US government can spend as many dollars into the private sector economy as it chooses, without obtaining those dollars from some other source first, and it can always pay any debts that have been incurred by borrowing dollars.  But the critics will go on to charge that MMT mistakenly concludes from these few institutional and operational facts that there are no economic limits to the wealth-generating capacities of the government.  They caricature MMT as a doctrine of manna from heaven, in which the power of issuing a generally accepted medium of exchange confers the power of conjuring real wealth into existence by prestidigitation.   In short, they see MMT as a disordered syndrome characterizing people who are experiencing massive money illusion.

Without recapping the whole argument of that piece, I think the central point can be put fairly simply: It is true in the aggregate that there is no free lunch.  There is almost always a price to be paid for increasing our prosperity, and the price is a lot of very hard work. We take some of the things we already have and decide to use them as inputs for some productive process. By the enterprising application of our industry and intelligence, we transform those inputs into different and better things, and we exchange our work and the products of our work among ourselves to enhance our lives.

But the MMT approach is fully cognizant of this reality.  What it points out are the different ways in which government control over modern monetary systems can and does play a role in mobilizing underutilized capacity and unemployed labor. It argues that economic expansion almost always requires an expansion of the consolidated government balance sheet, unless the private sector as a whole is willing to reduce its savings, and it points out the options a government has in its kit of policy choices regarding the order in which the expansion of economic activity and expansion of the government balance sheet will occur.  Let me expand on this:

As the economy grows, the volume of daily exchanges in the economy tends to increase.  And if more things are being bought and sold, then people will tend to need more money to carry out these exchanges.  A well-functioning monetary system has mechanisms that adjust the supply of the medium of exchange up or down in accordance with the needs of the economy, and in a way that keeps prices as predictable and stable as possible while economic conditions change dynamically.

One way this monetary expansion can happen is through the initiative of private enterprise working with the banking and financial system. The perception of potential markets for new products, or for greater supplies of existing products, gives producers an incentive to invest in expanded production.  If existing monetary savings are inadequate to finance the entirety of the new production, or if risk-averse producers are unwilling in the aggregate to reduce their financial savings even though those savings are adequate to the task, there will be demand for a sharply increased net supply of credit to finance the production.  Banks issue their own negotiable liabilities (deposit balances) to accommodate this demand, in exchange for borrowers’ promises of future repayment.  The expansion of bank balance sheets and economic activity in turn drives an increase in the volume of interbank payment obligations and withdrawal obligations, and increases the demand for settlement liquidity in the banking system. Since most banks in our system settle their payment obligations with the liabilities issued directly by the central bank, the increased demand for bank liquidity takes the form of increased demand for central bank liabilities, which the central bank then accommodates by issuing money in both electronic form and physical currency form.

One way the demand for settlement balances can be accommodated is by an expansion of net lending by the central bank at the discount window.  But while this process expands the government’s balance sheet, it concurrently increases the net indebtedness of the private sector to the central bank by an even greater amount than it increases the private sector’s holdings of central bank liabilities.  In other words, while the supply of central bank money to the banking sector has increased, the net financial asset holdings of the banking sector have decreased, and this can have an inhibitory effect on growth.

So an alternative way the government as a whole can accommodate the need for settlement balances, while increasing the net financial assets of the economy, is to supply those liabilities for free.  The main way it does this in our present system is by selling and repurchasing securities.  The sale of the security increases the net financial assets of the private sector, since the amount paid for the security is less than the value of the security.  The repurchase of the security at a higher price than the sale price then converts some of those assets back into the form of money – which appears in the banking sector as settlement balances (“reserves”).  (The central bank also adds reserve balances to the system by paying interest on existing reserve balances, but the amount is relatively small and the interest rate is determined by the use of that rate to help target the interbank lending rate, so this is not an important part of the provision of liquidity.)

As a result of all of this activity, economic production expands, employment expands, and the balance sheets of both commercial banks and the central bank expand.  More importantly, the consolidated balance sheet of the entire government expands, since the treasury is the agency responsible for issuing securities, and the sale and repurchase of securities involves coordination between the treasury and the central bank. The process then looks something like this, with the arrows representing the direction of causal influence:

Scenario A: Decision to expand production —> Increased demand for bank credit —> Increased bank demand for central bank settlement assets —> Government accommodation of demand with  a balance sheet expansion and either an increase or decrease in private sector net financial assets —> Increased income to households —> Effective household demand to purchase added output.

But there are various ways in which this process, which is driven by markets and private enterprise initiative, can break down, and so complete reliance on the mechanism just described will be inadequate to maintain a healthy economy. We could have a a situation in which producers are stuck in a low-employment, underutilization equilibrium. Since the income to purchase goods produced following production, in the aggregate, comes from the prior compensation to labor for participating in their production, we might have a situation in which (i) all producers would benefit if all producers expanded at more or less the same time, but in which (ii) any individual producers will lose if they expand their own production while others don’t.  We have a huge social coordination problem, and since no individual producer controls the production decisions of any significant number of other producers, we have the obvious possibility of the economy settling into an equilibrium at a low level of production.  We could also have a situation in which traumatized producers are suffering from extreme risk aversion, and so will not expand, even in circumstances in which they would expand if their risk acceptance was more normal.  There is sometimes a clear need, then, for effective government action to get us out of the low-employment equilibrium by solving the coordination problem on terms more favorable to the public interest.

And here is a way out: The government can emit its financial liabilities directly, without regard to demand in the credit markets, and either distribute those liabilities to people outright, or use them to purchase more goods and services as it expands its own role in the economy as a consumer and investor.  The treasury can issue its securities and, working with the central bank, swap those securities for money at a price profitable to the purchasers.  It can then either issue monetary transfer payments or purchase goods and services, without increasing taxes, thus increasing the size of the consolidated government balance sheet and the private sector’s net holdings of financial assets.  As payments are made to households and firms in the non-banking sector, reserves also flow from government accounts to commercial bank reserve accounts, and the balances of both non-bank entities at their banks and banks at the central bank increase.  The provision of income up front to households and businesses drives the demand for expanded production while reducing the risks involved in that expansion; and the government’s own expanded role as a customer and producer forwards this process.

The end result is roughly the same as the process described previously.  In the end, there is more production; more employment; more work.  That work is the price of lunch, and the added output is not free.  The commercial banks’ balance sheets have expanded, and the central bank’s balance sheet has expanded.  The consolidated government balance sheet has also expanded.  But in this case, the government balance sheet expansion occurs first, and the injection of income to households and businesses starts the process.  The additional real asset creation and commercial bank balance sheet expansion follows and catches up with the income increase, rather than the other way around.  So the process now looks something like this:

Scenario B:  Government balance sheet expansion and increased transfers and spending —> Increased income to households and business and expanded bank balance sheets following government payments —> Effective household and business demand to purchase more output —> Decision by producers to expand production —> Increased demand for bank credit —> Increased bank credit drawing on expanded reserve balances without additional central bank accommodation.

MMTers have inveighed frequently on behalf of fiscal expansion and against reliance on central bank action alone in restoring economic health.  But the above description focuses quite a bit on the role of money.  Since central banks are usually taken to be the agencies responsible for monetary policy, isn’t there a tension here?  No, not at all from the MMT perspective.  As I have argued recently, monetary policy is not central bank policy.  Neo-monetarist and New Keynesian economics focuses on the central bank as the instrument of monetary policy, and has therefore pinned a lot of hopes for economic recovery on unconventional operations such as quantitative easing.  But the central bank is not a omnipotent money god in the sky.  As currently organized and institutionally constructed, a central bank can carry out no helicopter drops. It is a specific kind of institution with important statutory and customary constraints, and limited mechanisms available for influencing the economy. Nor do we want central banks conducting autonomous fiscal policy in a democratic society.  Also, the payment assets the central bank provides acting alone are generally not free; and the provision of these assets does nothing in itself to increase the the antecedent demand for production and credit.  If there were a restriction on bank credit due to an excessive cost of funds and an excess of illiquid financial securities, the provision of more money could reduce that cost and loosen credit markets.  But the potential for a significant impact is limited.  And once the cost of funds question is out of the way, and the economy is still struggling, clearly the problems lie elsewhere.

And there is one other issue that needs to be raised in considering the choice between central bank expansion and comprehensive government expansion.  I have been discussing these issues at an abstract level looking at the aggregate economy and different ways of getting it out of a low-performance equilibrium into a high-performance equilibrium.  But in the real world, in response to real policies, not everybody benefits equally.  The central bank-oriented approach favored my many conservative economists directly benefits the most prosperous firms and individuals in our society, those with an abundance of financial assets to sell.  It aims to create a disequilibrium in that sector by changing the portfolio composition of financial assets, hoping that as equilibrium is re-established the resulting spill-on effects will trickle out to everyone else.   The more comprehensive government approach involved in Scenario B that employs a combination of fiscal and monetary tools starts with individual households and businesses.  It delivers income to those sectors directly, which is then used to drive further demand and production, with less risk to producers, less leverage and less reliance on financial sector credit.  As a result, the end result delivers somewhat greater benefits to the broad economic foundation of the economic pyramid, and somewhat less to the concentrated financial apex.  The central bank-driven approach is a trickle down approach which is much less effective in stimulating demand; and even where it is effective, it does its work by injecting money into the apex of the economic pyramid, hoping it will pour down to the bottom, with many financial intermediaries taking many cuts along the way. So the central bank approach is unlikely to have the same positive aggregate impact as the comprehensive approach, and the impact it does have is more concentrated at the top.

Cross-posted from Rugged Egalitarianism

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50 responses to “Let’s Do Lunch Again

  1. “It [MMT] argues that economic expansion almost always requires an expansion of the consolidated government balance sheet, unless the private sector as a whole is willing to reduce its savings,”

    Not at all. Only when the foreign sector has a surplus, or a smaller deficit than the private sector savings desires.

    It would be correct if you changed it to read “unless the private sector and foreign sector as a whole were willing to reduce their savings”.

    • Golfer, “private sector” stands here for “non-government sector”, not just for “domestic private sector”.

      • You’re including the Chinese Central Bank in “private sector” ?? That’s a new one on me. Probably deserves a footnote or something.

        • Currency and securities exchanges with the central bank are not included in either G, T, X or M in the sector balances equation. That equation is not a comprehensive flow of funds equation, it deals only with sales and purchases of final product – so financial transactions are left out.

          • But X-M is, except for a few dollar bills in the pockets of foreigners, financial assets accumulating in foreign central banks. Private citizens around the world save in their own currencies, not in dollars. If the CBs did not hoard the dollars (or Treasuries), the trade deficit would not exist.

            • X is export sales and M is import purchases and are part of the current account. X-M does not include currency sales and purchases by central banks, which are part of the reserve account and the capital account, not the current account.

              • Then tell me what happens to the dollars that we spend in China (in excess of what they spend here)? Don’t they end up in China’s CB, as Treasury securities? Foreign sector savings? If not, where do they go?

                • If we have to convert the dollars to yuan, then they do go to someplace in China where dollar reserves are held, including the central bank. I’m just saying that they are not themselves part of X-M.

                  • But they are equal.

                  • No, if the Chinese government just buys a boatload of dollars to hold as dollar reserves, and gives us some yuan in return, but no goods or services are exchanged, then X and M are unaffected.

                    Similarly, the S and I in the S-I part of Godley’s equation are derived from the National Income and Product Accounts. They refer respectively to the (i) total national income that is not consumed and (ii) the total national income that is invested in further production. For the purposes of this accounting, income is only realized from the sale of value adding goods and services. Mere transfers of dollars from one bank account to another, including a government account to a non-government account, are not counted.

                    Godley’s equation isn’t a comprehensive flow-of-funds equation

                  • But we don’t hoard yuan. We would spend them on Chinese goods (M). China hoards dollars.

                    Yes, there are other transactions that would change the amount of foreign CB savings, but they are a minuscule part of the foreign surplus, which is the pertinent number for the sectoral balance. Trade is the overwhelming majority of it. That’s why X-M is used to represent the foreign surplus, and the rest is ignored.

                    China may buy dollars on FX markets to suppress the value of the yuan, but I don’t think those dollars are bought from the Fed (I believe that unlike China, we let our currency float freely and just complain about manipulation, not take part in it or try to offset it), they are bought from other country’s CB’s, countries that earned them via trade surplus with the US and do not wish to hoard them, but to exchange them for yuan because their citizens need yuan to buy stuff from China. It is a transaction within the foreign sector, not a transaction between sectors like our trade deficit is.

  2. The part of MMT that turns off conservatives and libertarians is its (Progressive) bias toward increasing the role of government in the economy. Or, rather, that bias on the part of most MMTers, not the theory itself. If the emphasis were on increasing private sector incomes and demand by reducing taxes, they would be more inclined to listen further.

    • That’s a possibility too. A lot depends on how much more demand you think you will get just from cutting taxes as opposed to boosting incomes or from buying goods and services directly.

      • The way I put it when discussing these ideas with my conservative friends is: that would be the right fiscal policy debate to be having (shall we lower taxes or increase spending or do some of both?); whereas the one we are in fact having (shall raise taxes or cut spending or do some of both?) is deeply, unredeemably perverse. MMT ideas are salutary because they can shock us into arguing about the right things, for a change, instead of the wrong things.

        • It’s not new with MMT. Kennedy and Reagan knew that cutting taxes was the way to fight recession. Somewhere around 1990 politicians began to lose the knowledge of how government impacts the economy. “Fiscal drag” used to be an overused buzzword, but it has virtually vanished from the discussion today. Bush 41, despite his “read my lips” pledge, always believed, and does to this day, that tax cuts are “voodoo”, and finally went along with a tax hike on the eve of the recession, thinking it would help somehow. His son remembered the right way to do it, but he was one of a very few. Romney may have been the last Keynesian in politics.

        • that would be the right fiscal policy debate to be having… whereas the one we are in fact having… is deeply, unredeemably perverse. YES. +1

          And if you can convince more conservatives of the truth of MMT’s foundations, you’ll not only shock them into arguing about the right things, you’ll also shock them into thinking about “public purpose” lying behind the monetary system and dramatically shift the Overton window in the progressive direction on at least a couple of key economic issues. Trying to convince a substantial majority of the population that they ought to be more “liberal” or “progressive” is mucking about with their self-identity, which gets weird fast. Better to convince them that their conservative instincts just need adjustment based on the facts.

        • Agreed, Amileoj. MMTer’s tend to have a progressive bent because we are reality focused. As Stephen Colbert decries, “Reality has a liberal bias.” But, I would settle for the “debate we should be having.”

          Part of the problem is that Conservatives like to measure the size of government by the deficit, when in reality you could have a large deficit with fairly limited government intervention.

          Dan, I think one of MMT’s faults is that it doesn’t look close enough at the breakout of the private sector. I know that most of us do look at things like income inequality, but it’s not a main topic of discussion in MMT. I think adding it would be helpful in explaining why the savings desires of the private sector change (e.g. the existing money supply gets concentrated under a few individuals) and would also help explain the progressive policy choices we champion.

          I know that MMT tries to maintain its apolitical approach, but we are missing out on helpful info by not folding some of the other work underneath it. Maybe there is some sort of higher level classification needed that incorporates MMT, income inequality, fraud, and Steve Keen’s work on debt acceleration and instability (among plenty of other topics I’m sure I’m forgetting).

      • Government spending isn’t done to manage demand, it is done to provision the government with what it needs to carry out its legitimate activities. It doesn’t matter how much demand it would create, it matters whether or not it is what government ought to be doing. There are debatable issues around that, but managing demand should not be part of the discussion.

        Taxes are the right tool for managing demand. The particular type of tax matters, in terms of its effect on demand.

        If by “boosting incomes” you mean increased transfer payments, you should be careful. If you raise Social Security or food stamp payments, for instance, in order to fight recession, then it becomes also a tool for fighting inflation, something to be reduced when the economy needs less demand. Most transfer payments are set the way they are for policy reasons, and like other spending the level should depend on what is the right thing for government to do, not on the impact on demand.

        • Government spending isn’t done to manage demand, it is done to provision the government with what it needs to carry out its legitimate activities.

          Why not both?

          • On the one hand, the legitimate role of government is a political decision that ought to be decided democratically, and really has very little to do with whether we are currently in a recession or a boom. As such, it doesn’t make a whole lot of sense to start spending on a whole bunch of things that the polity doesn’t think are legitimate just because of a recession, nor to stop spending on critical government functions because of a boom. To that end, taxation seems the more logical “lever” to pull for managing demand.

            On the other hand, most people agree that the legitimate role of government includes some spending on counter-cyclical programs. So to that end government spending is also a perfectly useful lever for managing demand. If increased government spending is on pro-cyclical or neutral programs, I’d want to ask, why weren’t we spending on these before, are these really the things we ought to increase spending on now, and will we really want to cut back on them when the cycle turns the other way?

            Mosler said this more concisely than I have, but I didn’t take the time to look it up. 🙂

            • As such, it doesn’t make a whole lot of sense to start spending on a whole bunch of things that the polity doesn’t think are legitimate just

              Well certainly if the public doesn’t agree to the spending, then it probably won’t get passed. The question is what to try to convince the public to do.

              Personally, I think we need a significantly more active government role in the economy, and that private enterprise and markets are adequate only for a much more limited collection of purposes than currently dominant attitudes recognize.

              I also think we should have a more aggressive tax and redistribution system, until such time as we have reformed the primary income distribution system to make redistributive taxes unnecessary.

              • I think we need a significantly more active government role in the economy

                Sure, but I’d wager you want that more active government role regardless of whether we are in a recession or a boom period. So (except for the counter-cyclical programs), you probably wouldn’t want to cut back on the government role during a boom. If you aren’t willing to cut back on spending for a particular program during a boom, then that program can’t function as a regulator of aggregate demand. Also “a more aggressive tax and redistribution system” strikes me as counter-cyclical, but again something you and I view as a legitimate public purpose anyway, and not something we’d want to stop doing during boom-times.

                We want the government role we want regardless of boom or recession, spending on counter-cyclical programs automatically regulates demand, but taxes provide the most easily adjusted “levers” to regulate demand.

                • Also “a more aggressive tax and redistribution system” strikes me as counter-cyclical.

                  It depends how it’s structured, and it depends on what other programs it is combined with, and in what ways.

                  In my view, redistribution can be pro-cyclical, even if deficit-neutral, if it combats excessive concentration of wealth. Concentration of wealth is an employment killer.

                  • Concentration of wealth is an employment killer, I agree. So shouldn’t deficit-neutral redistribution be counter-cyclical (i.e. stabilizing) not pro-cyclical (i.e. destabilizing)?

                  • If you just redistribute $1 billion dollars from Mr. Billionaire to 10,000 other people, by taxing it from the former and sending it to the latter, there is no change in the deficit. But I think the result would be stimulative nevertheless. Those $10,000 people would probably spend more and save less of the $1 billion, so it would counteract demand drains.

                  • But I’d expect it to be more stimulative during a recession (when Mr. Billionaire’s demand drains are larger) than during a boom (when Mr. Billionaire is more willing to spend/invest), thus counter-cyclical. Right?

                  • To be clear, I think I’m confused by where you said “redistribution can be pro-cyclical”. I’m sure we can think of weird tax-redistribution schemes that are pro-cyclical, but I think you meant to say counter-cyclical because that seems to be what you’re describing. Or possibly I’m just confused. 🙂 Other than definition of terms, I’m pretty sure we’re in agreement on this point.

                  • Oh, sorry. You’re right. I meant stimulative: i.e counter-cyclical.

            • “Taxes are too high for the size government we have” – Warren Moslerr

              • Perhaps, but not to high for other governments we could have instead. As Mosler says, that is a political decision.

                Also, one can add in purely redistributive taxes that don’t appreciably expand the size of the government, but only the flow of dollars moving through it from Peter to Paul.

                • “As Mosler says, that is a political decision.”

                  I agree, but I thought you identified yourself as a Progressive? Other Progressives have said often, on these blogs, that politics and economics are inseparable.

                  • Politics and economic policy are inseparable. There is no economic policy choice that is not at the same time a political choice. But MMT is primarily a body of macroeconomic thought, a way of understanding how the economy works, and numerous different political choices are compatible with that basic understanding.

                    In any case, I don’t mark my posts with some official MMT seal of approval. I present my own opinions. I only talk about MMT and characterize it some particular way when I think what I am saying is compatible with what is common to what others in a better position than me have identified as “MMT”.

                  • So you would not accept the possibility of someone advocating MMT economic policies and limited government, as Mosler allows for. If MMT economic policy is a political choice, then only Progressives could advocate for it, in your view? That makes no sense to me, mainly because I consider myself proof of its falsehood.

                  • And it appears that Bill Black stands with Mosler:

                    “My overall theme is that Ecuador’s President Correa is a serious economist and that this makes him unpredictable for those who assume that ideology determines his policies.”

          • It’s unwieldy. It takes a long time to agree on additions to or subtractions from the list of legitimate government activities. By the time action is taken the need will have passed, or the crisis will have turned into a disaster. (Tax changes have this flaw also, currently. If MMT is adopted, there should be a Federal Tax board to make small periodic adjustments to a broad-based tax in the same sort of way that the Fed makes small periodic adjustments to interest rates.)

            Significant parts of spending are unpredictable. Besides the automatic stabilizers that are constantly affecting spending, emergencies from weather to 9/11 and war can cause significant or even massive changes without warning.

            A very great deal of government spending directly affects people’s lives, starting with employment. If “permanent” workers are to be hired and fired according to the latest economic stats, they will be in a constant state of insecurity and stress. JG would be an exception, first because it is an automatic stabilizer, and second because employment in JG would be at the option of the worker, not the government.

            Government projects cannot reasonably be made contingent upon the economy. You wouldn’t want to stop a highway project after the old road was torn up and before the new one was paved, because the economy improved.

            • I think you can build in a lot of contingency golfer. Yes, you don’t want to stop a particular road in mid-project. But there is more than one road to be built. There is always a huge social maintenance and upgrade schedule of roads, schools, bridges, water towers, levees, piers, landscaping, etc. to be managed. You put things on the schedule, and then you accelerate the schedule during lean times for the private sector, decelerate during flush times. Also, bad times economically are a great time to do more workforce training and education. If there is not enough other work for people to do, then pay them to teach and learn.

              • “accelerate the schedule during lean times for the private sector, decelerate during flush times.”

                Again, it takes an Act of Congress. It takes longer to pass the law (which they don’t start trying to do until the need is recognized, long after the fact), than the need persists, and the spending gets delayed until it becomes pro-cyclical.

                And as you say, there is quite the backlog. Let them delay fixing your potholes until the next recession, but not mine.

                Spending changes must be automatic, like JG. Teaching and learning are excellent jobs for the JG workforce.

              • You put things on the schedule, and then you accelerate the schedule during lean times for the private sector, decelerate during flush times. Also, bad times economically are a great time to do more workforce training and education. Excellent examples. The latter sounds like a simple application of the Jobs Guarantee. But (contrary to some of my earlier statements), schedule acceleration/deceleration is a great way to approach spending programs with “levers” that are easier (and less politically painful) to adjust than most taxes.

                • I don’t get how you can do schedule acceleration without an Act of Congress. If Congress appropriates $1B for DOT, how does the executive decide to spend $1.2B?

                  • You don’t take Congressional action out of the picture. You just make it easier for them to act. They create a permanent National Strategic Reinvestment Schedule. (Come up with a niftier name if need be.) The plan has a permanent budget and carries out infrastructure repairs and upgrades, and human development spending, on a regular schedule, and the people in charge of the program are in charge of pre-organizing the projects out to say a 3 or 4 year horizon, with contingency plans for over-committed resources. If there is a recession, Congress can pass a single act requiring a 5% acceleration of the program. Or to make it more automatic, Congress could pre-authorize the President to sign off on such an acceleration, upon receipt of an employment report of such and such a kind from the BLS, Dept. of Commerce etc. Make it like the Strategic Petroleum Reserve or FEMA.

    • You are right about that. We all are entitled to our beliefs, but while I fully support the JG it’s in more of a “safety net” and boosting private sector concept, while of course providing direct aid to the needy and societal benefit. I think if framed the right way, the idea can be very palatable even here in the US (though admittedly its tough with the extreme anti gov sentiment…many may trash the idea without an actual thought) but I agree, the tone and attitudes of some supporters are VERY ideological and can be a bit abrasive. I have no issue with this, and its usually admitted yes, we have an ideology and this supports it, but it is a turn off to the right.

      And it’s important to try and win them over, I at one point actually got on the Paul bandwagon, and it made total sense to me at the time. After learning about MMT, well here I am with full support. I saw that MMT is less ideological than it may appear and it’s just the best way to achieve goals most Americans want, just it must be presented in a less biased way. My two cents

      • The Pauls have some misinformed economic ideas, but I support the libertarian desire for limited government, and I also support MMT and JG.

        I see two ways to make JG attractive to conservatives and libertarians: one is to label it “workfare 2.0”, stressing the idea that, unlike unemployment insurance, JG requires participants (participation is voluntary, of course) to do useful work, mostly (although training is allowed, too).

        The other is a moral argument that requires some economics knowledge about leakages. In any monetary economy, any attempt to save means that some output will not be sold, and that causes unemployment. As sponsor of the system, government has the moral obligation to mitigate its ill effects. Simply goosing demand through deficits cannot eliminate unemployment without causing inflation, because many resources will always go into shortage before the last bit of available labor can be utilized. JG solves the problem of the Phillips Curve by utilizing only unutilized resources.

        Progressives don’t like the word “workfare”, but we can use it anyway.

  3. It’s not a matter of a free lunch but of preventing the destruction of lunches already paid for; i.e. the bust often destroys what would otherwise be sound investments except for our stupid debt-money system whereby money is lent into existence and therefore is doomed to non-existence again as it is repaid. Worse it drags other money, the interest, into hands that are less likely to spend it.

    • The way Heinlein’s TNSTAAFL is often used by the Right has long annoyed me, because some of the most important lessons of economics ought to be that lunches do grow on trees (some of them anyway), there are plenty of lunches currently left on the trees to rot, there are lunch-producing trees that we ought to stop actively poisoning, and there are societal arrangements and technological advancements that produce more lunch with less effort than is currently expended, etc. Yes, yes, someone somewhere has expended some effort at some point to produce any particular lunch, but compared to the current arrangement there may be an effectively negative cost lunch. Many sloppy TNSTAAFL-invoking arguments can be dismissed by this even before you get to the critically important points MMT makes about mobilizing underutilized capacity and unemployed labor.

      • (For what it’s worth, I accidentally posted my previous comment as a reply, it was intended to be top-level.)

  4. Ed Seedhouse

    Who is this “Heinland” guy?

    I remember first reading the aphorism in the novel “The Moon Is a Harsh Mistress” by the American science fiction author Robert A. Heinlein. Wikipedia seems to agree with my memory.

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