The Politics of MMT (Strange Bedfellows)

By Jonathan Denn

There are the cut-and-dried facts, about how money actually works, which MMT succinctly explains—that those who were unaware—seem to readily grasp.

1. The US is the issuer of currency not just currency users like households, towns, businesses and US States.
2. If a country has a marvelous productive capacity, a free floating sovereign currency, and little to no debt denominated in foreign funds—then there is no external reason it cannot spend regardless of taxing or borrowing.
3. The last seven US depressions were preceded by seven rare public surpluses.
4. A public deficit is a non public surplus, which means a private surplus after taking into account what leaked overseas.
5. A private surplus is the point of a prosperous nation, as long as it doesn’t cause hyperinflation.
6. Banks create money, too. But since it usually has to paid back someday, those dollars are temporary.

The conclusion is that the US is the monopoly issuer of net financial assets. So, given a stable foreign trade balance the only way the private sector can grow is with increased government spending, asset appreciation (inflation), people spending out of savings, or people/businesses borrowing (temporarily) from banks.

But, then newcomers to these rational facts hit the ideology wall. People have it ingrained—that government should be small or at least not interfere unduly in private markets.

I don’t think these two premises, MMT and ideology, are mutually exclusive. What I propose is there are issues and contexts where a majority, perhaps even a supermajority of Americans, could agree on—where, how, and when—public spending can decouple from the restraints of taxing and borrowing.

Small businesses are our country’s backbone, its main employer. If small business owners were to get onboard with MMT, there would likely be a phase shift. So, what does the small business owner want? I propose this package of packaged fiscal reforms.

1. Not to be responsible for their employees’ health care insurance.

If a person decides to take on risk (which most sane people shouldn’t do, as 97% of new businesses fail) to make a living, get ahead, and build assets—why as a country have we decided to force them to be experts in providing health care to their citizen employees? Isn’t that what government is for? Or isn’t it up to the individual to decide? It is a false equivalence to put it on the backs of small businesses just because it’s easy. If MMT could get healthcare off the backs of small employers, that would be huge.

On main street, I don’t hear many folks who disagree with Medicare for All with available upgrades or fast lanes for those who have worked hard, and want to spend their money that way.

No small business owner, managing their expenses, would design a healthcare service Fee for Service. They would design it Fee for Outcome. This is another reason why small businesses hate the Affordable Health Care for America Act.

2. Taxes

Many small businesses already take advantage of LLCs and S Corps to avoid also paying corporate taxes. But, again, why do employers who are doing what both sides of the aisle want them to do—employ—have to pay onerous payroll taxes. Geez, if you want more people to be employed, then stop taxing the employers.

Our society is brainwashed about having to prepay for Social Security. If a retired person is essentially living at subsistence levels, eating low quality food, and staying in undercapitalized housing—does it matter where those funds originate? If it’s a prepaid account or simply issued by the Treasury—how will either drive up demand enough to cause inflation yet alone hyperinflation? It almost can’t.

I believe only the large financial industry wants to end/change social security so they can make a profit on it somehow. I don’t think small businesses care about the large financial industry all that much. I think they care about keeping the doors open, making a living, keeping their staff which many consider to be neighbors if not family, and the customers they’re blessed with (or lucky to have). And maybe getting some time off now and again.

If MMT could cut down on red-tape and  paperwork—or—speed up the DMV lines it would be a slam dunk!

3. Unemployment Insurance

So, when there’s a downturn, why do small employers have to essentially keep unneeded staff on the payroll at half pay? If MMT policies can pick up the slack and alleviate the burden of unemployment costs—small business will stand up and cheer!

4. Not Competing with the Public Sector for Business/Staff.

This is probably the biggest rub. I believe if small businesses were assured that they would not have to compete with the public sector they would embrace MMT in a heartbeat.

For example: Let’s say a private construction company is minding it’s own business, and along comes a government construction project nearby that pays higher wages to truck drivers, crane operators, carpenters, and the rest of the trades. That private employer can’t compete on wages, and loses staff that THEY took on the risk to train. Geez, thanks Uncle Sam.

But what policies would prevent this? Perhaps index infrastructure work to the local labor pool, and only award contracts to local construction firms.

Hmm, but why is that not happening now? Because Big Government awards Big Contracts to Big Government contractors. These contractors are not barred from making campaign contributions. See the cyclical nature? Both reformers, Robert Reich on the left and Peter Schweitzer on the right have called upon President Obama to issue an Executive Order banning campaign contributions by government contractors. Why, oh why, won’t President Obama do so? Hmm, potential third-act speechifying?  I still have hope that President Obama will do the correct thing.

5. Jobs Guarantee (JG) Program

Well, a high unemployment rate does drive down the cost of labor—which benefits employers. But unemployed people are essentially removed from the customer pool. So, I happen to like the idea of the federal government being the Employer of Last Resort (ELR) or at least funding the States and/or nonprofits, to be. But here again, if an industry, with small businesses, has jobs that are anti-glamorous, and these JG jobs are even a bit more attractive, local employers won’t support it. Snatching MMT defeat from the jaws of MMT victory.

How do we find a balance? Not sure, but certainly JG shouldn’t pay a higher wage, or for that matter even par private wages. Maybe there is a low “Federal Minimum Wage” that incentives workers to hunt for higher wages in the private sector. Maybe there are subsidies to employers for hiring JG employees. Maybe there are subsidies for employing folks in industries that have inelastic pricing. Maybe expanding the Earned Income Tax Credit (which is already supported by some conservatives.)

I believe there are also public policies that a supermajority of Americans can agree upon.

6. Veterans’ Health Care Benefits Equal to that of Congress.

Polls show that most Americans want better healthcare for Veterans, but “how can we afford it?” And most Americans disapprove of Congress’ performance. Do we have the productive capacity to give Veterans better healthcare? Of course we do. Are Congress members more patriotic than Veterans? No. If dollars were spent into existence out of seignorage then in a very short time we would likely treat Veterans to the healthcare and respect they deserve. I doubt Congress will line up at the VA. I believe this would bridge MMT with the political will.

Possible dissent: Are there enough mental health professionals, nutritionists, holistic healthcare practitioners, physical therapists, medical devices to help our wounded warriors without causing hyperinflation in healthcare? I think there is, and if there isn’t then our marvelous society will adapt to fill the need. Given the resources MMT can provide.

It is despicable that Congress and the Executive Branch won’t care for our wounded warriors. SHAME ON YOU RED AND BLUE!

7. The Right to A Fraud-Free Counted Vote.

Liberals want unfettered access to the polls although it makes it easier to vote more than once. Conservatives want to make sure that only citizens vote and only once.

The answer is to assure a fraud-free counted vote. Rather easy solutions only require modest fiat federal funds.

Almost everyone does business with their State or Federal Government. Frictionless automatic voter registration is just a matter of enough coders, and local frictionless double checks. If a State can’t afford voting machines, I mean, c’mon really? Print the currency and give it to the State. This isn’t brain surgery. We can even afford the purple ink for thumbs. What is currency for, after taxes, but to assure a fraud-free counted vote (if you chose to vote that is)?

These last two are what I call—true equivalence—or the greater overlap. All too often the two parties in Congress come up with solutions with false equivalence. Cabbage is good, chocolate is good, chocolate covered cabbage isn’t ordered in any restaurant by anyone. Look at the Sequester or the Affordable Health Care for America Act—is that any way to run a country?

After one or a few popular items decouple US spending from taxing and borrowing, and the world doesn’t end economically, then Congress can get on with the jobs of deciding between freedom and order, between the rights and responsibilities of the public and private sectors, and the roles of meritocracy and justice in our society—but with a better capacity to implement solutions thanks to MMT.

Even with the above policies being popular enough to be passed into law, is it the MMT slippery slope that deficit hawks and doves don’t want to slide down? Maybe. But packaging thoughtful, epistemic popular solutions—first—appears to me to be better political rhetoric.

The US is in an exceptional and enviable position: it has marvelous productive capacity, a willing workforce, and sufficient risk takers—all in a society with a free floating sovereign currency with no significant debt denominated in foreign currency. There is no reason currency can’t be issued for the things WE (the supermajority) NEED as long as it is agreed upon by a majority of the left and the right.

MMTers, in my humble opinion, should consciously split “corporate America” into “main street businesses” and “crony capitalist big business.” It is an insult to do otherwise. Small business owners and leaders are heroes and potential allies of MMT.

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Jonathan Denn is the editor of aGREATER.US an internet platform to find epistemic supermajority policy solutions. He is a board member of the Clean Government Alliance, a SCORE Mentor, Vistage Chair, and business coach.