Prosperity economics: Building an Economy for All

The research, writing, and production of this report has been a collaborative effort involving several dozen economists and other academics, policy analysts, activists, organizers, and other dedicated professionals in the public policy arena. The authors owe special thanks to Steve Savner of the Center for Community Change, Damon Silvers of the AFL-CIO, Lawrence Mishel and Josh Bivens of the Economic Policy Institute, and Dan Feder of Yale University. We are grateful to Patrick Watson, who edited the report and oversaw its final production, and to Kim Weinstein, our designer, who worked against strict deadlines with grace and good humor. Valuable feedback was provided by the following (organizations provided for identification purposes only): Dean Baker, Center for Economic and Policy Research; Seth Borgos, Center for Community Change; Mark Levinson, SEIU; Catherine Singley, National Council of La Raza; and Corrine Yu, The Leadership Conference on Civil and Human Rights. In addition, the authors benefited immensely from the input and help of dozens of generous thinkers. Though they are too numerous to list here, we would like to thank in particular Eileen Appelbaum, Diane Archer, Algernon Austin, Ana Avendana, Bob Baugh, Jared Bernstein, Deepak Bhargava, Victoria Bilski, Pierre X. Bourbonnais, Healther Boushey, Max Bruner, Olivia Cohn, Cory Connolly, Stuart Craig, Nina Dastur, Andrea Zuniga DiBitetto, Gail Dratch, Linda Evarts, Michael Evangelist, Heidi Hartmann, Wade Henderson, Jon Hiatt, Charles Kamasaki, Lane Kenworthy, Mike Konczal, Doug Kysar, Pamela Lamonaca, Mary Lassen, Kelly Lawson, Mike Lux, Barry Lynn, Mark Manfra, Jane McDonald, Caitlin Miner-LeGrand, Denise Mitchell, David Moss, Teryn Norris, Christine Owens, Tom Palley, Paul Pierson, Jonas Pontusson, Eric Rodriguez, Kelly Ross, Lauren Rothfarb, Nancy Schiffer, Theda Skocpol (and the Scholars Strategy Network, which she founded), Rick Sloan, Gus Speth, Becky Thiess, Anna Walnycki, Jessye Waxman, Drew Westen, and Joanne Williams.

Paper available at Prosperity For America
Prosperity economics: Building an Economy for All
Jacob S. Hacker, Ph.D., is the Director of the Institution for Social and Policy Studies (ISPS), Stanley B. Resor Professor of Political Science, and Senior Research Fellow in International and Area Studies at the MacMillan Center at Yale University, and Nate Loewentheil, third year law Student at Yale Law School where he is focusing his studies on environmental law and politics.
(h/t Kevin Fathi via email)

Study and public policy proposal with a decidedly liberal bias. Most of us will recognize several people in the acknowledgements.

Warren Mosler — Proposal update, including the JG

Proposal update, including the JG
by WARREN MOSLER
January 10th, 2012

Reposted from The Center of the Universe

My proposals remain:

1. A full FICA suspension:
The suspension of FICA paid by employees restores spending which supports output and employment.
The suspension of FICA paid by business helps keep costs down which in a competitive environment lowers prices for consumers.

2. $150 billion one time distribution by the federal govt to the states on a per capita basis to get them over the hump.

3. An $8/hr federally funded transition job for anyone willing and able to work to assist in the transition from unemployment to private sector employment.

Call me an inflation hawk if you want. But when the fiscal drag is removed with the FICA suspension and funds for the states I see risk of what will be seen as ‘unwelcome inflation’ causing Congress to put on the brakes long before unemployment gets below 5% without the $8/hr transition job in place, even with the help of the FICA suspension in lowering costs for business.

It’s my take that in an expansion the ‘employed labor buffer stock’ created by the $8/hr job offer will prove a superior price anchor to the current practice of using the current unemployment based buffer stock as our price anchor.

The federal government caused this mess for allowing changing credit conditions to cause its resulting over taxation to unemploy a lot more people than the government wanted to employ. So now the corrective policy is to suspend the FICA taxes, give the states the one time assistance they need to get over the hump the federal government policy created, and provide the transition job to help get those people that federal policy is causing to be unemployed back into private sector employment in a more orderly, more ‘non inflationary’ manner.

I’ve noticed the criticism the $8/hr proposal- aka the ‘Job Guarantee’- has been getting in the blogosphere, and it continues to be the case that none of it seems logically consistent to me, as seen from an MMT perspective. It seems the critics haven’t fully grasped the ramifications of the recognition of the currency as a (simple) public monopoly as outlined inFull Employment AND Price Stability and the other mandatory readings.
So yes, we can simply restore aggregate demand with the FICA suspension and funds for the states, but if I were running things I’d include the $8 transition job to improve the odds of both higher levels of real output and lower ‘inflation pressures’.

Also, this is not to say that I don’t support the funding of public infrastructure (broadly defined) for public purpose. In fact, I see that as THE reason for government in the first place, and it should be determined and fully funded as needed. I call that the ‘right size’ government, and, in general, it’s not the place for cyclical adjustments.

4. An energy policy to help keep energy consumption down as we expand GDP, particularly with regard to crude oil products.

Here my presumption is there’s more to life than burning our way to prosperity, with ‘whoever burns the most fuel wins.’

Perhaps more important than what happens if these proposals are followed is what happens if they are not, which is more likely going to be the case.

First, given current credit conditions, world demand, and the 0 rate policy and QE, it looks to me like the current federal deficit isn’t going to be large enough to allow anything better than muddling through we’ve seen over the last few years.

Second, potential volatility is as high as it’s ever been. Europe could muddle through with the ECB doing what it takes at the last minute to prevent a collapse, or doing what it takes proactively, or it could miss a beat and let it all unravel. Oil prices could double near term if Iran cuts production faster than the Saudis can replace it, or prices could collapse in time as production comes online from Iraq, the US, and other places forcing the Saudis to cut to levels where they can’t cut any more, and lose control of prices on the downside.

In other words, the risk of disruption and the range of outcomes remains elevated.

Warren Mosler — MMT to Obama- Use This Speech!

This is the speech I [Warren Mosler] would make if I were President Obama:

My fellow Americans, let me get right to the point.

I have three bold new proposals to get back all the jobs we lost, and then some. 
In fact, we need at least 20 million new jobs to restore our lost prosperity and put America back on top.

First let me state that the reason private sector jobs are lost is always the same. 
Jobs are lost when business sales go down.
 Economists give that fancy words —- they call it a lack of aggregate demand.

But it’s very simple.
 A restaurant doesn’t lay anyone off when it’s full of paying customers,
 no matter how much the owner might hate the government,
 the paper work, and the health regulations. A department store doesn’t lay off workers when it’s full of paying customers. And an engineering firm doesn’t lay anyone off when it has a backlog of orders.

Restaurants and other businesses lay people off when their customers stop buying, for any reason. So the reason we lost 8 million jobs almost all at once back in 2008 wasn’t because all of a sudden all those people decided they’d rather collect unemployment than work. 
The reason all those jobs were lost was because sales collapsed. 
Car sales, for example, collapsed from a rate of almost 17 million cars a year to just over 9 million cars a year.
That’s a serious collapse that cost millions of jobs.

Let me repeat, and it’s very simple, when sales go down, jobs are lost,
 and when sales go up, jobs go up, as business hires to service all their new customers.

So my three proposals are specifically designed to get sales up to make sure business has a good paying job for anyone willing and able to work.

That’s good for businesses and all the people who work for them.

And these proposals are bipartisan.
They are supported by Americans ranging from Tea Party supporters to the Progressive left, and everyone in between.

So listen up!

My first proposal if for a full payroll tax suspension.
 That means no FICA taxes will be taken from both employees and employers.

These taxes are punishing, regressive taxes that no progressive should ever support.
 And, of course, the Tea Party is against any tax.
 So I expect full bipartisan support on this proposal.

Suspending these taxes adds hundreds of dollars a month to the incomes of people working for a living. This is big money, not just a few pennies as in previous measures.

These are the people doing the real work.
 Allowing them to take home more of their pay supports their good efforts.
 Right now take home pay is barely enough to pay for food, rent, and gasoline, with not much left over. When government stops taking FICA taxes out of their pockets, they’ll be able to get back to more normal levels of spending.

And many will be able to better make their mortgage payments and their car payments,
which, by the way, is what the banks really want — people who can make their payments.
 That’s the bottom up way to fix the banks, and not the top down bailouts we’ve done in the past.

And the payroll tax holiday is also for business, which reduces costs for business, which, through competition, helps keep prices down for all of us. Which means our dollars buy more than otherwise.

So a full payroll tax holiday means more take home pay for people working for a living,
 and lower costs for business to help keep prices and inflation down,
 so sales can go up and we can finally create those 20 million private sector jobs we desperately need.

My second proposal is for a one time $150 billion Federal revenue distribution to the 50 state governments with no strings attached.
 This will help the states to fill the financial hole created by the recession,
 and stay afloat while the sales and jobs recovery spurred by the payroll tax holiday
restores their lost revenues.

Again, I expect bipartisan support.
 The progressives will support this as it helps the states sustain essential services,
 and the Tea Party believes money is better spent at the state level than the federal level.

My third proposal does not involve a lot of money, but it’s critical for the kind of recovery that fits our common vision of America.
 My third proposal is for a federally funded $8/hr transition job for anyone willing and able to work, to help the transition from unemployment to private sector employment.

The problem is employers don’t like to hire the unemployed, and especially the long term unemployed. While at the same time, with the payroll tax holiday and the revenue distribution to the states, business is going to need to hire all the people it can get. The federally funded transition job allows the unemployed to get a transition job, and show that they are willing and able to go to work every day, which makes them good candidates for graduation to private sector employment.

Again, I expect this proposal to also get solid bipartisan support.


Progressives have always known the value of full employment,
 while the Tea Party believes people should be able to work for a living, rather than collect unemployment.

Let me add here that nothing in these proposals expands the role or scope of the federal government.
 The payroll tax holiday is a cut of a regressive, punishing tax,
that takes the government’s hand out of the pockets of both workers and business.

The revenue distribution to the states has no strings attached.
 The federal government does nothing more than write a check.

And the transition job is designed to move the unemployed, who are in fact already in the public sector, to private sector jobs.

There is no question that these three proposals will bring drive the increase in sales we need to
usher in a new era of prosperity and full employment.

The remaining concern is the federal budget deficit.

Fortunately, with the bad news of the downgrade of US Treasury securities by Standard and Poors to AA+ from AAA, a very important lesson was learned. Interest rates actually came down. And substantially.

And with that the financial and economic heavy weights from the 4 corners of the globe
made a very important point.

The markets are telling us something we should have known all along. 
The US is not Greece for a very important reason that has been overlooked.
 That reason is, the US federal government is the issuer of its own currency, the US dollar.
 While Greece is not the issuer of the euro.

In fact, Greece, and all the other euro nations, have put themselves in the position of the US states. Like the US states, Greece and other euro nations are not the issuer of the currency that they spend. So they can run out of money and go broke, and are dependent on being able to tax and borrow to be able to spend.

But the issuer of its own currency, like the US, Japan, and the UK,
 can always pay their bills.
 There is no such thing as the US running out of dollars.
 The US is not dependent on taxes or borrowing to be able to make all of its dollar payments.
 The US federal government can not go broke like Greece.

That was the important lesson of the S&P downgrade, 
and everyone has seen it up close and personal and they all now agree.
 And now they all know why, with the deficit at record high levels, interest rates remain at record low levels.

Does that mean we should spend without limit and not tax at all?
 Absolutely not! 
Too much spending and not enough taxing will surely drive up prices and inflation.

But it does mean that right now,
 with unemployment sky high and an economy on the verge of another recession,
 we can immediately enact my 3 proposals to bring us back to
 a strong economy with good jobs for people who want them.

And some day, if somehow there are too many jobs and it’s causing an inflation problem,
 we can then take the measures needed to cool things down.

But meanwhile, as they say, to get out of hole we need to stop digging,
and instead implement my 3 proposals.

So in conclusion, let me repeat these three, simple, direct, bipartisan proposals
for a speedy recovery:

• A full payroll tax holiday for employees and employers


• A one time revenue distribution to the states

• 
And an $8/hr transition job for anyone willing and able to work to facilitate
the transition from unemployment to private sector employment as the economy recovers.

Thank you.

[Reposted from moslereconomics.com]