There is a consistent undercurrent against Modern Monetary Theory (MMT) that centres on whether we…
UN Report on employment guarantees misses the essential points about buffer stock mechanisms
In 1978, during my postgraduate studies at the University of Melbourne I came up with the idea of a Job Guarantee – although I didn’t call it that then. I have written about it extensively since then and you can see some of the non-academic work published in this blog under the category – Job Guarantee. Among the many blog posts is this one – Some historical thinking about the Job Guarantee (February 25, 2021) – where I discuss some of the provenance of the idea. It is hard to get people interested in this idea because they dismiss it as just another public sector job creation scheme and then make all sorts of claims about inefficiency, ‘make work’ and all the rest of the ruses that are used to divert attention from the substance of an idea or proposal. In fact, the way I conceived the Job Guarantee and the way it has subsequently become a central part of the body of knowledge now known as Modern Monetary Theory (MMT) is not as a job creation program, but, rather, as a comprehensive price stability framework exploiting the dynamics of buffer stock mechanisms. Anyway, it seems that the UN might be interested in the idea of guarantee employment now after the special Rapporteur on extreme poverty and human rights published – The employment guarantee as a tool in the fight against poverty – in April 2023. The question is whether this is a job creation program or closer to the concept of a Job Guarantee.
These blog posts are useful background reading to learn about the role buffer stocks can play in maintaining price stability:
1. Buffer stocks and price stability – Part 1 (April 26, 2013).
2. Buffer stocks and price stability – Part 2 (May 10, 2013).
3. Buffer stocks and price stability – Part 3 (May 17, 2013).
One point I have always made is that there has never been a shortage of productive work to undertake even when there has been mass unemployment at various times in our history.
A shortage of jobs is different to a shortage of work.
The former arises because employers cannot see a revenue stream arising from hiring more workers and so a gap between the available labour power and the workers that have jobs arises – that is, unemployment.
However, those employers will take on extra staff if there is the prospect of increased sales of the products that that extra labour would create.
The constraint is a lack of spending not a lack of work.
The other way to say that is that there is a lack of paid work not a lack of work to be done.
Broadening it out, society always has the potential to benefit from the creation of hundreds of thousands of extra jobs in all sorts of areas of activity and service.
These jobs are not created because no one will pay for them to be done.
Of course, the currency-issuing government can always meet the payment and it is that reality that leads me to state in public presentations that mass unemployment is a political choice that can be remedied at any time the state chooses.
The capacity to purchase anything for sale in the currency that the government issues, means there is never a reason for workers to be unemployed, unless they are just moving between jobs (so-called frictional unemployment).
The UN Report adopts a human rights justification for proposing an employment guarantee, which is one avenue available.
In 1998, I co-authored this article (among others on the topic) – Unemployment, Human Rights and a Full Employment Policy in Australia – which lays out the rights agenda argument.
The rights agenda demonstrates that the state has the responsibility to ensure there are enough jobs for all those who desire to work, given that “the right to work is a human right”.
It is one thing to have responsibility and another to ensure it happens.
The Job Guarantee requires the state to unconditionally offer a job to any person who desire to work, which is a more explicit statement of the rights embodied in work.
The UN Report understands the difference between the number of paid jobs available and the potential for work.
It notes that:
The job guarantee is an answer to a paradox … The paradox of too few jobs and unfulfilled societal needs …
In my research over the decades that my career has spanned, I have never found that community or environments needs are fulfilled.
There is always work to be done, but often a lack of payment forthcoming to do that work.
That is the paradox and arises from relying on market mechanisms to prorate people across jobs.
It also opens up the idea of what is productive work?
Too often, and this is a common mistake that opponents of the Job Guarantee make, productivity is conceived narrowly as some activity that makes profit for a private employer.
Even public sector activities have, under neoliberalism, become KPI driven where all sorts of ‘corporate’ goals (user pays, cost recovery etc) are imposed to judge whether some work should occur or service provided.
Of course, the role of the public sector is not to achieve the same goals and outcomes as a capitalist firm pursuing private profit, which means all the private profit-type calculus is meaningless and when applied usually results in an undersupply or degradation of an essential public service.
But once we start thinking about unfulfilled societal needs, which in many instances remain that way because no private entity will allocate resources to them as there is no private profit to be made, the concept of productive work becomes almost infinite.
When we shift our thinking from private costs and benefits to social costs and benefits, the door opens widely to a bounty of work that is available across a broad range of skills and preferences, that can be offered by government.
So what looks to a capitalist like a boondoggle (make work) becomes a valuable input to a local community which advances its well-being and sustainability.
My research over the years has verified the value in the creation of so many jobs that the private market will never create.
Which gives the state a massive terrain to operate in both in terms of creating career public sector jobs and also offering a buffer stock of jobs with a Job Guarantee, to render mass unemployment a thing of the past.
Further, given employment status is a major factor determining whether a person is forced into material poverty or not (unemployment is a major predictor of the incidence of poverty), a Job Guarantee would go a long way to eliminating the scourge of poverty.
The UN Report says:
Unemployment or underemployment significantly increases the risk of poverty, since social protection against this life risk remains highly uneven … public employment programmes … [are] … a powerful tool against poverty. Employment was the most important contributor to poverty reduction in a set of 16 low- and middle-income countries in which substantial poverty reduction occurred in the period 2000–2010: in 14 out of 16 countries, labour income explained more than 40 per cent of the change in “poverty” (and 50 per cent in 10 countries).
Note, that a Job Guarantee would also eliminate time-based underemployment – which is a state where a person desires to work more but there is insufficient hours of work on offer in the labour market.
Skill-based underemployment – where the skills of the unemployment are mismatched with the skills required in the available paid jobs, however, would persist, although providing training ladders with the Job Guarantee program would help reduce that source of labour wastage as well.
While clearly understanding the benefits of eliminating unemployment and underemployment, the problem with the UN Report though is that it sees the issue in terms of governments having:
… too little public revenue to invest in creating the jobs needed for these transitions …
The word ‘revenue’ is derived from the Latin word ‘revenire’ which means “return or come back”. The old French word ‘revenue’ took that meaning.
What comes back?
When governments spend their currencies into existence, the flow of income generates the capacity to meet tax liabilities, and the tax payments then flow or ‘come back’ to the government.
The UN Report correctly notes that:
This is the paradox. There may be a shortage of decent jobs, but there is no shortage of work: the problem is that markets undersupply the public goods that are needed for the greening of the economy and for a thriving care economy …
But the reason for the paradox is not that currency-issuing government have insufficient financial means to ensure those public goods are in supply.
Rather, it is because the dominant political ideologies prefer to leave productive labour resources idle and essential societal needs unfulfilled.
It is a political choice that is being exercised not a financial constraint being met.
Will a Job Guarantee eliminate poverty?
I noted above that unemployment is a strong predictor of poverty.
However, not all work will eliminate poverty.
The UN Report notes that:
For many, precarious working conditions and a lack of decent pay characterize the work experience. The “gig economy”, casualized labour contracted through digital platforms, has rapidly emerged as an important employment category, yet also one with less social protection and less scope for collective bargaining than more traditional employment forms … Precariousness and informality characterize the emergence of a global precariat.
A carefully designed Job Guarantee program will eliminate this trend to precarity.
The provision of a socially-inclusive mininum wage to anyone who wants to work within the Job Guarantee (at hours they choose) will soon force private employers who are currently paying under such a wage or providing precarious conditions of work to either disappear from the scene or restructure their workplaces and wage offers to meet the ‘competition’ from the Job Guarantee.
A win-win.
I would also suggest that there a many private sector jobs that should be eliminated anyway given that they are not consistent with the challenges to move to a degrowth, lower carbon world.
For example, factories that employ workers on minimum wages and conditions to spew out low-quality plastic consumer goods that quickly break and end up discarded are not needed.
Many of those jobs could be replaced with Job Guarantee jobs, although we should see the latter as a structural change vehicle.
What do I mean by that?
The UN Report echoes the thoughts of many progressives that an employment guarantee program could help in the “greening of the economic and the growing recognition of the importance of the care economy”.
Some MMTers have written that the Job Guarantee is the solution to the jobs displaced in the carbon economy by a green transition.
We should be careful not to fall into the trap that sees the Job Guarantee as a panacea for the job shedding that will accompany the structural shifts required to meet the climate challenge.
In the main, the new jobs that will meet this challenge should be highly-paid, career positions, not buffer stock jobs on a socially-inclusive minimum wage.
The reason I make that point is that it goes to the heart of the Job Guarantee concept – it is a buffer stock mechanism to provide price level discipline which is why it must pay at the bottom of the wage distribution.
The UN Report misses that point.
It notes:
Public employment schemes typically pay the statutory minimum wage, ensuring that this minimum wage is sustained across the whole economy. Only rarely do such schemes pay wages that are higher: … this ensures that the costs will remain limited and that participants will be encouraged to graduate from the programme.
Once again there is the inference that a financial constraint limits the program – “costs will remain limited”.
The UN author sees the employment guarantee as a job creation program that is supply-driven (constrained by government ‘budgeting’) rather than as a demand-driven program offered unconditionally to any one who demands work at the given wage.
The latter conception is the MMT version and faithful to my original design as above.
The UN Report clearly misses the point about the Job Guarantee being an inflation anchor when it notes:
A more graduated pay level, however, set in line with education and experience,90 may reduce the risk of the scheme being used to undercut higher paid sectors of employment.
Once there is a wage structure offered, the price anchor weakens and the shifts of workers from employment to Job Guarantee employment have to be larger than if there is a fixed mininum wage offered.
Those who advocate a wage structure in an employment guarantee scheme do not understand the way buffer stock mechanisms operate.
If a higher paying job is justified then it should just be offered with the mainstream public service not as a buffer stock position.
Conclusion
There are many more examples in the UN Report where the author is operating within a mainstream economics framework – “financing from general taxation would be fully justified” etc – which undermines the breadth in which he can envisage a Job Guarantee operating.
Once we deliberately (and usually in ignorance) limit the field of fiscal space by imposing artificial (and erroneous) financial constraints on government, we limit the scope to which we can meet real world challenges.
Neoliberalism has perfected the limitations on government activity aimed at advancing the well-being of all rather than the few and look what a mess that has left us all in.
That is enough for today!
(c) Copyright 2023 William Mitchell. All Rights Reserved.
Good points!. The buffer stock and making the deficit endogenous to the cycle are key aspects of the JG. Still, the rapporteur’s report is a way to bring the instrument to the limelight. In Spain the progressive coalition, Sumar, is talking about a Universal Basic Inheritance of €20,000 as their key proposal, obviously Piketty’s proposal. And Piketty’s analysis is totally neoclassical. So very disappointing election campaign for me. They won’t listen to us but maybe they’ll pay some attention to the rapporteur.
The majority of the private sector could be said to be a boondoggle make-work scheme.
We discovered during the pandemic that we didn’t miss most of the work people did and it could be replaced by government purchasing their hours with a furlough payment.
It’s probably time to make a stronger argument for the Job Guarantee – that it replaces the interest rate adjustment mechanism of the “twin star hypothesis” with a physical price anchor grounded entirely in reality.
Mainstream economists brag about being “guided by the stars” and then wonder why they are compared to astrologers. We should make more of that. Seeing stars is normally the sign of a serious brain injury.
There are out there too many voices claiming that the UN has become just another arm of the world economic forum.
Those voices say that all the UN does now is to recast the WEF neocons’ sci-fi visions of the future – the neo-feudalist society.
Another arm of the WEF, the media, is doing everything possibel to omit and distort the part that doesn’t match the WEF’s narrative.
But that hasn’t stoped the turmoil in France.
Maybe the great reset will just be the great bankrupcy.
I do think that the argument that “protection from unemployment” and the “right to work” are enshrined in various Human Rights declarations and covenants is potentially a fruitful way to make states accountable for their deliberate choices to create unemployment.
It reveals their contradictions – supporting the right to work in theory but not in practice.
States will argue I am told that creating unemployment is a “rational and proportionate” response to inflation…..justifying their actions…
The Rapporteur may have adopted the language of neoliberalism (the need to “fund” state programs through taxation) because the states that are the focus of his report lack the fiscal power of developed countries. (Though the Rapporteur also undoubtedly lacks understanding of the buffer stock mechanism inherent in a true job guarantee, and is conflating job creation with a job guarantee.)
Developed countries are experiencing some labor shortages in both skilled and unskilled work. The current job opening-to-unemployed ratio here in America is running at around ~2 currently. At that level, a job guarantee is effectively in place here already. The Rapporteur is not speaking to developed nations.
@JOHN B,
Maybe it is, but the JGP also has a much higher min. wage than most nations have.
A socially inclusive wage in the US now would be close to $25/hr. with fully paid health care.
I do not fully understand MMT but the key thing that has encouraged me to look at MMT is the Job Guarantee proposal (the employment buffer stock approach v the unemployment buffer stock approach).
The value of the MMT Job Guarantee as a price-stabilization tool and as a framework for humane work is very appealing.
The question for me remains: how do we go about moving to it? What institutional changes will be required to make it happen? Will a Job Guarantee replace or supplement interest rates and inflation targeting? What will be the role of the Reserve Bank? What changes in the social thinking of ALL citizens is required?
I’ve been looking at how to design a JG policy that is federally funded but administered by local government. It would be a self-adjusting source of funding for local government. Unlike council rates based on land value, which provide more revenue for wealthy areas, the JG would provide less funding to wealthy areas with lower unemployment, and better scope to provide community services in areas that need it.
As a side effect, it might start to overcome the shitty idea that workers must move to find work. Why do we expect people to dump friends and family, and bear all the social and financial costs of chasing money? A federally funded locally administered JG would move the money, not the people, so that people can put down roots and build a community, instead of just being a mobile unit of labour for sale. It would build social capital, instead of destroying it every time a worker is forced to move.
It would also be far fairer than a massive federal bureaucracy administering it.
I’m no expert on MMT, however as I see it, the Fed Res. Bank would lose a lot of the reason it exists. It would not any longer have the function of controlling inflation. The JGP would do most of that work automatically. As a sop to the Fed, I have suggested that there also be a variable UBI and give the Fed the role/job of varying the UBI to control inflation, if the JGP was not getting the job done. So, instead of having Congress changing the tax rate, we would have the Fed change the amount of the UBI. AFAIK, this would have the same effect of taking money out of the economy to control inflation. It would have the ability to take the exact amount out that is thought to be required, and do it immediately.
But, I’m no expert.
It seems to me that whatever we do to address inflation (demand for constrained resources) that those that always suffer the most are the poor. So, Steve_American’s proposal to cut the UBI as an inflation-control tool would hit the poor most. But it is probably the poor that will end up in the employment or unemployment buffer stock in all cases.
The difficulty for me is how do we restrain demand from (over-consuming) households and businesses for constrained resources, and if the government chooses to push more money into the private sector (households and businesses) through tax cuts then it has to restrain its own demand for resources by cutting programmes. This may force paid public servants into the buffer stock (which may not be a bad idea).
So it seems to me that some quite radical re-organisation of society is required since MMT alone will not decide what policies and programmes a government should pursue or whether or not the resources are available to implement the chosen policies and programmes.
It seems that we can never avoid causing people to lose income (i.e. exit paid jobs) and enter the minimum wage employed buffer stock or the low welfare unemployment buffer stock. In each case, some people, usually those less able to afford it, end up losing income.
“As a sop to the Fed, I have suggested that there also be a variable UBI and give the Fed the role/job of varying the UBI to control inflation”
That would indicate a capture by the neoliberal belief system.
MMT rejects the ‘twin star hypothesis’ – that there is a magical ‘neutral rate of interest’ and a mystical ‘natural rate of unemployment’: r* and u* in the vernacular. There is no control mechanism from fixing interest rates or managing amounts of money. It doesn’t work as advertised because everybody can issue their own money (credit) and everything has its ‘own rate’ of interest.
Instead MMT adopts the ‘price anchor hypothesis’ – that you control prices by fixing the price of one element in the economy. That price is the price of a labour hour, which then becomes the numeraire for the system. A crude summary is that the underlying price of everything becomes based upon ‘labour hours’, not dollars, and that allows more people to be employed and generate greater output.
You can’t create more labour hours, and you can’t hoard them. All of us have a finite amount of them.
If you give people money for nothing, then you stop this price anchor working and cause instability and inflation much as we have now.
You can only give people money, if you raise an equivalent amount of taxes on the other side – which is then a redistribution of consumption. That’s how a state pension works, for example.
We cannot reduce the state pension age to 18, nor can we give child benefit to adults. Not without causing inflation and/or unemployment somewhere in the currency area – even if that is outside your country borders due to other nations pegging their exchange rates with yours. Those can become unpegged very quickly.
“It seems that we can never avoid causing people to lose income (i.e. exit paid jobs) and enter the minimum wage employed buffer stock or the low welfare unemployment buffer stock. In each case, some people, usually those less able to afford it, end up losing income.”
They only lose income because the job they were undertaking didn’t create sufficient added value to justify a wage above the Job Guarantee wage.
In other words the capitalist failed to create valuable labour services from the labour hours they had purchased. Both the capitalist and the worker then end up back on the Job Guarantee – or elsewhere.
However in a competitive system that is how the price anchor is transmitted up the wage structure. By definition if you are paid more than the Job Guarantee wage, then you have an alternative bid in the job market at a higher than Job Guarantee wage. Otherwise you are overpaid.
Anybody who loses a job with a failed competitor will be able to get a job with one of the successful competitors at the next bid down in the wage structure. Remember the demand hasn’t gone way, and the successful competitors will need to expand to service the demand.
It’s quite difficult to envisage how a competitive economy works when there is no unemployment and it is the businesses with excess supply capacity that end up ‘out of work’ – because we’ve been stuck in the alternative reality for so long.
Walking into another job the next day used to be the norm. A rich local job market with high demand for labour is what provides income protection for the worker, not propping up failing firms.
Doesn’t anchoring all prices to the price of a labour hour (minimum wage) imply that the price of labour is the critical element in all cases? Isn’t the universal element the price of money (i.e. the interest rate)?
“Isn’t the universal element the price of money (i.e. the interest rate)?”
I don’t think so. The interest rate is fundamental to the money system itself, but the money system is a made-up thing. Sometimes I liken money to language — something we have cooked up ourselves in the process of dealing with each pother. We see interest rates jumping all over the place, and surely the world hasn’t changed so much, so fundamentally, in so few days.
Labour power, as a fundamental element is something almost everybody has. We know it can be useful. Makes it a good foundation of our standard of value.
“Doesn’t anchoring all prices to the price of a labour hour (minimum wage) imply that the price of labour is the critical element in all cases? Isn’t the universal element the price of money (i.e. the interest rate)?”
Correct. MMT rejects the Twin Star Hypothesis as I said. There is no neutral rate of interest (r*) and there is no natural rate of unemployment (u*). They don’t exist because everything has its ‘own’ rate of interest.
There is no one rate of interest to rule them all. That is a Tolkienesque fantasy.
However we can anchor money in the real world by setting one exchange price. That is the Price Anchor hypothesis, and the Job Guarantee is its manifestation. It replaces interest rate adjustments as the system stabilisation policy.
Mel and Neil – thanks for clearing things up for me. As I said in an earlier comment, I always found the Job Guarantee very appealing. I did not realise the radicalness or criticality of it in the MMT narrative.
@ Neil Wilson,
I don’t think I communicated my whole idea to you.
Yes, the rich will be taxed to fund the UBI.
Once the system is in place the market will adjust to the UBI being there.
The problem I’m addressing is that in the US Congress doesn’t act fast enough to increase taxes. So, it will not be seen by the voters as being able to control inflation.
I’m predicting that if the JGP does work as you say it will, the JGP will automatically regulate the economy to see that the is no inflation. So, the Fed will not need to change the UBI payments. [Note that the size of my UBI is *NOT* enough to live on.]
My UBI system will be unnecessary. However, it smooths the way to adopt the JGP and MMT in general. Such a system is likely necessary to get the public to accept the JGP and MMT as a whole. There is resistance to MMT that must be overcome so the voters will vote in politicians who will vote for the JGP and MMT.
“Yes, the rich will be taxed to fund the UBI.”
And that won’t work – because the rich save. They don’t consume sufficiently. So you end up having to tax somebody else instead – either directly or by inflation.
Stop thinking in money terms and start thinking in real terms.
“The problem I’m addressing is that in the US Congress doesn’t act fast enough to increase taxes.”
The problem is that MMT doesn’t advocate increasing taxes to control inflation. Inflation is controlled by the Job Guarantee and the floating exchange rate. Percentage taxes on transactions vary depending upon the transaction amounts and automatically stabilise.
Giving child benefit to adults is a silly idea. It adds nothing other than inflation. And people instinctively vote against it. They know there is no such thing as a free lunch.
I understand that the RBA will be in need of new leadership sometime this month.
Bill?
Neil,
I’m just an, hmmm, armchair idiot, but I think that’s slightly simplistic. Supply shortages and demand surges exist, even if they are rare, demanding (but not requiring, I suppose) quicker and more direct intervention. I understand the point that taxing unwanted behavior can become various traps, but I still think it can have it’s uses as well.
Either way, yeah, the JG is so different that it takes a while and many different perspectives to sink in.
@Neil Wilson, you wrote, “The problem is that MMT doesn’t advocate increasing taxes to control inflation.”
This news to me because AFIK, IIRC, Bill, Stephanie Kelton, Waren Mosler and Randal Wray all say the raising taxes is one way for MMTers to fight inflation.
Besides which, after a few years with a JGP in place paying $25/hr (with my UBI included), workers and small business owners will be making more and big corps less. So, who knows if it will be easy to tax someone to support my UBI.
Also, France has been paying large child subsidies to adults with kids for decades and inflation was not the result until covid.
“I’m just an, hmmm, armchair idiot, but I think that’s slightly simplistic. ”
You can think that, but you’d be wrong. The Job Guarantee is effectively an automatic tax. When people get jobs in the private sector, net government spending falls immediately. You don’t get any quicker, more automatic, or more location specific than that.
Discretionary taxation is by far the worst way of stabilising an economy. It has huge lags, calculation difficulties, collection problems – quite beyond the issues of getting it enacted in the first place and that it works at the end of the demand process not the beginning. Quite why progressives are so attached to fiddling with it I don’t know. If they want to enact Robin Hood fantasies, dress up in Lincoln Green and join a LARP group.
Taxation has to be seen as strategic, not tactical. It’s a way of moving resources over the medium to long term to achieve a political goal.
Something I have begun to wonder about is the lack of normal distributions in the “free market” economy.
In a free market why should not average profit be normally distributed around a mean of zero.
Why should income not be normally distributed?
If the reason is that market events are not “fair “, in the sense of the Central Limit Theorem, would it not be reasonable to impose a “normalisation tax” to correct for the unfairness in the system. This would work similarly to the many “normalised test score” systems in the academy and see people’s rank order of income maintained, but the magnitude adjusted to ensure a normal distribution of income.
Thanks Neil. I think I understand it better now.
The Job Guarantee buffer is the price stabilisation mechanism. It sets the quantity and price of available labour resources. The value of all resources is ultimately determined by the movement of labour resources in and out of the Job Guarantee buffer. The currency issuing government is not money constrained. It is only resource constrained. The rest of the economic actors – the mainstream (non-JG) Federal public service, local and state governments, businesses and households – are money constrained. The price of resources is ultimately anchored to the Job Guarantee wage.
I think this also means that the Federal government (the currency issuer) is also money constrained if it has to compete with other economic actors (the currency users) for JG resources and for other resources in the open market?
“… Federal government (the currency issuer) is also money constrained if it has to compete with other economic actors …”
The money issuer can issue enough money (if they want) to pay any price, no matter how high.
@ Neil Wilson.
You wrote, “You can think that, but you’d be wrong. The Job Guarantee is effectively an **automatic tax.** When people get jobs in the private sector, net government spending falls immediately. You don’t get any quicker, more automatic, or more location specific than that.
**Discretionary taxation** is by far the worst way of stabilising an economy. It has huge lags, calculation difficulties, collection problems – quite beyond the issues of getting it enacted in the first place and that it works at the end of the demand process not the beginning.”
If the JGP is a tax, who pays it?
My small variable UBI is not a tax. The tax to “fund” it is constant. [BTW, go back and read your posts in this thread. You said I need to fund my idea with a tax (on the rich, IIRC).]
Anyway, my small variable UBI payments are not delayed, they increase, reduce, or don’t change everyone’s buying power every month. It has no collection problems. It may be hard to calculate how much to change it, but next month it can be changed again, if this is thought necessary.
You live in the UK, right? As such you don’t grok the problems with the American system of changing tax laws. I’m trying to get around those problems.
An example may be useful. **Suppose** the UBI is $50/mo., and so $600/year. There are about 330M citizens and legal immigrants in the US. So, the total UBI payments are $198B/year. There is a tax on someone with income/money to “fund” this payment. It isn’t changed often. Now, if the Fed thinks that inflation is too high, it can reduce the payment by (for example) $10 to $40/mo. This reduces the total income in the US by 330M x $10 = $3.30B/mo. There is no delay. Nothing else is changed, except what this change causes in the economy. This may be unnecessary. If so, then over time, the Fed will (hopefully) learn not to change the UBI payment.
Mel said: “The money issuer can issue enough money (if they want) to pay any price, no matter how high.”
Surely this is price destabilising (ie inflationary). Isn’t the spending of the currency-issuing government constrained by the requirement of price stability enforced by the Job Guarantee mechanism and the size of the fiscal space?
Bill defined the fiscal space as:
“the available real productive resources that can be brought into use without causing inflationary pressures as a result of government having to compete with existing users of those resources at market price.”
(https://billmitchell.org/blog/?p=60956)
Neil Wilson wrote:
Mainstream economists brag about being “guided by the stars” and then wonder why they are compared to astrologers. We should make more of that. Seeing stars is normally the sign of a serious brain injury.”
Excellent characterization.
But there are currents of dispute among MMTers.
eg, a lecturer in MMT recently told me Warren Mosler said there is no such thing as “debt free money”. Surely there is, even if “debt-free money” is only available to the currency-issuing government, not for you and me – iow, the govt. is resource-constrained, not money constrained.
Before the release of Stephanie Kelton’s ‘The Deficit Myth’, I heard she was writing a book which would be titled ‘The Debt and Deficit Myth’; I wondered why the book was released with the shorter, less graphic title.
Mosler’s influence?
Also, I note some confusion over your proposition that “taxes create fiscal space for government”; which sounds much like taxes are required to *fund* government.
I suppose I would prefer government to have a much larger role in deciding how to mobilize the nation’s available resources, after presenting the various development options to the electorate…..
iow. less development determined by ‘invisible hand’ private profit-seeking, which the new RBA governor Bullock intends to tame by lifting interest rates and increasing unemployment.
But yes, the Job Guarantee is incredibly important (as a price anchor, inter alia) – which we in Oz will have to understand when the ‘Voice’ referendum fails and the nation is still faced with ‘closing the gap’……(unfortunately the debate is being hjacked by cultural/sovereignty issues).