Tcherneva, Sawicky and Kaboub on MMT and policy

Pavlina Tcherneva:

There is nothing more crippling to a bold policy agenda than the myth that the government can run out of money. This myth is behind every But how will you pay for it? objection to proposals such as a Green New Deal and Medicare for All. New House Majority Leader Nancy Pelosi (D-Calif.) has even proposed instituting self-defeating PAYGO (pay as you go) rules, which would require all new government spending to be matched with increased revenue, wrongly prioritizing the balancing of the budget over the well-being of the public.

Dispelling this myth is at the heart of an economic approach that is rapidly gaining a global following, known as modern monetary theory (MMT). MMT stresses that, in the modern world, where government-backed currencies are no longer backed by gold or other commodities, federal governments can’t run out of financial resources. Unlike states and municipalities (which have hard constraints on spending), for the federal government, all funding shortages are artificially created. Understanding this changes everything—from the economic possibilities before us to what the public can demand from our government.

In These Times

PAYGO Is Based on a Fallacy
Pavlina R. Tcherneva | program director and associate professor of economics at Bard College and research associate at the Levy Economics Institute

Max Sawicky:

Pavlina asserts that an ideology of fiscal rectitude, embodied in the How will we pay for it? mantra, places impossible barriers before progressive public spending initiatives. For a number of reasons, however, this isn’t quite right.… 

There are a bunch of ways to justify additional public spending without recourse to MMT....

In These Times
The Best Way To Argue Against PAYGO
Max B. Sawicky | independent economist and writer based in Virginia, formerly at the Economic Policy Institute in Washington, D.C.

 Fadhel Kaboub:

The rising popularity of modern monetary theory (MMT) has inevitably brought misconceptions. Critics across the political spectrum often claim that MMTers want sovereign governments to “just print money” with no concern for the national debt or, as Max B. Sawicky suggests, inflation. Some, especially on the Right, point to Venezuela and Zimbabwe as classic cases of hyperinflation.

But MMT points to a different primary cause of inflation in developing countries: not domestic spending, but foreign debt and a resulting lack of “monetary sovereignty.”...

In These Times

Why Government Spending Can’t Turn the U.S. Into Venezuela—When poor countries fall prey to inflation, it’s not because they’re “too socialist.”
Fadhel Kaboub | associate professor of economics at Denison University, and president of the Global Institute for Sustainable Prosperity

Snadwichman — Jobs Guarantee vs. Work Time Reduction

…what are the alternatives to a job creation program -- especially a a work-sharing program and permanent reductions in the hours work, what John Maynard Keynes called the "ultimate solution" for unemployment.  

"...the full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less. Personally I regard the investment policy as first aid. In U.S. it almost certainly will not do the trick. Less work is the ultimate solution (a 35 hour week in U.S. would do the trick now)."

Econospeak
Jobs Guarantee vs. Work Time Reduction
Snadwichman

Sandwichman — UBI Caritas

The miraculous Max Sawicky resumes wrestling with Universal Basic Income at MaxSpeak. This time the incitement comes from Dylan Matthews at Vox, who argues that a secondary benefit of basic income would be that "it enables a transition to a world of less work and greater leisure."

That would indeed be a good thing. But as the Sandwichman pointed out two weeks ago, advocates for basic income seemingly make exactly the opposite argument. Guy Standing, co-president of the Basic Income Earth Network, cited a recent experiment in India -- and earlier experiments in North America and Europe -- as evidence for the claim that a basic income guarantee "would not reduce labor supply... The simple fact is that people with basic security work harder and more productively, not less."….

You may wish to read the Dylan Matthews and Max Sawicky posts first if UBI is your thing. Even it it isn't best to read Sandwichman anyway. When you finish his post, take a look at Greatest mass extinction driven by acidic oceans, study finds. The likely consequence of this is that capitalism as we know it has hit the wall and needs overhaul. Or else we are headed down the tubes.

Econospeak
UBI Caritas

Sandwichman

Steve Randy Waldman — The political economy of a universal basic income

Debate is hotting up. SRW disagrees with Max Sawicky and agrees with Ed Dolan.

I think that UBI — defined precisely as a periodic transfers of identical fixed dollar amounts to all citizens of the polity — is by far the most probable and politically achievable among policies that might effectively address problems of inequality, socioeconomic fragmentation, and economic stagnation. It is not uniquely good policy. If trust in government competence and probity was stronger than it is in today’s America, there are other policies I can imagine that might be as good or better. But trust in government competence and probity is not strong, and if I am honest, I think the mistrust is merited. 

UBI is the least “statist”, most neoliberal means possible of addressing socioeconomic fragmentation. It distributes only abstract purchasing power; it cedes all regulation of real resources to individuals and markets. It deprives the state even of power to make decisions about to whom purchasing power should be transferred — reflective, again, of a neoliberal mistrust of the state — insisting on a dumb, simple, facially fair rule.…

Like the excellent Ed Dolan, I favor a basic income large enough to matter but not sufficient for most people to live comfortably. The right way to understand a basic income as a matter of economics, and to frame it as a matter of politics, is this: A basic income serves to increase the ability of workers to negotiate higher wages and better working conditions. Market labor is always “optional” in a sense, but the option to refuse or quit a job is extremely costly for many people. A basic income would reduce that cost. People whose “BATNA” is starvation negotiate labor contracts from a very weak position. With a basic income somewhere between $500 and $1000 per month, it becomes possible for many workers to hold off on bad deals in order to search or haggle for a better ones. The primary economic function of a basic income in the near term would not be to replace work, but to increase the bargaining power of low income workers as a class. A basic income is the neoliberal alternative to unionization — inferior in some respects (workers remain atomized), superior in others (individuals have more control over the terms that they negotiate) — but much more feasible going forward, in my opinion.Interfluidity

The political economy of a universal basic income
Steve Randy Waldman