California Free Press

Off the Top of My Head

Which is better: A Universal Basic Income (UBI) or a Government Job Guarantee (JG)?

by John Lawrence, January 22, 2021

Modern Monetary Theory (MMT) favors a JG where the government is the employer of last resort employing people that the private economy cannot accommodate. Now Larry Summers, Secretary of Treasury for Clinton, is coming around to the MMT view. Especially now when there is so much work that needs to be done (infrastructure, renewable energy) and so many idle workers, a JG makes much sense. One might ask where will the money for this come from? Answer: from the same place it came from for Reagan's $100 billion tax cuts, Bush 1's $125 billion tax cuts, Bush 2's $1.2 trillion tax cuts and Trump's $1.5 trillion tax cuts, all of which benefited the rich a lot more than they benefited the poor. Surprisingly, MMT maintains that government spending whether in the form of tax cuts or government programs benefit the private sector economy whether or not they are "paid for" out of tax receipts. Since the US dollar is a sovereign currency, the Federal Reserve can just create the money by a few keystrokes on a computer and move it into the US Treasury's account at the Federal Reserve. This process does not depend on tax receipts or money generated from the sale of Treasury bonds.

Either way - tax cuts or government programs - benefits the private economy. It's just that tax cuts benefit the rich more and government programs benefit the poor more. The fact that both entail deficit spending is irrelevant because the Fed can never run out of money. Don't believe me? Read: The Deficit Myth by Stephanie Kelton. She explains it better. Larry Summers says:

"The impulse behind the latest “big” progressive idea of creating a federal job guarantee is entirely valid. Studies show that those without jobs are much more likely to be dissatisfied with their lives, to become addicted to alcohol or drugs and to be abusive within their families than even those working at low wages they find inadequate.

"On this point, the U.S. economy is falling short of its potential. The fraction of the adult population between ages 25 and 54 that is working or seeking work has declined over the past 20 years. Despite America’s vaunted labor-market flexibility, the chance that a 25- to 54-year-old man will be out of work is much greater than it is in France and not very different than what it is in Spain . And in sharp contrast to the rest of the world, the fraction of adult women working in the United States has been declining since 1999 .

"These trends are important causes of the increasingly bitter nature of U.S. politics and of resistance to technological change and overseas trade. President Trump received disproportionate support in parts of the country where joblessness increased most.

"If the United States could guarantee jobs in even a modestly efficient manner and in a way that significantly increased employment, it would be a very good thing. I want to be enthusiastic about job-guarantee proposals. But at a time when cynicism about government runs strong, it is important for progressives to avoid making promises that they cannot keep. We must rigorously examine the practicality of a job guarantee."

Here's how the Fed's money creation process works. Tax receipts are deposited into the US Treasury's account at the Fed. The US Congress authorizes either spending programs or tax cuts. The US government spends money. When the Treasury's account at the Fed gets down to zero (spending equals tax receipts), the Fed injects money into the Treasury's account. It is impossible for the US government to ever run out of money. Then Treasury bonds are sold by the Treasury Department which are bought by "primary dealers" (mainly big Wall Street banks) which are obligated to buy them. Some are sold to investors whether they be private individuals or governments like China and Japan.

When the point is reached that the banks don't have enough liquidity (cash - because they've been buying up Treasury bonds)), the Fed creates liquidity by buying up the Treasury bonds from the Wall Street banks in return for cash. Where did it get the money to do this? It created it by a few keystrokes on a computer. So by a roundabout process the Federal Reserve makes sure that the US government has all the money it needs as authorized by Congress regardless of any considerations for deficit spending or the total amount of the US national debt. Those are just accounting entries on the Fed's balance sheet. The Fed buys and sells Treasuries every day as a means of setting the interest rate or of providing liquidity as it did in the Great Recession of 2008. The Fed is the loaner of last resort to the US banking system, and it stands ready to create as much money as is necessary to keep it running smoothly. It also stands ready to provide the same guarantees for the US government, but the money has to be authorized first by Congress.

The takeaway is that Deficits Don't Matter. The private sector benefits from government deficit spending whether those deficits are created by tax breaks or government programs. Government spending programs primarily help the poor while tax cuts primarily help the rich. A government Job Guarantee in which the government becomes the employer of last resort is better than a Universal Basic Income because a job provides one with more dignity than a handout and there is much work to be done. Congress - not taxes - is the limitation to government spending. Republican obstructionism is the only thing that can limit economic benefits to the American people because, while the Fed can directly benefit the Big Banks without Congressional approval, it cannot benefit the American people without Congressional approval. Democrats want to benefit the American people, convert to renewable energy, provide jobs and income for the American people and prevent the earth from burning up due to climate change. Republicans want simply to hold on to political power by preventing Democrats from being successful.

Off the Top of My Head

Reparations and Universal Basic Income

by John Lawrence, July 14, 2020

Old Chinese proverb: Give someone a fish, and they will eat for a day. Teach them how to fish, and they will eat for the rest of their life. This is how I feel about cash payouts for both reparations and Universal Basic Incomes (UBI). I am for reparations in the sense of guaranteeing a living wage job for people who are able bodied. If not the social safety net should provide food, housing and medical care free of charge. In kind welfare is always better than cash payouts which can be squandered, gambled away, spent on drugs and alcohol or other foolish items. Besides billionaires and millionaires, black or white, don't need reparations or UBI.

I am for reparations in the sense of affirmative action for minorities and poor people in the sense of providing jobs either in the private sector or by the government as a last resort. I believe government should be the employer of last resort. In Sweden they have a national employment database which tracks every job opening in the whole country. They will do their best to hook you up with one of those jobs. This is not a bad idea. Then if no matches can be found, the government should be employer of last resort. There sure is a lot of work that needs to be done that can only be done by government like infrastructure repair and development, not only in this country but around the world.

China has exported its expertise and workers to the rest of the world to build infrastructure. This creates future trading opportunities for China, but it also guarantees that there will not be an unemployed class in China. China by virtue of its Belt and Road Initiative is a full employment society. The US could do the same. There is much to be done in terms of sanitation, health, education and job development to bring the rest of the world up to even a minimally acceptable standard of living. At the same time everyone, in both developed and developing societies needs to adopt a sustainable standard of living. The New American Dream should encompass not unlimited consumption but reasonable and sustainable consumption. Otherwise, the planet's resources will be rapidly, at least in geological terms, exhausted, and the result will be resource wars, poverty of the majority and over consumption of the few.

There is much work that needs to be done, but the private economy is not concerned with necessary work. It is only concerned with encouraging consumption that produces the most profits. It is not concerned with what is good for the environment. It is only concerned with exhausting resources if that is what produces the most profit in the shortest period of time. We need to be concerned with husbanding the earth's resources so that they are there for future generations. Renewable energy is a must instead of exhausting earth's fossil fuels. The same can be said for agriculture and other consumable items. They need to be harvested in a sustainable way. Forests need to be maintained instead of being clear cut. The environment needs to be protected. Food needs to be grown without being sprayed with chemicals. There are good practices which will sustain, maintain and renew earth's resources in such a way that everyone can be employed and everyone can benefit including future generations.

In the meantime there is much necessary and essential work to be done here at home and around the world in eliminating poverty, building housing along the Habitat for Humanity model, growing organic food, eliminating factory food operations, providing health care. China is building infrastructure, but it is not directly eliminating poverty around the world. That's a niche the US could fill. A good step would be converting the 800 military bases in various countries to hospitals, schools and affordable housing for local and indigenous people, defunding the military and reallocating resources to helping poor countries become developed in a sustainable way rather than exploiting their resources.

Off the Top of My Head

The Fed Will Have Given About a Trillion Dollars a Year to Rich People Since 2008 by the End of 2020

by John Lawrence

The Federal Reserve prints money and gives it to rich people. According to CNBC, it will have printed about $10 trillion by the end of 2020. This policy is called quantitative easing. It represents a Universal Basic Income (UBI) for rich people, but so far, despite Andrew Yang's proposal and the Second Great Depression we find ourselves in due to the coronavirus, there is no UBI in the works for the rest of us. In addition the Fed has lowered interest rates to zero for rich people, but credit card rates for poor people still top 30%. So the rich can borrow unlimited amounts of money to buy up all the foreclosures and failing businesses caused by the Second Great Depression.

The economy is not going to bounce back to where it was which was an economy in which consumerism was 70% of GDP. There just is no way when large scale venues and bars operating at 25% capacity will be the norm for the foreseeable future. There is also the possibility of multiple waves or spikes in the number of cases as states and cities try to open too much too soon. Plus people are just not going to feel comfortable going on cruises and going to professional sports venues until there is a vaccine which is not a foregone conclusion that one can even be developed. The economy as it existed pre pandemic was one in which we were entertaining ourselvesr to death. It was an economy built on entertainment, an economy predicated on selling each other lattes. Even though we can still be entertained at home via TV and via the internet, there is still a substantial enough loss of revenues and jobs that the economy will stumble along at half or three quarters speed unless a fundamental change is made in how the economy functions.

Government investment in the economy similar to FDR's New Deal is not only necessary to get the economy working again, it is essential to change an economy of entertainment and titillation to an economy where real and essential work will once again be the norm. We have a multi trillion dollar deficit in infrastructure in the US. This can be addressed by forgetting the defunct economy consisting of selling each other lattes and putting people to work doing real and essential jobs. This will also contribute to a revitalization of the American spirit. America was built by people doing real work whether that was in agriculture or manufacturing and not by people entertaining us to death.

The book, "Amusing Ourselves to Death: Public Discourse in the Age of Show Business," by Neil Postman made the argument very cogently. According to Wikipedia,

The essential premise of the book, which Postman extends to the rest of his argument(s), is that "form excludes the content", that is, a particular medium can only sustain a particular level of ideas. Thus rational argument, integral to print typography, is militated against by the medium of television for this reason. Owing to this shortcoming, politics and religion are diluted, and "news of the day" becomes a packaged commodity. Television de-emphasises the quality of information in favour of satisfying the far-reaching needs of entertainment, by which information is encumbered and to which it is subordinate.

Postman was on to something. Entertainment and not religion is the opium of the masses. When people like the Kardashians can make their living by just advocating consumerism and indolence, America has lost its work ethic. A UBI which just allows the consumer economy to reinvent itself would to a certain extent be a missed opportunity for government to create meaningful jobs that the private sector can't create to build a better, more meaningful society, a society built on helping people here and around the world. FDR was on to something. His New Deal can be emulated in a Green New Deal which at one and the same time can address the global warming crisis, build  a stronger and more resilient infrastructure and create meaningful jobs for every American.

A Universal Basic Income Is Essential and Will Work

Posted on April 19, 2020 by Ellen Brown

 

Web of Debt blog

A central bank-financed UBI can fill the debt gap, providing a vital safety net while preventing cyclical recessions.

According to an April 6 article on CNBC.com, Spain is slated to become the first country in Europe to introduce a universal basic income (UBI) on a long-term basis. Spain’s Minister for Economic Affairs has announced plans to roll out a UBI “as soon as possible,” with the goal of providing a nationwide basic wage that supports citizens “forever.” Guy Standing, a research professor at the University of London, told CNBC that there was no prospect of a global economic revival without a universal basic income. “It’s almost a no-brainer,” he said. “We are going to have some sort of basic income system sooner or later ….”

“Where will the government find the money?” is no longer a valid objection to providing an economic safety net for the people. The government can find the money in the same place it just found more than $5 trillion for Wall Street and Corporate America: the central bank can print it. In an April 9 post commenting on the $1.77 trillion handed to Wall Street under the CARES Act, Wolf Richter observed, “If the Fed had sent that $1.77 Trillion to the 130 million households in the US, each household would have received $13,600. But no, this was helicopter money exclusively for Wall Street and for asset holders.”

“Helicopter money” – money simply issued by the central bank and injected into the economy – could be used in many ways, including building infrastructure, capitalizing a national infrastructure and development bank, providing free state university tuition, or funding Medicare, social security, or a universal basic income. In the current crisis, in which a government-mandated shutdown has left households more vulnerable than at any time since the Great Depression, a UBI seems the most direct and efficient way to get money to everyone who needs it. But critics argue that it will just trigger inflation and collapse the dollar. As gold proponent Mike Maloney complained on an April 16 podcast:

Typing extra digits into computers does not make us wealthy. If this insane theory of printing money for almost everyone on a permanent basis takes hold, the value of the dollars in your purse or pocketbook will … just continue to erode …. I just want someone to explain to me how this is going to work.

Having done quite a bit of study on that, I thought I would take on the challenge. Here is how and why a central bank-financed UBI can work without eroding the dollar.

In a Debt-Based System, the Consumer Economy Is Chronically Short of Money

First, some basics of modern money. We do not have a fixed and stable money system. We have a credit system, in which money is created and destroyed by banks every day. Money is created as a deposit when the bank makes a loan and is extinguished when the loan is repaid, as explained in detail by the Bank of England here. When fewer loans are being created than are being repaid, the money supply shrinks, a phenomenon called “debt deflation.” Deflation then triggers recession and depression. The term “helicopter money” was coined to describe the cure for that much-feared syndrome. Economist Milton Friedman said it was easy to cure a deflation: just print money and rain it down from helicopters on the people.

Our money supply is in a chronic state of deflation, due to the way money comes into existence. Banks create the principal but not the interest needed to repay their loans, so more money is always owed back than was created in the original loans. Thus debt always grows faster than the money supply, as can be seen in this chart from WorkableEconomics.com:

When the debt burden grow so large that borrowers cannot take on more, they pay down old loans without taking out new ones and the money supply shrinks or deflates.

Critics of this “debt virus” theory say the gap between debt and the money available to repay can be filled through the “velocity of money.” Debts are repaid over time, and if the payments received collectively by the lenders are spent back into the economy, they are collectively available to the debtors to pay their next monthly balances. (See a fuller explanation here.) The flaw in this argument is that money created as a loan is extinguished on repayment and is not available to be spent back into the economy. Repayment zeros out the debit by which it was created, and the money just disappears.

Another problem with the “velocity of money” argument is that lenders don’t typically spend their profits back into the consumer economy. In fact, we have two economies – the consumer/producer economy where goods and services are produced and traded, and the financialized economy where money chases “yields” without producing new goods and services. The financialized economy is essentially a parasite on the real economy, and it now contains most of the money in the system. In an unwritten policy called the “Fed put”, the central bank routinely manipulates the money supply to prop up financial markets. That means corporate owners and investors can make more and faster money in the financialized economy than by investing in workers and equipment. Bankers, investors and other “savers” put their money in stocks and bonds, hide it in offshore tax havens, send it abroad, or just keep it in cash. At the end of 2018, US corporations were sitting on $1.7 trillion in cash, and 70% of $100 bills were held overseas.

Meanwhile the producer/consumer economy is left with insufficient investment and insufficient demand. According to a July 2017 paper from the Roosevelt Institute called “What Recovery? The Case for Continued Expansionary Policy at the Fed”:

GDP remains well below both the long-run trend and the level predicted by forecasters a decade ago. In 2016, real per capita GDP was 10% below the Congressional Budget Office’s (CBO) 2006 forecast, and shows no signs of returning to the predicted level.

The report showed that the most likely explanation for this lackluster growth was inadequate demand. Wages were stagnant; and before producers would produce, they needed customers knocking on their doors.

In ancient Mesopotamia, the gap between debt and the money available to repay it was corrected with periodic debt “jubilees” – forgiveness of loans that wiped the slate clean. But today the lenders are not kings and temples. They are private bankers who don’t engage in debt forgiveness because their mandate is to maximize shareholder profits, and because by doing so they would risk insolvency themselves. But there is another way to avoid the debt gap, and that is by filling it with regular injections of new debt-free money.

Off the Top of My Head

Explainer: Quantitative Easing for the People

by John Lawrence, April 19, 2020

Let's say a Wall Street bank has a mortgage that's been defaulted on. That qualifies as a "toxic asset" meaning the guy isn't paying his mortgage. The bank then pleads with the Federal Reserve to take it off its hands because the bank is running low on money that it thought would be coming in if the guy had made his monthly payments. So the Fed adds "liquidity" by saying to the bank, "Give me that mortgage. I will take it off your hands and pay you the full value of the amount borrowed, and then I will be the mortgage holder for the "toxic asset." So the bank is made whole, and the Fed is now the holder of the toxic mortgage. The Fed has "taken it on its balance sheet" and taken it off the balance sheet of the Wall Street bank. This is what happened during the Great Recession of 2008. It's what Quantitative Easing is all about. Theoretically, some day the Fed will sell this mortgage in the marketplace, but who wants to buy a mortgage that no one is paying either interest or principal on especially if the mortgagee is long gone. Instead the toxic asset disappears in what amounts to the Fed's black hole.

Although the Fed will do this for a bank especially for those banks that are too big too fail, they will not do this for Joe Blow. Joe blow, for instance, may have a toxic asset of $30,000 in credit card debt or $100,000 in student loan debt. Why couldn't Joe Blow approach the Federal Reserve and say please will you take this toxic asset off my hands? That would mean adding "liquidity" to Joe Blow's bank account by taking the credit card debt or student loan debt onto the Fed's balance sheet and paying off Joe's creditors. This would make the Fed Joe's creditor. Perhaps some day, when Joe is better off, the Fed might be able to move Joe's debt off its balance sheet and put it back on Joe's account. At least theoretically that could happen.

What is happening today with the coronavirus relief package and the stimulus checks is a variation on QE which amounts to QE for the people. Where is all the money coming from you say? Will it just be added to the deficit and the national debt, God forbid? Right now interest on the national debt is $479 billion. The more money the nation borrows, the more interest on the debt crowds out other items in the Federal budget like social security, Medicare and the military. But there is a neat little trick that is played between the Treasury department which issues the bonds that comprise national debt and the Federal reserve which has the aforementioned capacity to make debts disappear down a black hole.

Those toxic assets that the Fed took off of banks' balance sheets? Some of them were Treasury bonds. Now more than ever the Fed will be taking Treasury bonds off the big banks balance sheet for two reasons: 1) they can't be all sold in the open market because there are no buyers and 2) the US taxpayers will not have to pay interest on these bonds because although the government pays interest to the Fed on these bonds all profits the Fed makes are returned to the Treasury after deducting minimal expenses at the end of the year. So one hand really does wash the other or, if you prefer, the Federal government is playing a shill game with the Federal Reserve. The Federal Reserve monetizes the debt which is the same as saying that it disappears down a black hole on the Fed's balance sheet. The middleman in this whole operation is Wall Street since the Fed by law cannot buy Treasury bonds directly from the Treasury Department. So by monetizing the debt, the Fed is doing two things: 1) it is taking the pressure off of interest paid in the Federal budget and 2) it is guaranteeing that the Federal government will have whatever amount of money it needs to pay its bills without having to increase taxes.

Now this is good news for pandemic relief. Deficit hawks are muted because they know how this shill game is played, and it's no skin off their backs. The Fed essentially prints money (although it's doe with a couple of keystrokes on a computer) and bails out the whole economy. There is no inflation since unions which drove up the price of labor were essentially muted during the Reagan administration which saw most manufacturing jobs transferred to China. So then Fed can print away giving everyone a taste of a Universal Basic Income (UBI). (See Ellen Brown's accompanying article.) Since the cat is out of the bag there is no reason why this same game couldn't be played to relieve American consumers of student loan debt and credit card debt although you can get rid of credit card debt in bankruptcy. Not so for student loan debt.

Also money for infrastructure could be obtained this same way by having the Fed monetize the debt. This would create good union jobs according to Bernie Sanders. But this is exactly what the bond market and the Fed doesn't want - good union jobs - because that would create wage inflation. When wages go up prices go up, and the bond market would not be pleased because inflation eats up the yields on their bonds. What the Fed and the monied interest want is an economy in which workers are deeply indebted because that means a ton of interest going to the banks which are totally in cahoots with the privately owned Fed. If your a worker, the Fed is not really your friend. They are the banker's friend. The Fed was set up in the first place to bail out banks not American consumers. Now it is giving American consumers a taste of a bail out because the coronavirus presents a unique situation with everybody being out of work. When things get back to normal, the Fed will go back to just bailing out banks, and relieving pressure on the national debt.

Off the Top of My Head

Where is the Money Coming From for Stimulus and Relief?

by John Lawrence, April 14, 2020

Where are the deficit hawks like the Tea Party who insist on a balanced budget and less government spending? In recent weeks the Federal Reserve has coughed up $1.5 trillion and the Federal government has spit up $2.2 trillion, and there's more on the way. Just 12 years ago the Fed spent $4.5 trillion plus the $700 billion Troubled Asset Relief Program (TARP), the Federal government spent to purchase toxic assets from banks. Where is all this money coming from and do we the taxpayers have to pay it back? There's good news and bad news. The good news is that the Fed just created its money out of thin air with a few keystrokes on a computer. When the Fed takes Treasuries and other financial assets on its balance sheet, American taxpayers are not liable to pay back this money. It just disappears into a black hole. On the other hand the $3 trillion that was created on the "fiscal side" by the Congress of the US goes right on the deficit and the debt, and, theoretically, the American taxpayer is liable to pay this money back.

Practically, however, the American taxpayer will never have to pay back the national debt because, with Wall Street acting as the middle man, it will mostly just be transferred to the Fed's balance sheet. They do this in order to add "liquidity" to the economy. That's their rationale at least as cover for this shell game. In practical terms the Fed has taken on the role of not only bailing out the big Wall Street banks but also major "too big to fail" corporations like Boeing which has screwed up so much with its 737 MAX that it will probably never be profitable again.

So you might think that all this free money created by the Fed and even the Congress which went mainly to rich people in 2008 might also be spent on the hoi polloi for relief from the recession caused by the coronavirus. You might also think that Trump's huge tax cut should be reversed so that there is money there for the relief of American taxpayers. Never fear, you indeed can have it all just like the banks and hedge funds have had it all up to now. In its infinite wisdom the Fed and the superannuated Tea Party finally realize that the shell game played by the Fed can also be played to benefit them. Money created out of thin air by the Fed or by the Congress and Treasury Department in cahoots with the Fed can also benefit them, and without their having to pay more taxes.

The tax breaks perpetrated by the Republican party and most recently by Trump have made it necessary for the Fed just to create money out of thin air to keep the economy going. What the chairman of the Fed realizes is that American GDP is made up mostly of American consumer purchases. American consumerism represents 70% of the American economy so if average people don't have money to spend, American business is in deep shit. But no need to raise taxes on the rich to put it in the American consumer's hands so that they can go out and buy stuff. Instead the Fed just creates the money out of thin air and dispenses it to the people just as it had done previously just with the banks. Now the banks are flush, and the economy will go down the drain unless the American people have money to spend so they can keep up their 70% of GDP. George W Bush said, "Get down to Disney World in Florida. Take your families and enjoy life, the way we want it to be enjoyed." But, unfortunately, Disneyland is closed.

So why should we ever have to pay taxes again? Let the Fed just give everyone what amounts to a Universal Basic Income. Well, it's not quite as simple as that. The powers that be need to at least keep up the pretense that the government taxes and spends rather than that the Fed just prints whatever money is necessary to keep "liquidity" in the system which now includes the American consumer. That is just considered good fiduciary practice and fiscal prudence and will keep the American dollar more in good standing with the rest of the world than it would be otherwise. In the meantime, although people will lose their jobs and their businesses, the Fed will do its part to see that the American economy doesn't collapse altogether so it will keep the printing press going as long and as much as it takes.

Off the Top of My Head

Progressive Taxation and Remuneration: A Progressive Universal Basic Income

by John Lawrence, April 2, 2020

It's obvious that the Federal government has the power to get $1200 or any amount to every citizen. It's actually doing that as a result of COVD-19. So it could provide a Universal Basic Income if it wanted to. It also has the power to tax the rich and untax the poor. The idea is to progressively tax the rich and progressively remunerate the poor. If progressives controlled the Federal government, this is what would happen. Right now conservative Republicans control the Federal government so the opposite happens: money is transferred from poor to rich. The only reason the Federal government is providing everyone with $1200. is that they don't want the 70% consumer economy to totally collapse. Progressive taxation and progressive remuneration are possible. In fact they could balance each other out. As incomes and/or wealth increased, taxes would increase; as incomes and/or wealth decreased, remuneration would increase. This would not totally equalize incomes; it would just bring poor people up above the poverty line to a point at which each family had an income which would adequately provide the basic necessities of life. People would still have an incentive to do better.

It's well known that the Federal Reserve is willing to provide unlimited amounts of free money to the banking system and hedge funds. It provided trillions in the form of Quantitative Easing (QE) during the Great Recession of 2008. Even though this was supposed to be a one time shot in the arm, it didn't turn out tom be that. Even today the Fed is doing QE. It is still providing trillions to the banking system free of charge. It could also be doing that for the average person - QE for the people. This is effectively what the Federal government is doing now during the COVID-19 pandemic. The only difference is that the government is doing it from the "fiscal side," which means it comes out of the budget and is added to the deficit. Which means that the taxpayers are ultimately responsible. The national deficit was about one trillion dollars before the pandemic. The bill Congress passed that gave $1200 to every US citizen was a two trillion dollar bill. This bill alone added two trillion dollars to the deficit for a total of $3 trillion for fiscal year 2020. This means that the national debt will increase by at least 3 trillion in FY 2020 from 23 to 26 trillion dollars, and that's if there's not another phase to the bailout.

But why worry about the national debt? The government issues Treasury bills, and Wall Street buys them if there are no other buyers. Then the Fed bails out Wall Street by taking them onto its balance sheet in return for cash. Problem solved. The Fed just deep sixes the debt in a black hole never to be seen again. Meanwhile the consumer economy just keeps humming along. This is the lesson learned from the Great Recession. The Fed can just print money although most of the money printed in 2008 went to rich people and a lot of middle class people lost their homes. Since the Fed has the capacity to print money, the US will never run out of money. Now they are printing money and distributing it to average people, and this will keep the economy running indefinitely, albeit at a lower level, even during  the coronavirus pandemic.

Off the Top of My Head

One Positive Thing: Lower Pollution and Greenhouse Gases

by John Lawrence, March 24, 2020

Among all the negative things that are happening because of the coronavirus, there is at least one positive thing: air pollution and the emission of greenhouse gasses (GHGs) is way down. The pandemic is shutting down industrial activity and temporarily slashing air pollution levels around the world according to satellite imagery. There are fewer cars on the roads, fewer airplanes flying, fewer ships at sea. The downturn in economic activity means that less power is being consumed; therefore, less coal is being shoveled into power plants around the world. It's a veritable demonstration that it is possible to reduce pollution, reduce global warming and in other ways have a cleaner, healthier planet.

Paul Monks, professor of air pollution at the University of Leicester, predicted there will be important lessons to learn. “We are now, inadvertently, conducting the largest-scale experiment ever seen,” he said. “Are we looking at what we might see in the future if we can move to a low-carbon economy? Not to denigrate the loss of life, but this might give us some hope from something terrible. To see what can be achieved. It seems entirely probable that a reduction in air pollution will be beneficial to people in susceptible categories, for example some asthma sufferers,” he said. “It could reduce the spread of disease. A high level of air pollution exacerbates viral uptake because it inflames and lowers immunity.” Agriculture could also get a boost because pollution stunts plant growth, he added.

One of the largest drops in pollution levels could be seen over the city of Wuhan in central China which was put under a strict lockdown in late January. The city of 11 million people serves as a major transportation hub and is home to hundreds of factories supplying car parts and other hardware to global supply chains. According to NASA, nitrogen dioxide levels across eastern and central China have been 10-30% lower than normal.

This period, when the pandemic is not under control, is an opportunity to think differently about the economy. What are essential goods and services? Definitely we need food, clean water and sanitation services. We need garbage collection. People need enough money to supply essential needs for themselves. We could also ask what are inessential needs? Some of these are going to sporting events, going to movie theaters especially when we can watch movies at home, going to music events at arenas especially when we can listen to music at home, going on cruises. With the increase of capabilities for working from home, going into the office is not a necessity for a lot of workers. This can be increased with the result that there will be fewer cars on the road, less rush hour traffic and less GHG emissions. Getting cars off the road is a long term goal for a green economy. This would mean fewer car sales, but it would be better for the environment.

We should ask what are essential activities to keep people healthy and safe and think about doing away with other activities which don't increase the health and welfare of human beings. After dithering for years over the homeless situation, homeless people are being put up in motels and hotels post haste as a public health issue. This is a positive development and goes to show that the homeless situation could have been ameliorated years ago if we had the will to do it. The provision of money to average Americans will not hurt the economy. It will only help the economy. During the 2008 Great Recession trillions of dollars were given to the banks to bail them out. Much of this money went to bail out investors and hedge funds which had made huge bets on the economy. Many of these bets paid off, and their bets were covered in full by the Federal Reserve when the individual Wall Street banks couldn't cover them. Obviously, these rich people did not need that money to continue to cover their own 'essential needs' or the needs of their families. It was money given to gamblers while Joe six pack got zilch. We don't need an economy which caters to rich gamblers and showers them with money when they bet the economy will go down bringing suffering to millions.

At this point the Fed has the capability of bailing out the average American family especially if they have lost their jobs so they can continue to eat and pay rent. This support for average Americans will function also to stabilize the economy and maintain GDP but at a lower level. Perhaps the 70% level that consumption contributes to GDP cannot be maintained, but this might actually be a good thing by eliminating things that are not essential to the health and welfare of the population while driving air pollution and greenhouse gasses down. Neel Kashkari President of the Minneapolis branch of the Federal Reserve siad on 60 Minutes that the Fed needs to be "overly generous" to the average family, something they weren't when the economy tanked in 2008. The Fed is committed to not letting any banks or major US businesses go under. They could just as well make sure that no American families go under. Andrew Yang's idea of a Universal Basic Income (UBI) not only helps families survive. It will help the economy survive.

Off the Top of My Head

China Out Capitalizes Capitalist Nations

by John Lawrence, March 23, 2020

Who would have thunk it? China has taken capitalist financial methods to the next level with the result that it is progressing more rapidly in material abundance and a consumer society than the proto-capitalist nations of the world: the US and Europe. Sure, politically, they are an authoritarian nation. But that expedites their development since all institutions are on the same wavelength. In particular their central bank, the People's Bank of China (PBC) funds infrastructure projects all over the world. This keeps China a full employment society. They put all the Chinese people to work building infrastructure which expands the money supply in a very widespread way. Essentially the PBC provides loans for all these projects which means it creates the money just as US banks do when they create loans or the Federal Reserve does when it provides "liquidity" to the markets through quantitative easing (QE).

The Federal Reserve has actually expanded the range of market interventions it can do. It used to be that the Fed could only set interest rates. That was it. Now it can buy corporate bonds, state and local bonds and give money directly to corporations to keep them afloat. In fact it can act more like the PBC which interacts directly in the Chinese economy. The Fed can take debts directly onto its balance sheet where they may remain forever. This is exactly what it did in the 2008 financial crash. It provided cash directly to banks in return for mortgage backed securities and Treasury bonds thus providing liquidity to the banks so that they would not go under. Now the banks are well capitalized, and, since they know that the Fed stands ready to bail them out again, they have no worries. In fact the term "bail them out" is actually a misnomer at this point. It can be replaced with "provide them with cash" as necessary.

There was an interesting interview on 60 Minutes with Neel Kashkari, Obama's Assistant Secretary of the Treasury, who was in charge of the Troubled Assets Relief Program (TARP) during the Great Recession. He noted that TARP, which was supposed to help out actual people with their mortgages did not go far enough. They were too stingy with it, and not very many people got helped. He says that this prolonged the recession. Instead of being stingy as they were, they should have been "overly generous." That is the lesson he learned. So now in the coronavirus recession, his advice is that the Fed should be overly generous in providing relief to actual everyday people and not just to banks. At this time the banks are doing very well, thank you.

It is well known that money is created by the banks themselves when they create a loan which they do with a couple of keystrokes on a computer. Why is this possible? Because money has no relationship to gold or any other precious metal any more. That's why it's called "fiat money." So what bankers and economists are realizing (which has been the secret of China's success all along resulting in their bringing 800 million people out of poverty in 40 years) is that the US central bank, the Federal Reserve can do the exact same thing. It can create fiat money just like the banks do, like Wall Street does. The only concern is that money so created would lead to inflation, but, as Kashkari noted, there was no inflation even after the Fed created trillions of dollars in 2008 most of which went directly to bankers, hedge funds and rich individuals and not to the average American. Now Kashkari, who is President of the Minneapolis branch of the Federal Reserve, is saying that the Fed could provide liquidity to the American people and not just to the banks. How this will probably happen is by Congress passing a bill on the "fiscal side" as they say. Then they will sell more Treasury bonds to cover the increased deficit. Wall Street banks will buy them since other countries are decreasing their purchase of US debt, and then the Fed will provide liquidity (cash) to Wall Street taking the Treasury bonds onto its balance sheet where they will reside forever probably. This is why the national deficits and debt are no problem because the Fed can print money to cover them ad infinitum. It's as if the Fed provided money directly to the US economy, but, by law, they have to do so indirectly.

Ellen Brown understood this possibility long before Neel Kaskari had his "awakening."

America’s chief competitor in the trade war is obviously China, which subsidizes not just worker costs but the costs of its businesses. The government owns 80% of the banks, which make loans on favorable terms to domestic businesses, especially state-owned businesses. Typically, if the businesses cannot repay the loans, neither the banks nor the businesses are put into bankruptcy, since that would mean losing jobs and factories. The non-performing loans are just carried on the books or written off. No private creditors are hurt, since the creditor is the government, and the loans were created on the banks’ books in the first place (following standard banking practice globally).

Precisely! So no need to worry about another Great Recession or Depression. The US could effectively provide a Universal Basic Income (UBI) to its citizens indefinitely as Andrew Yang proposed.

As observed by Jeff Spross in a May 2018 Reuters article titled “China’s Banks Are Big. Too Big?”:

[B]ecause the Chinese government owns most of the banks, and it prints the currency, it can technically keep those banks alive and lending forever.…

It may sound weird to say that China’s banks will never collapse, no matter how absurd their lending positions get. But banking systems are just about the flow of money.

Spross quoted former bank CEO Richard Vague, chair of The Governor’s Woods Foundation, who explained, “China has committed itself to a high level of growth. And growth, very simply, is contingent on financing. Beijing will come in and fix the profitability, fix the capital, fix the bad debt, of the state-owned banks … by any number of means that you and I would not see happen in the United States.”

There is no reason why the US could not emulate China. From an economic point of view QE or a UBI would not be inflationary as long as the dollars provided to the system were either invested in new plants and equipment, infrastructure or consumption. What is needed now is about $10 trillion worth of Green Infrastructure, a Green New Deal funded indirectly by the Fed. This money can be provided to the American people and not only rich billionaires as was done in 2008 and as China is providing directly to its workers who are kept busy building infrastructure in the Belt and Road initiative. It would also ease economic inequality and not induce inflation as long as the money is widely distributed.

'Two $1 Trillion Coins': Rashida Tlaib Proposal Calls on US Treasury to Fund Coronavirus Recovery From US Mint

Published on Saturday, March 21, 2020

by Common Dreams

Tlaib's "Automatic BOOST Act" calls for a universal payout of $2,000 to everyone in the U.S. and $1,000 a month after that. 

by Eoin Higgins, staff writer

 

72 Comments

Rep. Rashida Tlaib (D-Mich.) arrives at a House Democratic Caucus meeting at the U.S. Capitol September 25, 2019. (Photo: Alex Wong/Getty Images)

Progressives on Saturday welcomed news that Rep. Rashida Tlaib is calling on the U.S. Treasury to exercise its power to issue platinum coins to fund the coronavirus recovery, calling the move an example of thinking outside the box and celebrating the universality of her proposal to give everyone in America cash payments. 

"I fully support the House Financial Services Committee Democrats #COVID19 economic response proposal," the Michigan Democrat tweeted Saturday. "I also want to encourage leadership to consider my truly universal relief proposal on behalf of #13thDistrictStrong."

I fully support the @FSCDems #COVID19 economic response proposal. I also want to encourage leadership to consider my truly universal relief proposal on behalf of #13thDistrictStrong.

— Congresswoman Rashida Tlaib (@RepRashida) March 21, 2020

"This is a really ambitious and creative plan from Rep. Tlaib taking advantage of ideas that financial experts began exploring during the debt crisis showdowns of the Obama years," tweeted HuffPost reporter Zach Carter.

We're 100% serious when we say: PUT @RASHIDATLAIB ON THE TRILLION DOLLAR COIN!!! https://t.co/3SpWXjXWef

— People for Bernie (@People4Bernie) March 21, 2020

The "Automatic BOOST to Communities Act" (pdf) would deliver a $2,000 pre-paid debit card to every American, with $1,000 being paid monthly after that until a year after the coronavirus crisis ends. Tlaib proposes to pay for the cost of the program by calling on the Treasury to use its authority under federal law to issue two trillion dollar platinum coins. The move would not add to the debt.  

"Tlaib wants to take advantage of an obscure Treasury authority to issue new currency through minting platinum coins, and then give that currency to people," said Carter. "No new debt, no weird Federal Reserve programs, just cash straight to folks."

The bill also uses a broad definition of "every person," including non-citizens, children and other dependents, those in territories and protectorates, and those without bank accounts. 

Under the bill, "an emergency corps will conduct a targeted outreach program to at-risk populations (homeless, elderly, etc) to ensure they receive cards, and at the same time perform a wellness check to assess whether they need additional assistance," said Modern Money Network president Rohan Grey, who helped write the bill.

"It's been a thrill to work on this proposal, but it is important to note that while emergency cash relief is critical, it is not sufficient on its own," Grey added. "We need far-reaching debt and expense relief, additional income and benefit protection and expansion, including direct payroll support, repurposing and public ownership of key industry, and direct worker support through a job guarantee that supports emergency and solidarity work, remote work, and begins planning for what the post-crisis recovery looks like."

---

Our work is licensed under a Creative Commons Attribution-Share Alike 3.0 License. Feel free to republish and share widely.

Off the Top of My Head

The Fed Keeps On Bailing Out Failing Businesses

by John Lawrence, March 17, 2020

The Fed announced recently that it would cut interest rates to zero. It has also promised to insert $1.5 trillion of "liquidity" into the markets. It's clear that the US is a society that runs on debt, and the biggest non profit producing industry that has gorged itself on humungus amounts of debt is fracking. But investors are getting weary. S&P Global Ratings this month cut credit ratings of six shale gas producers citing the outlook for natural gas prices. "We are particularly concerned about some of the issuers' ability to access the capital markets given investor aversion to the space," S&P said. But no worries. A Fed bailout is on the way. Zero percent interest. Free money. Whoopee. Frack away.

Just a few days ago, CNBC host Jim Cramer exclaimed, "I'm done with fossil fuel," after disappointing earnings reports from Dow Jones energy giants Chevron and Exxon Mobil. "We're in the death knell phase," he warned. The fracking industry is deathly afraid that, if Bernie Sanders is elected, the gravy train will be over. Fracking has provided a lot of jobs for a lot of people, but it is not profitable if the world oil price is less than $40 a barrel. Right now, thanks to Russia and Saudi Arabia, the price of oil is $30 a barrel. A Green New Deal would have to provide jobs for all those workers in the fracking industry who have been making pretty good money even though the industry as a whole is unprofitable.

The Fed is doing its job to create another tower of debt in the US. Alexandria Ocasio-Cortez has pointed out that the $1.5 trillion the Fed has injected into the system for "liquidity" could wipe out all the student loan debt in the US which now stands at $1.5 trillion. But the Fed insists that any stimulus to the economy which would actually help working people as opposed to investors has to come from the fiscal side meaning that Congress would have to appropriate the money. The Fed's job is to make sure that no major business player in the US economy goes bankrupt including the US government itself which is wallowing in debt to the tune of $1 trillion a year thanks to Trump's tax cuts for the rich similar to Ronald Reagan's tax cuts for the rich which quintupled the national debt. It took a Democrat, poor old Clinton, to reduce the deficit to zero.

The question naturally arises of why can't the Fed bail out American workers to the tune of $1000 a month as Andrew Yang has suggested especially now that the coronavirus has put a huge damper on consumption which is 70% of the economy. The Fed says, "Not my job. That's Congress' job." The Fed as it turns out is a wholly owned subsidiary of Wall Street. It is not a publicly owned entity. Congress will do nothing to bail out the American people because of the Republican controlled Senate led by Mitch McConnell. Even if Democrats were to attain a majority in the Senate, the filibuster would prevent them from doing anything. So Joe Biden, even if elected, will get nothing substantial done including building on Obamacare. The only reason Obamacare was even passed in the first place was that Democrats had a majority in both Houses and a filibusterproof majority in the Senate (60 votes) for a very short period of time (4 months) during which Obamacare was passed. Good luck Joe.

If the Fed, instead of being privately controlled by Wall Street, were to become a truly public institution controlled by Congress, then maybe it could bail out the general American public instead of failing businesses. According to the rules of capitalism, failing businesses at some point should go bankrupt. The Fed is essentially preventing that from happening thus fueling the stock market. However, the stock market senses that at this point the Fed has used up all its tools and can do nothing further. There is probably too much liquidity in the markets already. Providing more wouldn't do any good. Interest rates are already at zero. The Fed could go to negative interest rates, but that would screw the economy up even more. Perhaps we'll all have to settle for a good old recession after all. But one thing is for certain. About six months from now, Trump will pull out all the stops to get the economy moving again just before the election since he is basing his reelection on a robust economy. However, it all depends on whether or not the coronavirus is under control at that point. If it is, Trump will take credit.

Off the Top of My Head

Expanding Earned Income Tax Credit is Preferable to a Universal Basic Income

by John Lawrence, March 5, 2019

The EITC is a Federal program for low and moderate income earners which gives them a tax refund even if they don't pay any taxes. As such it is sort of a guaranteed income for those having little or no income. As a person's or family's income increases, the EITC gradually decreases until it disappears after a certain level of income is reached. As a family's income increases, the EITC effectively lowers the tax they would otherwise pay. In a random survey of 568 members of the American Economic Association in 2011, roughly 60% of economists agreed (31.7%) or agreed with provisos (30.8%) that the Earned Income Tax Credit program should be expanded.

The Universal Basic Income (UBI) would give a fixed amount of money every year to every American citizen. That's why I'm against it. The rich don't need an additional amount of income. The poor and moderate income group do. The EITC raises the income for low and moderate income families especially those with children. These are the people that need additional income the most. Some 40 million Americans are one paycheck away from the street. Just 39% of Americans say they have enough savings to cover a $1,000 emergency room visit or car repair, according to data released by the personal finance site Bankrate. What will retirement be like for them? Meanwhile, the three richest people in the US – Bill Gates, Jeff Bezos and Warren Buffett – own as much wealth as the bottom half of the US population, or 160 million people. Bezos' wealth accumulation vehicle, Amazon, will pay a whopping $0 in Federal taxes on $11.2 billion profits for 2018.

The beauty of the EITC is that it doesn't discourage people from working more and earning more. They still qualify for EITC albeit at a reduced level. Just as I believe that we should have Medicare for All with the rich paying more through increasing taxes on the rich, we should have an expanded EITC which I would call Social Security for All. There is no need for social security to be a universal program just as there is no need for a UBI. Rich people don't need an addition $1000 a month whether or not they paid into it. I am against universal programs that benefit the rich as much as they benefit the poor and middle income people.

Social security should be expanded for low and middle income retirees and eliminated for rich retirees. The EITC should be wrapped into social security. The whole program would benefit low and middle income people and families whether or not they were retired and whether or not they were supporting children. The income tax would just be adjusted to reflect these changes so that the rich and upper level income earners would pay more and lower income people would pay little or nothing or receive a monthly check from the government. This would constitute a negative tax for low and moderate income earners. Rather than a tax it would be a support. Low and moderate income earners would be supported by the government rather than taxed.

Robert Reich has some excellent ideas for expanding the EITC. See his article here. The gist of his ideas are the following:

1) Raise the maximum amount that very poor Americans receive from the Earned Income Tax Credit by several thousand dollars. 

2) Extend the Earned Income Tax Credit into the middle class, so even families earning the median family income – which was just about $76,000 in 2017 – will benefit. 

3) Expand the benefits of the Earned Income Tax Credit to two groups of Americans who are working hard, but not necessarily collecting paychecks: unpaid family caregivers of children and women.

4) Let people receive this money each month rather than in a lump-sum once a year at tax time.

These ideas combined with reducing the bloated military-complex budget approaching a trillion dollars a year will put the American People First rather than putting America First whatever that means. So the recipe is Medicare for all, Social Security for All and Tax the Rich,  Reduce the Military Budget to pay for it. That's simple, right?

Universal Basic Income Is Easier Than It Looks

by Ellen Brown, December 27, 2018, from truthdig

Calls for a Universal Basic Income (UBI) have been increasing, most recently as part of the “Green New Deal” introduced by Rep. Alexandria Ocasio-Cortez, D-N.Y., and supported in the last month by at least 40 members of Congress. A UBI is a monthly payment to all adults with no strings attached, similar to Social Security. Critics say the Green New Deal asks too much of the rich and upper-middle-class taxpayers who will have to pay for it, but taxing the rich is not what the resolution proposes. It says funding would primarily come from the federal government, “using a combination of the Federal Reserve, a new public bank or system of regional and specialized public banks,” among other vehicles.

The Federal Reserve alone could do the job. It could buy “Green” federal bonds with money created on its balance sheet, just as the Fed funded the purchase of $3.7 trillion in bonds in its “quantitative easing” program to save the banks. The Treasury could also do it. The Treasury has the constitutional power to issue coins in any denomination, even trillion dollar coins. What prevents legislators from pursuing those options is the fear of hyperinflation from excess “demand” (spendable income) driving prices up. But in fact the consumer economy is chronically short of spendable income, due to the way money enters the consumer economy. We actually need regular injections of money to avoid a “balance sheet recession” and allow for growth, and a UBI is one way to do it.

The pros and cons of a UBI are hotly debated and have been discussed elsewhere. The point here is to show that it could actually be funded year after year without driving up taxes or prices. New money is continually being added to the money supply, but it is added as debt created privately by banks. (How banks, rather than the government, create most of the money supply today is explained on the Bank of England website here.) A UBI would replace money-created-as-debt with debt-free money—a “debt jubilee” for consumers—while leaving the money supply for the most part unchanged; and to the extent that new money was added, it could help create the demand needed to fill the gap between actual and potential productivity.

The Debt Overhang Crippling Economies

The “bank money” composing most of the money in circulation is created only when someone borrows, and today businesses and consumers are burdened with debts that are higher than ever before. In 2018, credit card debt alone exceeded $1 trillion, student debt exceeded $1.5 trillion, auto loan debt exceeded $1.1 trillion, and non-financial corporate debt hit $5.7 trillion. When businesses and individuals pay down old loans rather than taking out new loans, the money supply shrinks, causing a “balance sheet recession.” In that situation, the central bank, rather than removing money from the economy (as the Fed is doing now), needs to add money to fill the gap between debt and the spendable income available to repay it.

Debt always grows faster than the money available to repay it. One problem is the interest, which is not created along with the principal, so more money is always owed back than was created in the original loan. Beyond that, some of the money created as debt is held off the consumer market by “savers” and investors who place it elsewhere, making it unavailable to companies selling their wares and the wage-earners they employ. The result is a debt bubble that continues to grow until it is not sustainable and the system collapses, in the familiar death spiral euphemistically called the “business cycle.” As economist Michael Hudson shows in his 2018 book, “… and Forgive Them Their Debts,” this inevitable debt overhang was corrected historically with periodic “debt jubilees”—debt forgiveness—something he argues we need to do again today.

For governments, a debt jubilee could be effected by allowing the central bank to buy government securities and hold them on its books. For individuals, one way to do it fairly across the board would be with a UBI.

Off the Top of My Head

The Problem with Universal Basic Income

by John Lawrence, June 5, 2018

Different people have proposed a Universal Basic Income (UBI) to help offset the economic divide and the lack of good paying jobs or the diminution of jobs at all due to automation or outsourcing. While I support augmenting the incomes of poor and middle class people, I have some qualms with the word "universal" as applied here. For one I don't think rich people need another supplement to their incomes. I don't even think they should get social security if they're above a certain income and wealth level.

But my main objection to a UBI is that people at the bottom of the economic spectrum, namely the homeless, would probably spend the money on drugs. In my opinion drugs are not something reprehensible but something that amounts to a universal human need only somewhat below the need for food in the hierarchy of human needs. So I don't see the need for drugs as something pejorative. I use the word "drugs" in the widest general sense including caffeine, nicotine, alcohol, prescription painkillers, cocaine, heroin, opioids etc.

Therefore, I'm in favor of "in kind" support for the homeless including housing, social services, etc. Once an individual or a  family is above a certain income level I would favor financial support, but only for poor and middle income. They are already paying either rent or a mortgage, and the income support will help them to keep their heads above water. At the lowest income levels a UBI would not be sufficient probably to allow one to rent an apartment. That's why I'm in favor of the government, whether Federal, regional or local building low income housing. Affordable housing has become somewhat of a misnomer. What's affordable for some may not be affordable for others.

Homeless people need basically free rent and social services to get them back on track and help finding a job. At the same time society cannot expect them to forego drugs completely just as it can not expect other members of society to forego their drugs of choice. By getting drug habits under control, though, people can go on to lead useful and functional lives. The more useful and functional a person's life is, the less will probably be their dependency on drugs of whatever kind.

The homeless would be better served by "in kind" support than a UBI.

THINKING BEYOND TRUMP: WHY WE NEED A FEDERAL JOBS GUARANTEE

 by Robert Reich

Tuesday, May 22, 2018

We must not forget the economic frustrations that helped fuel Trump’s election.  For too long, too many Americans have faced lousy jobs or no jobs. One answer: A guaranteed job at a living wage.

The Republican answer won’t work

Republicans continue to push for work requirements for recipients of Medicaid, food stamps, and public housing benefits.  But the real problem is there aren’t enough adequately-paying jobs to go around.

Even today, with a low official unemployment rate, millions who work part-time jobs want full-time work. Millions more are too discouraged to look for work, having endured the brutalities of job discrimination for far too long, or unable to move to where the jobs are.

And a large and growing number of jobs don’t pay enough to get people out of poverty.

A federal jobs guarantee would work

At the same time, a lot of work needs to be done – “greening” our nation’s infrastructure, caring for the elderly, teaching in our public schools, adequately staffing national parks, you name it.

So why shouldn’t the federal government create jobs and connect them directly to people who can’t otherwise find one, with decent, predictable hours and at a living wage?

An added plus: The availability of such jobs would give more bargaining power to many low-wage workers to get better hours and wages – because if they don’t get them from their employer, they’d have the option of a public job. In this way, a federal job guarantee would raise the floor for job quality nationwide.

And a job guarantee would act as a giant economic stabilizer during downturns, when the first to lose their jobs are usually the most economically marginalized.

We can afford it

Can we afford a job guarantee today? Yes. It’s estimated to cost around $670 billion in its first year – $30 billion less than the defense budget.

But that tab would quickly shrink. With more people working at better wages, Americans would have more purchasing power to buy goods and services. This would lead to more hiring by the private sector, and eventually, less need for the federal job guarantee.

More people working would also generate more tax revenue, partially offsetting the direct cost of the job guarantee.

Additional savings would come from fewer people needing public assistance. The Center for Labor Research and Education at Berkeley estimates that the federal government now spends over $150 billion a year because workers aren’t earning enough to get out of poverty. Doesn’t it make more sense to use this money to create guaranteed jobs at a living wage?

So, let’s think beyond Trump – to what Americans need. Few things are more important than a decent job. Full employment through a federal job guarantee makes sense – for workers, for the economy, for America.

Embracing 'the Sort of Bold Thinking We Need,' Sanders to Introduce Plan to Guarantee Every American a Job

Published on Monday, April 23, 2018 by Common Dreams

"Proponents trace the idea back to the New Deal Era, when President Franklin Delano Roosevelt pitched a 'Second Bill of Rights' to Congress in 1944. First on the list: the 'right to a useful and remunerative job.'"

by Jake Johnson, staff writer

 

 62 Comments

Sen. Bernie Sanders (I-Vt.) addresses a rally against the Republican tax plan outside the U.S. Capitol November 1, 2017 in Washington, D.C. (Photo: Chip Somodevilla/Getty Images)

With the goal of eliminating "working poverty and involuntary unemployment," driving up wages, and curtailing income inequality, Sen. Bernie Sanders (I-Vt.) is reportedly planning to introduce a federal jobs guarantee that would provide decent-paying employment to every American "who wants or needs" it.

"This is an opportunity for something transformative, beyond the tinkering we've been doing for the last 40 years, where all the productivity gains have gone to the elite of society." 
—Darrick Hamilton, The New School

 

First detailed by the Washington Post's Jeff Stein on Monday, Sanders' plan would "fund hundreds of projects throughout the United States aimed at addressing priorities such as infrastructure, caregiving, the environment, education, and other goals."

"Under the job guarantee, every American would be entitled to a job under one of these projects or receive job training to be able to do so, according to an early draft of the proposal," Stein notes. "Proponents trace the idea back to the New Deal Era, when President Franklin Delano Roosevelt pitched a 'Second Bill of Rights' to Congress in 1944. First on the list: the 'right to a useful and remunerative job.'"

In addition to providing workers with health benefits, Sanders' proposal would also require that Americans employed by the federal program be paid at least $15 an hour, which supporters say would lift the wages of all workers by boosting competition with the private sector.

"The plan's authors envision millions of Americans getting hired under the proposal," Stein notes.

Darrick Hamilton, an economist at the New School in New York, lauded Sanders' plan in an interview with the Washington Post, saying, "This is an opportunity for something transformative, beyond the tinkering we've been doing for the last 40 years, where all the productivity gains have gone to the elite of society."

Others embraced Sanders' proposal on social media:

This is the sort of bold thinking we need - disrupting the status quo back and forth in government between left and right and giving something for people to vote for. https://t.co/uvKWu2QcNQ

— John Iadarola (@johniadarola) April 23, 2018

News of Sanders' plan—which is still in the draft stage—comes as recent polling data has suggested that a federal jobs guarantee is immensely popular nationwide.

"We find that the job guarantee polls stunningly well in all 50 states," Sean McElwee, Colin McAuliffe, and Jon Green of Data for Progress noted in a recent article for The Nation. "Even in the state with the lowest modeled support, Utah, support is still 57 percent. Deep-red states like West Virginia (62 percent support), Indiana (61 percent), and Kansas (67 percent) all boast strong support for a job guarantee."

We modeled support for a job guarantee nationwide. It performs stunningly well. Democrats can run on a job guarantee everywhere. https://t.co/Uk3GR5Eu6Q pic.twitter.com/N4YPSY1Xpb

— abolish ice. send homan to the hague. (@SeanMcElwee) March 20, 2018

In addition to Sanders—who has also introduced legislation to guarantee healthcare to all Americans as a right—Sens. Cory Booker (D-N.J.) and Kirsten Gillibrand (D-N.Y.) have also expressed support for a federal jobs guarantee.

"This is not a radical idea," Hamilton concluded in an interview with the Post. "It was well-couched in the Democratic platform that existed during its heyday."

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License

Off the Top of My Head

Would Universal Basic Income Solve the Homeless Problem?

by John Lawrence, April 17, 2018

Many people are touting the concept of a Universal Basic Income or UBI as a way to keep people out of poverty. Martin Luther King Jr famously talked about a "guaranteed annual income." With the loss of jobs due to automation the idea is that there has to be some way to get cash into the hands of the people so they have the basics of live and so that the consumer economy can keep humming away. However, I don't think that a UBI would solve the basic problems in 21st century America for the following reasons.

First of all, the amount would have to be so small as to be insignificant or else it would dwarf the US annual budget. Second of all, the major problem which forces people into homelessness is ever escalating rent. There seems to be no reasonably priced housing for people at the low end. Here in San Diego there is no lack of expensive high rise condos in downtown, but low cost or low rent apartments. Forget it. They tore them down to build the condos. So it's basically a policy of housing for rich people taking priority. That's what the market has determined.

Thirdly, most of the homeless have a basic income already. I talked to one homeless lady who had an income of about $600. a month from GR - General Relief. A UBI would replace this income with a similar amount so what has been gained? The homeless have also demonstrated that there are more important things to spend money on than housing if you are at the very low end of the income scale. Like drugs, for instance. People will choose drugs and food, first; housing second. You have to go up the income scale before people will also choose to spend money on an apartment.

So I think that society providing "in kind" goods and services is the way to go. Provide housing free rather than giving people the money to buy housing. The same goes for food, medical care, transportation etc., all the basic needs. However, this solution undercuts the basic tenets of capitalist economics which maintains that nothing is free, and you can purchase what you need in the consumer economy or go without. Society providing housing free means that the tax base would have to be extended among the better off to provide for the needs of the worse off. It means that government would have to play a greater role in the economy instead of leaving everything up to the free enterprise system. There is no political will for this solution because the poor and homeless have no power withing the American political system. You only can move the system towards a solution if you have money to spend on lobbyists and campaign contributions. The poor don't.

So the de facto solution is to let the homeless continue to push their belongings around in shopping carts, sleep wherever they can, shoot up wherever they can, urinate and defecate wherever they can and cause a miserable counterpoint and underclass in America's finest cities. America has created a relatively new underclass of people who have developed their own culture, and doesn't seem to want to do anything about it.

In Brave New World, Huxley talks about the underclass known as Epsilons. The overlord class are the Alphas. Society has been divided into classes according to the firt five letters of the Greek alphabet:

"I suppose Epsilons don't really mind being Epsilons," she said aloud.

"Of course they don't. How can they? They don't know what it's like being anything else. We'd mind, of course. But then we've been differently conditioned. Besides, we start with a different heredity."

"I'm glad I'm not an Epsilon," said Lenina, with conviction.

"And if you were an Epsilon," said Henry, "your conditioning would have made you no less thankful that you weren't a Beta or an Alpha."

Huxley's dystopian vision has come true in 21st century America.

 

How to Fund a Universal Basic Income Without Increasing Taxes or Inflation

by Ellen Brown, Web of Debt Blog, October 3, 2017

The policy of guaranteeing every citizen a universal basic income is gaining support around the world, as automation increasingly makes jobs obsolete. But can it be funded without raising taxes or triggering hyperinflation? In a panel I was on at the NexusEarth cryptocurrency conference in Aspen September 21-23rd, most participants said no. This is my rebuttal.

In May 2017, a team of researchers at the University of Oxford published the results of a survey of the world’s best artificial intelligence experts, who predicted that there was a 50 percent chance of AI outperforming humans in all tasks within 45 years. All human jobs were expected to be automated in 120 years, with Asian respondents expecting these dates much sooner than North Americans. In theory, that means we could all retire and enjoy the promised age of universal leisure. But the immediate concern for most people is that they will be losing their jobs to machines.

That helps explain the recent interest in a universal basic income (UBI) – a sum of money distributed equally to everyone. A UBI has been proposed in Switzerland, trials are beginning in Finland, and there is a successful pilot ongoing in Brazil. The cities of Ontario in Canada, Oakland in California, and Utrecht in the Netherlands are planning trials; two local authorities in Scotland have announced such plans; and politicians across Europe, including UK Labour Party leader Jeremy Corbyn, have spoken in favor of the concept. Advocates in the US range from Robert Reich to Mark Zuckerberg, Martin Luther King, Thomas Paine, Charles Murray, Elon Musk, Dan Savage, Keith Ellison and Paul Samuelson.  A new economic study found that a UBI of $1000/month to all adults would add $2.5 trillion to the US economy in eight years.

Welfare can encourage laziness, because benefits go down as earned income goes up. But studies have shown that a UBI distributed equally regardless of income does not have that result. In 1968, President Richard Nixon initiated a successful trial showing that the money had little impact on the recipients’ working hours. People who did reduce the time they worked engaged in other socially valuable pursuits, and young people who were not working spent more time getting an education. Analysis of a similar Canadian trial found that employment rates among young adults did not change, high-school completion rates increased, and hospitalization rates dropped by 8.5 percent. Larger experiments in India have reached similar results.

Universal Basic Income Needed to Break 'Addiction to Economic Growth Killing Us'

Published on Friday, August 11, 2017

 

by Common Dreams

Anthropologist Jason Hickel presents basic income as part of strategy of "planned de-growth," which will "increase human well-being and happiness while reducing our economic footprint."

by Andrea Germanos, staff writer

 

31 Comments

"Curbing advertising, taxing carbon, a basic income, and a shorter work week" can be part of a strategy of "planned de-growth." (Photo: Generation Grundeinkommen/flickr/cc)

As some tech giants throw their weight behind the idea of a universal basic income, one anthropologist says it's a key component of a strategy to break the "addiction to economic growth [that] is killing us" and the planet.

Offering his views this week on BBC's "Viewsnight," Jason Hickel, an anthropologist at the London School of Economics and author of books including The Divide: A Brief Guide to Global Inequality and its Solutions, says "we can't have infinite growth on a finite planet."

That argument—which others have made as well—should be clear by evidence of the "climate change, deforestation, and rapid rates of extinction" taking hold, he says.

The primary blame, according to Hickel, rests with "over-consumption in rich countries," and addressing that entails "planned de-growth," which will put the reins on "our plunder of the earth."

Hickel stresses that he's not referring to austerity, as the goal of "de-growth" is to "increase human well-being and happiness while reducing our economic footprint."

A blueprint to achieve that goal, he says, includes "curbing advertising, taxing carbon, a basic income, and a shorter work week."

"We need an economic model that promotes human flourishing in harmony with the planet on which we depend," he says.

The idea of a universal basic income is gaining attention in the U.S. thanks to a recent resolution put forth in Hawaii, and Philip Alston, U.N. Special Rapporteur on extreme poverty and human rights, said earlier this summer that a basic income is "a bold and imaginative solution" amidst growing economic insecurity.  

Laura Williams of the U.K.-based advocacy group Global Justice Now recently asked, "Has the time for universal basic income come?"

According to Hickel, it may be more necessary than ever given the era of President Donald Trump. Hickel wrote in an-op ed at the Guardian this year that

a basic income might defeat the scarcity mindset that has seeped so deep into our culture, freeing us from the imperatives of competition and allowing us to be more open and generous people. If extended universally, across borders, it might help instill a sense of solidarity—that we're all in this together, and all have an equal right to the planet. It might ease the anxieties that gave us Brexit and Trump, and take the wind out of the fascist tendencies rising elsewhere in nativism that is spreading across much of the world.

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License