This Should Be the Progressive Economic Argument: It's the Employment Deficit, Stupid

Mind you, I'm not talking about 'framing', but simply the justification for the policy (I'll the propaganda for another time). I'm encouraged that Matthew Yglesias, who writes for the Center for American Progress, a progressive outfit, has stumbled into modern monetary theory (italics mine):

Does anyone seriously deny that there's something these people could be doing that would be more useful than being unemployed? Now ask yourself this. Suppose you had more money. Would you buy more goods and services? I would. And if more people were buying more goods and services, then wouldn't firms need to hire more people to provide those goods and services? I don't see any way around it. So why not put some money into people's hands so they can go out and buy more goods and services? Maybe you think we can't do that because "the money has to come from somewhere." But it doesn't. It's fiat currency, we can just make more. It's true that if we print more and more money that at some point we'll soak up all the idle people and it'll start to spark inflation. And that would be an excellent time to stop trying doing it. But what's stopping us today?

That's the argument we have to make: we have an employment deficit. And we know how to fix it.

But what I find really encouraging, and I hope it spreads, is the recognition that deficits aren't a problem per se when you have a fiat currency, any more than gold mining was a problem when we were on the gold standard--only now we can create as much gold as we need, when we need it.

Stupid deficit spending can be bad policy, just as stupid budget cutting can be. It's what we do while we're increasing or decreasing deficits that matters. So let's tackle that employment deficit. Because that's what matters right now.

More like this

Agreed, but with reservations.

It's all well and good putting money into consumer hands to create demand, BUT the jobs that are created to meet that demand must be created in the same market as the consumer subsidy.

This means that the importing of goods from countries with cheap/slave labour must be heavily discouraged. With domestic industries complaining about "over regulation", it seems fair to slap on import tariffs on goods from countries that do not have/enforce equivalent consumer, worker, and environmental protections. This should level the playing field for domestic manufacturers and discourage the shipping of jobs overseas*.

*Unfortunately, only for physical goods...service and "intellectual property creation" jobs don't seem amenable to this.

I am a left wing liberal but this sound pretty stupid to me. If you give money to the unemployed then they have no incentive to get work If you give to the employed, then at least some of them will just squirrel it away. I doubt it will work. I see areas where they overbuilt new construction (homes, commercial, businesses, etc.) and the unemployment rate is very high. Maybe a small test would be in order, although I have no clue how it could be set up and isolated.

By NewEnglandBob (not verified) on 03 Feb 2011 #permalink

Actually, most unemployed people during a recession or depression do want to become employed, and giving them enough money so that they don't end up on the streets doesn't prevent them from wanting to make more money by being employed. The only time the unemployed don't have an incentive to get work is if you pay them more than they can make by getting a job.

You don't just give money to the unemployed. The idea is that the government injects money into the economy either by directly hiring people (as in the WPA and CCC), or fairly directly, by paying for infrastructure projects, expanding arts funding, paying for all the delayed maintainance on the National Parks etc. What doesn't work is injecting money by giving to the rich, since they will sock it away, and you are just giving it away.

I'm a left wing liberal and NewEnglandBob seems pretty stupid to me. Seriously, you call yourself a left-wing liberal and you don't get behind unemployment insurance? You must also be one of those anti-choice liberals too, huh? The whole point of UI is to get people back to work, not keep them from working, and if you bothered to even learn the first basic thing about the system you would understand that. Have you ever collected UI? I did a few years ago, and I don't care what kind of life you're used to, it's a paltry sum. It's also time-limited, so choosing to not find a job while you have it is only increasing the chances of you having to find a job when you don't have any UI to fall back on. Contrary to what you may think, most people are actually smart enough to figure this out, and don't stay on UI on purpose. And I'm curious where you get the idea that these people are "squirreling" away their UI money. Um, aren't they getting that money so they can afford food and a roof over their head? How exactly do they squirrel this money away? As far as the areas where you see lots of new construction and also lots of unemployment, well, uh, I suppose there's a chance they could always be unrelated. Are you trying to illustrate a point here, or are you just typing things you see?

By Rob Monkey (not verified) on 03 Feb 2011 #permalink

What's stopping us today?

Partly ignorance.

Partly ideology. Hatred of anything Keynesian, just because.

Partly anti-unionism. Unemployment is a club to use against unions. "If only you would accept lower wages, reduced pensions, give up tenure, etc., etc., etc."


1. You did not even begin to comprehend what I wrote.

2. You made assumptions of what I think that are not even close to the truth.

3. You started out with an ad hominem, which shows what a disgusting piece failure you are.

4. Don't bother to respond because I stopped reading your cretinous spew and will never read anything you write in the future. I am sure you are quite alone in life with that hateful attitude and muddled thinking.

By NewEnglandBob (not verified) on 03 Feb 2011 #permalink

BWAHAHA! Oh noes, I've been resoundingly criticized! Good job actually defending yourself though. Oh wait, you must have forgotten to actually justify your bassackwards position. Incidentally, an ad hominem is not the same as an insult, you should try to learn the difference. I didn't say your arguments were invalid because you seemed pretty stupid, I said you seemed pretty stupid and then demonstrated why your arguments are invalid. Not an ad hominem, but good try. I'll somehow make it through the day without you reading my cretinous spew, but thanks for the concern about my social life. It's doing fine, btw, I just associate with people who can actually articulate an argument.

By Rob Monkey (not verified) on 03 Feb 2011 #permalink

Just because we have a fiat currency does not mean you can print money to get people jobs - money does not work that way. It has a value dependent on, among other things, how much is in circulation. When governments simply print more the value of money decreases, so the ability of purchasing power decreases - if you just print money to give to the unemployed, everyone would suddenly have less real value in their money and be less able to buy goods and services (since these would increase in price).
I'm not really sure what would happen if the gov't were to hire the unemployed and then pay for their wages by printing extra money. At this point, at least the unemployed would be adding to the system - trading real manhours for something. My guess is that the value of money would still decrease - what do you think?

Crazy: "I'm not really sure what would happen if the gov't were to hire the unemployed and then pay for their wages by printing extra money. At this point, at least the unemployed would be adding to the system - trading real manhours for something. My guess is that the value of money would still decrease - what do you think?"

Nope. Inflation depends upon more than just the amount of money. For instance, during the French and Indian War in America, the amount of money (fiat currency) in the colonies increased dramatically, then fell towards the end, with no discernible effect upon prices.

In the case of putting people to work, the economy has more goods and services as well as more money. Why should the prices of those goods and services increase?

Printing money for the unemployed is going to be about as successful as tax cuts for the rich--except it'll have to change hands an extra time or two first. Newly printed money will soon just congregate at the existing sinkholes in the economy and thus fix absolutely nothing. We need to remember that if we want something, we need to earn it or pay for it.

I'd love a WPA-type program, I'd survive the government raising taxes & tariffs, I'd appreciate tax incentives, but only for truly innovative, new technologies. We waste tones of tax money on oil/coal tax breaks, airline subsidies, and outsourcing military functions. If going to war is so worth it, people need to pay up or make some sacrifices. If the government is going to be a major customer of the health care industry, the government needs to take extra measures to prevent rampant waste in the health care industry or increase taxes to cover the costs.

Basically, we need to convince people with money that it's worth spending or lending their money to get the economy healthy.

By Always Curious (not verified) on 03 Feb 2011 #permalink

There is a common argument, similar to what Crazy stated, that "if we do that we'll end up with hyperinflation like in Weimar Germany." Min has stated a response to this argument which I think makes sense. But, I've never seen an explanation for Germany's hyperinflation that was more complex than "they printed a bunch of money to pay war reparations," so it's hard to think through this without a better understanding of why that happened. Following Min's argument, we could say that the difference is that printing money to hire people to make and do stuff is different than printing money to hand over to foreign governments, because the former increases the overall value of the pool of stuff that the money supply represents (if that's what money does, anyway).

Are there other considerations or arguments to be raised in response to "but what about hyperinflation?" Anybody got reading recommendations that would help with a better understanding on this point?

Direct hiring doesn't work anymore, because liberals have put so many obstacles into starting new projects.

In Boston, it took 20 years to build the Big Dig.

In New York, it's taking 13 years to rebuild the World Trade Center.

For the first 2 or 3 years, all that happens is that the EPA gets to review the environmental impact statements, there are endless public hearings and NIMBY lawsuits, and basically the only employment is for lawyers. After that, Davis-Bacon law makes it hard to hire non-union labor, even if they're long-term unemployed.

This ain't the 1930s anymore. FDR didn't have Davis-Bacon, EPA, OSHA, or NIMBY to contend with.

For a liberal, Obama at least knows how to face reality:

"With unemployment hovering near 10 percent nearly two years after President Obama signed his economic stimulus package, Mr. Obama is acknowledging that, despite his campaign promises, 'there's no such thing as shovel-ready projects.'

"The president gave that remark in an hour-long interview with the New York Times."

The problem isn't lack of currency, it's that the rich have it all locked up. Printing currency and giving it to bankers will exacerbate the problem. The only fix is cash giveaways to the bottom of the pyramid - people who will buy bread and milk. Give every parent $500 tax-free dollars per school-age child for "school expenses". It will kick-start the economy far better than any quantitative easing.

Oh heck - no it won't. The moment that money goes in a bank account, the banksters will seize it and apply it against the mortgage debt.