More political interference from the central bank – oh but its independent!

This Post Has 80 Comments

1. And I believe the US is doing something similar to that with their Municipal Liquidity Facility. Is that correct?

2. What’s stopping the government implementing a job guarantee program? Surely they can’t use the “inflation” argument at a time like this?

3. “He claimed that the reluctance of the States and Territories to spend more was driven by their determination to protect their credit ratings.”

   It seems to me, having attempted to communicate with these characters over the past few weeks and months, that there is a bit of a split personality amongst the Rabid Right as there is amongst the Regressive Left.

   The Rabid Right control everything with debt. They are obsessed with getting everybody else into debt while avoiding it themselves. Debt is their control mechanism. Everything has to be “borrowed” and then “paid back” – even education.

   And they see everything in this light. Perhaps it’s because liabilities are always on the right hand side of the balance sheet and that’s all they can see.

   Whereas the assets are on the left.

   When dealing with the excess savings issue that is the core of the economic problem, the left are obsessed with confiscating it and the right are obsessed with obfuscating it via some sort of borrowing.

   Neither can see that the best approach is to accommodate those savings and stop worrying about them so much.

4. “persuaded the States to abandon a number of taxes that they were constitutionally allowed to levy, but which were not efficient vehicles (for example, payroll taxes).”

   Is that inefficient in mainstream terms?

   ISTM that the federal injection via a Job Guarantee and withdrawal via a federal payroll tax is the most efficient structure – since it necessarily frees up people for use elsewhere.

   State level taxes are more difficult since you can only rely upon the physical infrastructure to stay in one place. It’s like fishing rights – no use if you drive the fish away.

5. Same thing is playing out in Scotland over the last few years.

   One minute the SNP scream about being allowed to borrow then after they get bored with that they scream about being able to control taxes.

   But they’ll never control taxes as they leak across borders. Tax does not stop after the payroll tax because your spending is someone else’s income which is then taxed. Spending flows into England, Wales and Northern Ireland and the SNP cannot measure that leakage because they do not have their own currency.

   Nurses go on a hen night to Blackpool or the police On a weekender to Cardiff for the Rugby. Their spending which is then taxed as income will not show on the Scottish government accounts. The hotel and bars and restaurants in England and Wales will be taxed but HMRC. They have no way of knowing where the currency came from. The hotels, bars and restaurants will save some of their income so good luck trying to figure out what Scotland’s deficit actually is.

   If they ever go down the borrowing route they’ll regret it big time. Borrowing in a currency they can’t issue always ends up badly as the politics means they end up even bigger serfs with less control.

   To stop Scotland from handing everything over to Brussels and becoming another EU slave. Which is the SNP plan. You introduce MMT for the whole union.

   All that needs to be done is London credits £10 trillion,nah let’s make it 10 quadrillion into the Scottish consolidated fund. Then says when that runs out we will credit another 10 quadrillion. Whenever you need it you can have it. Job done. To highlight the complete farce that it is and show that they are just blips that can be created at will.

   If nothing changes and the charade continues. If I was a right wing voter in Scotland I would fully support the SNP plan for independence. I would get everything I ever wished for. Brussels would hand me my right wing dream on a plate.

   I would get the budget surpluses I’ve always wanted. I would get my low tax rates. I would get very low government spending and all the privatisations I ever wanted. Just by voting Yes for the SNP plan. It’s a good job the right wing voters in Scotland are as thick as mince or the SNP would win by a landslide.

6. Every time Scotland screams to borrow and screams to control taxes.

   The London Gentleman clubs must be laughing their heads off and pointing up North playing a banjo.

7. English councils heavily invested in commercial property as a way of ‘offsetting’ the withdrawal of needed funding from central government. The same situation applies, the councils are merely users of the State currency and not a currency creator. Office buildings, shopping centres and such have taken a huge hit, this situation started well before the pandemic. Further cuts to needed services will need to be implemented if central government doesn’t act. You could view it as localised austerity measures, but it covers all councils, so it’s not so local. Councils are achieving bankruptcy status with Section 114 notices issued and many are on the edge of such notices. The same tactic and consequence are visible globally. I would suggest that governments need to take their foot of the fuel of economies and invest currency into, as Bill says, operations that promote full employment and price stability.

8. Senexx wrote: “And I believe the US is doing something similar to that with their Municipal Liquidity Facility. Is that correct?”

   Yes, but in a limited way which is severely constraining the potential success of the program. Got to forbes.com and search for any of Robert Hockett’s columns between April and June of this year for an explanation of the considerable implicit potential of the MLF but also a critique of its half-heartedness.

9. “The sensible strategy, given the scale of the pandemic, is the federal government to use its currency-issuing capacity to increase its fiscal stimulus and provide ample grant support to the states. The principle of subsidiarity is fine but, if not moderated by an understanding of the capacity of the currency-issuer in a federation, will deliver situations where an austerity bias becomes the norm.” This “sensible strategy,” which recognizes the essential distinction between currency issuers (federal government) and currency users (lower levels of government, etc.) is, not surprisingly, also being largely rejected in the U.S., which operates under a similar system of a central government/federated states. As dismal as both current national approaches may appear, I hold out more hope, in the short run, for Australia than I do for my own “exceptional”–exceptionally obtuse–country. Also, I appreciate Bill’s take on the principle of subsidiarity, which is a useful guide in social and political theory but not in the economic arena unless the fundamental currency issuer/user distinction is kept front and center. I’m reminded of the so-called “broken windows effect,” a principle which began as a good faith code enforcement strategy to preserve healthy neighborhoods by promptly addressing slowly deteriorating buildings. Unfortunately, it morphed into abusive governmental practices, such as cops ticketing petty crimes like jaywalking in an obsessive, sometimes racist campaign to nip serious crime in the bud. Related, at least tangentially, to these examples are two old folk sayings that contain more truth than most realize: (1) the exception proves the rule, and (2) rules are made to be broken. The first saying, rather than refuting the notion of a general rule, affirms it by noting that if you must search for an exception to a rule, its general applicability is demonstrated. The second saying indicates, however, that even the best and wisest rules, those which seem most universally valid and beneficial, will occasionally bump up against situations where the right thing to do is to act counter to the rule. Might MMT profit from keeping these two old folk sayings in mind, as it lays out its axioms and applies them to a wide variety of macroeconomic contexts?

10. “The Federal government is essentially trying to force the political consequences of its own failure to increase its net spending by enough and the resulting real economic damage that has resulted onto the states and territories.”

    Yet, this is the very same structural/institutional/human framework that the MMT crowd is going to utilize in order to implement ‘change’ and radical renewal?

    i.e. government and state bureaucracies. My point is self evident.

    HINT:

    “Turnbull’s brown coal hydrogen horror show: $500m for 3 tonnes” by Giles Parkinson, April 12, 2018

    “The $1 billion cost of pork barrelling revealed” By Eryk Bagshaw and Lucas Baird,
    January 20, 2018, The Sydney Morning Herald

    Now, back to my ‘homework’.

11. “I am on the public record supporting the lockdowns, because the evidence is that they suppress the virus infection rates and reduce the death rates.”

    I’m sorry Bill, I love your work but you are very much wrong on this point. The evidence overwhelmingly shows that lockdown stringency does not reduce death rates at all. Otherwise why were Belgium, the UK, Spain and Italy far worse off than Sweden (and that’s just from the EU).

    A large Lancet study confirms this here – https://www.thelancet.com/journals/eclinm/article/PIIS2589-5370(20)30208-X/fulltext

12. Sweden? You cannot be serious. Their neighbors the Danes and Norwegians would like a word …

    https://www.cnbc.com/2020/08/13/swedens-coronavirus-critics-urge-more-caution-to-avoid-a-second-wave.html

13. “Sweden? You cannot be serious. Their neighbors the Danes and Norwegians would like a word”

    Why them and not Belgium. Why is Belgium never required to have a word with its neighbour Germany or Holland?

    Why is Peru never mentioned – despite the harshest lockdown in the world?

    When you disaggregate the USA into the individual states you get a similar picture.

    Cherry picking aggregations is always curve fitting a belief.

14. “.e. government and state bureaucracies. My point is self evident.”

    Really just the central bank – by paying the Job Guarantee wage directly using “QE techniques”.

    The stabilisation is then automatic. No need for bank governors. No need for committees. We can sack them all.

15. The lockdown was, in my opinion, the correct course of action. The course of action taken, has evolved from historical inaction that didn’t help to prevent/slow pandemic contagion of the past with devastating consequence. Time was needed to gain an understanding of COVID-19 and how to approach and mitigate the effects of this newly discovered coronavirus. The Lancet: https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)31201-0/fulltext

16. The Lancet: “Importantly, despite the low infection rate, the death rates in Sweden are considerably higher than those of its neighbouring countries and approximately 30 countries around the world that enforced lockdown rapidly and now are making use of testing, tracing, isolation, and masks to control the disease. The Swedish experiment has failed, but what is the cost? The death rate is much higher in countries (1) that delayed lockdown, (2) where posters calling for an approach like Sweden’s arguably led to people in these countries (eg, Brazil and the USA) attempting to follow the Swedish approach to the pandemic, and (3) that were released from lockdown early by their government. It is indeed difficult to calculate, but the increased death toll from following advice from Giesecke and the Public Health Agency of Sweden is going to be substantial around the world. The attempt to reach herd immunity, and the public promotion of herd immunity to others, has cost many lives.” https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)31676-7/fulltext

17. “No need for bank governors. No need for committees. We can sack them all.”

    According to your assumption [See above quote], the Job Guarantee, will be some sort of magical, spontaneous , self organizing entity, without the need for any planning departments, management, central and/or local administration, ect.

    As well, further observations suggest that MMT is simply a post Keynesian/neo-liberal charade concocted/co-opted by Mosler and his friends, Rumsfeld, Laffer, ect., and a coterie of pliant academics/intellectuals seeking to maintain the current social [the current class/power structure] arrangement at any cost.

    See for example, “The Economist Who Believes the Government Should Just Print More Money”

    That is about as blunt as it gets, without having my comment deleted.

18. “the Job Guarantee, will be some sort of magical, spontaneous , self organizing entity, without the need for any planning departments, management, central and/or local administration, ect.”

    It’s just buying your hours off you at a fixed price you so you can’t use them yourself. How complicated is that?

    You drop onto a default payroll and money turns up on a Friday. You’re then on the volunteer list until you are called forth.

    Which if you run a rabid libertarian/anarcho-communist system (either label will do. they’re the same really) you never will be.

    If you don’t like the private sector operations around you, you quit your job and get paid at the living wage. The private sector operation then has to compete to get your labour back by paying a better wage or offering better terms. Or they close and a better employer turns up instead to service the demand.

    Banks can go bust because you don’t need them to inject money. Interest rates are at zero so mortgages remain permanently low. Asset prices naturally increase as they are not being suppressed by the artificial market intervention that is “setting bank base rates”.

    Demand is maintained spatially and temporally across the currency area. Entirely automatically. All parliament has to do is set up an employment tax and set a rate once a year – which business then pays. You can cancel income tax and corporation tax as they are unnecessary.

    Everybody is better off. More flow. More wealth

    Set the employment tax at a level necessary to employ the police and judges – assuming you want to bother with such trivia.

    Unless you’re a complete banker, it’s nirvana.

19. “. . . ., it’s nirvana”

    Sure it is. “The Economist Who Believes the Government Should Just Print More Money” and my comments vide supra.

    “We’re always used to talking about the “stupidity” of the bourgeoisie. I wonder if the theme of bourgeois stupidity is not a theme for [artists, for intellectuals, for philosophers]: those who think that merchants are dim-witted, that financiers are obtuse, that those in power are simply blind. Sheltered by these caricatures, in fact the bourgeoisie is remarkable in intelligence. The lucidity and intelligence this class, which has captured and retained power under the conditions that we know, produces many effects of stupidity and blindness, but where? – if not exactly among intellectuals. We might be able to define intellectuals as those upon whom the intelligence of the bourgeoisie produces an effect of blindness and stupidity.”

20. Alan – Who says the bourgeoisie is stupid? I said the exact opposite. So did Kalecki and Quirk etc.. Trust the bourgeoisie, trust the extreme right and what they hate and fight against: Permanent full employment, the Job Guarantee. So Foucault’s quote is singularly inapt here – but it applies well to those I describe below.

    By the way, I am the one here who goes out on a limb saying that the JG and thus MMT are socialist. Few go that far. The main MMTers don’t say such things, at least not very often, or loudly, though most of them have studied Marx, surely more deeply than I have or 99% of today’s Marxists have. But my position is firmly, irrefutably based in classical socialist theory. And history unequivocally shows that MMT-ish policy leads to decreasing class differences and changing power structures, not their maintenance. (I promise I’ll post something on the Skocpol/Goldstein debate you cited.) But so many modern “Marxists” and “socialists” abhor such obvious and inescapable conclusions and facts. Why?

    IMHO, one should presume that a (long) 19th century socialist author is a sane person writing about the real world toward positive change, no matter how exaggerated, florid or frenzied their tone is. But for the (long) 20th century we are still in, the opposite – such people should be presumed insane until they prove otherwise, no matter how calm and sensible they seem. Most organized Marxists, the more ultra-Left or accelerationist the pose they strike, are ardent foes of Marx and socialism. Since they don’t really want to succeed at anything in the real world, the closer success comes despite all their efforts, the crazier they speak and act.

    As for JG administration etc. Big deal. Of course there will be administrators and whatnot, people signing checks etc. But MMT and the JG opposes the learned helplessness so prevalent especially now in the USA. The first of the New Deal work programs, the CCC which employed millions of people, was enacted in the first hundred days and began hiring about 30 days after. Harry Hopkins ran the WPA – bigger than the US armed forces at the time – with a central organization of about 150 people. It’s not a big deal- ordinary people can do it, if they just stop telling themselves they can’t. Don’t listen to the teachers of learned helplessness, working everywhere to infantilize people and especially the left!

21. “Harry Hopkins ran the WPA – bigger than the US armed forces at the time – with a central organization of about 150 people.”

    Your sincerity and enthusiasm is admirable; even though, you may be misguided in your assertions. For example, [NOTE: And read the following very carefully.]

    1. “Disappointed by the slow pace in getting the PWA up and running, and concerned about growing political unrest among the unemployed, Roosevelt was quick to embrace Hopkins’s proposal. A week later the Civil Works Administration (CWA) was formally established by executive order, with Hopkins at its head and an initial budget allocation of $400 million diverted from the PWA.”

    2. “The administrative task of establishing the CWA – which moved from nothing more than an idea to a fully operational program with four million employees in about ten weeks time – was gargantuan. It employed seven and one-half times as many people as the rest of the federal government (civilian and military) combined.”

    From: “When Government Helped: Learning from the Successes and Failures of the New Deal”, eds. Sheila D. Collins and Gertrude S. Goldberg (New York: Oxford University Press, 2013

    CHAPTER 5: “THE NEW DEAL’S DIRECT JOB CREATION STRATEGY: PROVIDING EMPLOYMENT ASSURANCE FOR AMERICAN WORKERS” by Philip Harvey

    Available online for free.

    I stand by my initial assessments in the above comments. Palpable threats to the status quo [The Warren Moslers, Donald Rumsfelds, Arthur Laffers, ect. of this world] and the real, tangible threat of rebellion/insurrection requires that, in order to maintain the status quo as it is, a conjurers trick must be devised in order to soothe a potentially fractious public. That is why the ‘New Deal’ was created and that is why MMT is currently being offered up as a panacea. Who ultimately benefits is obvious, i.e., it is fully explained in “The Economist Who Believes the Government Should Just Print More Money”.

    I am truly sorry that I cannot be more charitable, but it is what it is. What is truly required is the ultimate in skepticism and that is what I have to offer. In any case, I have more reading and ‘homework’ to do.

    Peace be with you, God willing.

22. @Neil Wilson at 18:13,
    There again you said, that the central bank of nation X should jst fund the JGP of MMT.
    Before, twice, you have said that other than that the Gov. of nation X should carry on as it has in the past.
    I think you also said, that the interest rate on bonds should be set in stone leaving nothing for the central bank to have to think about.

    IStM, that nations could/should also use deficit spending to pay for investments in the public interest. Things like 5g internet, a new bridge, or repairing the existing infrastructure, etc.
    We might even include health care for the workers. Without them the economy stalls.

    You also said at 1:48, that most taxes should be repealed and mostly the Gov. rely on an employment tax on corps. and businesses. IMHO, this is not a good idea. Taxing comps. (at a high enough rate) for how many workers they have will make them want to automate a lot. This will make the Gov. have to receive less tax revenue or raise the tax rate (which will make comps. automate more).

23. IMHO, if we believe that ACC, aka AGW, is a huge threat. And, maybe lead to human extinction, then

    it follows, that AUTOMATION of production should be strongly discouraged.

    IStM, that having machines make stuff is always going to use more electric energy than having people make stuff will use.

    At least, in the short run. Maybe someday enough solar, etc. energy will be produced. However, as long as any fossil fuel is being burned to make electricity automation is bad for the climate.

    Therefore, we should tax automation more and tax payrolls less.

24. “Taxing comps. (at a high enough rate) for how many workers they have will make them want to automate a lot.”

    That’s sort of the point of productivity. We can always fully employ people by switching shovels for teaspoons, but that would be really stupid since it is a waste of energy.

    The task of the private sector is to automate everybody out of a job – and then pretty much everybody drops onto the Job Guarantee. Which then provides the money to buy the output of the firms, less what the owners eat for themselves, and because capitalists like to save to show off how rich they are the process ends there (savings and taxation are largely the same from an MMT point of view. Savings are essentially voluntary taxation – hence Japan).

    People on the Job Guarantee can be used by the public sector “for free”.

    Productivity is where the efficiency come from that reduces energy use. And energy is the ultimate limiting factor. Ideally we only want to use today what the big star in the sky supplies today.

    Going back to the stone age isn’t an option. At least not one that is remotely electable.

    “Things like 5g internet, a new bridge, or repairing the existing infrastructure, etc.”

    Using what for resources? Where are the people coming from to do it. And what are they doing now that you will have to stop them doing to free them up for that task? How do you stop it without ending up in a bidding war for resources?

    There’s no free lunch here. The only thing available in the economy is the unemployed. Once you have hired those, then you’re back to tax and spend.

25. Hi
    “Neil Wilson
    Monday, August 24, 2020 at 15:17
    …When dealing with the excess savings issue that is the core of the economic problem”
    Do you mean the excessive wealth and consequent power accumulating to increasingly small numbers of people or something else, Neil? If something else have you got a suggestion for a search term on the blog or a suggestion for a link to further reading on it.

    i watched a debate hosted by Adam Tooze on international effects of a “savings glut” postulated by some economists. Quite a lot was beyond my understanding but I did wonder if that might be what you were referring to.

    Thanks to Neil and other commenters for consistently interesting additions, illustrations and challenge to Bill’s insights.

    John

26. Neil Wilson at 18:07,
    IMO, you are wrong to assert without evidence that you are back totax and spend after the MMT JGP has hired all the unemployed.
    For the last 30 years, American Repuds have been borrowing and spending. Not taxing and spending. Yet, there was little inflation. The national debt went form about $1T in 1981 to over $25T now. [I have to say “about” because there are a few ways to calculate the natl’ debt.] It took the US 140 years to get to that $1T, and then just 40 more years to add another $24T. And despite all of the $24T of borrowing, the inflation rate never got over about, IIRC, 3%. At least not since 1990.

    My evidence is the historical record. What evidence do you have?

    I think your assumption that all possible production *was* (or will be) *being used* over those 30 years (or in future years) is just wrong. More demand causes more investment or hiring to produce more stuff. Where is the evidence that the natural resources to do this are not present on the earth? Do you have any evidence to support that assumption?

    OTOH, to fight ACC we need to cut back.
    .

27. “Do you mean the excessive wealth and consequent power accumulating to increasingly small numbers of people or something else, Neil?”

    Something else. The excessive wealth and power argument is largely another confection and myth to try and push an agenda. People with good connections are powerful, and will remain powerful.

    The non-government sector over all tends to accumulate net financial assets ‘savings’ because it doesn’t spend as much as it earns. Those net assets can only come from the government sector – since everything else is balanced by something else in the private sector.

28. “IMO, you are wrong to assert without evidence that you are back totax and spend after the MMT JGP has hired all the unemployed.”

    If you watch the video that Bill put up Today (Wednesday), you’ll see Bill confirming the point.

    But you’re welcome to believe whatever you want to believe.

29. I think Neil would be right if there were two additional assumptions – that the JG effectively ended the ‘business cycle’, and that JG jobs were always the optimal use of people’s time and efforts.

    The first means that private sector savings desires will remain static at all times.

    The second means that the JG would no longer be functioning as a ‘buffer stock’.

    Absent those, I see a role for Keynesian fiscal policy at times even with a JG in place.

30. As Bill says in the video- the Job Guarantee is not meant as a panacea.

31. “Absent those, I see a role for Keynesian fiscal policy at times even with a JG in place.”

    Which completely contradicts what Bill says in the video today. Once you are full you are full. All you can then do is move things around.

    Clear as day.

    “As Bill says in the video- the Job Guarantee is not meant as a panacea.”

    No it isn’t. But what else did he say in the video on the grid of fiscal/real choices. Why have you decided not to mention “taxation” that Bill mentioned very clearly. Time index 30:00 for +1.30.

    Once you want to pay more than the JG wage for a public sector operation, (which is essentially that you don’t want the private sector poaching that person during a boom) you have to fund that transfer in real terms somehow. Somebody has to have less, so they can have more.

    Productivity improvements don’t appear at the wave of a wand.

32. Neil Wilson at 22:23 and other times,
    OK, Neil, I watched Bill’s video of Wed.

    I think you heard Bill wrong. At about the 30:00 mark, Bill says (to paraphrase), “when an *economy* is fully employed there are real constraints.” He goes on to talk about “all resources and all labor are fully employed.” He didn’t say, “When there is full employment, there are real constraints.” It is as plain as day.

    So, again I think you are making an assumption that is not necessarily true.
    It is that, the MMT JGP will provide enough Gov. spending to make the whole economy “fully employed”.

    Now, I have made your point, but I used more careful language.
    I have said that when there is full employment from a JGP *and* other deficit spending is using *all* the resources THEN there are real constraints.

    I suppose that your assumption could always be true IF the GOV. MADE SURE the JGP wage was *large enough* to suck up *all* the available resources. However, you didn’t specify that level of JGP wage and I want there to be other investment spending.

    And like you have said, it is also necessary to target the taxes or rationing programs (etc.) to free up just the right resources.

    Therefore, I stand by my claim that it maybe necessary to have other so-called deficit spending on other programs like the Green New Deal, which is obviously a form of ‘investment’. You are denying this.
    .

33. Neil, I am very optimistic about the JG program, but I am not so optimistic that I think it would completely end the private sector business cycle. Bill typically states that the JG would create a situation of ‘loose full employment’ at all times. Unless the JG jobs are such that they are the optimal use of workers’ time from a social standpoint, the government may want to counter-act slumps in private sector employment with additional deficit spending to stimulate demand. I don’t understand your objection to this- it really doesn’t seem like a big deal to me. What am I missing?

34. “I don’t understand your objection to this- it really doesn’t seem like a big deal to me. What am I missing?”

    I thought it would be fairly obvious. Once everybody is fully employed in the private sector or the Job Guarantee, there is nothing left to buy.

    What are you going to buy and where is it going to come from? How are you going to make the demand “effective”.

    At that point you are up against the physical limits. You have a PPE problem – all the money in the world and no supply. Because any extra supply requires extra labour activity which itself has to be paid, which then has to be supplied and so on. You’re after a cascade of magic productivity from somewhere.

    Less Magic Money Tree. More Magic Porridge Pot.

    The reason the left failed last time was that they failed to address the supply side, which led inexorably to the “supply side economics” we’ve suffered for the last 40 years. They have the opposite problem. They forget that savings drains demand and you can’t supply people without any money.

    MMT, as ever, takes the middle ground. Hence the point Bill was making in the video. Once people are fully engaged then you either move things around, or your improve productivity – which like training means you have to have less today so you may possibly be able to do more tomorrow, if the investment works.

    Investment is still a transfer of effort today. There’s a limit to what you can use JG labour for on the investment side because the labour is largely going to be low quality, and the projects generally have to be “nice to haves”.

    Eventually you need JCBs and their drivers, and they are already gainfully employed elsewhere.

35. Just like Keynes said that the economy can get stuck in a rut where there is high unemployment, I would think the economy might get stuck in a rut where there was overly high numbers on the JG. The solution in either case is for the government to increase demand by spending more or taxing less.
    The opposite in the case of demand induced inflation if that was to occur- even with a JG.

36. I don’t understand the problem. If the economy reaches a state where all resources are being used then:
    a) there is something to do that’s more important than things that are being done, or
    b) there isn’t.

    In case a) then free up the resources and do that thing, which is, after all, more important.
    In case b) sit back, sniff the roses, ponder something, relax. “What do you always have to be *doing* something for?” — Tony Hancock, _A Quiet Sunday Afternoon at Home_

37. Maybe it just depends on how high the JG wage ends up being in real terms. I cant see that it would reach what is now the median wage and remain at that level in real terms after the initial inflationary burst that I assume that would cause. And even if it did, I don’t see that everyone who ends up on the JG would be happy to remain there at that level of income- many people would have financial commitments and real obligations that might exceed the income a JG wage provides. And I don’t imagine that the JG jobs will be the best possible use of all who are on them, as in the most productive use of all people’s time and efforts- not that private sector jobs usually are either. “loose” full employment with a JG is not the same as real full employment of resources and if it is then the JG is not acting as a buffer stock. But then I’m not the expert here and sometimes I lack imagination.

    Imagine we had a good JG system in place with a decent wage and something far-fetched like a global pandemic occurred- can’t you imagine that the government might need to provide additional fiscal policy beyond the JG? I’m just saying I think it is a mistake to rule out that possibility.

38. Neil Wilson at 3:57 wrote, [quoting Jerry Brown and then replying],
    [q]”I don’t understand your objection to this- it really doesn’t seem like a big deal to me. What am I missing?”

    I thought it would be *fairly obvious*. Once everybody is fully employed in the private sector or the Job Guarantee, there is nothing left to buy.

    What are you going to buy and where is it going to come from? How are you going to make the demand “effective”.[/q]

    Neil goes beyond the statements of core MMTers. He asserts that a MMT JGP is all that is necessary and it will automatically make the economy fully employed, inc. all the real resources available to it.
    When asked for evidence to support this, he replies, “I thought it would be fairly obvious.”
    He miss quotes Bill. In the Wed. video Bill says, that there will be a real constraint when the economy (not labor) is being fully used. He even says “resources”. When Neil is asked about this he ignores you. This is like a typical person on the internet and also [quite tellingly] like a MS economist, who misquotes authorities and claims, “it’s obvious” as evidence. When a MS econ. says its *obvious* that the UK Gov. is like a corp. or a household, are you going to take that as proof?

    Mel at 5:12
    [q]I don’t understand the problem. [/q]

    Mel, the problem is that Neil is making assertions without any evidence. He goes beyond our Bill and other core MMTers. He is being believed {by many here} based on the logical fallacy of argument from authority, his supposed ‘authority’.
    And, if his statements are accepted by Congress then to get a Green New Deal we will have to “find the money”.
    He also asserts that the super rich will still have total control over Congress if we take 99% of their wealth away from them. So, we *must* let them hoard their money & wealth, so they will let us have the “magic” of the MMT JGP, which will solve all the UK’s problems. [Yes, I’m adding my take on his words.] Note that he assumes that if we promise to let them get richer that they will NOT OPPOSE us tooth and nail. This assumption is, IMO, obviously false.
    He also asserts that the only tax the UK should have is a tax on corps. and comps. for each worker they employ [in the UK?]. When asked about this [with evidence and opinions] he ignores you.

    These are the problems I have with Neil Wilson’s statements.
    .

39. Well Steve, I am pretty sure there is room for disagreement here. Especially when arguing about an as yet hypothetical program. Who could actually be an authority on what might be but has never been yet? I argue with even Bill Mitchell occasionally- even though I think he is brilliant and understands economics better than I do. We can have a disagreement with Neil and that doesn’t mean it is a situation where we just don’t get it or he just doesn’t get it- nobody knows for sure is the actual situation.

40. Jerry,
    It may look like I’m arguing or discussing with Neil Wilson.
    Actually, because Neil chooses *not* to reply to most of my points, I have found it useless to do so.
    So, in fact, I’m trying to explain to the lurkers and other comment-ers why they should not believe Neil is right about what he asserts with such certainty.

    OTOH, Jerry, you are right. Nobody knows *for sure* how it will play out. Neil says he does. At least he sounds like that. I hope I don’t sound as sure as he sounds.

    BTW — did you go back and listen to Bill’s talk at the 30:00 to 32:00 mark to hear if I was right about what Bill actually said. You might also pause it so you can read the slides carefully.
    .

41. Steve, I told you some time ago that no one ever tells you when are right on this blog- only hear it if they think you are wrong. Get used to it.

    But I think you were on the right track there, even if I would have used different words 🙂 And if you read Bill Mitchell’s next post you can see that he does also, even though he uses different words and you have to read between the lines, so to speak.

42. Jerry,
    It is unfortunate that there are always 2 possible reasons why a person here will not reply to you when you shoot their ideas down very well.
    1] They can’t think of a comeback that makes any sense. So, you could take this as agreeing with you.
    2] They don’t think that such a ridiculous reply merits a response. OR, they never read your reply.
    So, you could take this as *disagreeing* with you.

43. “And I don’t imagine that the JG jobs will be the best possible use of all who are on them,”

    It necessarily is by the way it works as it is introduced.

    We have the current situation where we have a suppressed private sector and a number of unemployed people U.

    You introduce a Job Guarantee at the living wage. Let’s say the “default job” is to sit at home in isolation so we don’t complicate things with added production. Those on the Job Guarantee then have money to spend they didn’t have before, which caused the subdued private sector to respond by producing more *and hiring people off the Job Guarantee*. The Job Guarantee then backs off.

    That process is a dynamic feedback loop that moves to a point where the JG injection balances the net savings of the private sector. The cohort U ends up divided between those remaining on the JG and those rehired by the private sector (R). So you have

    U -> JG + R

    At which point you have used up the output gap, and market operations have shuffled people around so they are in their best positions. Which will include some price rises in areas where people have been underpaying labour – and that is a redistribution since wages will largely not respond in those areas. However if the private system is degraded or the JG wage is too high then you may trigger an inflation which will require either taxation to quell, or the JG workforce to be engaged producing substitute goods and services (and selling those acts like taxation).

    The reason we can introduce a Job Guarantee without taxation is that there is an output gap to use up. But it will use it up.

    Beyond that you have to free up real resources to use elsewhere by suppressing the appropriate part of the economy.

    “I would think the economy might get stuck in a rut where there was overly high numbers on the JG.”

    That doesn’t happen, or certainly doesn’t happen for long. Unemployed in Keynes were *unpaid* unemployed. They were unable to demand those goods and services which would have caused them to be hired and paid to produce them.

    If the private sector sees no profit in borrowing from a bank to hire people off the JG and use them more effectively to generate more output, then why would government think they can do better? Somebody has to be hired and paid by government to make the same decisions an entrepreneur would do. And as we’ve seen from the Covid crisis, risk taking and organising the efforts of others isn’t the strong point of government planners.

    Ultimately there is no need to pay anybody on the JG any more until there is an alternative bid from the private sector. The JG anchor pulls wages and prices towards it over the cycle as businesses are forced to compete for labour, quantity expand and compete for sales.

    But then I have the advantage of having a pretty Job Guarantee agent based model in front of me and can watch the process unfolding – rather than having to imagine it in my head. The dynamics are tortuous to get your head around based on a description on a page.

44. Neil Wilson

    It would be great to see the JG agent based model or is graphical output. About time you revived your great blog?

45. Yes, Steve, Jerry. Neil is always worth listening to but it is sometime not clear enough that what he says is NOT what the core MMT authors say. One should always think “spend and tax”. That’s how it always works fundamentally. That when there is full employment, the economy begins to approximate the neoclassical picture and “tax and spend” and other neoclassical ideas begin to make some sense – is true, so some ideas of neoclassical origin can be grafted onto MMT, lessening the heavy workload of the poor core MMT authors. But thinking about it should be done very carefully and in light of the fundamental realities.

    For another instance, the tax regime he suggests recently is pretty much the opposite of the standard “hut tax” MMT recommendations augmented by personal income and estate taxes. See Michael Hudson for the negatives of tax regimes similar to Neil’s. Which only become appropriate in a white-hot WWII type, tight full employment economy, not the loose full employment JG economy we usually talk about here. Conflating the two situations – when we aren’t speaking grosso modo – leads to some of the dispute here. Everybody makes mistakes or explains themselves badly sometimes – Stephanie Kelton did imho, on roughly the same matter – in the piece Alan criticizes.

    For taxing paying productive work, payroll taxes, is usually wrong in principle- economically, though sometimes politically imperative. Such work is good and should be encouraged, not discouraged with a tax. Monopolies, bads, scarce resources controlled by a few private hands etc are what should be taxed. And that’s standard MMT/Keynesian econ – which was once and will be again applied as well as human beings can.

46. Neil Wilson at 18:41 wrote
    [q]The reason we can introduce a Job Guarantee without taxation is that there is an output gap to use up. But it will use it up.
    Beyond that you have to free up real resources to use elsewhere by suppressing the appropriate part of the economy.[/q]

    Why will a MMT JGP — ALWAYS — use up ALL the output gap?
    Why do you assume that the real resources are ALL then being fully used. Isn’t it usually possible to mine more ore or pump more oil? Isn’t it usually possible for industry to hire some JGP workers and make more stuff?
    Corps. limit their production to about the amount they can sell. The amount they can sell depends on the effective demand. The effective demand requires the buyers have the money to buy. It seems clear to me that throughout history production has been increased to supply the effective demand. This was true even after WWI in what Bill calls the “Full Employment Era”. Production kept being increased. It never stopped increasing as long as there was demand.
    . . . [Note: the OPEC oil crisis is an obvious exception.]

    I’m sorry, but again it seems you are making false assumptions.
    Perhaps your ‘model’ (I’m assuming that you meant to say it is a complicated computer ‘model’, like a climate model) doesn’t include or allow for the above historical facts.

    Like I said, I *really* WANT the Gov. to be able to use so-called deficit spending to fund a massive Green-ND. So, it is possible that this desire blinds me to the truth of your claims. OTOH, it is possible that you are blinded by something and can’t see the truth of my claims.
    .
    .

47. The JG isn’t the end all, be all of government intervention in case of crisis now, and certainly doesn’t have to be. There’s no reason (in general) the government can’t create permanent jobs to fill the void left by capital, nationalizing if need be. Especially once it stops peddling to job creators and breaks monopolies and cartels, cutting their power to throw sand in the gears.
    I say “in general” because there might be things that are a waste of resources, but I expect that would involve a relatively small amount of workers, even if some would need to be reskilled.

48. Bad terminology, replace “government jobs” with “public sector jobs”.

49. Neil, it seems to me you are saying that an economy where either 3% or 20% are employed in the JG are both at potential and neither has an output gap. I am saying there is a difference between the two- the 20% JG economy is not at potential output and the 3% is close.

    One way to look at it is that JG participants are playing a similar role to today’s unemployed- except they are personally much better off with the JG as an option for them. Sure they might produce some things that are nice to have produced while on the JG- but those things that they do- those things have already been determined to be ‘not very important’ or we would be paying regular government or private sector workers to do them absent the JG.

    So a JG payroll that has expanded due to a recession means that an economy is not at potential output in my opinion. And while the JG would be a strong automatic economic stabilizer and would reduce the severity of recessions, it would not have prevented what we are currently experiencing in 2020, nor would it have prevented the GFC recession that started in 2008. Would have been better for sure with a JG tho.

    Neil, Bill Mitchell has described the situation with a JG as being a ‘loose full employment’. Why would he make that distinction from ‘full employment’ if the economy was optimal in either state?

50. “But then I have the advantage of having a pretty Job Guarantee agent based model in front of me and can watch the process unfolding – rather than having to imagine it in my head.”

    Damn- they always send me the less attractive models. Must be that connections thing you were talking about.

    Like Martin Freedman, I am always interested in your thoughts about the JG idea. Like I said before, this is a minor disagreement about things that might possibly happen in the future if we can get a JG implemented in the first place. My support of the JG idea does not depend on whether additional Keynesian policy might be warranted some time after it was finally implemented. I doubt yours does either.

51. Jerry [@ others too]: “One way to look at it is that JG participants are playing a similar role to today’s unemployed- except they are personally much better off with the JG as an option for them. Sure they might produce some things that are nice to have produced while on the JG- but those things that they do- those things have already been determined to be ‘not very important’ or we would be paying regular government or private sector workers to do them absent the JG.”

    That’s very wrong, as is the “nice to have” characterization of the output of the JG, which in my humble opinion, even the core MMTers wrongly underrate. These “nice to have” things include a (Green) New Deal – contributing to a planet that is not much hotter than today’s. In the New Deal, these “nice to have” things included “not having a Dustbowl” – the main tool against it being the “JG” work by the CCC. Not having a JG is a psychotic idea, and without it the priorities become psychotic – the “essential” becomes massive welfare for the rich to do insane, disgusting things – what we see today. A JG is a major, essential part of the (Green) New Deal, not something opposed to it!

    Ultimately, such ideas as “potential output”, “output gap” and optimal state of the economy, full resource utilization etc are contingent on definitions, fantasies, guesses. There is no practical way to attain genuine full employment and get a real evidence for what they are – except by having a Job Guarantee.

    WWII white hot economies with tight full employment are only really possible when there is something like WWII – a catastrophe. Tight full employment creates its own inflationary, bottleneck, conflict problems which can only be solved when entire societies agree on priorities far more than usual. Wishing for that is foolish.

    In any case, these matters are irrelevant to today. We are in depression economics land. It’s like worrying about the precise diet to avoid getting fat when you are starving.

52. Some Guy @3:32,

    Hey. I don’t understand everything about everything. But the JG proposal is designed to address the social and economic problems associated with unemployment in my understanding. Maybe it can be used in a way that moderates the problems associated with global climate change while dealing with unemployment at the same time- that would be terrific. In my estimation, the issues of climate change are large enough to deserve their own program with their own workers that we pay just like we pay for the military. And if JG workers can help out well that is great.

    The JG is not the panacea to all that ails society. It ain’t going to solve global warming and it isn’t going to cure the corona virus or cancer or recessions or a whole lot of other things we want to have happen. It is still a great idea though that we should do.

53. “These “nice to have” things include a (Green) New Deal ”

    Green New Deal stuff will not be done with Job Guarantee labour. With the best will in the world the disabled and the low level staff that tend to remain on the Job Guarantee are no good at putting solar panels on roofs.

    Throwing training and people and expecting to turn low level people into brain surgeons is a mainstream myth. We need to deal with reality here.

    Green transformation requires technology and skills – which have to be freed up from what they are currently engaged in. And banning all the dirty stuff to make room.

    All of which requires political discussion about what they are currently doing and whether stuff that is dirty is actually dirty. Not trying to hide with with monetary illusions – whether from the left or the right.

54. “So a JG payroll that has expanded due to a recession means that an economy is not at potential output in my opinion.”

    Well that depends what you ask them to do. You can ask them to do anything within their skill level and not have to pay them any more – because there is no alternative bid in the marketplace. By definition you could say.

    However the issue is that the private sector rapidly regroups and bids people off the Job Guarantee. As Warren would say, the JG is there to help people transition back to a private sector job as quickly as possible.

    And from my modelling that is exactly what happens. And the JG is practically empty of people most of the time.

    You have no time to set up anything else, or anything long term – except for the type of people the private sector really isn’t interested in at all. And it only isn’t interested in them because they can’t deliver a surplus of output.

    To do anything long term, you have to hold back the private sector permanently. Which means running tighter tax policy in general and ideally specifically to release just what is needed.

55. “About time you revived your great blog?”

    Already revived – at the new location. I’ve put a post up today with the link to the Job Guarantee model.

56. “Such work is good and should be encouraged, not discouraged with a tax.”

    It has to be discouraged with tax if you want to free up resources for use by the public sector.

    Necessarily.

    The hut tax is a “valorisation” tax. It is there to ensure that money is accepted and frees up the general fungible stuff. After that you need a “resource” tax to get the stuff you need to do public sector things.

    And there is little better targeted than a payroll tax – as long as that payroll tax is paid by the employer, not the employee. The employee should be blissfully unaware of taxation completely – given it is utterly irrelevant to them and should always take home just what they earn.

    Since what I am proposing is just the de facto operation of the current UK PAYE system, I’d suggest it works pretty well – when combined with an injection by the Job Guarantee.

    MMT show you can abolish both income tax and corporation tax – since neither make a lot of sense in MMT terms. And that fixes a whole host of problems with the avoidance of those taxes.

    Let’s fix the distribution at labour exchange time.

57. I haven’t found your model yet- but it can’t possibly rule out the possibility that additional deficit spending could be necessary in something like what we are dealing with today.

    Large sectors of the economy suddenly experience a gigantic drop in demand for the services and products they had been providing. Millions of workers who had been working productively but now cannot due to that drop in demand. Among other things for sure. And they all go on the JG if we had it in place.

    But that economy is no longer close to potential at that point even if they are employed as JG workers rather than maybe airline pilots or hotel room cleaners or whatever they were doing before as employed people who were skilled in their particular jobs.

    Sure, the fact that they have some income due to the JG wage moderates the recession comparatively. But it is still a large hit to the economy in terms of income and output- and a responsible government might want to do some additional fiscal policy adjustments as in Keynesian policy to speed up the process.

    Is it really asking too much to admit that circumstances might arise where additional government policy might be warranted?

58. Neil Wilson,
    I googled this data.
    US Gov. revenue 2019 = $3.46T= $3,460,000 M.
    US employment 2019 = 157 M.
    Then I calculated $3,460,000 / 157 = $22,000/worker/year
    And if the JGP wage is $20/ hr then the average wage in the Private Sector will have to be over $25/hr.
    Then $25/hr x 40 hr/week x 52 weeks/yr = $52,000/yr.
    Then add $22K + $52K = $74K/yr
    And cal. $22K / $52K = 38.6%.
    So, a comp. or corp. pays 38.6% more than the wages they pay for your payroll tax. How can a restaurant make enough sales in a year to pay that to/for each worker?

    At this point I’ll say that this is adjusted for inflation and make the 2019 dollar worth 100 cents. If thee is inflation then the 2025 dollar will be different. This is just a rough calculation

    Also, you have said that your model shows that most of the workers soon are working in the Private sector.
    IStM, that many comps. will move many jobs overseas to avoid that $22,000/worker tax. So, what will all those 157 M workers be doing? Will service jobs be profitable with $22K/yr added to the cost for the employer?
    Middle class people who want to hire a comp. to send a housecleaner once a week, will have to pay about 2.5 times what they pay now. OTOH, they would have to pay at least 2x as much just for the new min. wage.

    I truly wonder just how useful your “model” is. How can you check it against reality? Many people don’t trust climate models that predict disaster soon. Climate models are based on physics and have been checked against the history of changing temps vs CO2 levels over the last 40 years and are pretty accurate and also checked over deep time for many millions of years.
    . . . Your model may not include all the critical effects. How can you predict all the critical interactions of an economy that has never existed? Why should we, your readers, trust your model?
    . . . It sees like you put a lot of faith in the accuracy of your model. Has anyone else reviewed it , is it peer reviewed? If not and if it can’t be checked against economic history, then why should I put *any* BLIND faith in its results?

    I’m a total amateur at this, but I have created many spreadsheets to calculate things. Things like curve fitting the cost of space warships vs their weapons and shields strengths. I create a formula and get one fixed point near the middle on that curve and look at what the formula says all the other warships should cost. It is easy to get the formula wrong. But, how would you know? I look at the extremes. That is the smallest warship and the largest, and see what I think of those costs relative to the cost of that middle size ship. That is, would I buy those ships at that cost to fight battles in the game? I have to fiddle a lot to get anywhere near right.

    You are asking us to put blind faith in your model. Why should we do that?
    At least tell us how many other people have looked deep into your black box and approved your model. If you don’t answer, I hope the readers assume the answer is zero. And then think about the reliability of your model.

59. NW:”Green New Deal stuff will not be done with Job Guarantee labour.”
    Not according to most Green New Deal proposals, AOC, Green Party, Bernie Sanders etc, which make it an integral part. Most of the Green part of FDR’s quite Green New Deal was with “Job Guarantee Labor”. Commenters here like to think they are ahead of the curve. But some are clearly lagging, behind the politicians and the masses, with strange, deprecatory ideas on the JG.

    Jerry suggests that a JG won’t cure the coronavirus. Maybe, but it surely can be used to fight it.
    There were proposals from Johns Hopkins etc to have an army of contact tracers in the USA in the hundreds of thousands. They were not followed. But a young friend/student of my wife’s in Wuhan, China did such “Job Guarantee” contact tracing/home care etc work against the virus – and came down with a worse case than I did later. But of course his “JG” efforts bore fruit, for China, even though it was the origin, suffered and is suffering much less than the USA with far more warning. On this point also see Naomi Klein’s article “How Not to Lose the Lockdown Generation” citing New Deal efforts against tuberculosis – labor provided by the NYA – National Youth Authority – “JG labor”.

    So people are saying things can’t be done – which history and current events show WERE done, and done well, with “JG labor”. Is there a better proof of my & Klein’s point about pervasive “learned helplessness”? Which goes hand in hand with bad economics.

    SG: “Such work is good and should be encouraged, not discouraged with a tax.”
    NW: It has to be discouraged with tax if you want to free up resources for use by the public sector. Necessarily.

    There are many ways to tax and “free up resources” – usually hardly a problem in demand-constrained capitalist economies. A standard MMT point is that payroll taxes are a bad idea economically, for reasons I stated. Read any MMT paper on US Social Security. There is no economic necessity to them as FDR & his Keynesian advisers well knew.
    I am convinced by the MMT arguments and completely unconvinced by yours. It is Good that non-core MMTers come up with their own stuff. Not Good if they don’t distinguish it from what the core MMTers say, especially when it is the exact opposite, as here.

    NW: The hut tax is a “valorisation” tax. It is there to ensure that money is accepted and frees up the general fungible stuff. After that you need a “resource” tax to get the stuff you need to do public sector things.

    This is an imaginary distinction without a difference – and may be founded on a reversal of the direction of causation. Spending is always first, taxation second.
    Any tax, especially any “valorisation tax” is a “resource tax”. The only genuine distinction of this sort is between valorisation taxes like a hut tax – or customs duties in 19th century USA – which relate the real and the financial, and ones like income taxes which are (nominally) only on monetary income and can be avoided by simply not having any income. So income taxes can only be used to augment the value of money not create a tax-driven money system ab initio. The only general reason to have payroll taxes in an MMT / JG economy – is if one were a Socialist/Communist who wants to hasten the socialization of production by discouraging private sector employment. OK, if someone like alan were proposing it, but I don’t think that is what you or he have in mind! 🙂 Again, all this is worrying about how to avoid getting fat when you are starving. Anorexic economics concerned with imaginary problems.

    NW: And from my modelling that is exactly what happens. And the JG is practically empty of people most of the time.

    That, along with some other statements above on the unemployed / “low level people” is proof positive that what you have constructed is quasi-neoclassical and is neither an MMT model, nor one likely to have much relevance to the real world. And any AI person could tell you that automating “high level” stuff is easy. It’s what “low level people” can do, what humans learn as children, that is hard. Unskilled labor is the most skilled labor there is! 🙂 Again, against the mainstream, it is voluntary unemployment that is impossible, not involuntary unemployment- simply because voluntary unemployment is a contradiction in terms. So you seem to be entirely ignoring the Phillips (space-filling? 🙂 ) curvy area, the Keynesian “semi-inflation” regime, the difference between Lerner’s low full employment and high full employment – and that is the basic technical macroeconomic stabilization feature and reason for existence of the JG. People, like Thomas Palley IIRC, sometimes criticize a strawman MMT that ignores such things. But MMT does not, it focuses on them!

    So MMT – all the core authors – envision JG numbers comparable to the usual unemployed buffer stock numbers (which again, without a JG are guesses). Surely smaller as employment is a better inflation-fighting buffer stock than unemployment – But not approximately zero! In the US it would always be several million people. The emptiness of the JG implies that non-JG spending (and taxation) is magically “fine-tuned”. Fine-tuning’s failure in the 60s-70s was one reason for the downfall of the old Keynesian consensus. Only God is smart enough to do that, even for short periods. The best we humans can do is to have a JG – growing and shrinking, but with millions of people in it.

    I have been saying for years that 99% of the Bright Ideas that people want to add to MMT or ways devised to explain it better amount to a return to the still omnipresent bad mainstream economics. If one studies the history of the decline and fall of the Keynesian era, you clearly see these Bright Ideas At Billyblog or NEP are just a farcical repetition of the Bad Ideas That Sounded Right, that helped wreck the Much-Righter-In-Truth Keynesian consensus. The criticism that the MMTers need is against this, AGAINST all these Peanut Gallery Proposals. To do the opposite of this bad advice- to respond to misguided complaints by sticking to their guns and shove their MMT stuff down people’s throats harder! Unfortunately, very unlike in the past, many of Neil Wilson’s recent statements here exemplify these Bad Bright Ideas, PGPs.

60. Well we got four of us, who all think the JG is a great idea and want to get it into action, arguing about what are minor points of disagreement about what might be the case if we ever succeed in getting it enacted as a program. This is not how we get the JG into existence anywhere.

    I regret my part in arguing about this. It is very clear that the JG program would be a huge improvement on what exists now. Lets get the thing enacted somehow. How can we do that?

61. “might want to do some additional fiscal policy adjustments as in Keynesian policy”

    How will that help given the supply capacity has been destroyed. How do you make your demand effective?

    The point is that if a JG had been in place then people transfer to the JG and the market sorts it out very quickly indeed – including reconfiguring the economy to the new normal. That’s sort of the point. It’s pointless maintaining sandwich bars in the middle of cities if nobody is going to be going back to cities.

    The central planner doesn’t know what needs to be produced.

62. “There are many ways to tax and “free up resources” – usually hardly a problem in demand-constrained capitalist economies”

    Not without appealing to fungibility. You have to tax entities that are using what you want to use. If you want doctors you have to stop whoever is currently buying doctors from buying them. You have to free up resources to train them if there aren’t enough.

    You don’t get to get away with handwavy “There are many ways” statements. You need to explain how you are going to get the physical resources you want to buy. And how precisely without getting into a bidding war with the private sector, which necessarily causes inflation.

    A payroll tax can do that directly. You just increase the tax on doctors. If you want to do it indirectly, time to explain the steps and assumptions.

    Because the opposition will eventually.

    “A standard MMT point is that payroll taxes are a bad idea economically”

    You won’t find that in any MMT text – in the context of freeing up resources. Try and find it in the Macroeconomics textbook for example.

    Remember the context here is not one of an economy without any employment – in which case payroll taxes are too high by definition – but one where everybody is engaged and the people the public sector needs (eg. doctors) are engaged by the private sector.

    If you like it is a *different* payroll tax.

63. “I regret my part in arguing about this.”

    Don’t. It’s important to clarify what we do *after* a JG is in place or we risk bringing down everything by getting that bit wrong.

    The approaches we can take in a demand constrained economy are not the same as the ones we need to take once we have eliminated the demand constraint by introducing a Job Guarantee.

64. “So MMT – all the core authors – envision JG numbers comparable to the usual unemployed buffer stock numbers”

    It reduces to about 2%. All wait unemployment, no long term unemployment. No underemployment.

    Which is what I get in my agent based model – those who have just left a job and are looking for a new one at the higher wage they had previously. Over time they either get that job, or eventually accept they have to drop onto the Job Guarantee so they can buy food.

    What you see in the trace is regular dips in private sector employment that represent this process. Scale that model output up spatially and phase shift it to account for different areas and business types hitting restrictions out of sync and you’ll get the constant wait unemployment line you are looking for.

    “The emptiness of the JG implies that non-JG spending (and taxation) is magically “fine-tuned”.

    It does. It’s the expectation dynamics. Firms know people drop onto the JG in certain circumstances. You see it in the model when firms try to cut wages blow the JG wage and all their staff vanish onto the JG. So they stop doing that.

    People don’t have to be on the JG all the time for the JG to do its job. Fear of the JG taking workers keeps firms in line. Fear of dropping onto the JG keeps workers in line. That’s how it works.

    A JG that works in the goods market by threatening to produce substitute goods does the same job there.

    What happens in admittedly this very simple system is that all wages are pulled towards the JG value and then the goods price starts to deflate as productivity is transferred to the wage share. If the profit share doesn’t add any more productivity their share gets squeezed towards zero.

    “Unfortunately, very unlike in the past, many of Neil Wilson’s recent statements here exemplify these Bad Bright Ideas, PGPs.”

    Isn’t it more likely the case that I’m challenging your core beliefs, which come from a particular political persuasion, and that is causing cognitive dissonance in you?

    Because your posts are attacking me, not what I am trying to point out. And then attacking straw men. Why?

    MMT doesn’t allow you to spend with abandon. I refer once again to the line from Macroeconomics, since appeal to authority seems to be flavour of the month at the moment.

    Taxes create real resource space in which the government can spend to fulfil its socio-economic mandate

    “How are you going to pay for it” will morph into “how are you going to staff it” and particularly “exactly why should we pay them any more”.

    And currently from quite a few commentators there are no answers to those questions. And answers to those questions are vital for any country outside the USA where we will run up against supply limits very quickly. The USA has a bit more leeway because of the number of other countries pegged to the US dollar. And it can therefore hoover up the unemployment there – without paying them a JG wage.

65. “But that economy is no longer close to potential at that point even if they are employed as JG workers rather than maybe airline pilots or hotel room cleaners or whatever they were doing before as employed people who were skilled in their particular jobs.”

    Why would they not be employed as airline pilots or hotel cleaners on the JG?

    There is no reason to pay them any more since there is no alternative bid. And that’s the only reason anybody gets higher than the JG wage.

    Nobody gets paid more just because. It is, (or at least should be) a competitive process.

    The process by which a capitalist would capture that additional productivity is as follows. First they have to get some capital from somewhere, or some collateral. That necessarily means that somebody else in the economy has to decide not to spend or use that capital item. In other words they “tax” themselves. And that creates the real space from which the operation can be created.

    If the JG is full of high skilled people, entrepreneurs will quickly move in to hoover up the spoils – because the JG has injected money, maintained demand and allowed people to rapidly repair shattered balance sheets. Then the economy can quickly reconfigure to the new normal with multiple entrepreneurs operating in parallel.

    Permanent public sector provision has to follow roughly the same process.

66. Neil, the answers to our disagreement could only be resolved after we get the JG in place. The economic and social benefits of a JG are clear to me as is the fact that there is a huge political hurdle remaining in the way. I no longer think that clarifying the JG further helps with overcoming that hurdle- especially if that clarification means that people who support the general idea- which is great as you know- become ‘clarified’ right out of supporting it.

    After we get the JG enacted we can continue our argument- if you haven’t seen the light by then 🙂

67. Jerry,
    I’m no expert. However, IMHO Neil’s take on the JGP and MMT in general may be easier to sell to the mass of voters.
    Then, we can do a re-think and just co-called deficit spend until there is a problem, i.e. inflation.
    You see Neil is making the claim that the only so-called deficit spending will actually be done off the Books by letting the UK Bank of England fund the JGP. All other UK Gov. spending will be done with taxing or borrowing.

68. “After we get the JG enacted we can continue our argument- if you haven’t seen the light by then :)”

    I suspect the issue is where we are designing the JG from. You have to design it from the top of the cycle when the private sector is at maximum extent. It’s at that point you see how “tight” your taxation policy is and how many unused resources are available.

    The tuning approach of the JG is that taxation should be sufficiently tight so that the JG buffer doesn’t exhaust in any physical location in your currency area at the top of the business cycle. That ensures the JG wage anchor remains in force.

    But similarly you don’t want taxation so tight that too many people are on the JG at that point in the cycle. Now if it is too tight, then you already have your required taxation in place. You either release that by reducing taxes, or increasing other spending.

    The important point is to set tax policy and size the JG for the top of the business cycle, not the bottom. Otherwise a private sector expansion will cause inflation or service degradation once the private sector starts poaching public sector staff.

69. How is a JGS going to work as a stabilizing force at the top of the cycle? It isn’t it. The economy is running hot. JGS employment is probably non existent. The only way to quell the economy is by killing demand. (That is increase taxes and increase interest rates – interest rate policy will come back into its own in a hot economy).

    At the bottom of the cycle, inflation shouldn’t be a problem. A JGS will serve the social purpose of providing financial and psychological support to the unemployed.

    The question is will a JGS prevent an economy becoming hot? I don’t think so. Once the ball gets rolling private sector employment demand will fire up and all the usual pressures will resume.

    And as I have mentioned before, be careful what you wish for. In the hands of a right wing government (the electoral cycle always turns) a JGS will be used to pull the wage structure down.

70. I thought the impromptu nature of the Job Guarantee was one of its big strengths. You didn’t have to concoct an estimate of NAIRU to decide how much slack the JG program would be allowed to take up. You just opened a bunch of employment offices, confident that the Central Bank could fund any overdraft that Treasury would have to draw to pay a JG wage to the people who showed up. It seemed so simple. And it would give policy makers time to react to events after they occurred, rather than before.

71. Henry, I think it would work. The JG is an automatic way that government decreases its spending as people get hired away from the JG jobs in an economic boom time. Presumably government tax collections are also increasing as JG employment rolls decrease as the economy heated up. That is typical Keynesian advice I would think. Big automatic stabilizer.

    And I don’t understand how the JG program could be used to pull the wage structure downward. It in one sense is government establishing a minimum wage and offering a job at that wage to anyone. Worst case it becomes completely neutral in its effects on wages. Arguably like the US federal minimum wage rate of $7.25 per hour- probably doesn’t help many workers at this point, but it doesn’t actively hurt them. You can’t pull wages lower by setting a minimum allowed level of compensation unless you are a libertarian economist.

72. Dear Henry Rech (at 2020/08/31 at 9:13 am)

    You obviously have not understood how the buffer stock mechanism disciplines prices. At the top of the cycle, we create unemployment to discipline inflationary pressures. Under a Job Guarantee, we expand the Job Guarantee pool – buying an idle resource at a fixed price eventually has to be stabilising in terms of inflation.

    best wishes
    bill

73. Bill,

    Killing demand is what pulls down inflation.

    Inflation will stay subdued if demand stays down but as soon as the ball starts rolling again business will attract JGS workers at the old wage rates. And it’s on again.

    If there was no JGS, business could attract unemployed workers more easily than if there was – they have to push wage rates higher. I have no problem with that but it means the JGS is less effective as an inflation stabilizer.

74. Jerry,

    “And I don’t understand how the JG program could be used to pull the wage structure downward.”

    If it can be used to pull the wage structure up it can be used to pull the wage structure down, by adjusting the minimum wage.

    Also, if there was a right wing government, you can imagine the clamour from business. There are all those JGS workers producing faux goods and services why not employ them in “real” jobs. The duty to work obligation could be turned to compel JGS workers to work for business. Business would argue that they would not employ these workers if they were employed at normal rates and if they are going to work why not have them produce goods that are wanted.

75. ” we create unemployment to discipline inflationary pressures”

    Would it be valid to turn the causality around here?
    “we remove spendable money to discipline inflationary pressures, with the side effect of creating unemployment”

76. Henry @18:14,
    You could probably grant that for those who wanted to see lower wages for workers in the economy, a JG (or creating a minimum wage) is an unlikely tool for them to use. I mean if you wanted to pull something downwards, a hot air balloon is not the thing I would try to use to do it.

77. Jerry,

    Funnily enough, hot air balloons readily come back to earth.

78. Yes Henry, hot air balloons come back to earth. And your intellectual generosity is underwhelming in this instance 🙂

79. NW:It reduces to about 2%
    Which contradicts what you said before. And I think 2% is on the low side and should not be expected in every country.

    NW:Isn’t it more likely the case that I’m challenging your core beliefs, which come from a particular political persuasion, and that is causing cognitive dissonance in you?

    No, I don’t feel challenged – which of my core beliefs do you think you are challenging? I try not not have any. 🙂 We came upon MMT at the same time and we almost always agreed and I very often supported you and vice versa. My position is that you are making specific logical errors, speaking obscurely, imprecisely and self-contradictorily in ways that you did not several years ago. Based on your statements, your model or at least your confusing and confused explanations of it do not seem to be ready for prime time. The problems that concern you may be clearly relevant in your model. My point is that experience and history shows they are rarely relevant in the real world, so that they are not intrinsic to MMT and real economies.

    NW: “Because your posts are attacking me, not what I am trying to point out.”
    I’m trying not to attack you, but say that what you are trying to “point out” is NOT TRUE, and sometimes the opposite of MMT. As I said before, as usual, they do seem to recapitulate the sorry history of most later “improvements” to Keynesian economics. Again, my apologies if I have failed and made ad hominem attacks.

    NW: And then attacking straw men. Why?

    If I am attacking straw men, criticizing something that is clearly not what you intend, then my bad. Which straw men? But if many people are attacking the same straw men, might it not be because you are explaining your actual position badly enough to give others a more than reasonable belief that you do hold the “straw man” position? Less “precision” in and reliance on formal models, more precision in writing leads to better communication and thinking and models.

    NW: MMT doesn’t allow you to spend with abandon.

    Never said it did, in real terms. Of course it does in nominal terms. But neither does a job guarantee instantly eliminate all “fiscal space”. Even with it, there is still plenty of room for a government to do a new spending program and see by experiment whether it is spending too much rather than worrying about imposing new taxes, let alone regressive ones. Most firms will just raise quantities, not prices. That and the automatic stabilizer function of the existing tax regime – and the JG’s diminution- should do most of the work, usually all of the work. Technological progress makes these bottleneck, inflation problems recede ever more, the bottlenecks ever rarer or easier to circumvent. To make it hard to spend enough, let alone too much.

    SG:”The emptiness of the JG implies that non-JG spending (and taxation) is magically “fine-tuned”.
    NW:It does.

    Well, I am glad that you consistently say this. (Though 2% just returned to “empty” again.) Because this is enough to show that your model is not an MMT model or a realistic one. Fine-tuning is impossible. One of many reasons for the JG. I of course have often said that much/most of the effect of the JG is not from the JG proper. Just the same way that you can sometimes see the effect of (planned) deficit spending – before the spending itself occurs. But it has to exist and be substantial – in the USA, millions of people, not “empty”. Some of our disputes may be that you are explaining yourself badly – for most people “empty” means 0% not 2%.

    SG: “A standard MMT point is that payroll taxes are a bad idea economically”
    NW: You won’t find that in any MMT text – in the context of freeing up resources.

    SG: You will find it in every MMT text where payroll taxes are under consideration. It isn’t in the context of freeing up resources — because that context is usually inappropriate. It’s an answer to a wrong question at a wrong time. The questions you’ve asked here are RARELY vital- more like vital to breezily ignore.

    Arguments from authority are good – if what is in question is “what did the authority say”. Core MMTers say no to payroll takes. Franklin Roosevelt understood that they were not necessary and generally bad economics – even knew beforehand they might help cause the 1937-38 recession as they did. But they were a political necessity AT THAT TIME – and surely he was right. But I don’t think they are even politically necessary now. Fighting for them is fighting the last war, with a unreliable musket. How could my views here be affected by politics – if I said that taxing private-sector employment would decrease its size and thus accelerate some kind of “socialism”?

    NW:You don’t get to get away with handwavy “There are many ways” statements. You need to explain how you are going to get the physical resources you want to buy. And how precisely without getting into a bidding war with the private sector, which necessarily causes inflation.

    Well, I am saying one can and should handwave here, because it is appropriate at most times. The term “handwaving” comes from mathematics – one of my teachers, Irving Kaplansky wrote that it is entirely appropriate and the best explanation – at the right times. And imho the MMTers handwave appropriately – or not even ENOUGH, supplying too many details, not too few!

    To do otherwise can fall prey to an opposite mistake – False precision, and that is what you are doing imho. I don’t need to explain or do those usually counterproductive things at all. Largely, that’s what markets are for.

    The core of my criticism here is that you – (and even a bit, Stephanie Kelton in effect in the confusing statement Alan picked up on) conflate a normal loose full employment “New Deal” MMT JG economy with a white hot above-capacity tight full employment WWII command economy. They’re quite different things and I had no economic objection to payroll taxes or worrying about how to impose new taxes during the second, quite rare situation.

    E.g. NW: “The approaches we can take in a demand constrained economy are not the same as the ones we need to take once we have eliminated the demand constraint by introducing a Job Guarantee.” does this conflation, reversal. MMT mainly aims at the big sweet spot between the strongly demand-constrained and the strongly supply-constrained economies. Where most societies are most of the time. The demand constraint the JG eliminates is macroeconomic, on labor. Not universal on all demand constraints on every microeconomic factor. Labor will be fully employed, not every kind of widget or capital or con man.

    What you propose is NOT actually to “set tax policy and size the JG for the top of the business cycle” which I could agree with. You’re setting tax policy for a rare situation that is way OVER the top of the business cycle!

    This conflation seems to be causing you to reverse the standard MMT order – soemtimes in effect putting taxation before spending – and some people have gotten into this trap along with you when they think they are arguing against you.

    The MMT order – the real order – is that the government does the (more rigid) planned spending as it does now. As now it will UNDERspend to avoid inflation, so that there would be unemployment. Then comes along the flexible JG, which hires everyone else. The JG is “an add-on” to quote Wray, basically meaning this sequence. But this doesn’t create universal bottlenecks! Whatever new bottlenecks should be more than made up for by the other benefits of the JG. All the usual deflationary tendencies of capitalist economies remain, maybe even augmented. If unemployment is inflationary, as Mosler & other MMTers sometimes say, permanent full employment must be deflationary.

    But you have recently been arguing as if the flexible JG buffer stock intrudes on the more rigid planned spending. As if you could break a rock with a pillow! Confusing the idea of a JG which is and should be permanent, rock-hard inalterable – with its “pillow” implementation, which should and will be changeable and unpredictable. Albeit you sometimes, maybe more often, argue the correct way, with a flexible JG. But you can’t have it both ways!

    So, no, I don’t have to explain the taxation regime. It ain’t my decision. Just make general suggestions, like no regressive payroll taxes for many reasons. I don’t have to think about taxing doctors or whatnot. I believe that some of the core MMTers have said on taxation that there simply aren’t enough of them, that their time is finite – to do more than speak generally or rely on specialist authorities they approve of. Taxation is something for every country to decide on at specific times and situations and should be that way. The practical MMT recommendation I think would be get to immediately get rid of very bad ones on the poor, put in good ones especially on people getting rich doing destructive things – i.e. make the system more progressive, but otherwise just nudge in the MMT direction whatever is being done already.

    But it doesn’t really matter all that much in a normal economy. Not even regressive payroll taxes I oppose matter much. Better a JG + payroll taxes than no JG, no such taxes. Fungibility, substitutability, looseness will almost always be sufficient to avoid or circumvent bottlenecks and inflation – at the very least a JG would surely do better, be a better anti-inflation buffer stock than unemployment. Which means that in this predicted situation – touched on in Wray’s first book – instituting the JG should provide MORE room for other spending, not less, as you assume. That was contemporaneous opinion during the New Deal –> WWII sequence, that the first significantly economically prepared the USA for the latter. The US has more room than any other country now – freedom now usually spent on acting as the most insane country in the world – but today’s problem in other countries like the UK or Australia is still the usual gross underestimate of how much freedom and looseness there is, not the reverse. Anorexics should not be prescribed any weight-loss diets until they really do get fat, not just when someone hands them a mere projection that they will get fat!

80. Jerry,

    ” And your intellectual generosity is underwhelming in this instance.”

    It was your analogy – and you should know by now to be careful using analogies as an argument – they can always be turned against you. 🙂