Monetary Realism

Understanding The Modern Monetary System…

(MMT – JG) + Medicare = MMT

As you’ll recall from the Dylan Matthews piece in the Washington Post, James K. Galbraith was described as, “part of a small group of economists who have concluded that everyone — members of Congress, think tank denizens, the entire mainstream of the economics profession — has misunderstood how the government interacts with the economy. If their theory — dubbed “Modern Monetary Theory” or MMT — is right, then everything we thought we knew about the budget, taxes and the Federal Reserve is wrong”.

Anywho, Galbraith was at FireDogLake today plugging his new book and the question was asked:
How do you feel about the MMT policy of government as employer of last resort — a job guarantee (JG) — when the private sector is not hiring?…

Galbraith responded:
To come back to the job-guarantee approach, I think asking the government to create jobs directly is not a robust solution. The problem is that the program goes right into the budget firing line, where it will get chopped up. That was the experience with CETA, the Comprehensive Employment and Training Act, back in the 1970s.
So I prefer to think in terms of how to get decentralized institutions doing useful things, with their own funding streams, so that you can create jobs that endure. Education, health care, social services, home care, neighborhood conservation… [and in response to a related question] But I think there are ways to get jobs funded — you just have to put a few degrees of separation between the program and the budget-cutters.

I chimed in to ask Galbraith what he meant with his “degrees of separation” line.
He responded:
Well, I like the non-profit sector in this country a lot. Health care, education — these are useful things. Paul Samuelson once said to me “Health care is 15 percent of GDP, and it’s the best 15 percent of GDP.”The thing about these sectors is, they have multiple funding streams. Higher ed has state money, federal money, tuition, philanthropy… This buffers the institution from cuts. If you go to (say) France, and look at what happens when you rely entirely on state funding for universities, you’ll see what I mean. That said, the federal government handles *insurance* extremely well. Social Security and Medicare are functional, efficient programs. That is why they are so hated by some people – and prized by others.

I rather agree with his last point. As I’ve suggested before, Congress should dump universal healthcare funding onto the Fed’s lap. This would have the side benefit of providing the Fed with a fiscal policy tool; they could periodically adjust the rebate’s ratio of segniorage vs transaction fee revenue depending on economic conditions.

To take a few minutes to unpack my last paragraph (you can punch out if you don’t want to go into the weeds)… While Obamacare was being debated in 2009, Anthony Weiner went on the Morning Joe show to make a ridiculously strong case for a single payer system (Part I, Part II). Congressman Weiner was promised a floor vote on a Medicare for All bill he drafted but Pelosi and/or the White House pressured him to drop it so people would pay less attention to how flawed Obamacare really was (but I digress). Unlike the HR 676 Medicare for All bill that you often see touted, Weiner’s bill was actually vetted by the CBO so its additional expenditures were matched by additional taxes… A LOT of new taxes (approx $1 trillion a year, that’s over and above current govt health spending that’d roll over into the new system). Raising taxes seems rather unnecessary since Congress could accrue this revenue without taxes or inflation simply by mandating the Fed deposit an equivalent amount in TGA every year.

The Federal Reserve Act was amended in 1980 to give the Fed governors (and NOT the FOMC) the authority to levy and adjust bank transaction fees. Of course this is completely different from bank transaction taxes, after all, only Congress can levy taxes! In 2005, UW-Madison Econ professor Edgar Feige proposed to President Bush’s tax reform panel a bank transaction tax (of approx. half of one percent) that would generate $1.8T in revenue (in 2002 dollars). My reading of the FRA is that the Fed could enact Feige’s plan on its own (though Congress can always push them if they won’t jump). In perhaps the most wonderful example ever of “its a feature, not a bug”, economist Bruce Barlett complained of Feige’s plan, “Since GDP equals the money supply times the turnover of money—what economists call velocity—a fully effective transactions tax will presumably reduce velocity. Consequently, it would be severely deflationary unless the Federal Reserve​ substantially increased the money supply to compensate. It also means that the tax base will shrink as soon as the tax is imposed.”

So this is the plan, the unstoppable force of $1 trillion in inflationary Medicare spending would meet the immovable object of $1 trillion in deflationary transaction fees. Of course we only need spending and revenue to match at full employment (and even that assumes no trade deficit demand leakage). At other times, The Fed could use this as an adjustable fiscal policy tool (the Board of Governors can amend their fee schedule at any time). When the economy falls short of full employment with balanced trade, the Fed could fund Medicare by cutting transaction fees and filling the deficit by way of the Mint with coin seigniorage (I’ll just note in passing that ordering, say, a $1 billion platinum coin seems less wasteful than a billion $1 coins, reasonable minds can differ). :o)



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54 Responses

  1. studentee says

    “As you know, the state theory renders the horizontal’s existence totally unnecessary and even conflicts with MMT’s perspective…”

    These guys are working in the tradition of Minksy. Have you read any Minksy, Cullen?

    • Cullen Roche says

      They’re not just working under the tradition of Minsky. But I’m really not interested in another MMT flame war here so save your breath.

  2. Joe Firestone (LetsGetitDone) says

    Hey Cullen, where’s the quote and link to me “. . . describing a version of “MMT without the JG”? I clean forgot I ever wrote that! Do you remember me writing that Mike? How ’bout you, Carlos?

      • Joe Firestone (LetsGetitDone) says

        Oh, I see.

        Of course, I was referring to you guys and using the notion of MMT – JG in words rather than using the label MMR. I was not intending to say that MMT – JG was really MMT and make that clear here:

        In the comment on Jamie’s book salon, I was referencing Mike’s early post here where he used the 4/4 targets with the TC rule.

        • Cullen Roche says

          Hmmm. Okay. Nice to be consistent. :-) Thanks Joe.

      • Tom Hickey says

        The MMT JG is an essential aspect of MMT as a macro theory and an overal policy proposal developed from it. How it would be implemented in different circumstances is strategic and tactical. Scott has made the distinction between theory, policy, strategy and tactics clear in the recent discussion with Krugman. MMT economists have said that an MMT-based policy can pursued tactically without the JG, but Warren has added, don’t blame MMT if you get inflation, too. So I don’t see that Joe is saying anything new here. Joe is trying to clarify JKG’s position independently of tactical considerations, which would be interesting to know.

        • Cullen Roche says

          You guys have managed to obscure MMT even more so you can basically say it’s never wrong, but it’s always applicable. I have no idea why you guys think these word games are useful. They totally discredit MMT. Just say MMT is applicable in one form or just say it’s not applicable. Don’t say MMT is always applicable, but won’t be applicable if something goes wrong. That’s just a big steamy load of nonsense.

          The truth is, MMT is based on the state theory and the idea of a money monopolist. Neither of those concepts apply to a monetary system in which the horizontal banking system creates its own reserves AND the term monopolist doesn’t even apply. As you know, the state theory renders the horizontal’s existence totally unnecessary and even conflicts with MMT’s perspective. Warren says banks “serve public purpose”. But this is obviously wrong. Banks serve private purpose almost entirely. They are slaves to their shareholders. It’s a clear conflict of interest in money issuers. There’s a strong argument that this is wrong, but MMT doesn’t make this argument entirely (well, Bill M does, but he’s the only one of you taking MMT to its logical extreme).

          MMT is only applicable to one vertical component with a truly state money system and a true money monopolist. Until then, MMT is a progressive policy agenda hoping to one day get us to that reality (although most of you won’t publicly state that you want one vertical component because that would throw a big wrench in MMT for political reasons). Until then, MMT isn’t applicable so you guys should all get on the same page, argue against private banking, argue in favor of one vertical component and use your progressive agenda to push us in that direction. The way you’ve framed it all now is just totally disingenuous and very misleading. This is constructive criticism and I know you agree with much of it because half of these quotes are ripped from your previous comments….So please don’t take my comments the wrong way. I just see MMT precisely for what it is. And when people reach my level of understanding they’ll call BS on it for what are fairly obvious reasons once you can connect all the dots from the state theory to the money monopolist to the JG. It’s best if you guys get ahead of that rather than dig yourselves deeper by obscuring what you really want/need the system to be.

        • AK says

          “Until then, MMT is a progressive policy agenda…”
          So is MMR. It’s just slightly less progressive.

        • Cullen Roche says

          MMR doesn’t represent an agenda at all.

        • AK says

          MMR recommends certain courses of action, given certain economic conditions. Therefore it has no more or less of an agenda than MMT.

        • Cullen Roche says

          No. MMR does not recommend policies. It explains how the system works, and all policy options are peripheral to MMR.

        • AK says

          Statements from your recommended readings, such as “we should not seek merely to consume and import from our neighbors”, and “we believe the government should consider other policy measures to establish an environment of full employment and price stability” certainly sound very much like policy prescriptions.

        • AK says

          Beowulf: I agree entirely with your post, and moreover, I don’t think it’s at all incompatible with MMT. Personally, I have not and will never express offence at someone offering alternatives. Nor do I view any theory as the one shining path. I do believe (and will continue to argue) that theoretically, a JG is the best way of dealing with the residual buffer stock of unemployed. That is why I agree with MMT’s aspirations rather than MMR’s aspirations. But, this certainly does not mean that I ignore the practical and political difficulties inherent in implementing a JG, and the need to look for alternatives given that a JG may/probably will never happen. Nor does it mean that I ignore the ‘low-hanging fruit’ of fiscal adjustments, which should unequivocally be the priority at the moment. All other aspirations, including JG, remain as intellectual debates at this point in time, which is exactly why I frequent this site and comment. Not because I like ‘trolling’, but because it’s boring when everyone agrees and we all learn nothing. I enjoy reading your posts. It is encouraging that you are able to engage in debate about them. I look forward to reading more of them in the future.

          Cullen: I’m rather disappointed at your ‘troll’ comments (and your comments generally which have changed from their once-professional tenor, and now seem to become more and more heated every time I comment on this site). I didn’t offer ‘vague quotes’; I offered specific quotes from your own recommended readings showing how impossible it is to remove policy aspirations from any theory. They arise naturally from the underlying theory. It has amused me, for example, that you regard it as problematic and ‘political’ that the JG is embedded in the heart of MMT, but then have gone and specifically embedded opposition to the JG in the heart of MMR, and then claimed that MMR is apolitical.

        • Cullen Roche says

          I’m sorry that you think your comments aren’t trolling, but they fall under a similar pattern that I see in MMTers. You didn’t show up around Pragcap until the JG debates started. It’s clear that you’re here for one reason and one reason only – to aggravate MMR proponents when they say anything bad about MMT. ALL of your comments here and at Pragcap revolve around defensive comments in response to MMT criticisms. EVERY SINGLE ONE. That’s fine, but don’t claim you’re here trying to be productive because there are dozens of comments proving otherwise. You’re here on a MMT mission to aggravate anyone who criticizes MMT. You’ve done it since day one and you do it still (more respectfully than some others at least). But please don’t come around here pretending to take the high road from your anonymous perch. You’re here for one reason and one reason only and I am sorry if you don’t think that’s trolling, but it is. Maybe try being more productive and less defensive and you’ll get a different style of response????

        • Michael Sankowski says

          We wouldn’t even consider offering a just a single path to achieve better real growth. There is too much at stake.

        • Cullen Roche says

          Come on? You’re gonna claim you’re not trolling this website one week and then come here wasting your breath offering vague quotes as evidence backing up your accusations? There are no policies that MMR is built around. There are plenty of options. Hell, I’d even consider a JG on a small scale. But I do reject the JG as it’s presented under MMT. So yeah, there are lots of policy options, but nothing embedded as a necessity in the theory as market monetarists or MMTers do….

        • beowulf says

          Actually they’re aspirations. We’ve stated what our goals should be but like the Hindus say there’s more than one path up the mountain. Look, if Congress sets up carefully monitored pilot programs that can show that JG is a cost-effective policy tool, then sure lets scale it up. On the other hand, if the studies show that its a bust, then we should try something else. In the meantime, lets pick the low-lying fruit and look for existing policies that are effective and can be quickly scaled up (the payroll tax holiday is a great place to start).

          At the end of the day, what we want is for the economy moves toward our goals (full employment, price stability, balanced trade, full production are met), but we’re indifferent if its by JG or floating payroll tax rates any other policy lever that the evidence shows is the best path up the mountain. Sometimes I get the impression that the MMTers have chosen the one shining path they want to the country to follow and they take it as an insult if anyone suggests we scout it out first.

        • beowulf says

          “And when people reach my level of understanding…”

          Do you mean in the spiritual sense, or just economics? :o)

      • FDO15 says

        Oh, that was good. Joe’s memory must be pretty short!!!!

  3. AK says

    Very enjoyable post Beowulf.

    I agree with Gailbraith’s comments on the JG. His main problem is that it is not politically feasible at this point in time to centralise job creation. And that is indeed the political reality.

    Hence it’s important to waste less time arguing about a JG (even though it’s still the best buffer stock mechanism anyone has proferred thus far) and more time thinking of palatable alternatives, which, although not as theoretically nice as the JG, are at least more politically feasible.

    Gailbraith has done that well – his advocation of “decentralisation” of job creation by funding through non-profit channels is great because it directs job creation to the places that government is already efficient at doing. I particularly like his list of “education, health care, social services, home care, neighborhood conservation” as a focus point – in an alternate universe where a JG could pass Western parliaments/congresses, that is the areas in which job creation would ideally be focussed.

  4. Economic Maverick says

    Fascinating…use entitlements as fiscal policy lever by the only institution (independent CB) that can actually do counter-cyclical policy on something other than the”ad-hoc” basis that constrains the legislature

  5. Senexx says

    It doesn’t matter where the funding comes from, it is always in the budget firing line. Galbraith’s remark doesn’t stand up to criticism.

    • beowulf says

      Au contraire (at least in the US, I can’t speak for Australia’s budgetary rules).

      Medicare is an example of what are called entitlements. Congress passes the authorization (grants the permission slip) and the appropriation (writes the check) at the same time. The only time Congress votes on Medicare is when they have to manually override an otherwise automatic budgetary procedure. Anyway, with no annual appropriation bill to block (which either the House, Senate or President alone could do), an entitlement program can’t be defunded unless the House, Senate and President all agree. Funding an entitlement through the Federal Reserve would add to this the advantage of being, in effect, off-budget (to be precise, the on-budget Fed rebate would automatically match the on-budget Medicare expenditure producing a net budgetary cost of $0). The Fed rebate’s ratio of seigniorage to transaction fee is the lever by which the Fed governors could adjust fiscal policy. Increasing the ratio a net fiscal add, decreasing it a net fiscal drain.

    • Cullen Roche says

      It’s strange. I see Joe Firestone over there describing a version of “MMT without the JG”. Which is really bizarre because Joe Firestone wrote a 16 part series misconstruing my comments and blasting away at many of us because we disagreed with the idea that the JG should be central to MMT. He made it very clear that MMT was a “core component” of MMT saying:

      “Since all the MMT founders and later MMT adherents such as myself agree with this, it’s not surprising that we think that the JG is a core component of MMT.”

      So now Joe is saying there’s a version of MMT “without the JG” which directly contradicts pretty much everything you all spent 3 months tearing us down for? You guys are literally all over the map on where you stand with MMT. Now there’s a version of MMT floating around without the JG in order to appease one of the leading economic voices of our day? Maybe Joe can write part 17 of the series titled: “Cullen Roche was right about the Job Guarantee”. :-)

  6. Obsvr-1 says

    Not a bad idea, although it will force a huge spike in lobby dollars from HC insurance companies to fight this “socialist” idea.

    Nationalizing HC funding would require a solid foundation of oversight and regulation to ensure Waste, Fraud and Abuse is minimized through tough enforcement policies.

    • beowulf says

      Agreed, one positive element of the Obamacare is putting more resources into cutting wasteful Medicare spending (both in terms of fraudulent billing and ineffective treatments). Alas, here’s what’s going to happen in June– the Supreme Court is going to throw out the Obamacare law lock, stock and barrel in the middle of the presidential campaign Its going to be pandemonium, a political train wreck that will require a complete reboot of our healthcare system. You either believe in Milton Friedman’s shock doctrine (“only a crisis – actual or perceived – produces real change”) or you don’t. People who do, plan ahead. People who don’t, are left wondering why they keep get taken by the other guys (like Geithner said, plan beats no plan).

      I was simply riffing off something Galbraith said (“the federal government handles *insurance* extremely well. Social Security and Medicare are functional, efficient programs.”) to suggest that MMTers look up from their map and ask themselves how they can use what they know (see Galbraith, Firestone, Mosler, Auerback & Wray above) to take advantage of the looming crisis we can see directly in front of us. Talking about a JG (which isn’t a bad idea except when its the ONLY idea) while the rest of the country is focused on healthcare is like shouting into the wind.

      • Dunce Cap Aficionado says

        “only a crisis – actual or perceived – produces real change” I’m a believer there. As far as my planning? I have plenty of popcorn and beer ready to spectate when the perverbial —- hits the fan in June…

  7. geerussell says

    It’s certainly an interesting idea, with lots of implications to sort through. If it really does put sufficient degrees of separation between funding and the ability of congress to cut funding, it does seem that it would serve the purpose of keeping healthcare safe from the budget-cutters.

    By that same logic, the same mechanism would be equally effective for preserving a job guarantee from the budget firing line.

    Following it through to its logical conclusion, once congress got a taste of this elixir would it become the go-to funding method for every measure that might be controversial? Would that be a good thing?

    • beowulf says

      It takes advantage of a couple of things under the budgetary hood: 1. Fed rebates are booked as miscellenous receipts that reduce the budget deficit (Congress labels Mint proceeds as miscellenous receipts also but for no reason in particular, Tsy doesn’t count coin seigniorage against the deficit, that should change); 2. The Medicare trust funds are funded by automatic permanent appropriations instead of annually. Harness them together– absolute budget neutrality whether on a 1 year, 10 year or 75 year time frame (since Fed rebate would always adjust to meet Medicare expenditures).

      Since Medicare’s creation in the mid-60s, Congress has locked the barn door in terms of creating new auto-appropriation entitlement programs (to avoid precisely the “taste of the elixir” danger you mention, they now require supermajority approval). However, they neglected to shut the window, existing programs like Medicare can modified with a filibuster-proof reconciliation bill.

      • geerussell says

        Thanks, that cleared it up a lot for me.

  8. beowulf says

    We report, you decide and all that. :o)
    I thought Galbraith’s take was interesting in that instead of citing MMT macro theory, he harkened back to the political reality he faced as a congressional aide. Its almost shocking to read an economist who believes what he sees instead of what his map says he should see.

    Incidentally, Marshall Auerback and Randy Wray had an excellent piece last week discussing the economic advantages of a universal Medicare system.
    “Reform” measures actually promote the status quo by pulling more people into an expensive healthcare system that is managed and funded by insurers. Since two-thirds of household bankruptcies are due to healthcare costs, forcing people to turn over an even larger portion of their income to insurance companies will further erode household finances and exacerbate the problem. This is despite the fact that research by, among others, David U. Himmelstein and Steffie Woolhandler, demonstrates that single-payer reform could save about $380 billion annually that’s currently wasted on insurers’ overhead and the unnecessary paperwork (and screen-work) they inflict on hospitals, doctors and patients.

    • Michael Sankowski says

      Yes, Warrens on this too. He has his own typically awesome Mosleresque version of how to do it.

      Give out $5000 to every person in the U.S., every year. It’s really a fiscal stimulus combined with medical care, similar in some ways to your proposal to give the Fed responsibility for Medicine.

      300M * 5K = 1.5T.

      • beowulf says

        Yeah, I have to agree that Warren’s plan is better than Weiner’s bill (also, I find his Tweets more tasteful :)), though either approach is better than the status quo.
        Not sure if the $5k would go out annually as spendable money or if it would sit in a Health Savings Account until needed. In any event, for the procedural reasons I mention below, you’d still want to call Warren’s plan Medicare (Part M?) and fund it via the Federal Reserve.

        • Cullen Roche says

          I think his plan was to offer the 5k for health spending and if unused it is a tax credit. It’s smart….would be a big economic boost also….

        • Erik V says

          That is correct, unused money could be spent after each year and the health debit card would be refilled. The health care system most similar to Mosler’s in the real world is Singapore’s which only spends 3.5% of GDP on health care and gets great results. Mosler’s would be even better because the excess funds could be spent each year. If we could even get our health spending from the current 17% of GDP to tied for last at 12%, that would unlock $750 billion a year to be reallocated to more productive sectors of the economy.

        • Michael Sankowski says

          I am slightly partial to the argument “As we get richer in absolute terms, we’ll choose to spend more of our relative income on XXX”.

          The Molser plan would probably be more popular than the JG and viewed as an entitlement from the moment it was enacted. I tell ya, the more I find out about Warren, the more astonishing he is. He’s incredible.

        • Erik V says

          True, but the question becomes are we getting more goods/services for spending more dollars. In the area of health care the answer is clearly no. We spend 17% of GDP on health care, the next highest spending country spends 12% and some of the really efficient countries keep it in the mid to high single digits, while getting as good or better health outcomes than we do. If we ever manage real reform in this area, tons of money can be reallocated to education, energy, R&D and lower taxes.

        • Brian says

          But health outcomes depend on other factors besides spending on health care, like diet and exercise.

        • Erik V says

          Agreed with beowolf and Brian. Garbage in, garbage out and the American populace, with our rampant obesity, is garbage.

        • beowulf says

          Yeah, there’s a tremendous amount of waste in the current system.
          I do like where Warren’s heads at. Its like a supersized version of GOP Governor Mitch Daniels’s Healthy Indiana Plan for Medicaid (as a state program, it faces budgetary constraints that a federal program would not), which uses a (subsidized) HSA topped off with catastrophic coverage.

        • Michael Sankowski says

          Yes, it’s great. It would give a ton of money to people in the prime of their spending years.

  9. FDO15 says

    MMT’s most famous proponent doesn’t even fully support MMT. Am I reading this correctly? Maybe MMT needs to change their position on the job guarantee being an essential part of MMT. Otherwise, they just lost their leading voice.

    • anonymous says

      “government to create jobs” vs. government to fund jobs

      • Cullen Roche says

        Galbraith is saying the govt shouldn’t even be the prime funding source. Which is obviously what a JG would require. Besides, I know for a fact that Galbraith doesn’t support the idea of MMT with the JG embedded in it as a necessary piece. But you guys have used his name to push your policy agenda nonetheless. Bizarre really. It’s not surprising that a guy as bright as Galbraith finds it odd that a policy proposal is embedded as a necessary piece of an economic theory. It’s a rather irrational position to take. And it’s interesting to me how MMTers rip Market Monetarists for doing this, but love to obscure the fact that the JG is THE central piece of MMT….

        • Ro says

          Cullen, is there any writing/links to back up your claim that you “know for a fact” that James Galbraith doesn’t support direct job-creation? I ask because my reading of his comments was very different to yours.

          Further down the comments, a person called TomThumb defended direct government job-creation against Galbraith’s claim that “you just have to put a few degrees of separation between the program and the budget-cutters”, saying:

          “No. I disagree. I enjoyed it when you used to call for a direct frontal attack on their weasel words about creating jobs. Anything else is caving. In my opinion. Call them out for being do nothings. That is better than watching people get hurt every day and not making any changes.”

          Galbraith then responded: “Point taken. It’s a tactical issue and there are mornings when I agree with you.”

          As i read those comments (although it’s entirely possible you are more familiar with his broader views), Galbraith’s concerns regarding the JG are extremely different to those typically brought up by MMR, and appear to center mostly around the frailty of perpetual JG-funding in the face of misguided political pressure of the type Galbraith himself faced while working in government with CETA in the 1970’s. As he states, this is a tactical issue, not a criticism of the validity of the underlying idea, and I imagine one that MMTers are well aware of and do not dismiss lightly – hence their tireless educational and PR efforts. Moreover, as he also states, this is a value judgment based on his own understanding of political operations. It’s entirely possible that changes in technology, demographics, the overton window, etc in different time periods may affect the feasibility of such a program. Alternatively, perhaps we are destined to have cycles in which WPA/CCC/CETA like direct job-creation programs emerge and slowly die, only to be replaced with others. Again, that is a different question to the operational impact of public-sector creation proposals.

          I say all of this because while i don’t necessarily agree with many of your concerns, I appreciate why MMR feels the need to branch off and seek new ground. But I think (in the absence of further supporting evidence) you’re running the risk of painting yourselves as disingenuous by pointing to Galbraith’s testimony here as evidence that he would be closer to MMR than MMT. In particular, he makes no mention of any of the commonly voiced MMR concerns with the JG, such as:
          1. the inflationary impact of direct job creation programs (i.e. that it would be a price “buoy” rather than anchor)
          2. effectiveness (in terms of net productivity, logistical feasibility, capacity to generate meaningful jobs)
          3. political concerns with dramatically increasing the size of the public sector

          As i said, I may have misinterpreted or read too much into Galbraith’s comments, but at this point more detail is required to convince me that Galbraith’s concerns with the JG even remotely similar to MMRs.

        • Cullen Roche says

          Disingenuous? I am never surprised by the comments some of you make. I speak to Dr Galbraith on rare occasion. He’s always incredibly responsive and generous. He has specifically told me on multiple occasions that he does not understand how a theory can have a specific policy proposal embedded in it. And it’s quite clear from the above comments that he does not support a fully govt funded JG. That doesn’t mean he doesn’t support govt created jobs. He very clearly does, but does he support the JG as it’s embedded in MMT. No. From our discussions it sounds like he takes a fairly similar position to me on the JG. The JG is no slam dunk so it’s silly to box ourselves in around a single policy that may or may not work….

          So the only thing disingenuous here is the fact that MMTers have taken a great economist and attempted to leverage his name to promote their own theory. Of course Dr. Galbraith supports many of the operational understandings. MMT doesn’t have a monopoly on understanding the world of fiat money. But ask him yourself if he considers himself a “member” of MMT. He’ll tell you he prefers to keep his distance from being a member of any specific group. I’m sure he agrees with much of MMR, but I would NEVER try to claim he’s an MMRist….That would be disingenuous…

        • Ro says

          Ok, apologies for suggesting ulterior motives – i should have said inaccurate. I have a lot of respect for all of you here and appreciate your work.

          It’s probably not worth rehashing already-argued points, but i think MMT doesn’t imply that the JG is a slam dunk either – as evidenced by posts such as Wray’s below regarding healthcare, as well as their broad financial reform proposals. I also think MMT has clarified that there are other buffer stocks one may choose, such as a reserve army of the unemployed, but they choose to emphasize those policies that promote full employment and price stability; those being generally acceptable standards in economics, much as market monetarists emphasize NGDP targeting in their writing. By an economist’s very choice to focus on certain ideas, policy levers and options (such as beowulf’s fascinating proposal above), economists make normative claims about what is relevant and worth considering (i believe Wray has also made this point).

          I did not mean to imply you were calling Galbraith an MMRist – I also appreciate the importance of not ascribing dogmatically to one school of thought. However, my question was more concerned to where MMR and Galbraith saw the major problems in the JG proposal, and whether they resembled each other. In particular, MMR emphasises the third prong of full employment and price stability – productivity – and questions it in regards to the JG, based on the concerns i articulated above. I was interested whether based on your experience with Dr. Galbraith (cheers for sharing those insights, by the way), you thought that his concerns – which seemed to me to be largely tactical – resembled your own, which seem to me to be directed at the operational/productivity sides of the proposal. In my mind, it could be possible that Galbraith sees the JG (regardless of whether it should be embedded in MMT theory) as a very good idea economically despite being hard to enact and maintain politically. That position would perhaps explain his apparent affinity with MMTers despite their “leveraging of his name,” including his participation in panels and conferences with them, his defense of MMT against Krugman in the NYTimes, and his foreward in Mosler’s 7DIF.

        • Cullen Roche says

          Look, the last thing I want to do again is get in some semantic back and forth with MMTers about what specific words mean and what they don’t mean. You guys are confident enough in the JG that you’ve essentially bet MMT on it. Whether you call that a “slam dunk” or not is unimportant. It’s “central” and “crucial” to MMT. Without it, you aren’t MMT. And Galbraith is very clearly not MMT. He might agree with a whole lot of it, but he does not agree with the idea of embedding a policy proposal in the theory. Yet you all constantly claim him as your leading voice. That’s fine, but it’s just one of many many inconsistencies that have become apparent in MMT over the last few months.

          I can’t speak for Dr. Galbraith, but my discussions with him lead me to believe that he’s skeptical of the govt’s ability to manage and sustain such a large program as well as its general efficacy as a superior buffer stock. I won’t disclose the direct quotes from our discussions, but since he’s made his position relatively clear I think it’s now very safe for me to say that he’s not a full bore supporter of the MMT that many of you claim allegiance to. Like me, I think he’s taking a more cautious approach regarding a program that really would change the way our govt and our economy operates. It’s a very reasonable position to take and I am still surprised at the back lash that many of us were on the receiving end of when we made our concerns public.

          Personally, I think it was a huge mistake to build MMT around the employment buffer stock and the JG, but that’s just my opinion. If you can’t even get guys like me and Dr. Galbraith fully on board then this thing is worse than a non-starter if it ever goes mainstream. I still believe it will sink MMT. But that’s just my opinion. You’ve allowed a very controversial and potentially misguided policy to become the base case of what is generally a very excellent view of the world. And unfortunately, it’s exposed many other weaknesses in the framework….

        • beowulf says

          I did find it pretty amusing that the Post story (Modern Monetary Theory, an unconventional take on economic strategy) spent 10 paragraphs on Galbraith before getting around to mentioning Bill Mitchell.

    • Cullen Roche says

      Yes, certainly an interesting development. :-)

  10. wh10 says

    You are a creative guy, beowulf.

    • beowulf says

      Thanks for the kind word! I forget to mention a 2009 California Nurses Association study Joe Firestone brought to my attention:
      “Establishing a national single-payer style healthcare reform system would provide a major stimulus for the U.S. economy by creating 2.6 million new jobs, and infusing $317 billion in new business and public revenues, with another $100 billion in wages into the U.S. economy… The number of jobs created by a single-payer system, expanding and upgrading Medicare to cover everyone, parallels almost exactly the total job loss in 2008.”