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MMT for Conservatives

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  • Strongly Liberal Democrat
    Democrat
    Dallas, TX
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    Tax and spend "liberalism" is inapplicable to the monetary system that we have. "The funds to pay our taxes and buy government securities come from government spending"-Warren Mosler. So it's not tax and spend; it's spend for public purpose and tax at a level that corresponds to full employment. The function of taxes is to regulate demand, not raise revenue per se. The currency is a simple public monopoly. Involuntary unemployment is the evidence that government is restricting supply to levels that do not support demand for the currency to pay taxes and to save. You may not like that the government is the currency issuing monopolist, but it doesn't explain why you would want the government to use this power you hate to oppress the private sector via overtaxation per size of government. If you want less government spending, lower tax levels are appropriate, and MMT proposals to cut the regressive, punishing FICA payroll tax should be at the top of your agenda.
  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    CBB --

    I generally agree with most of what Warren Mosler says. However, I do question if "full employment" is a realistic goal. As I understand it, he visualialzes full employment as 100 percent employment...or zero unemployment. I would guess that a more realistic number might be something like 3 percent unemployment. The lowest unemployment rate that I could find is for the year 1944, when the rate was 1.2 percent. That was a war year.

    Other than that the next lowest was 3 percent for 1952.

    http://www.infoplease.com/ipa/A0104719.html

    It seems to me that if government spending is allowed to run unabated until the unemployment rate reaches zero, then you are getting into uncharted territory, and the implications on the efficiency of that government spending might have more negative consequences than positive. Is there an optimum unemployment rate at which government measures to lower it beyond that point become counterproductive?
  • Strongly Liberal Democrat
    Democrat
    Dallas, TX
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    Basically, you want a 1 to 1 ratio b/n job seekers and job openings, or you could just eliminate involuntary unemployment by definition by offering a federal Job Guarantee to everybody able and willing to work but unable to find employment in the private sector or 'normal' government.

    Yes, it is very hard through the normal process to hit that magic number where the deficit is just right, which is why MMT advocates a 'rules based' Job Guarantee to let the market for unemployed job seekers set the amount of government spending needed to keep us at full employment.

    "Crowding out" is only applicable when we're at full output; at that point, additional government spending can be counterproductive as it's competing directly against the non-government for those resources.

    But the economy has built-in brakes in the form of the intense incentives to save. This gives the economy a deflationary bias that has to be overcome. These massive demand leakages include pension funds, retirement accounts, corporate reserves, and central bank reserves.

    As per fighting inflation, it might be a good idea for government to get in the business of supplying buffer stocks of particular commodities.
    Whether we realize it or not, government is a price-setting monopolist at the margins.

    It's very important to understand that inflation is not solely caused by too much spending. And even in that case, that private credit creation is by far and away in the ead in terms of adding to overall demand and change in incomes.