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What Do We Agree On?

January 9, 2012

I know, the JG is all the hot topic.

But I’d rather talk about something we agree on – the need for more fiscal stimulus.  We need more fiscal stimulus.

Here are the reasons I’d rather talk about fiscal stimulus than the JG:

  1. People here largely agree on the need for more fiscal stimulus
  2. 2012 election season is coming up
  3. Odds are higher than zero we can get stimulus passed and in action in 2012

I think the most important point is we can actually have an impact on real lives in 2012. This isn’t a philosophical discussion about morals of the JG.  It’s about concrete actions we can take today that could have an impact on the lives of real people in 2012 and 2013 and beyond.

In some ways, I support the JG – it’s a more moral way to anchor prices. But in other ways, it’s nearly irrelevant to me. Why? I don’t think we will see anything like a JG in the next 5 years.

In short, for me to act on my morals, I need to make a difference sooner rather than later. Improving the lives of U.S. citizens in 2025 isnt’ as important to me as improving their lives today.

I could spend my time arguing about the JG with people I respect and mostly agree with anyway – or I could spend my time making a difference in real lives in 2012 and 2013.

The differences in opinion between someone like Neil or Senexx and myself on the JG are large in some ways. But I don’t care at all, simply because I know we’re walking in the same direction, and all support making peoples lives better though using MMT.

If at some point in the future, we’ve already done the easy stuff we agree on, We might start to worry about the hard stuff we disagree on.

Is there anything I – or anyone – can do or say to get the JG implemented in 2012 or 2013? No. We can’t even extend the joke that is unemployment insurance.

Now, I prefer talking about a payroll tax holiday.  More specifically, I prefer to talk about a variable payroll tax holiday – one that is linked to the unemployment rate.

Why? We already have a partial payroll tax holiday in place. It’s already in place!  How hard would it be to talk about this much more and enlarge the payroll tax holiday?  Probably pretty hard. But not as hard as even getting the first words out about a JG.

Talking about a payroll tax cut allows us to explain MMT in a way which makes sense to people and with something they want to agree with already.  “Would you like to make more money?”  MMT sells itself when we talk about a payroll tax cut.

And how about possible support for expanding the Payroll tax holiday? Let me assure you, this is a political no-brainer.

How hard would it be to link this holiday to the level of unemployment in our own discussions? Not hard at all.

We have people watching us. They are watching right now. And we’re talking about a policy 65% of the U.S. population considers to be communism even before the U.S. right wing starts to talk about it.


Categories: Main
  1. wh10
    January 9, 2012 at 9:18 pm


  2. beowulf
    January 9, 2012 at 11:22 pm

    Also we should take into account national differences. Neil is from the UK and Senexx is from Australia, two countries that have long provided universal healthcare, have less income inequality and have broader safety net programs in place for their poor that we do.

    Its a matter of picking your battles, apparently in the US its unavoidable being labeled a big government socialist for believing every citizen has a right to medical care regardless of their income (which sooner or later will entail a universal Medicare system), so there’s no way out of that fire but through it.
    On the other hand, a JG (in the US) would encounter avoidable political obstacles. If there’s a way to boost AD and get the unemployed working that can be done without tripping over fears of big government, then its only prudent to do so (lulling the public so, unbeknowest-like, we can sneak in the healthcare death panels). :o)

    The right to universal healthcare is an position that the British and Australians haven’t considered a topic a reasonable person could disagree with for decades. Its a different political culture, and since my hesitation for going great guns for the JG is political, I would never argue against Neil or Senexx on its value or its political prospects in their own countries. Just bear in mind that in the US, the population can be divided almost evenly between the half-crazy and the all-crazy.

  3. January 10, 2012 at 4:49 am

    Please remember that the JG is not in isolation. It is one part of a plan of how we get from here to there.

    You can get rid of the subsidy paid on Bonds and recycle that into domestic tax cuts. See what that does to GDP and review what monetary effects that has if any. So uncover the ‘non-structural deficit’ and get the Fed to pay it directly. After all its cyclical and will disappear when the economy recovers.

    You can sell that with the “Why pay the Chinese rather than the American” line, and it is entirely in keeping with the current neo-classical economic line.

    You cut taxes to the bone. I wouldn’t even bother with variability as it complicates matters. Just cut the employee payroll tax and see how far you get with that before you hit supply side restrictions.

    But then when you’ve got that aggregate demand up as far as you can you will still have millions of people unemployed, and they will remain unemployed due to the design of the system.

    Then the argument should be about how much compensation these people should receive due to the inability of the system to provide them with income and something to do. Your lawyers should be sueing the state on their behalf.

    Once the unemployed start receiving their full compensation you’ll find the objections to Job Guarantee melt away.

    btw from the point of view of the British, what the US is going through at the moment is ‘very Edwardian’. Remember that we’ve been the great power, reserve currency and declined already. Learn from our mistakes or it is likely they will be repeated.

    • TC
      January 10, 2012 at 1:13 pm

      Hi Neil,

      I think back to the late 1990’s all the time. If you wanted a job, you could find a job pretty easily. There wasn’t much inflation at all, despite gigantic GDP prints and unemployment below 5%.

      There was no JG then and the economy rocked. So insisting the JG is a crucial part of a healthy economic system doesn’t make sense for most people’s personal experience.

      I see the JG as being something not necessary for an economy to be near full employment and production, and keep cost push prices in check.

      It would be nice if it works as we suspect it might. I just don’t see it as something necessary today.

      I agree, it’s tragic we use human misery to guide our economic system instead of human happiness. But there are lots of steps to get from where we are today to something better.

      And many of those easier steps would dramatically reduce that misery right away.

      Then, being right about those steps gives credibility to talk about more dramatic programs. It’s the old Ty Cobb method of choking up on the bat during batting slumps, just to make contact.

      I really think we MMTers had an impact on the debate over the summer. I think talking about the JG risks pushing our level of influence to that of http://www.mises.org.

      This would be a double tragedy – first for the people we should be helping today, and for getting MMT out into the world.

    • TC
      January 11, 2012 at 9:32 am

      BTW – nice work on the horizontal money in QED. It’s illuminating.

  4. Dan Kervick
    January 10, 2012 at 2:56 pm

    It seems to me that a fiscal expansion/larger deficit consists in some combination of these four actions:

    1. Cutting taxes.
    2. Purchasing goods and services from enterprises that already produce them.
    3. Delivering outright monetary grants to various entities.
    4. Hiring people to produce goods and services in government enterprises.

    #1 is always the easiest politically. But I worry on the excessive reliance on tax cuts, because I worry that these cuts will be exploited in the future to justify spending cuts. How long before conservative supporters of the payroll tax cuts, who neither understand nor support MM, telling Americans that we now need to cut Social Security because it is “broke”?

    All three of the others will be, I fear, almost impossible to achieve in this election cycle. Instead, both parties will compete to explain how they plan to shrink the deficit.

    But it seems to me that proposing to hire people to do productive work is an easier sell than the others, especially if it is presented as a way of getting millions of people off unemployment.

    • Dan Kervick
      January 10, 2012 at 2:57 pm

      “How long before conservative supporters of the payroll tax cuts, who neither understand nor support MM,..”

      I meant MMT.

    • TC
      January 10, 2012 at 3:20 pm

      I worry about #1 too – you can see this dynamic happening over and over with the republicans. They spend on war and blowing stuff up when in office. They pressure for cuts in stuff that helps people when they are not in power.

      But at this point, my inclination is to push for payroll tax cuts because they stimulate the economy in a near optimal fashion for current circumstances, and they increase the deficit.

      I think we can win the long term argument over spending being irrelevant except with regards to optimal inflation. Pushing through tax cuts will help us win this argument.

  5. beowulf
    January 10, 2012 at 6:48 pm

    In terms of boosting low income wages (which will have a big AD effect), The two main approaches are raising the minimum wage (Jamie Galbraith recently endorsed raising it $4.75 to $12.00/hr) and using tax credits (Edmund Phelps and Robert Shiller have endorsed a $4.50/hr employer tax credit for minimum wage workers, estimated cost of $150B a yr).

    Hmmm, this is a classic example of what economists call a “You got peanut butter on my chocolate / you got chocolate on my peanut butter” scenario. Why not raise the minimum wage AND pay a tax credit?

  6. beowulf
    January 10, 2012 at 8:42 pm

    Ha ha, I love how TC’s website embeds a youtube link right into the comment.

    • TC
      January 10, 2012 at 8:44 pm

      This is a premium site, beo – nothing but the best for ya’all. I pay for it with TC dollars.

  7. beowulf
    January 10, 2012 at 9:36 pm

    “I pay for it with TC dollars.”
    Of which you are the monopoly creator. :o)

  8. Tom Hickey
    January 10, 2012 at 9:59 pm

    Agree that fiscal stimulus is the way to go now. Fiscal austerity is a disaster and Europe and the US, while still providing enough of a deficit to muddle through, is not recovering quickly enough to return to anything like normal anytime soon. The economic is greatly underperforming and growth is anemic at best so far.

    Reducing taxes is the simplest way to increase the deficit, short of initiating another war at least, and reducing taxes were the funds will be spent or used to pay down debt overhang is the preferred course. FICA is the low-hanging fruit.

    But people have to be be convinced that this will not endanger SS and Medicare or it will run into problems on the left and it is also likely to be used by the right to advance its policy agenda of cutting social services due to lack of affordability.

    As long as the government as big household analogy holds sway stimulus will be difficult to accomplish. This is extremely ingrained, so it is not clear how it can be reversed.

    • beowulf
      January 10, 2012 at 11:06 pm

      Tom, that’s why I suggested as an alternative, the Galbraith-Phelps chocolate and peanut butter synthesis stimulus plan (incidentally, last month the two debated the policies of Keynes vs Hayek, I’ll let you figure out who took which side). :o)

      Raise minimum wage from $7.25/hr to $11.75/hr (or $12.00/hr if we hike Phelps’s tax subsidy to $4.75/hr). But a $4.50/hr hike would be a $9000 raise for full-time minimum wage workers, going from $14,500 to $23,500 a year. Since most minimum wage workers live hand to mouth presently, that would be a heck of an AD kick. After that, increase minimum wage (and subsidy) by CPI annually. If we want to keep a variable tax rate, you could tie the employer tax credit to unemployment rate. 100% the first year but thereafter adjust the tax credit by U3 rate quarterly (e.g. at 8.5% U3, employer gets 85% of full credit, at 4.5% he gets 45%, etc).

      Here’s Galbraith endorsing The American Conservative publisher Ron Unz’s call for hiking the minimum wage (brilliantly framed as an anti-illegal immigration plan):
      The plan isn’t just good for Republicans — it’s good for the economy. What would workers do with the raise? They’d spend it, creating jobs for other workers. They’d pay down their mortgages and car loans, getting themselves out of debt. They’d pay more taxes — on sales and property, mostly — thereby relieving the fiscal crises of states and localities. More teachers, police, and firefighters would keep their jobs.

      And here’s Robert J. Shiller endorsing Edmund Phelps’s employer wage subsidy (so its the Unz-Galbraith-Phelps-Shiller C&PB synthesis stimulus plan):
      the government should provide a subsidy of $4.50 an hour for the lowest-paid workers, with declining amounts until they earn more than $15 an hour. Unlike the current “earned income tax credit,” his plan would not be biased toward families with dependent children, but would apply equally to all workers… He estimates today that the cost of such a program would be about $150 billion a year, around 1 percent of gross domestic product.

      Of course, on its face, its unclear if the employer could just pocket the $4.50/hr himself instead of passing it through and continue paying $7.25/hr. Raising the minimum wage to $11.75 an hour at the same time would remove any ambiguity from the matter. :o)

      • beowulf
        January 11, 2012 at 10:37 am

        Incidentally, the Phelps estimate of program size seems way low even if it nets out the savings from means-tested programs (that $9k raise means more means). Even though this is a feature and not a bug, I wouldn’t put too much stress on this point. o)

        • TC
          January 11, 2012 at 1:19 pm

          I am very much for gettting people off of those programs – the effective tax rates on many of them are gigantic.

          My uncle cried when my dad gave him a raise because it took him off some programs – basically, getting a raise from my dad made his life worse.

          These are large distortions in our marketplace for labor. You have to think about how people actually live when they are poor for all of this to work.

          If we give many people a raise, we’re looking at riots as they lose their benefits.

  9. beowulf
    January 11, 2012 at 8:28 pm

    TC, healthcare is sui generis, (as I said upthread) the endgame there is universal Medicare. But for everything else, I say go Ron Paul on the budget by cutting spending and tax expenditures and roll over the savings into a negative income tax (whether refunded at the individual or employer level). Tsy would create money with refundable tax credits and reel it back in with tax receipts.

    In 1974 [Congresswoman Martha] Griffiths introduced the Tax Credit and Allowances Act (H.R. 17574)… Griffiths’ proposal, which she dubbed, “Income Security for Americans” (ISA), replaced deductions and personal exemptions for low-income families with refundable tax credits. It abolished AFDC and Food Stamps, moreover, in favor of a guaranteed income program administered by the IRS. Also in 1974, Secretary of HEW, Caspar Weinberger, proposed on behalf of the Ford administration the Income Supplement Plan (ISP), a comprehensive negative income tax proposal that would replace all existing welfare programs. The proposal ensured that a “family would no longer both pay taxes and receive benefits at the same time, but instead would have either a tax liability or eligibility for a transfer”

    • beowulf
      January 11, 2012 at 8:37 pm

      Sorry meant to add that P.M. Lawrence recently published something on this a bit more recently than 1974 (January 2012 to be specific) that ties in to the Job Guarantee debate.
      Negative Payroll Tax: how to reverse our present approach of paying people to be unemployed and of penalising employers

  10. Clonal Antibody
    January 11, 2012 at 9:35 pm

    From The Modern Monetary Theory Trader

    I believe we have everything we already need to effectively make the JG superfluous.
    We seem to have the operational infrastructure in place to address the JG without having to call it a JG (politically endangering unemployment benefits).

    • Clonal Antibody
      January 11, 2012 at 9:44 pm

      Well we have Beowulf’s Platinum coin and now this. Now we just need somebody with “b*lls” to implement it and then we have

  11. beowulf
    January 17, 2012 at 10:20 pm

    OK when I’m wrong I’m wrong. Reading Ron Unz’s original article, I see there’s no need to rebate the cost of a $12/hr minimum wage with employer tax credits. That’s the genius of framing it as an anti-illegal immigration policy (which Galbraith caught immediately and I did not).

    The automatic rejoinder to proposals for hiking the minimum wage is that “jobs will be lost.” But in today’s America a huge fraction of jobs at or near the minimum wage are held by immigrants, often illegal ones. Eliminating those jobs is a central goal of the plan, a feature not a bug.

    Damn, that’s clever! The monetary value of that answer is at least $150 billion (the annual cost of Phelps’s employer wage subsidy). Throw in in a border fence and an employer mandate to E-verify workers’ S.S. numbers and that should melt liberal brains sufficiently to win congressional approval.

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