I was surprised she didn’t go farther and discuss a universal basic income, which has not only shown to stimulate business and lower poverty, but is also profitable to the government because all the entitlement programs would go away, with all of their applications, interviews, investigations, denials, prosecutions, appeals and bureaucracies. Maybe next book.
Don’t hold your breath waiting for Dr. Kelton, or any MMT advocate, to endorse a long term UBI. In conversations I’ve had with her and other MMT economists it is a general consensus among them that the Job Guarantee (JG), federally funded but locally managed, would be a better answer without creating the inflation that is almost a given with any current UBI proposal.
The fact that the JG would be countercyclical to the business cycle, and therefore not inflationary, is what makes it preferred, but also that it doesn’t cut into vital supplemental programs for those who can’t engage in private sector work. Those people already have a UBI in Social Security Disability that simply needs to be expanded to reflect the reality of the current cost of living.
The JG would not only backstop the economy but would keep it pegged to labor and maintain a floor for workers that is so sorely missing from the political football of a minimum wage. The option to perform public service should pay enough to live on as well as offering benefits that provide the level of dignity all Americans should expect from their labor without relying on the whims of legislators. Private employers would only have to bid above the wage and benefits of the program to obtain a workforce with their social and job skills intact.
We’ve wasted a century looking at government as if it were a family or a business. It isn’t. As the monopolist controlling American currency, the government doesn’t ever have to worry about running out of money. It can always fund social security and Medicare, and many other programs besides.
Leaving the gold standard domestically in ’34 (and totally in ’71) was likely the most important economic factor in our nation's history but it created very little change in econ education or public awareness. Both simply plowed forward with assumptions rooted in gold standard logic that were no longer valid in a new fiat currency world. Course books that reflect this new reality in American education could be counted on one hand until very recently.
Much of the fault for this can be laid on conservatives who found political advantage in people believing that they fund their government with their tax payments, enabling them to be enlisted as “watchdogs” for federal spending and minimizing the potential for the federal government to benefit the average worker. However, the left is also culpable as it pushed class politics and the concept of making the more fortunate “pay for” programs and benefits to the less fortunate via progressive tax policy. Once public support for such is achieved extreme amounts of financial support can be gained by simply not doing so, which explains why taxes have remained low for the wealthy and corporations in spite of several periods of Democratic control since the New Deal ended in the ‘50s.
It’s surpluses that suck money out of the economy
The concept is much deeper than that. As the only net source of dollars in the economy, the federal government (Congress) must spend in excess (deficit) of tax collections if it is to leave any store of value available from commerce or to retire private sector bank debt. The “debt” that sets politicians’ hair on fire is actually only a tracking number that informs Treasury of how much has been spent in dollars and not yet collected by taxation. It also serves, as anyone familiar with dual entry spreadsheet accounting should know instinctively, as a “balancer” for those collections, canceling each dollar before it can be recycled to spending.
The government cannot “have” dollars on its side of the spreadsheet, just as the private sector cannot owe a debt for those dollars it retains. Either would simply balance to zero. While the government never needs dollars, its ability to levy and collect taxes assures that we, the private sector, do need them, which is their purpose. This completely negates the perception of Treasury bonds as a funding mechanism to enable spending and makes them only a safe harbor for savings that pays a small dividend.
That this benefits mostly only the wealthy and banking would not be lost on average Americans if they understood finance. It certainly puts a new twist on the age-old argument of Social Security and Medicare “trust funds” going broke, as they were always broke and both only served to remove money (purchasing power) from the working class once we no longer had a gold reserve to defend. Collecting those dollars from working-class earnings does nothing to enable payment of benefits in either program in the future. That knowledge may be the push that causes the boomer generation to abandon fiscal conservatives.
