Dear Treasurer, I have a plan for your $60 billion

This Post Has 21 Comments

1. Bill,

   The post on this site Jan 30th 2018 – Planning public works history has a lot to say if we listen properly.

   “The neo-liberal era has also been marked by a major reduction in Departmental capacity to design and implement fiscal policy – given the obsession with monetary policy and the major outsourcing of “fiscal-type” government services to the private sector.

   Many of the major government policy departments in the advanced nations are now just contract managers for outsourced service delivery.

   So this diminution in the overall capacity of the government machine to implement efficiently and speedily complicated nation-wide infrastructure programs has to be addressed as a matter of urgency by progressive politicians.

   As a result of what we learned during the GFC, we can no longer deny that fiscal policy is required to address serious swings in non-government spending.

   Monetary policy has been proven – categorically – to be ineffective in dealing with aggregate demand failures of the sort we have witnessed in that crisis.”

   Is that not the real issue at the moment if and when they decide to introduce a JG ? How long is it going to take to be paid for doing nothing to being productive ?

   It’s not an overnight story. We can’t do these things overnight and people are being displaced. Are all of those workers that have been displaced well-suited to the kinds of jobs we’re gonna be creating? There will be a lot of administrative work that will need to be done.

   It’s never about the number it is about the skills and real resources. Since years of neoliberalism has reduced the capacity to implement changes quickly. How would you implement it ?

   We need to show in great detail how we would do this or these questions are going to keep coming up from our opponents. Even more so now in this climate. You are probably looking at A decade to phase it in properly.

   A MMT’d learning video perhaps ?

2. Hi Bill, the link to the 29 Apr article is not working
   Should be

   [Bill notes: Thanks for spotting the error]

   Cheers,
   Boris

   P.S.: My children are already so worried of paying it all off 🙂 I’m enjoying reading Randy’s Primer and the textbook.

3. Bill – from a new convert, thank you for all your hard work and paving the way for better education regarding the increasingly more obvious fiscal realities. It’s both a disgrace and a tragedy that the gormless media are patting the dimwits in Canberra on the back for their covid response (even after this momentous cockup). Unfortunately it feels like we’ve got nowhere to turn to with either major party.

4. Here’s the URL for Bill Mitchell’s 2018 blog post cited by Derek Henry above:
   https://billmitchell.org/blog/?p=37930

5. I wonder how far out in space the Labor Party gurus would have to be to spot the error? That aside, MMT analysis seems ‘wing agnostic’ and deserving of serious review by economists and policymakers – many of whom are plainly still stuck in the ‘how can we afford it’ paradigm. I share Derek’s ‘overnight story’ concern for MMT. Firstly, what would a JG mean for worker and small business incentive? Would those who dislike their current work week prefer a JG to their current situation? Would it be a big deal if they were not ‘well-suited’? Aha – a possible solution! Could part of the JG include a ‘conscription component’? Perhaps all people between 17-25 years should spend at least 6 months in a task which builds knowledge or resilience capability in local community (e.g. managing the fire risk that appears part of the new climate normal). Secondly, would a JG impact on the exchange rate? Would it matter?

6. “He is idly sitting by while the lives of these workers is trashed.” Bill’s throwaway line about the Australian Treasurer applies, of course, to the entire global neoliberal system, which the Treasurer merely happens to embody in a particular locality at a particular moment. What has amazed and disappointed me most of all in our collective responses to the Covid Crisis is the virtual abandonment of big picture thinking in favor of focusing on the details of our dilemma, the inability or unwillingness of not only the elites (as one might expect) but also the masses (for which one might have higher hopes) to see the forest for the trees. There we were just a couple of months ago, on a freight train hurtling down the track of capitalist mass production and consumption, heading hellbent toward the yawning abyss of plutocracy and ecocide, and suddenly, unexpectedly, the train came to an abrupt stop. And now here we passengers are, most of us scratching our heads and hoping “they” figure out how to get the train moving again ASAP so it can reach or exceed its prior speed. Wouldn’t a modicum of wisdom–hell, a tiny dose of common sense–have welcomed this opportunity, however painfully it arrived, to pause and ponder whether we wanted to continue this insane, frenzied journey, whether there were other tracks on which we could travel, other destinations that beckoned to us, whether we really wanted to be on this freight train at all, and, if not, upon what alternative vehicle might we progress together? Yes, there’s been some of this big picture thinking here and there on the margins of the mainstream, but decades of TINA neoliberalism seem to have stunted the vast majority of imaginations across-the-board to the point where our avoidance of immediate death–escaping Covid infection right now–is our all-consuming obsession, the horizon of our feverish and hazy vision. Thus I greatly appreciate it when Bill holds forth with more than numbers and charts (not for a moment to dis “the trees”) and puts big and bold ideas on the table concerning “the forest.” This he does and does well, but the rest of us must pick them up and run with them, run as if our lives depended on them…because, well, they probably do.

7. This is one of the reasons why I rate Bill. Everything is always backed by empirical data and statistics. It’s progressive economics but always grounded in data. How could others not pick up an error of that magnitude?

8. Neoliberals do not want that!
   But they do want to keep wages low, or debt pressure high, meaning workers will be less likely to complain or make demands. As workers struggle to provide their families with all the temptations that a capitalist society offers, they become far less likely to risk their employment, and less able to improve their situation. A healthy pool of unemployed helps maintain that dogma!

9. We will need to factor in the early superannuation withdrawals because they will also function as economic stimulus – $10.6 billion worth so far and more coming.

   It may be appalling that a sovereign government has allowed and encouraged the private sector to do the governments job for it by raiding their retirement savings today and thus reducing their capacity to spend when they are no longer actively earning an income – nonetheless, that spending will have an effect.

   At least Credit Suisse understands the realities exposed by MMT when they say………………

   ” Many commentators will argue that the government should keep its power dry, by saving the missing $60 billion worth of stimulus for a rainy day. But underneath many of these claims is the view that the Federal government is somehow funding constrained and needs to eventually pay for the stimulus. This is not technically correct. Fiscal deficits create deposits and reserves in the banking system, because they occur in the first instance on “overdraft-like” terms with the RBA. Whether or not the government chooses to spend $60 billion today or tomorrow is not a question of funding or sustainability of funding – it is a matter of choice.”

10. Hi,
    I am new to this world of economics, and am learning on the fly. I am an Architect by training, and the PM comments regarding the $60B being like getting a house built for way less than intended raises a question in my mind. Why have you built a house for so much less when the kids and the mother-in-law have to sleep in the garden shed because you don’t have enough bedrooms? I have found this Governments response of penny pinching, restricting certain groups and the like totally heartless. In answer to Boris’ comment above “My children are already so worried of paying it all off” which is repeated everywhere, perhaps money wisely spent is not actually a debt to be paid in the future but an investment in a better one? I used to say to my son when travelling on the train, “do you know how much these rails line cost to build 100 years ago?” The answer was that it didn’t matter as it allows us to have the wonderful system today that allows so many to get to work and be productive.

11. When they say the Government has to borrow the money shouldn’t we be asking from whom? The Auditor General should have those so called figures which could be analysed, by Bill preferably, to show how fictitious they actually are.

12. Greg writes:
    ” would a JG impact on the exchange rate? Would it matter?”

    Surely the elimination of the Poverty Industry itself would counteract any initial devaluation.

    Just as devaluation following the loss of thermal coal export-income during conversion to pumped hydro backed green electricity would be counteracted by increased economic efficiency.

13. @Leftwiinghillbillyprospctor,
    Can you share a source for
    “Credit Suisse understands the realities exposed by MMT when they say …”?
    I want to post it on another site, but I need a source.

    I’m 73 and I could’t find it with google.

14. @Steve_American,
    The comments you want are by Damien Boey from Credit Suisse. A secondary link is below.
    https://www.macrobusiness.com.au/2020/05/credit-suisse-jobkeeper-on-the-way-out/

    cheers.

15. Steve_American (If Bill allows it:)

    https://www.macrobusiness.com.au/2020/05/credit-suisse-jobkeeper-on-the-way-out/

    I think the author draws the wrong conclusion while recognising the capacity of the currency-issuer.

    BTW, here is a MMT thread on (America based) ‘Political Forum.com’

    http://www.politicalforum.com/index.php?threads/mmt-overcoming-the-political-divide.569365/

16. ” Would a JG impact on the exchange rate? Would it matter?”

    FDI

    Full employment at all times encourages Foreign Direct Investment which helps the exchange rate. Since we use floating ones now anyways they flexibility takes the strain. For example.

    The evidence shows – Bill’s post on this site 9th Feb 2016 – Is exchange rate depreciation inflationary. That pass through inflation is not as bad as it was.

    Since we all Only have a limited amount of disposable income every month. If imports do become more expensive we change our spending habits instead. We don’t borrow money to buy avocados. We tend to buy cheaper alternative instead and look locally.

    Because exporters have spent years building up their market share that they do not want to lose, they have some tough choices to make. Just ask the Irish mushroom farmers about their experiences after the Brexit vote.

    Cut staff

    Cut working hours

    Become more productive

    Go bankrupt

    Cut their prices

    If and when they cut their prices the exchange rate will adjust upwards. Find its true level eventually as the gamblers of FX get stopped out based on their fixed exchange rate thinking. The Kaldorian view point stop out I call it.

    🙂

17. @Eco Newbie: I’m trying to write something on MMT for leftwing newspaper in UK (Morning Star). The last thing I wrote was: “All good public expenditure is an investment in well-being” but I really need to qualify it. Your comment stimulated me to ask for help here.

18. And another “progressive” in the Guardian today- Richard Denniss- claims he said the numbers were dodgy, and links to his own article to prove it. I read the article and I cannot read what he says it says!! At least he does go on to say that we need a huge stimulus.

19. Dear Neale (at 2020/05/28 at 3:11 pm)

    Thanks for the Comment. There is certainly plenty of that around this week.

    Several commentators have claimed they were ‘sceptical’ but in their writing or comments in the press you wouldn’t have guessed it until now.

    Others like this case, try to claim they wrote about their doubts, although within the usual meaning of English words and prose you could distil that conclusion from what they offered.

    You can draw your own conclusions about all that.

    best wishes
    bill

20. Bill, I think you missed out an important word? Did you mean to have “not” in this sentence?
    “But it also improves the situation for employers and profit recipients (which, of course, is NOT the driving motivation but a positive derivative impact).”

    Greg responded to Derek Henry, asking, “Would those who dislike their current work week prefer a JG to their current situation? Would it be a big deal if they were not ‘well-suited’ [to the JG jobs].”

    Well, it has always been part of Bill’s notion of the Job Guarantee that the job should be created to suit the worker’s skills and abilities (and disabilities). Therefore if the JG is run properly, the workers will all be well-suited to their jobs.

    Bill has also pointed out over the years that JG jobs will act as a minimum level of quality for a job: if a private-sector job fails to match the JG in overall attractiveness (pay, conditions, job satisfaction, training, prospects for advancement…) then no-one will do that job: the private employer must make a better offer.
    Bill has argued that if that better offer (e.g. higher pay) is more than the business can afford, then really the business was never viable in the first place, since it relied on subsidies (government top-up payments to its workers so that they can survive).

    My own thought is that during the pandemic, many (most?) of those in a JG job should be receiving the wage and staying home to protect themseves and others, even if they can’t do work while at home. Yes, this might well mean that many people currently doing low-wage jobs that expose them to possible infection (e.g. in food retail, facing customers) will quit those jobs to stay home unless the wage is raised. I think it’s fair that they should get that danger-money.

    (I’m writing this from the United Kingdom, where statistics like the current rate of new infections per million population are in the worst one or two of all countries.)

21. @Eco Newbie
    The “children worry” comment with a smiley at the end was meant in a sarcastic way, to reflect the mainstream political discussion.
    Yes you’re completely right about the infrastructure investment example. That’s what Japan has been doing: the “sad, poor country with so much debt” – and maglev trains.
    I’ve heard of a local attempt at something similar: a highway in Adelaide where the government built only half of the width “to save money” and then 10 or so years later, when they finally had no choice but to finish the original full scope, just the “other half” cost triple of the full scope original cost or something like that. So that’s a local counterexample of your rail story 🙂
    Meanwhile these days freeway users now pay out of their pockets per mile to Transurban and the best one can do is to buy shares in the company to make it less annoying. My children are luckily not yet old enough to be reading books about “government takes taxes and with them pays for roads” and me then having to explain that both the “with them pays” and the “for roads” parts are untrue as the windshield beeper beeps at the toll point 🙂