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Cullen Roche continued his attack on the JG and his critics with a post asking whether America really needs to do a 180? I see the post as a set of distractions and straw man arguments that misconstrue the positions of his critics. The post quotes no one and constructs their positions fictionally without any documentation.

A Drastic Overhaul? Who Said Anything About That?

“This whole job guarantee debate has really shed light on the schism in many MMT thinkers. One group wants you to believe that the American way of doing things is so broken that it needs a drastic overhaul (in this case, the hiring of up to 30 MILLION government employees). . . . “

There's no group in MMT that wants you to believe that a “drastic overhaul” is needed. There is a group that wants you to believe that 25 – 30 million Americans want full-time work and can't get it, and that the Federal Government ought to put an end to this situation by passing and implementing an aggressive fiscal policy including a full payroll tax cut, $1200 per person in revenue sharing aid to the States, and a Job Guarantee program paying a living wage to all who want full-time work. What's “drastic” about that? That's just fulfilling the public purpose of fiscal policy. No more and no less!

Nor does this group contend that the Federal Government needs to hire 25-30 million Federal employees, It just contends that the legal obligation to provide work for them be implemented with a JG program. Since that program would be implemented along with the other MMT proposals, there would be far fewer JG workers actually hired. Most of the new jobs created by an MMT program with a JG would be created in the private sector as the economy grew, and the JG jobs actually provided would be transition jobs, most of which would be voluntarily given up in favor of new private sector jobs within a year's time.

Ideals That Made America Great


”My position has been that we need to maintain a more measured approach and acknowledge that while America is in a deep hole currently, it does not require such a drastic overhaul (yes there are big problems and I’ve spent years being bearish and discussing them, but let’s keep things in perspective). There are things our government can do that will help enormously, but won’t risk undermining the ideals that helped build this great nation.”

It would be nice to know what 'ideals” Cullen has in mind, and what he means by “measured.” Does he mean an approach that won't produce full employment? I ask that question because all the "measured approaches" we've been employing in the US since 1970 have failed to produce full employment.

Also, I think the two primary ideals that have made America what it is, are individual freedom and equality of opportunity. These ideals have been emphasized to varying degrees at different times throughout our history. When one or the other gets emphasized too heavily, America loses its balance, and its other primary ideal and its political system are both threatened. This is what's happening now.

Equality of opportunity has been diminished over the past 30 years at least, and one kind of individual freedom, economic freedom for large corporations and wealthy individuals has gotten way out of balance, to the point where it threatens to devour its own long tail and eat the economic freedom of others including that of its very children. It's the way things have been going in America that is jeopardizing our ideals, not those MMT fiscal policies that will eliminate unemployment and contribute to greater equality of economic opportunity for everyone.

Is There Simply No Refuting That “Fact”?

”I think a little perspective will help with this whole debate. People seem quick to forget what has been built here in the USA. In just 235 short years we have built the most prosperous wealth creating economy ever known to man.  EVER. There is simply no refuting that fact. . . .

Well, I'd like to know how Cullen measured that. The World Bank Total Wealth Per Capita  estimates in 2000, showed the United States at 4th in the world on this indicator with close to $513,000 in wealth per capita. Sweden was third, about $800 per capita more than the US. But Switzerland was first with more than $648,000, and Denmark was second at just over $575,000 (See p. 20).

These estimates are out of date; but it's doubtful whether newer ones would show that the US has been gaining ground on the nations ahead of it, since none of the three has suffered as greatly from the crash of 2008, as has the US.

If we use GNI per capita as the measure, then this much more imperfect but also more recent (2010) measure of wealth shows that the US is 6th at $47,184, far short of Luxembourg, first at $108,921. Norway, Switzerland, Denmark and Sweden are also ahead of the US on GNI with Norway and Switzerland rather far ahead. Also, there are five other countries, including Canada that are rather close to the US on this measure, though they are a bit lower lower in the GNI rankings.

When you take into account the discrepancy between other modern nations and the US on the GINI index, a popular measure of inequality both across and within nations, you get a better perspective on the approximate median wealth per capita, a measure that is hard to find. The GINI index value for the US reflects much greater inequality than the other nations named above. The US's GINI is .45; whereas the GINI value in the other nations is in the low .30s and Sweden is even lower at .23.

This suggests that if a median wealth per capita measure were available it would show that the US economy has been a much less effective wealth generator for the American “man-in-the-street” than the economies of other nations. Considering all this, it's very likely that's Cullen's very bald statement about the US being the most successful economy ever at generating wealth, not only can be refuted, but already has been by a number of counter-instances.

Small Government and Individualism

The ideals that built that economy were based on small government and individualism. We took the idea of a constitutional republic and combined it with a rugged sense of individualism that unleashed a whirlwind of innovation and wealth creation.

Our ideals may have been based on small government and rugged individualism, but at least since the Great Depression, our practices, our wars, our booms and our busts, our technology and a lot of our innovation is traceable to the activities of a big Government and considerable collaboration among Americans during the Depression, the War, and the post-War era. We're now talking about close to 80 years of bigger and sometimes very, very, big Government. And, last time I looked there's not a lot of scope for rugged individualism in our large corporations, or in our other large organizations, either. Nor is there much respect for the law, or the constitution in many of those places, as we all know.

There may have been some measure of reality to the picture Cullen sketches above in the 18th and 19th centuries. But since the 20th Century began, our National Government has played a much larger role in our lives, since it was the only institution capable of constraining the giant corporations from controlling the market in their own interests. It's too bad that over the past 35 years the Government has gradually grown incapable of maintaining those constraints, and that as a result we are now rapidly approaching a kleptocracy.

Those Evil Capitalists? Why Are They Relevant to the JG?

That shirt on your back? Yep, an evil capitalist likely helped in its creation. The computer you’re staring at? Yeah, some evil capitalist likely helped make that. The medicine that helps save millions of lives every year? Yeah, capitalists help fund those. The hundreds of billions of dollars Bill Gates and Warren Buffett have convinced themselves and their rich friends to give to charity? ARRGGGG, THOSE GOD DAMN CAPITALISTS!  This is not to imply that capitalists are some world saving group out to find world peace. But let’s not throw the whole idea under the bus just because a bunch of bankers got together and threw a wrench in the machinery over the last 20 years….

I'm not sure what Cullen has in mind here. Our MMT buddies are certainly not proposing to get rid of capitalism. They're just proposing a fiscal program which features a JG program providing a living wage and good benefits to people who want to work full-time, but who the private sector chooses not to employ, or to employ only part-time. So why include the paragraph above as part of the post. If it's directed at people who are not MMTers advocating a JG, it's irrelevant, and if it is directed at that them, then it's a straw man, clearly raising a non-existent issue. I think that paragraph is a clear attempt on Cullen's part to mischaracterize and brand his MMT opponents as anti-capitalist. But that is clearly nonsense since their intention is to save capitalism from its own very visible excesses.

American Exceptionalism? What Does That Have to Do With the Price of Eggs?

I know we’re in a rut right now. But before we start thinking about completely overhauling a system that has served so many incredibly well over the course of hundreds of years, let’s try to put things in perspective and not forget that while government can certainly help our society, it is not the answer to all of our problems. Call this story one of American exceptionalism or whatever you want to. I call it our reality. We know for a fact what built this great nation and we can prove (factually) how well it has performed and how far it has come in such a short period (despite recent turbulence). If your economic policy involves a drastic overhauling of that system then the onus is on YOU to prove that the current system is not only broken, but can be outperformed by another type of approach. To those people, I say good luck. You will need it.

More red herrings. The onus is not on MMT JG advocates to prove anything more than  anyone else has to prove. Now is now! That is the reality! We have to make decisions about what to do now based on the choices we have now, all the ones we have time and resources to consider.

As I argued here, Cullen's put on the table three alternatives

1. continuing with our present policies.

2. Putting into practice Cullen's alternative using some MMT measures, pursuing “full productivity,” and retaining an unemployed buffer stock.  And

3. pursuing the MMT program including the FE buffer stock through the JG.

Anyone considering the three alternatives has to fairly compare them and pick the one that stands up best to criticism and data which appears to contradict it.

There's no greater “onus” on 3, than there is on either of the other two alternatives. Alternative 1 isn't “working.” It's being refuted by the lack of a recovery that's gone beyond the wealthy and the upper middle class. So, we have to compare alternatives 2 and 3.

I did that in my last post, and I think I showed that Cullen's alternative is the weaker of these two. I'm sure there are other alternatives we can formulate and evaluate as well, and perhaps one of them will be better. But, as long as the current alternative is failing us, it makes no sense to claim that there is a greater “onus” on newer alternatives, either Cullen's or the full MMT alternative, just because they haven't been tried before.

Nothing “new” has ever been tried before. That doesn't mean it has a greater weight to overcome then something old that's not working. That viewpoint is just conservative ideology. It's just: Tradition! Tradition! Tradition!

Sorry about that; but the old something isn't working. We need something new. We need to move on! So, let's compare the new alternatives and see what looks like it is most likely to work best, then do that, and see if it works. If it doesn't, then let's move on to the next solution. Let's do what FDR did, try, try, try, until we get it right.

Also, as I indicated above, no drastic overhaul of the US economy is being suggested by MMT. Capitalism will remain the primary component in our mixed economy. All that will happen, if MMT policies are fully adopted, is that the social safety net will be strengthened with a JG, payroll tax cuts, revenue sharing and I'm sure, very soon after the real recovery starts, Medicare for All, more generous SS benefits, and free public higher educational opportunities.

The rule of law will be re-instated so that it again applies to businesspeople who commit fraud. Regulation will be perfected and implemented, and the Government will have a big role in helping us to solve other economic problems that we've been refusing to do anything about, like creating new, renewable energy foundations for the economy, new industries that produce sustainability for the economy, and re-invention of our crumbing infrastructure and public buildings and spaces.

In spite of all this, however, most of our mixed economy will remain capitalist. Most people will still work for managers and owners. Entrepreneurs will have a better economy to innovate within. And capitalism will be saved from itself once again, as it was during the 1930s. So, I don't see these things as a “drastic overhaul.” I just see them as the kinds of reforms that democracy needs from time-to- time to maintain itself.

Originally posted to Money and Public Purpose on Mon Jan 16, 2012 at 06:30 AM PST.

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Comment Preferences

  •  I keep reading these, not getting it. (0+ / 0-)

    There's a lot of information here, but it's not being presented in ways that sink in to my brain.

    Our MMT buddies are certainly not proposing to get rid of capitalism. They're just proposing a fiscal program which features a JG program providing a living wage and good benefits to people who want to work full-time, but who the private sector chooses not to employ, or to employ only part-time.

    Generically, I would agree with this goal, but I don't see how these suggested policies would be implemented.

    I have only a passing familiarity with what MMT's basic assumptions are.

    Can you:
    1) Explicitly reference the basic assumptions of MMT that apply to a given situation,
    2) Explicitly give an example of a program which would implement that precept?

    As I understand it, this jobs program would be paid for by outright Federal Reserve printing, but I don't understand what people would be paid to do?  Are you suggested a return of the CCC or the WPA?  Something like an expanded Teach For America?  Laying 10GB fiber network links to every town in America?  Grabbing projects off the bad infrastructure list and rebuilding them?

    -7.75 -4.67

    "Freedom's just another word for nothing left to lose."

    There are no Christians in foxholes.

    by Odysseus on Mon Jan 16, 2012 at 10:44:14 AM PST

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