Randy Wray: Forget Taxes for Redistribution – What to do About Inequality

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Yves here. A lot of people argue for redistributive taxes, contending that they were very successful in the golden age of the American middle class, from the end of World War II through the Reagan era, in constraining the concentration of income and wealth at the top. However, that tax structure reflected a broad social consensus in favor of fostering prosperity for ordinary Americans, in no small measure to keep Communist impulses at bay.

In Yankee terms, Wray’s argument against using taxes to create a more egalitarian distribution of income is “You can’t get there from here”. He contends that redistribution for redistribution’s sake when we have great concentrations of wealth is a political loser and there are approaches for reaching those ends that would work and also have better odds of success.

By L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City, Research Director with the Center for Full Employment and Price Stability and Senior Research Scholar at The Levy Economics Institute. Originally posted at New Economic Perspectives

America has discovered inequality. But, as Jared Bernstein says, dealing with that will be expensive. He comes up with a nice wish list of policies to help the poor:

What will work here is a large, publicly funded infrastructure program to begin to repair our deteriorating public goods, with the jobs targeted at the working poor. All of the above — the expanded earned-income tax credit, universal preschool, job-creating infrastructure — will take more tax revenue, and much of that new revenue will need to come from those at the top of the wealth scale.

He wags his finger at those who think there’s some free lunch that would let us help the poor without soaking the rich. Nope, he claims. Uncle Sam needs those taxes. The rich will have to pay-up.

We all love Robin Hood. Wouldn’t it be great if Kevin Costner rode his trusty stead through Wall Street, relieving the rapacious thieves of a few trillion of their ill-gotten gains, to be redistributed throughout the lands to all the deserving poor?

You remember Robin Hood from your children’s storybooks. Of course, those were well-laundered so as not to cause little kiddies to question the authority of your friendly monarch, the “good” King Richard the Lionheart. Robin was supposed to be a dispossessed aristocrat who helped restore the good king to his rightful throne.

Actually Robin was a yeoman living in feudal times, fighting the attempt by the lords to enclose the commons. He robbed the rich to give to the poor so that they could pay the rent-collecting sheriffs. Today he’d steal from the Banksters and pay the overdue mortgages to forestall foreclosures.

Take from the rich and give to the poor. We love that meme.

This is the third in a series on taxes. Virtually every liberal I know wants to raise taxes on the rich to pay for programs to benefit the poor. They see these taxes as necessary to reduce income inequality.

Me? I’d rather send Robin Hood to Wall Street to aim his straight and true arrows at the Black Hearts of the conniving CEOs that President Obama refuses to investigate for their crimes. Robin Hood and his Merry Band would cart them off to the dungeons where they belong.

I think that real punishment would do one heck of a lot more to reduce income inequality than taxes will ever do. Put a thousand of Wall Street’s “finest” behind bars.

Put such fear into our Bankster Class that before they try to push some new fancy derivative deal on a pension fund, they’ll imagine what it would be like waking up in a cell with a tattooed roomie named Bubba.

Trying to punish them with taxes is a fool’s errand. They’ll just raise their compensation package and buy tax exemptions from Congress.

And, as we know, Uncle Sam doesn’t need any stinking taxes to “pay for” jobs and income and healthcare and decent retirements for the poor. If you have unemployed resources, free lunches abound! Just put the resources to work, and you’ve got Bernstein’s wish list filled.

Forget taxes for redistribution. It will not work. It is a bad meme—especially in America. Once you let the greedy rich get their riches, trying to take them away is harder than prying guns out of the “cold dead hands” of NRA members.

Every time a progressive proposes a tax hike on the rich to pay for welfare, the Koch brothers giggle in gleeful delight. It is the surest way to prevent any policies that would help the poor. Tying tax hikes to sensible policy plays right into the greedy hands of the Conservatives and Regressives.

Did you ever hear a One-Percenter ask for a tax hike to bail out Wall Street? Come on, they are not that stupid.

What I’ve long argued is that we need “predistribution”, not “redistribution”.

Now, I know many will question my progressive credentials after that argument. But none other than Rick Wolff has just penned the same argument. Rick’s progressive credentials are beyond question. He’s been beating the inequality drum since long before Pikkety brought it to the attention of our nation’s liberal thought leaders a few months ago.

Let me quote from his powerful piece, Better than Redistributing Income,

Discussions of Piketty’s work show considerable support for redistribution. Yet history has shown both its friends and foes that redistribution has at least three negative aspects. First, redistribution mechanisms rarely last. Once established, progressive tax rates, social securities, safety nets, minimum wages, welfare states, and all the other mechanisms of redistribution can be and usually are undermined. The last 40 years, and especially the aftermath of the global crisis in 2008, starkly illustrate the undoing of redistribution.

Second, redistribution is socially divisive, often extremely. When taxes not only pay (quid pro quo) for government services rendered, but also serve to redistribute income, opposition usually grows. Some taxpayers suspect they pay more and get less in public services than others. Deteriorating economic conditions that lessen capacities to pay taxes intensify resistance. That often turns into opposition to income redistribution in principle. Lower-income people get demonized as lazy welfare-dependents. Racist and anti-immigrant oppositions get drawn into the mix, and so on. Meanwhile, advocates of redistribution make ethical appeals and/or threaten that without income redistribution, deepening income inequalities endanger capitalism and the social status quo.

Third, redistribution is costly. Taxing, spending and regulating require large government bureaucracies funded by tax revenues. Opposition to taxes easily extends into opposition to bureaucracies like the IRS. Those bureaucracies usually intrude on privacy and quickly become objects of influence peddling, bribery, and abuse. Exposés of the latter provide further fuel to redistribution’s opponents.

Yep, let’s see: Unsustainable, divisive, and inefficient. Rick’s “predistribution” is worker’s co-ops. I’d add jobs for all.

Of course, I do not agree with Rick on this “taxes pay for government services” notion—except for the case of state and local taxes. But Rick is absolutely correct that when the public begins to see taxes as a payment for services rendered, then they start trying to calculate whether their own payment is “fair”.

That is a path to hell so far as government services are concerned. Since around 1970 that is exactly what has happened to state and local government taxes. In the economics literature it is called “devolution”—moving provision of most government services to the state and local government level, and forcing them to pay for it with taxes.

It encouraged the “donut holes” that devastated cities as the more affluent whites ran off to the suburbs.

With new infrastructure and higher income and wealth in the ‘burbs, relatively low tax rates could provide good services. The cities that were left behind had to raise tax rates on an ever-shrinking tax base to try to provide even basic services.

Witness Camden, NJ, which has essentially abandoned large swaths of its jurisdiction to “Escape from New York” dystopia.

This “stakeholder”, “taxes pay for the goodies I get” view has already reduced much of America to third world living standards. No wonder that Regressives pushed the devolution that wiped out cities.

Now the Progressives want to do the same at the Federal level.

The notion that you’ll significantly reduce inequality through taxes on the rich is a pipedream. How high would taxes have to be on the top few tenths of a percent? 50%? 75%? Forget it. They’d still be filthy rich and you’d be poor by comparison.

As I said in the first instalment, we don’t need taxes for revenue. We can justify taxes on the rich not for revenue purposes but as sin taxes. Look at it this way. Let’s raise sin taxes on the rich to reduce the sin of ill-gotten gains.

How high? 100%? Nay, 1000%. Take everything: all their income, all their wealth, the house, the car, the dog. Don’t let crime pay.

But you won’t collect the tax anyway. As the great Philadelphia Inquirer reporters Donald Barlett and James Steele (a UMKC alum, by the way) documented, rich folk don’t pay taxes because they purchase tax exemptions from Congress: See Barlett, Donald L.; Steele, James B. (1988-04-10) “A Rich Texas Widow Could Save $4 Million”. The Philadelphia Inquirer. p. A15.

Leona Helmsley was right: taxes are for little people.

Bill Clinton has a better idea. At a Pete Peterson “fiscal summit” he argued: you can’t do anything about the top 1% doing better “unless you want to start jailing people.”

One wonders what the One Percenter Peterson thought about that.

Why is it that Democratic Party Presidents can only tell the truth once they’ve left office? Yes, that is the same Bubba who auctioned off the Lincoln Bedroom to the highest bidder, filled every Administration position higher than toilet cleaner with a Gov’tSachs or CitiGov official, and found novel uses for his favorite cigar.

Do I “want to start jailing people”? Heck yes. If you want to reduce inequality, you’ve got to incarcerate the top 1%.

And give jobs to the rest.

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  1. Jim

    This has been an interesting debate among the left, and those who recognize the realities of inequality. What action is of top priority? Tax or spend? Piketty, of course, wants taxes first; this post, among others, makes a compelling argument, based on MMT & politics, to spend first.

    I’m afraid you’re going to have to do both. If you spend first, the rentiers will just take it all from those for whom the spending was supposed to help, through higher housing costs, higher food costs, higher health costs, wage theft, general skimming of government funds, etc, etc. You’re still going to have to punish them in the only way they understand, by hitting them in the pocket book. Anything else is, like Obamacare, ultimately useless. So, maybe things are beyond hope, after all.

    1. Ben Johannson

      There are two ways to reduce inequality: you can take it after payment (taxes) and we can see that didn’t work. Or we can reduce what is payed out beforehand, by shifting income from profit to wages.

      Democrats only allow discussion of the first method, taxation. A number of regular commenter’s on this blog will engage in histrionics should anyone stray from that Party line, telling us whose side they’re really on.

      1. Dan Kervick

        On the contrary. It did work. Part of what juiced the contemporary era of plutocracy run-rampant, grotesque income inequality, rent-farming as a way of life and the hollowing out of the middle class was the neoliberal assault on the system of high marginal rate income taxes, estate taxes and capital gains taxes that had helped keep a containment mechanism around all those hyper-capitalist energies. We had a much more equal society when all those confiscatory mechanisms were in place. We need to bring them back, while working to build a new system of global capital transparency and regulated capital flows.

        High tax rates of the right kind aren’t just part of a system of “redistribution”, but have a “predistributive” effect as well, since they are part of the structure of the system of incentives in firms and in society. If people can’t keep or bequest much of what they earn beyond a certain level, their incentive for seeking more diminishes. I thin k this is something for which we have actual historical evidence.

        1. Moneta

          The fact that taxes had to get cut to stimulate the economy was proof that the system had hit a wall. Nobody wanted to pay for the upcoming maintenance and renewal so they either moved to the burbs and or used debt to finance it.

          So now the US was pick itself up by its bootstraps and clean up what it has built or it can find a ways to continue developing other unleveraged areas to continue its ways of kicking the can down the road.

          And big global and national wealth discrepancies increase the opportunities to do this.

          1. Moneta

            So now the US was pick itself up by its bootstraps
            has to pick itself up by its bootstraps

          1. Conelrad

            A thought-provoking follow-up is _Unjust Deserts: How the Rich Are Taking Our Common Inheritance_, by Gar Alperovitz and Lew Daly:

            . . . “In a lively synthesis of modern economic, technological, and cultural research, [they] demonstrate that up to 90 percent (and perhaps more) of current economic output derives not from individual ingenuity, effort, or investment but from our collective inheritance of scientific and technological knowledge: an inheritance we all receive as a ‘free lunch.'”

        2. mellon

          Every year, WTO(GATS) , TISA, TPP, open up more and more of these kinds of markets. Irreversibly.

          So many of these ideas are off the table. Forever.

          Here: http://www.iatp.org/files/GATS_and_Public_Service_Systems.htm





  2. Nell

    Wow – Wray sounds like he is getting increasingly frustrated with an elite that is running amok. Good for him. We should all be more outraged. In the UK the number food parcels handed out has tripled in the last year and the number of malnutrition cases reported by hospitals has doubled. For the 7th richest nation on the planet, this is a damning indictment of the ruling elite. They are no longer fit for purpose and should be legally culled.

    1. mellon

      Don’t become evil to “fight evil”
      Calm down.

      Not far into the future, the whole concept of some people being worth more than others will become more and more difficult to justify because machines will just do almost everything better and cheaper and faster than almost everybody.

  3. dannyb2b

    Maybe the biggest inequality is in how monetary policy is conducted. When the central bank conducts expansionary monetary policy one of the main effects is the wealth effect. This wealth effect is imbalanced in that it expands the wealth of the wealthiest because asset ownership is concentrated with little or no increase in wealth of the poorer.

    When the fed conducts policy and creates this wealth effect it is giving free wealth in an unequal manner. A more equal wealth effect would be achieved by evenly expanding money to all people in pursuance of fed targets.

    1. MyLessThanPrimeBeef

      Thank you, danny2b.

      It is called ‘Money Creation via the Little People Spending it Into Existence.’

      As Dan Kervick wrote the other day, we ordinary people should all have an account at the Fed. THANK YOU, DAN!!!.

  4. paul

    While I agree with the piece,
    they’ll imagine what it would be like waking up in a cell with a tattooed roomie named Bubba.
    I always feel depressed when people trot out that phrase.

  5. Hayek's Heelbiter

    Not the dungeon, the oubliette! Robin Hood’s own punishment. Followed by a most contrite, “Oops! Did I forget someone was in there? Sorry.”

  6. Jose

    Wray is spot on on this one.

    In Europe, high “redistributive” tax rates, on wealth as well as income, haven’t prevented the continent from becoming ever more unequal in recent decades.

    What is needed is more deficit spending to attain full employment (with a central bank ready to finance the Treasury and end the government’s dependence on “markets”) as well as higher wages to raise living standards – and enable consumer spending to be based on income instead of debt.

    1. Moneta

      Governments don’t use accrual accounting and budgets have not accounted for the full cost of maintenance and replacement of assets. Actually, the entire global economy has been built and managed on growth not accounting for maintenance and replacement. And now, after 3-4 decades of wear and tear, we are facing expenses that we never accounted for in our systems.

      The US is forcing ever country into short-termism and living above its means…and this is even more devastating for socialist countries which can only work with long-term planning

      1. Moneta

        All this to say that the issue is NOT redistribution failure, it’s that the nations were, in aggregate, spending “above their means”.

        When your accounting is wrong, it will come back to bite you. For families, it can take up to decade, for a country, a few more.

    2. Dan Kervick

      But inequality in Europe is much less awful than inequality in the US. The ginormous salaries of top CEOs in the US dwarf those of their European peers. Gini coefficients are much lower.

      1. diptherio

        Gini coefficients are lower, but the looting continues apace, perhaps faster there than here. Higher tax rates have not, apparently, stopped the elites from their pillaging. We need jail time for white-collar crime and cooperative economics for the masses.

        Speaking of that:
        Scaling-Up the Cooperative Movement

        1. Dan Kervick

          Most of the pillaging is legal. You need to change the laws and also tax extravagant wealth away from the pillagers.

          1. HotFlash

            Sir! Although I agree in principle, I have to wonder, how will changing the laws happen? We-the-people have long been out of this loop, and the current Supreme Court puts us far out of even earshot.

    3. Andrew Watts

      Corporate taxes are much lower than income taxes in most European countries. There hasn’t been any attempts in recent memory to advocate a broad redistribution of wealth. Previous movements like the anti-globalization movement avoided anything resembling anti-capitalist rhetoric.

      Wealth inequality is a relative newcomer to the political scene.

      1. James Levy

        I think this looting is a prelude to ecological disaster and peak oil. Those in the know understand that societies are so sclerotic, elites so entrenched, and the refusal to look reality in the face so mainstream that nothing is going to be done until the shit hits the fan and it is too late. So elites are gobbling up assets and hording resources for the crackup. They are all imagining that they can retreat to their “ranches” in Colorado, Wyoming, Idaho and Montana and easily dominate their localities (which are filled with white right-wingers to begin with, so opposition to their dominance will be minimal).

  7. Vicky Else

    I don’t get the point of this. How will jailing a few bankers achieve the kind of change Wray is talking about? Or Piketty, for that matter? If they can change the tax laws, they can change the regulations and the criminal laws just as easily. In fact, they already have. I don’t have any better solutions to offer, but what really is the point of this debate? Criminal law should be enforced, anyway, and it won’t be. There should be some way of reducing obscene profits in the financial sector, which is a parasite. But that won’t happen. Let’s be honest. Let’s embrace our cynicism and look at all of our political and economic institutions with the jaded eye they deserve. There is no Robin Hood.

    1. Lambert Strether

      Pour encourager les autres. There aren’t 300,000,000 C-suite people in the US, and they’re tightly networked. Word about what doing time involves will circulate fast enough.

      1. Vicky Else

        So naturally, when Michael Milken went to jail, that created a generation of completely honest bankers. Or no, wait, it created a generation of really persuasive lobbyists, who changed the law. Sorry, but I am way more cynical than you are.

  8. Hugh

    Scratch an MMTer and you will find a neoliberal. This piece reads like a cartoon, and proves what I have often said that there is no more effective way to discredit an MMTer than to let them talk. I am not criticizing here the concept of fiat money. I use it in my own economic theorizing. I am criticizing MMT. Mosler is not about to overthrow the financial system that allowed him to make his millions. Wray likewise for all his heterodoxy came out of the Establishment and remains a part of it.

    Saying someone has impeccable progressive credentials is usually a tell that follows is going to be highly anti-progressive in nature. Gee, we can’t tax the rich because it would be too hard!!! Cry me a river. Did anyone else catch that this is the same argument that Breuer, Holder, and Obama have used for failing to go after the perpetrators of the biggest financial frauds and thefts in world history? Or that Wray on the one hand raises Wolff up as some kind of progressive icon and then proceeds later to make snide remarks about progressives? (For those of us, who have watched the implosion of MMT, first with concern and then with amusement, this schizophrenic reasoning is all too typical.)

    And taxing the rich would be divisive. Yes, the rich engineer the deaths of tens of thousands of us each year. They ruin the lives of tens of millions of us and they steal from all of us. But heavens, let us not do anything that might be considered divisive in response. Apparently, Wolff and Wray can not see from their ivory towers the one-sided class war that has been raging against us for 35 years. Or maybe they have no interest in seeing it. But seriously, how can any of us trust them or anything they say if they can’t see it?

    Oh and taxing the rich is not sustainable. Name me one thing in this universe, including the universe, that is sustainable. That is not an argument. It’s an excuse not to act.

    Then there is Wray’s incoherent solution. Taxing the 1% is not feasible, but putting them in jail is. How pray tell? And it’s not even the guys with the big bucks. Going after the CEOs and banksters is not going to affect at all the Waltons with as much wealth as the bottom 60 million Americans, or the Kochs, or Warren Buffett, or Bill Gates, or George Soros, or even Warren Mosler.

    I am sure the usual MMT mafia will come along to defend this idiocy, but Wray has set them a mighty difficult task. First, we must realize that no solution is practical until we throw out the Establishment/elites from the public and political institutions they now control and use against us. If you really listen to MMTers like Wray and Mosler, they want to keep the current system much as it is. As I said, they belong to it and it has enriched and nurtured them. In this, they commit a fundamental error because the current system is kleptocratic. It is rather like saying they want to keep a cancer rather than excising it. Indeed if you want unsustainable, that is precisely what the current system is.

    Rather than throwing up his hands, Wray might try using them to organize, to talk to us hoi polloi. Movements are not created overnight they take education and organization, and lots of it. And being an economist, he might consider how the taxation system, as one element, could be used to reduce wealth inequality. Here are my ideas on the subject open to change:

    1. A 50% tax rate for incomes above $300,000 going to 75% at $1 million.

    2. A marginal 95% tax rate for income above $1 million. All earnings here and abroad from whatever source to be declared and taxed as income. Any income undeclared to be confiscated and subject to additional financial and criminal penalties.

    3. A yearly 10% asset tax on household wealth above $20 million. Any wealth undeclared to be confiscated and subject to additional financial and criminal penalties.

    4. Current charitable foundations set up by families (think Gates, Buffet, etc.) to also be taxed at this same rate. Ban family foundations in the future.

    5. A 50% tax on gross corporate profits. All profits and assets here and abroad to be declared or subject to confiscation with additional financial and criminal penalties for both the corporations and their chief officers.

    6. 100% estate tax on all estates over $3.5 million per individual, $7 million for couples. Eliminate most trusts.

    7. No renunciation of citizenship accepted until all tax assessments are paid and any assets in excess of $3.5 million returned to the American people.

    8. Any bank which hides or abets in hiding assets from taxes shall lose its charter to do business in the US.

    It may not be perfect but it sure beats pearl clutching.

    1. Vicky Else

      You’re right, that is a sensible and fair proposal, which would no doubt work to roll back the filthy privilege accumulated by the oligarchy. Definitely beats pearl clutching. Only right now, today, it has no chance of working whatsoever, any more than Wray’s ridiculously weaker proposal (scaring the rich into submission? using the current legal and regulatory system? please). The only proposal that matters right now is how it will be possible to radically change the power structure so that your reforms have some chance of being implemented. I am utterly cynical. Macro solutions will not be implemented; rich people will go back to their union busting ways and hire militias to shoot anyone who tries to take their stuff away. I think our system is frankly doomed. The question should be, what should replace it?

      1. susan the other

        I think our system is done for too. We are now up against forces we barely imagined. Gross human inequality; mass extinctions; the so-far nonexistent pollution mitigation technology we will need for the rest of the century because of Fukushima and all our garbage and toxics. And this new reality, combined with a total global-capitalist dysfunction, combined with a global warming catastrophe and sea level rise, combined with a fatal paralysis because growth pollutes (because we are pillagers, not builders) really means that our quaint governments – worldwide – not just here, are going to have to get real. I’m pretty sure somebody somewhere has drawn up an impressive to-do list. And in that list of imperatives will be the elements of the system we need in order to go forward. Taxing is a good tool only if people are making money. And to have enough money to make money without exploiting the environment even more we are going to have to MMT like there is no tomorrow. Because there isn’t.

        1. James Levy

          Yes, we’re in the triage/lifeboat stage. The ship has been hit by at least two killer torpedoes–climate change and peak oil–and it is going down. Perhaps if they sent the damage control parties in with all available resources 20 years ago the ship might have been saved. But the damage control parties were otherwise detained and now, despite the list to port, most of us are just milling about unaware of the danger or waiting for a miracle. MMT and just about any other reform is today something between a palliative and a trick.

          We’ve got to save as many people as possible and as much of our science and civilization as we can. All other considerations are secondary.

          1. Vicky Else

            Susan and James, you said it all very well. It’s down to what small communities can do to survive the upheaval, because the macro systems are not just doomed, they’re destructive.

    2. Moneta

      I thought the jail bit quite revealing because progressives usually promote positive reinforcement before punishment.

      1. Jim Haygood

        As a true believer in the State, Randy is perforce a believer in the Gulag.

        The War on Drugs creates hundreds of thousands of jobs, comrade.

        If you see something, say something.

    3. Malmo

      Very well said, Hugh.

      I’m sure the MMT true believers here will defend Wray or any academic MMTer to the death no matter what they say. Wray could say two plus two is five and the usual suspect posters would come out swinging in defense of such nonsense. This much is for certain: if MMT ever becomes a political movement, you can bet a year’s salary that it will never so much as get off the ground. Too many of its proponents are rife with contradictions, internal and external, to move the masses to action. They might have the descriptive right, but the prescriptive comes out as cluttered cognitions lacking a cogent purpose –you know, a purpose which meaningfully narrows the wealth gap (and power gap) as surely confiscatory taxation (as opposed to the minute incrementalism of predistribution) would certainly accomplish.

      Money is power and corruption gravitates therein. Take away the money (even absent transfer payments to the less monied) and you then take away much of the power concentrating at the top and reclaim a semblance of democracy. Simple as that.

      1. Dan Kervick

        When I was first learning about MMT, one thing that was emphasized by Mosler was that the total level of taxation was a political choice determined by the desired size of government. You can have a $500 billion deficit with $3.5 trillion in taxes and $4 trillion in spending, or with $1.5 trillion in taxes and $2 trillion in spending or with $5.5 trillion in taxes and $6 trillion in spending. No particular position about the size of the total tax take is essential to the MMT framework.

        What I think would be essential is that if you have a large tax haul that is used to build surpluses, rather than combined with spending of the appropriate level yielding an appropriate-sized deficit, then you can do economic damage by suppressing demand and promoting stagnation and unemployment.

        Also, note that higher tax rates wouldn’t necessarily result in commensurately higher government revenues. High taxes on top incomes and large capital stocks would have some impact on the way the private sector distributes the wealth it is generating, and might reduce the size of the largest capital stocks and hold down capital income and labor income, thus limiting the tax haul that comes from those higher rates. And that would be fine.

        1. susan the other

          Economics is totally political. Those decisions need to be made. The most terrifying thought of all is that people, all of us, will fail to see what we are up against. It’s so horrendous and so far we are just farting around, kidding ourselves that capitalism as we came to love it will save the day. Capitalism is nothing but an old fashioned accounting system. What we desperately need are political decisions.

        2. zapster

          My contention, every since the Bush tax cuts, is that the function of taxes is not a redistribution function, but a routing function. Business investment fell off a cliff the year they kicked in–not because there were no businesses to invest in, but because they no longer needed business deductions to protect their dough. High tax rates with targeted exemptions insures that money flows into desirable projects.

          1. zapster

            That said, I agree with Randy on the whole. The job guarantee, with a healthy minimum wage will do more to take out the banking system than anything else, simply because people will get out of debt *to* the banking system. Why would you get loans if you have cash in your pocket? Dry up their income streams with a flood of interest-free government cash, and Wall Street shrinks back to its pre-Raygun levels.

    4. craazyboy

      Praise Be MMT!!!!

      It’s a floor wax! An underarm deodorant! And with daily use, may cure toenail fungus too!
      Many uses around the home. Pets like it too!

      1. craazyboy

        Fairy Tales

        “We all love Robin Hood. Wouldn’t it be great if Kevin Costner rode his trusty stead through Wall Street, relieving the rapacious thieves of a few trillion of their ill-gotten gains, to be redistributed throughout the lands to all the deserving poor?”

        We all love George W. Hood. Wouldn’t it be great if George W. Hood rode his trusty military through Iraq, relieving the rapacious thieves of a few trillion of their ill-gotten gains, to be redistributed throughout the lands to all the deserving poor?”

      2. craazyboy

        On the uncooperativeness of looters

        Earth to MMTer: “They got all the money – wadda we do now?”

        MMTer to Earth: “Willy Sutton won’t give it back. Bonnie and Clyde will tell us to go to hell too. But I’ve got a theory – if you gotta few years to read about it and $50 for a book where I flush out my ideas.”

      3. craazyboy

        On Fiat and the monetary unit

        News Flash!
        The “dollar” will be changed to “attaboys” to facilitate a return to wealth equality.

        News Flash Ten Years Later
        The 1% own 90% of all the Attaboys – indicating a high approval rate by our society of this class of people. Kudos to these hard workers! [canned applause]

    5. Banger

      Ok, Hugh but there isn’t even a remote possibility of any of that happening. You simply cannot pass that sort of tax reform unless you can hire Right Sector thugs to patrol Congress and beat up a few Congresspeople from time to time–even then I don’t see it. Do you have any idea of what the Hill is like these days? Even if there was a broad social movement I don’t see any way of making anything but some cosmetic changes. More than any time in the history of this country, in Washington, money talks and bullshit walks.

      I think Wray did not articulate his point well. What he should have said is that it is much more difficult to change the tax structure than to enforce laws already on the books. Then the issue is clear and, frankly, black and white. You either enforce laws or you don’t. Yes, we run into the same problems as with tax policy but the issues are crystal clear and more amenable to social movements and has the virtue of appealing to the right which is essential in this matter since they are more than willing to attack the current corrupt administration. The right currently does not attack Obama for the corruption in represents by institutiing a policy that if you are too big to fail you are too big do convict of a crime thereby creating a hereditary aristocracy–an official return of the ancien regime. The fact we have turned back the clock to pre-Revolutionary France is far more important than tax policy or even income inequality.

      1. Dan Kervick

        It happened before and it can happen again. Zeitgeists change. Social movements emerge where they were previously unsuspected.

        1. Moneta

          There needs to be a paradigm shift and if it does come, it will be one person at a time until it hits a tipping point.

          Just a few years ago, if you asked the average American his/her thought on income/wealth inequality, they would have been totally off. Now, the collective consciousness is still off but growing.

        2. Moneta

          IMO, word has to get out. The word has to spread about unfairness and inequality and ways to fix it until there is social cohesion.

          This MMT stuff seems to want to deal with equality but frankly is way too is too opaque, sending the message that you can’t talk about it unless you read all the 1000 pages and if you still disagree, then you are an idiot and don’t deserve to voice an opinion. This stuff just mixes everyone up and creates factions instead of uniting.

          That’s why I get the feeling that MMT is good for the elite.

          1. montanamaven

            You are right on. That’s why I like reading Hugh’s thoughts and others on this thread who agree with him. Good solutions need not be difficult to grasp, as you say, and you need not have to look at a gazillion pie charts and thousands of pages. Here in rural America, land owners are looked up to with great respect akin sometimes to worship and leaving your land to your kids is a measure of your worth. But that is also changing. We have some of the richest and most influential people in the world who have bought ranches here while small family ranches struggle. They fly in on private jets and hire and fire people on a whim. At the same time the kids are leaving in droves as they watch their parents’ bodies deteriorate because of hard physical work, and their own health compromised probably because of chemical fertilizers and weed spray.
            All I can do is ask questions about “inheritance”. I did that last night. A few years ago, I was looked at as typical commie pinko Democrat. Now, a get, at least, a quizzical look when I put it in the context of what “inheritance” has done in terms of the sons and daughters of billionaires buying up all the land.
            Interesting times.

            1. MyLessThanPrimeBeef

              Interesting, Moneta…MMT, for the elites, by the elites, of the elites.

            2. Moneta

              They are buying vineyards, ranches and farmland…

              Then they promise the electorate that they will cut the red tape by reducing the number of laws that impede business… what they omit to mention is that the rules they cut are those that protect the small players.

              1. MyLessThanPrimeBeef

                Until they perfect their grape-picking robots, they will ‘job guarantee’ the local laborers.

        3. spooz

          I’m shocked to see the ZH commentariat attacking the latest Martin Armstrong union bashing post. Things do change.

    6. diptherio

      Ok, just spit-balling here…

      How’s about we take Hugh’s tax proposal (to which I would add all incomes below the median get a 0% rate), MMT’s Job Guarantee, and everyone’s desire to see white-collar criminals in orange jumpsuits and make these our demands.

      How do we get our demands implemented? Anonymous.

      Have Anonymous threaten to reveal every dirty secret they can lay their hands on about any politician who doesn’t play ball. Put the fear of the Fawkes into them, so to speak.


      1. craazyboy

        The NSA could do that too, but we may have to wait for who knows how long before that happens, as well.

        On the other hand, if someone nice could infiltrate the place and get the top post, I expect we could have the beginnings of a functional democracy within a year a or so.

          1. Romancing the Loan

            All of Washington was nice-proofed sometime around 1963, if memory serves…

          2. craazyboy

            One can fanaticize. Such a nice leverage point, though. It would be like being super hero karate expert crime fighter – throwing opponents across the room with nary a move of the little pinky. Nay, not across your room – across their room, miles away, without even standing up from your control chair or spilling a drop of your wine.

            And if the Wall Street Paul Revere Society ever organized and set up Morse code lantern signals to communicate devious plans amongst each other and transfer money to Swiss bank accounts, soon you will have the sky buzzing with mini surveillance drones to pick up these communications as well.
            J. Edgar Hoover on tech steroids, but I’ll bet the FBI is scared too.

            Guess we don’t need to think about possibility. yikes.

            1. MyLessThanPrimeBeef

              There is real politics and there is realpolitik.

              So, too, we can distinguish between economics and realeconomik.

    7. Andrea

      — This piece reads like a cartoon (Hugh)

      Idk about the MMT mafia, but this… Extremely weak and sorta hubristic, personal wow-wow, college-level top post..

      Makes no sense, none at all.

      I’m surprised it was posted on NC. Every sentence could be refuted – basically a helium light piece, and there is no final point, no argument of any kind, it is just smoke and clumsy obfuscations.

      One maybe interesting quote from the article:

      What I’ve long argued is that we need “predistribution”, not “redistribution”.
      And so? what serious development?

    8. Gerard Pierce


      Your comments are fair enough in a very abstract way, but your “solutions” (as far as taxation) don’t really work. Your can’t tax income or gross profits or anything else until you define what it is you think you are taxing. In a lot of cases, capital gains especially, you don’t know what the profit is until the investment is sold. This is mostly common sense. If they tried to tax the supposed gain in the value of your house from year to year (in mid-bubble), you’d have to sell the house to pay the tax.

      There are any number of normally accepted accounting rules that can be used in a sensible way or which can be used to disguise income. If a corporation works at it hard enough the very word “income” becomes meaningless.

      Other than that, you have provided a perfect solution.

      1. Hugh

        We need to look to the larger effects. There will likely be initial attempts to game this program, and, if necessary, these can be addressed through further legislation and principle based regulation. Principle based regulation does not try to nail down every possibility of evasion. Rather it judges whether the regulatory principle is being adhered to. This can be a major deterrent, especially if backed by confiscatory penalties.

        However, as the wealth of the rich is drawn down, there will rapidly come a point of diminishing returns. They won’t have vast amounts of wealth to hide or that they can hide and it won’t be worth their while to risk both confiscatory penalties and jail time for it.

        First attempt to post this failed.

    9. Ben Johannson

      Scratch an MMTer and you will find a neoliberal

      Talk about Freudian thinking. The guy whose only remedies to inequality lay on the supply-side. Conservatives favor supply oriented tax cuts and you demand supply oriented tax hikes, none none of which will help the poor or middle classes which struggle financially. Not to mention reforms on the demand-side, which you explicitly reject even though they would help 250,000,000 people, ate the only method available with a chance of being enacted into law.

      Nope, Hugh says, “My perfect system or what we’ve got now!”, not giving a damp how many are being hurt by it. That’s the difference between you and Wray: he wants to help while you consider others disposable.

      It’s a consistent pattern: when Hugh makes an accusation, draw an arrow from it back to his pseudonym and discover he’s engaging in exactly what he attacks others for.

      1. MyLessThanPrimeBeef

        Demand Side: Money Creation via the Little People spending it into existence, instead of the government spending it into existence.

        Supply Side: Tax the wealth, and in order to do something for the 99.99%, AND NOT TO DRAIN MONEY FROM THE SYSTEM, give (OK, the part is demand as well) that money to the above mentioned 99.99%.

      2. washunate

        Ben, what do you propose? What wage level should JG workers be paid? What benefits package? What working conditions?

        That’s quite a claim to suggest that a quarter billion people will be helped by low-wage crap jobs, so you must advocate something a lot bigger than a low-wage crap job.

        1. MyLessThanPrimeBeef

          I think for MMTers and Ben, it works like this:

          1. Peasants work via ‘work guarantee’ in order to live (Hallelujah, we should be grateful).

          2. The elites, with connection to the best government money can buy, create money (for us peasants, thank Brahma, Shiva and Vishnu) via spending it into existence. People, please, please understand, my good fellow countrymen, this spending money into existence is HARD WORK!!! If you are not an aristocrat, sorry, a rich person, you don’t know how to do it.

        2. American Slave

          “washunate- That’s quite a claim to suggest that a quarter billion people will be helped by low-wage crap jobs, so you must advocate something a lot bigger than a low-wage crap job.”

          Correction- Guaranteed low-wage crap job ;)

        3. Ben Johannson

          Is $15 per hour low wage? That would be my starting point with a review of the effects every six months. Furthermore there is no reason the JG cannot serve as a national apprenticeship program for workers wishing to change professions or the young as they enter the workforce. They can be retrained in the skills they wish with a job waiting for them upon completion, until such time as they choose to rejoin the private sector. No more graduating into the unemployment line, no more people trapped in a job or sector or role they do not wish.

          The primary value of the JG, which by the way is only one facet of a demand-side effort, is not that it creates jobs but that it offers them. Tens of millions in the U.S. stay in their current work not because they want to but because they have no alternative. Fear of losing paid work forces them to accept bad treatment by employers in the form of stagnating wages, benefit cuts, limited flexibility and continual demands for more production.

          A guaranteed job offer gives workers the option to tell their bosses to shove it. To retain them an employer will by necessity have to offer compensation in excess of the JG and an attractive work environment. Rather than bosses disciplining the workforce, workers will impose discipline on the boss with the implicit threat of quitting should they be mistreated.

            1. Lambert Strether

              When I was a lot younger and worked in factories, I made $12.35 an hour in today’s dollars. Six years later, when I left the factories for a series of white collar jobs that didn’t pay that much better, I see I was making $11.43 (!). So, yes, it’s possible to live on $15 hour. I remember being alive, at least.

              That’s not to make a case that $15 is the right or equitable level. Just to say, yes, it’s possible to live on $15 an hour.

              1. washunate

                So what number do you propose?

                I sincerely hope staying alive is not the criteria by which you judge the fairness and sustainability of employee compensation.

                1. Lambert Strether

                  A bigger one, above subsistence, like most JG advocates. Of course, since the JG would be passed by legislation, presumably, this would ultimately be decided by democratic processes.

            2. Moneta

              In university, end of 80s and early 90s, I refused parental help and lived on 5-6K per year. It forced me to live on the other side of the tracks and a whole new world emerged before my young and naïve eyes.

              While graduating without debt, I experienced the anxiety of financial distress many times. However, I knew that if push came to shove, all I had to do was swallow my pride but the most important factor in keeping my sanity was that upon graduation, the ordeal would come to an end. There was light at the end of the tunnel. Those living around me didn’t even have that option.

              1. zapster

                What is sad is that many that are graduating now still aren’t finding that light…

          1. washunate

            So why not just make the minimum wage $15 an hour and provide universal health insurance and universal unemployment insurance?

            The problem with a $15/hr federal job is that it entrenches inequality. Why should some public employees make six figures while others barely make enough to live?

            1. Moneta

              And have a progressive tax specifically paying for it. There could be a committee represented by the 5 quintiles of the economy whose duty would be to determine what is covered and what not. And this would force the 1% to look for efficiencies and cut costs instead of making people sick.

        4. Joe Firestone (LetsGetitDone)

          For the JG I propose a living wage with the kinds of fringe benefits one finds at places like Accenture. I think a living wage in the lowest cost areas of rural America is probably around the $10.10; but in NYC it’s more like $24.00 per hour. So my proposal is cost-adjusted by region JG living wages. Working conditions should be comparable to those in other Federal jobs. Jobs would be defined by local Governments, non-profits, community groups, and JG participants themselves.

          1. American Slave

            IL give you guys credit for actually giving solid numbers and a decent description of a JG for starting out, but for a lot of people a basic income guarantee even if lower than the JG would work better especially when it comes time to search for a better paying job with the modern application being over 5 pages long and tests being 10+ pages long it can be quite time consuming to find a job. And a BIG would also possibly allow for having a one income household again rather than 2 income household job wise.

            And what if there’s a household that needs children or the elderly to be taken care of, people can always find work to do but I dont see the purpose in forcing them to take a job or be homeless.

            1. Lambert Strether

              I (personally) would like to combine an income guarantee with a jobs guarantee. I think housework should be remunerated, for example. I need to research detail to combine them; but others do think as I do.

              1. Malmo

                I like the combination idea of a BIG and JG too. Much more big tentish than either standing alone.

          2. washunate

            So like Ben, you propose entrenching inequality as well? Why should some public employees make six figures while others make $20K?

            But moreover, let’s say these really are pretty good jobs with working conditions comparable to other federal jobs. Are you prepared for tens of millions of people to apply? That’s the discussion that needs to happen – either JG is a small program of low-wage crap jobs, or it’s a program that will entice a huge percentage of the population to apply.

            1. Calgacus

              Washunate, as I have been replying to you for some time now, “either JG is a small program of low-wage crap jobs, or it’s a program that will entice a huge percentage of the population to apply” is a non-sequitur, based on no logic or argument at all. Your estimates are off by an order of magnitude from MMT estimates based on explicit simulations & models.

              The idea that a JG entrenches inequality is beyond preposterous, beyond weird. Whatever the JG wage is, it is more than $0. If A earns $50 and B earns $0, then inequality is more entrenched than if A earns $50 and B earns $20. More money is more money, not less money.

        5. Lambert Strether

          Typically, the “crap jobs at low wages” canard is trotted out. Then, when people like Ben and Joe take the time to give detailed answers, the canard is dropped, only to be repeated at the next opportunity. Rinse, repeat.

          Maybe we’ll get lucky and it won’t happen this time.

          1. washunate

            Lambert, that’s a rather bizarre claim. For several months, the people advocating Modern Money have been refusing to provide specifics, from a specific proposed federal budget to the specifics of how the JG would work.

            1. zapster

              Right now, we need *massive* spending on climate change mitigation, and we have a massive unemployed workforce. I don’t see any problem at all. We’ve implemented this before. Hell, our military does it all the time. This is not rocket science.

              1. washunate

                The military comment reveals the problem. We don’t lack resources to address problems.

                Rather, management isn’t interested in addressing problems.

                Expanding the DEA or the NSA or the TSA or whatever hasn’t made us better off. It has made us worse off.

          2. Malmo

            Most jobs are crap jobs, whether of the JG variety or not. Since most people work to live rather than living to work what I’d like to see is centering the discussion around a viable living wage rather than the not so inspiring idea of a boring, soul decaying job as a condition to live. If it’s work we must do to live (JG) then at least make the fruits of one’s labor worthwhile. A good start would be a wage well above the poverty level if work we must, and said wage could be indexed to COLA’s in particular geographic domains. That will catch up more than a few recalcitrant types who might otherwise loathe day laboring at shit wages in shit jobs. More carrot than stick.

          3. washunate

            P.S., Lambert, I realized I assumed you know some information about wages that perhaps is not common knowledge.

            Two of the government sources for basic compensation I use are the SSA and BLS. They show that, even if we ignore tens of millions of unemployed people and those under supervision, there are tens of millions of employed workers who have crappy, low-wage jobs. It is not a difference between for profit and not for profit workers. Rather, it is a difference among different kinds of jobs, a difference that is driven and reinforced by public policy. Lack of aggregate demand is not why the median wage earner of $27,500 can’t afford a decent house or why econ professors and doctors and judges make tens of thousands of dollars a year more than preschool and kindergarten teachers and home health aides and cooks.

            In case you are not familiar with these:


    10. NoFreeWill

      Great proposals Hugh. Real, actual fist on face violence will be required to implement them, however, something I see very rarely discussed on the pages of this blog. Perhaps types interested in economics and finance should start going to the gym, the dojo, and the firing range.

    11. Lambert Strether

      Ultimately, people support government programs because they deliver concrete material benefits; that’s why programs like single payer in Canada or the NHS in the UK or Social Security and Medicare in this country are hard to dislodge, no matter who hard the neo-liberals work to degrade them.

      And the reason that programs that deliver concrete material benefits are hard to dislodge is that they develop constituencies and institutions that support them. Show me the enduring constituency for (say) a steeply progressive tax code! There isn’t one! And why? No concrete material benefits for voters, that’s why. Suppose the Piketty media boomlet turns into a constituency of sorts. Show me why that constituency is going to end up more powerful than a program like Social Security, that sends you a check in the mail (even today), or a progam like Medicare, that gets you medical care (even today).

      That’s why the best course is the one that Wray advocates: Predistribution. I’m a big fan of “Show me the money.” “Show. Me. The. Money.” Predistribution shows me the money. Messing about with the tax code does not. I read about the tax fight in the papers, but at the end of the day I have to ask a question: “And I get?” What do I get out of Hugh’s plan? Read them, steps 1 through 8, and you’ll see the answer: Nothing. Zip. Zilch. Nada. A big fat zero. Actually, to be fair, I get the good feeling of having taken revenge on evil-doers (and evil they are!). But feelings don’t pay the grocery bills, and a check in the mail does. Hugh: Show me the money! (You can’t, because Federal taxes don’t fund spending anyhow). Hugh: And I get? The only answer is nothing. I read the proposal, and there’s nothing in it for me.

      * * *

      Now let’s give some consideration to the whys and wherefores of the Piketty boomlet, and the whole “income inequality” gambit. (Wrong phrase: It’s “income inequality”; it’s class warfare.

      1) We know that both parties and the political class as a whole are fully committed to a neo-liberal worldview that rejects the public delivery of public services for public purpose in favor of private delivery of public services for private purpose, through rent-seeking intermediaries (hence ObamaCare and not single payer, and on and on and on).

      2) We know that “income inequality” and the Piketty book are being pushed by the Democratic nomenklatura and the career “progressives,” subsets of the political class above.

      3) We know that the Democrats pushing “income inequality” and Piketty got Obama elected, a con artist who’s “the more effective evil”.

      4) We know that the Democratic 2008 campaign took a massive popular wave of desire for “hope and change” and dissipated it, completely and deliberately (through, for example, closing down OFA).

      5) We know that the Democrats, and especially the career “progressives,” are expert at devising roach motels for progressive energy.

      * * *

      So where does that leave us?

      Let’s assume that a distributive tax program like Hugh’s is the main focus of good-hearted and sincere leftists (like Hugh) in the 2014 and 2016 campaigns. (You didn’t the Piketty boomlet was happening for any other reason, right?) So let’s see how all this is likely to play out.

      Leaving aside lots and lots of spam for money and petitions from Democratic operatives paid by the click:

      1) Massive tax fight in Congress in the Fall of 2014 and the summer of 2015. (There will be lots and lots of stories of wretched excess by the filthy rich, and the Senate may even bestir itself to [gasp] hold hearings, something Democrats could never bring themselves to do when the filthy rich had committed well-documented crimes.)

      2) The uproar over “tax reform” will therefore turn out to be another “progressive” roach motel. Real outrage and real desire for reform will be fed with TV images of another DC circus.

      3) A “tax reform” bill may even, after tremendous labor, be passed into law.

      4) In due course, say in a decade or so, the law will be seen to have sadly come to nothing, exactly for the reasons Wray gives. (Even as he accuses Wray of pearl clutching, I notice that Hugh’s proposal doe not address how these taxes are to be collected.) This will happen more or less unnoticed, since as I pointed out above, there’s no constituency for such a law, since it does not deliver any concrete material benefits.

      5) Therefore, what the neo-liberals really fear and hate — public delivery of public services for public purpose — won’t even be “on the table” at all. No “infrastructure program to begin to repair our deteriorating public goods, with the jobs targeted at the working poor.” No “universal preschool.” Robin Hood will have sucked all the oxygen out of the room.

      6) Democratic nomenklatura to their owners: “Mission accomplished!”

      7) Democratic apparatchiks to each other: “BWA-HA-HA-HA-HA-HA-HA!!!! The ol’ ‘roach motel’ play worked again!” They never learn! [high fives, drinks all round]

      Obviously, we should tax the rich painfully, to prevent the formation of an aristocracy of inherited wealth, to prevent the rich from buying the government with their loose cash, and for the psychological and spiritual well-being of their children. We also need to see banksters in orange jumpsuits doing the perp walk. Even if the statute of limitations for their crimes in the housing bubble now applies, they have doubtless committed fresh crimes. But let’s not bet the farm of delivering concrete material benefits on solving “income inequality” with the tax code. Na ga happen. The American people really need the left to do better, and the Democrats are doing all in their power to prevent that. Sadly, reactions like Hugh’s proposal play into their hands.

      NOTE Hugh claims “scratch an MMTer, find a neo-liberal.” Sticks and stones, and all, but the one that really stings is “MMT Mafia.” Damn! If I’d been collecting my cut of the vig, I would have been able to afford all my domain renewals! Live and learn, I guess.

      1. MyLessThanPrimeBeef

        The more we tax the rich, the more the rich will ‘give value’ (‘more value’) to our currency.

      2. Hugh

        The question was whether wealth inequality could be reduced via the tax system. It can. It was not how to spend money or for what. So you are charging me for not answering a question that wasn’t asked.

        Taxation is one way of precluding destructive accumulations of wealth and power. Wray’s hissy fit on the subject is just plain embarrassing. Not of us pushed him into this. He jumped the shark all on his own. That your MMT emperor has no clothes is not my fault.

        As it is, we can not contest the power of the wealthy on the field of money because they have it all. We need to create and use people power against them, and when we have wrested power from them, using instruments like taxation to prevent such accumulations from happening again. It may not be forever but if we can buy even a few generations respite from them, it will be worth it. It will be up to future generations to safeguard what we have done or renew the struggle to accomplish it.

        As for MMT, it has failed. It failed because its proponents had a few good ideas but unfortunately one of them was not how to turn it into a viable theory. It failed because its theorists could not free themselves from the neoliberal environment they came out of. It failed because it proclaimed itself as reality based and then promptly reverted to the coarsest forms of ideological dogmatism. This post is an example. It is incredibly lame, even insulting. It places the defenders of MMT in a no-win position. You reject it, and MMT loses credibility, or you defend it and both you and MMT lose credibility. Again this is not a situation we have created for you. This is something you have done to yourselves. This is something you keep doing to yourselves. If you look at this thread, read the comments, you have lost the debate, even here where you were most likely to find a sympathetic audience. For a lot of us, it is time to move on.

        1. Nobody (the outcast)

          The question is whether or taxation for redistribution is effective or possible. You still don’t get that apparently and in all your diatribe you have not once substantially addressed the points made by Wolff. You deceptively changed it from “redistribution is socially divisive” to “taxing the rich is divisive.” Wray suggests taxing the rich 1000% — take it all, but in his opinion you won’t collect the tax because they are allowed to get a huge discount. He is obviously not against taxation, he is against the taxation for redistribution purposes simply because of the reason Wolff states. Lambert’s analogy that taxation has no constituency to support it is spot on, IMO. If you advocate higher taxes on the top end to pay for more for the bottom end and you will get nothing but giggles from the PTB and resistance from most of the rest. Also, Wray has long argued for taxing undesirable behavior (like rent-taking and looting) out of existence and taxing the rich because they are rich. You got a problem with that?

          I would be more open to your thoughts, but as you cannot make them without hyperbole, disdain, distortion and ill will, you simply come off as someone who is full of irrational hatred towards an economic theory and it’s scholars. You rarely give evidence for your diatribes, only opinion. You are fighting a battle against MMT (an almost completely non-influential economic theory) while war is raging in the real world. It is petty, undignified and harmful and makes me question whether or not you care about anything else. You write these monthly unemployment reports but dismiss economists that advocate for full employment. I don’t get it. Afraid of losing your work/hobby?

        2. lambert strether

          The fact that good hearted progressives like you think this is the question is proof that the career “progressive” roach motel is working.

          You also get the question wrong. The question Wray poses “predistribution” not “redistribution.” Your question is much narrower.

          Skipping the rest. My bogometer is already pinned.

      3. Dan Kervick

        Messing about with the tax code does not. I read about the tax fight in the papers, but at the end of the day I have to ask a question: “And I get?” What do I get out of Hugh’s plan?

        You get a massive expansion of government services, public investment and national development. Even MMT doesn’t argue that you can spend indefinitely by just printing bonds and selling them to rich people. (Although who really knows what they say. Since they don’t do math, it is very hard to extract any concrete budget proposal out of the theorizing ans slogans.) To have an activist government and monetary stability at the same time, you have to tax, a lot, even if you run healthy continuous deficits. If we soak the rich we can cut taxes on everybody else and expand education, health care and . So that’s one thing.

        Another thing you get is a chance for your kids to make something of themselves, instead of being stuck at one of the pre-assigned and immobile caste niches that are created whenever a society becomes grossly unequal, and the rungs of the social ladder are so far apart that nobody can climb from one to another.

        Another thing you get is the possibility of building a democracy, instead of just hoping that enough rich people can be persuaded by Warren Mosler to direct the government they own to bestow a reasonable amount of goodies on us through the magic of fiat money.

        Another thing you get is the satisfaction of knocking the bosses and landlords off their pedestals and pulling them down to where the rest of us live.

        More benevolently put, there is the possibility of building a society of fellow citizens joined by bonds of solidarity, democratic equality and solidarity in place of the repulsive and psychologically fragmented anti-society in which we now live.

        Another thing you get is a broadly prosperous economy that produces quality goods and services made for universal consumption rather than the two-tiered economy where the majority of human and real resources go into the production of luxury goods, luxury services, massages and blow jobs for the privileged while the rest of us eat shit and whore ourselves out for the shit we are allowed to eat.

        On the Piketty issue, what you say strikes me as self-defeating paranoia. It seems you have been gunning for an angle to go after Piketty ever since some Democrat, somewhere said something nice about Piketty. Yeah, it’s the great Piketty plot for Team Blue to dupe the masses and talk us out of our much more productive blogospheric temper tantrum. Of course, you’re the guy who thinks that if Michelle Obama tells you to eat your vegetables there must be something wrong with eating vegetables. Don’t worry, the big-shot liberals have already gotten cold feet about Piketty once they figured out where the arguments lead, and are now working up their second thoughts. (See Summers, Madrick, etc.)

        God I wish Barack Obama would make a speech declaring Piketty a public enemy so that Lambert Strether would jerk his knee in the other direction, read the book and become a Piketty fan.

        1. lambert strether

          No, you don’t, Dan, for two really obvious reasons:

          1) Federal taxes don’t fund spending. I “get” because of spending decisions, not revenue decisions.

          2) The revenue decisions have no obvious relation to spending on a policy level. DC could raise a squillion dollars and spend them on more aircraft carriers.

          NOTE Can’t you better than “knee jerk”? Really!

          Adding… I’m sorry that you feel I “seem” to be doing something; I’m not sure what to do to alleviate your concern. If you follow electoral politics at all closely, the origin of the Piketty bubble is obvious. Thomas Ferguson in Truthout:

          Now, in the current election year–I mean, I–here I don’t guess. I’ve seen some Democratic Party memoranda, or, rather, from their pollsters. Their own focus groups show that President Obama is not very popular with most Americans. You know, we can all debate whether that should be or shouldn’t be, but that’s a fact. What they also realize is that, you know, most people don’t think they’ve gotten very much out of the Obama seven years or six years, as it were, in office. But when they change the subject to things like inequality, they discover that then they get a much more favorable response compared to, say, Republicans. And, you know, it’s not hard, I think, to figure out why that’s the case. It’s because on the question of inequality, the Republican Party is essentially unpresentable. There is no way that you can sit there, preach it, tell everybody that the existing state of income distribution in the United States is in any sense optimal, or keep nattering on about job creation, etc. You know, it’s just–it’s a loser for Republicans, just like it was a loser in 2012.

          Now, you could see last fall the president begin to give speeches on income inequality and draw attention to the issue. That led immediately to a discussion with even some of the center-right groups in the Democratic Party squawking that that was really a bad idea. It was pretty interesting to watch how the Center for American Progress, which is a think tank very close to the White House, then jumped into that debate, and some of their spokespersons began saying, well, you know, income equality’s a legitimate issue. Then you could watch the next step. John Podesta, who’d founded the Center for American Progress, rolled back into the White House as a senior adviser to the president. Then you could watch a little later when Piketty came to the United States–I won’t swear it was his first talk, but it was his first big talk, down at one of the affiliates of the Center for American Progress.

          And then that sort of–what then happened is even more interesting. Now, to understand what then happened, you have to realize that the White House press corps pretty much congregates around the White House the way birds were said to do around St. Francis. And so if they see the White House doing something, they start to sort of pick it up, imitate it, and talk about.

          Okay. What was really interesting to me is that Piketty gets an interview with the secretary of the Treasury. Now, look, I will tell you I know lots of people who work on income inequality, and they do absolutely outstanding work. They haven’t been granted personal interviews with the Treasury secretary. That’s a political move. And very plainly it was intended to sort of signal to Democratic friendlies in the press corps, this is, you know, an issue we’d like to talk about. They have all done this. I mean, just about every correspondent I know that has any kind of residual tendency toward the Democrats is starting to think, act, and talk like they are interested in income inequality, though when I directly asked people if they’ve actually read Piketty’s book, the answer is usually no. I mean, I have a feeling this is one of those books that is going to be more–it’s going to be bought and it’s going to end on a coffee table in a large chunk of the beltway. But, you know, that’s life.

          Anyway, my point here is this is going to go on at least through the November elections. Then it will probably tail off a bit. It will–I can write this trajectory too right now (predictive social science is possible)–it will probably resume as the 2016 presidential elections come up again, and then it will stop abruptly pretty soon after that.

          I’m not the only one who’s trying to think through how Piketty is being used, eh? So this paragraph:

          [S]eems you have been gunning for an angle to go after Piketty ever since some Democrat, somewhere said something nice about Piketty. Yeah, it’s the great Piketty plot for Team Blue to dupe the masses and talk us out of our much more productive blogospheric temper tantrum.

          This paragraph… Well, other than I didn’t say Piketty, personally, was plotting anything… Today is my day to be nice. So I won’t say anything more.

          NOTE “Temper tantrum” is better than “knee jerk,” I find. Nothing like using infantilization as a tactic to make your interlocutor blow a gasket, eh?

          1. Dan Kervick

            1) Federal taxes don’t fund spending. I “get” because of spending decisions, not revenue decisions.

            We need to get over this. There is no bottomless MMT money well.

            The Federal government cannot simply create all the dollars it wants and spend them without blowing up the currency. It has to tax back at least a substantial portion of what it spends. Now some think it it is really important to jump up and down at this point and say, “That’s not funding! It’s … it’s … schmunding!” But it doesn’t matter. From a policy point of view it’s the same thing. You can and should convince people to run reasonable deficits. It would be nice to convince people at the same to make sure the Fed holds treasury rates down next to nothing so that Federal deficits aren’t a tool for the rich to rent-farm the public treasury. But the free-wheeling, what-me-worry fiat money mania that MMT has allowed itself to be turned into is for the birds. It’s both a political and economic dead-end.

            There was a time when its seemed like the MMTers were going to get serious about price theory, about defining the inflation constraint in more precise theoretical and mathematical terms, and about coming up with policy rules that turned an airy framework into something policy-makers could really grab hold on. But instead they decided to stop doing research, stop engaging with any other economists and focus everything on marketing and “framing” with slogans and pictures.

            And of course it matters what we spend public money on, and not just that we spend it. But if you want to expand the state, expand public education, build a national health care system and build an honest-to-goodness national pension program that works, you’re going to have to raise revenues. Every hour spent kneecapping the people who want to go this route by imagining that there is a magical free money path that lets us spend freely, lets all the billionaires keep their money, and that even a hedge fund manager could love, is an hour wasted an an agenda which will never succeed politically and is crackpot policy in any case.

            1. Lambert Strether

              I don’t recall claiming there was a bottomless money well; and I’m thoroughly familiar with the “ZOMG!!!! Zimbabwe!!!” argument and how to debunk it.

              You need to get over the concept that there cannot be good faith shorthand for MMT ideas, and that every MMT comment that’s ever written needs to include a careful and luxurious rubbing of every MMT shibboleth that ever was. If you want MMT to stay in academe, you are proceeding along exactly the right path. If you want MMT to propagate widely, its exposition needs to be simplified and popularized. (That is, in fact, why Mosler, Kelton, Wray found blogs helpful when they discovered them.) There’s only one way to simplify and popularize MMT, and that is to simplify and popularize it. That is what I am trying to do here because that’s one of the things that blogs and commentariats are good for. It’s not easy work.

              It is especially not easy right now in this exchange. Every minute that you spend making straw man claims and writing snark — and, as I’ve tried to hint, really poorly done, amateurish snark that can give no pleasure to you, or to others — not only detracts from your very real virtues as a careful expositor, it’s time wasted on generating material of actual use to the NC commenters, and it’s time wasted for me, personally, or, far worse, Yve, since I have to poke through the straw and unpack the snark. Michelle’s vegetables, forsooth.

              1. Moneta

                Maybe a pro-MMT mediator should keep pro-MMTers in line and a non-MMT mediator should keep the non-MMTers in line.

              2. washunate

                What? Lambert, it is starting to sound like you are just disturbed that people have differences of opinion? Maybe you’re feeling overworked but don’t know how to say that?


                I was just disagreeing with Dan on another post a couple days ago; doesn’t mean I think he’s out of line. That’s what is so great about what Yves has created here at NC – the chance to exchange with intelligent people who share different opinions. There’s plenty of groupthink and team cheerleading available across most of the online (and offline) world.

                When Wray was writing about this a decade and a half ago, JG was a minor jobs program paying minimum wage. It didn’t deal with the prison system or the drug war or the national security state or financial fraud or the massive waste in our educational system or the massive waste in our healthcare system or fossil fuel subsidies or agribusiness subsidies or intellectual property or media consolidation or whatever. The entire proposed expenses were in the range of tens of billions of dollars annually. That’s less than what we spend on the Global War On Terror. If aggregate demand was the problem, then the past decade and a half since then of massive net deficit spending should have made things better, not worse.

                We face a management crisis, not a monetary crisis. If you want to popularize MMT as a solution to our problems, then explain how it addresses the fundamental failure of leadership across our institutions.

                For that matter, explain who doesn’t agree with the basic, descriptive component of MMT that a sovereign can never go nominally bankrupt in its own currency. Everyone in DC knows that giving currency to your buddies helps your buddies while allowing you the Friendly Authoritarian to control the Lives of Others.

            2. skippy

              Dan can we agree the only actual restraint is resources [externalities included] for domestic needs, with an eye to giving to the future and not taking from it.

              That said everything else is just a counter party work out… yeah grievances out the wazoo… life or death competition will do that… history echos thingy.

              skippy… clocks a ticking…

        2. Lambert Strether

          I won’t call this a lie because I’m sure it’s just ignorance and time pressure; it happens to the best of us, including me. You write:

          Of course, you’re the guy who thinks that if Michelle Obama tells you to eat your vegetables there must be something wrong with eating vegetables.

          This is silly. I’m the guy who’s responsible for all the posts on permaculture at Naked Capitalism (that’s this blog); I’m all for vegetables. That’s why, on my own site, I wrote a post titled “Now, the White House garden is change I do believe in” in 2009, about Michelle Obama’s White House vegetable garden.

          Did somebody say “self-defeating”?

      4. Nathanael

        Redistributionary programs are actively dismantled by the obscenely rich. Worker-owned co-ops are dismantled even *more* often (see “demutualization”). This has actually happened repeatedly.

        You have to have a progressive tax code in order to maintain them.

        “Obviously, we should tax the rich painfully, to prevent the formation of an aristocracy of inherited wealth, to prevent the rich from buying the government with their loose cash, and for the psychological and spiritual well-being of their children. ”
        Yeah. Mr. Wray brainlessly claims that taxing the rich is impossible and then proceeds to propose much more difficult-to-maintain things such as worker-owned co-ops.

        Taxing the billionaires is *extremely popular*.

    12. MikeNY

      I just got around to reading this, Hugh. Your comments, along with those of Malmo, Moneta, Dan and others, made me feel like I’m not totally crazy. Thanks.

  9. 99%er

    You don’t have to come from the far left to see the wisdom in redistribution. I don’t give a hoot if the taxes from the wealthy go to the lower classes or not, as MMT claims it does not. What does surely happen is a signicant narrowing of the gap between conspicuous wealth accumulators and the rest of us peons, and in a much greater fashion than predistribution allows. Thus the power dynamic shifts back towards the masses at the expense of the rich, even absent direct transfer payments from rich to poor vis a vis taxation from the MMT perspective.

    The idea that redistribution– MMT descriptive redistribution notwithstanding — makes little difference to the masses is nonsense. It wasn’t a problem with the vast majority of the electorate for 40 odd years post war, and I’d bet the farm the political landscape subsequent to the financial meltdown is ripe for a return to the status quo ante of confiscatory tax rates that narrow the wealth AND POWER gaps to 1950’s levels. In other words Wray is simply wrong on the politics here. Very wrong. In short redistribution is about power shaving at the top of the wealth pyramid. Absent it, predistribution alone won’t do a damn thing to bludgeon corruption at the top. Money talks, and less contraction of wealth whispers. Bottom line is that nothing changes unless the wealth gap is narrowed. Period.

    1. Lambert Strether

      Hmm. Wray’s wrong on the politics? You really think it was a change in the tax rate that sold the electorate on the New Deal, as opposed to concrete material benefits in the form of Social Security? I don’t think so.

      1. washunate

        The Social Security Act is a social insurance program, not a job guarantee program.


        Indeed, you are making the case for why Wray, Mosler, Mitchell, and others are on the wrong track. What we should do is strengthen the core insurance products of the Social Security Act – retirement, disability, unemployment, and medical. Unemployment insurance in particular is in shambles in our present system, and the healthcare system is much more wasteful than every other country on the planet.

        The government should hire people to do productive work. Macroeconomic buffer stocks should have nothing to do with employment policy.

        And yes, taxing the rich is incredibly popular. Who Should Pay was one of the more successful thorny questions when the Democratic Party was busy justifying bailing out the criminals, and Obama’s specific support of the Bush tax cuts was a key moment in revealing his true colors to a lot of Democrats.

        1. Lambert Strether

          Both programs provide concrete material benefits. What’s your point? On the popularity of tax cuts, no doubt they poll well; the post gives the scenario for how a focus on tax cuts will play out, regardless of polling.

      2. Nathanael

        Progressive taxation was actually an honest-to-god political movement in the late 19th century. Social security never had anywhere near the same level of support.

        1. Lambert Strether

          Which goes to show that you can do concrete material benefits plus taxation, as Wray allows for with sin taxes. However, the concrete material benefits are a have-to-have, and the “tax fight” is, at best, a nice-to-have, and at worst a roach motel, as I believe it will be.

        2. Calgacus

          Right. The Revenue Tax Act of 1935 under FDR is a good thing to bring up. But look a little closer.

          Soaking the rich is not what works. It is not what worked for the New Deal & during the postwar era. Giving any minimally sane, working tax system that gives value to the money, as the USA has had for centuries, more progressive taxation is a nice addition, icing on the cake. But it ain’t “what works.” It ain’t the essential thing.

          Because – who was it who really raised taxes on the rich? Not FDR. Top rates were raised from 63% to 75% in 1935. A 12% hike. The Revenue Act of 1932 under Hoover raised top rates from 25% to 63%. A 38% hike. Didn’t improve anything. What improved things was FDR’s understanding of & resolve against national and international banksterism & his willingness to deficit spend for employment.

  10. Moneta

    That is a path to hell so far as government services are concerned. Since around 1970 that is exactly what has happened to state and local government taxes. In the economics literature it is called “devolution”—moving provision of most government services to the state and local government level, and forcing them to pay for it with taxes.

    It encouraged the “donut holes” that devastated cities as the more affluent whites ran off to the suburbs.
    The problem is a far west, hit and run mentality and the cult of impermanence in the US. And subsidizing the real estate and automotive sectors acted as a catalyst.

    Planned obsolescence means that nothing is managed to last. Taxes never include the cost of proper maintenance and replacement. So when assets reach their end of life and budgets need to be increased, the rich leave and move to another region which can be levered up for a few decades. It’s all based on using debt. The same thing is happening on a global basis. Find the next area to exploit for a few decades, then leave it once you have squeezed the lemon dry.

    The money system adapts to serve a nation’s values and goals. Not the other way around. If the US wants to fix itself, it will have to question its focus on materialism, impermanence and hit and run mentality.

    1. Vicky Else

      I agree with this. Moral systems and social ethics are the underlying failure, and must be the solution. Any solution at all that emerges will spring from smaller, more local movements which turn their back on the failures of the wealthy and powerful and establish fairer communities. But there will be terrible wreckage left behind the collapse of this dying system.

      1. susan the other

        Wray is just saying here that the Federal Gov should have run deficits but instead it impoverished the state governments as if they were simply private entities. It was totally derelict of the Federal Government to act like it had no economic responsibility to the country, whether state or citizen. The Federal Gov. was accomplice numero uno to the oligarchs, along with the banksters.

        1. F. Beard

          Yep. Instead, Federal backing allowed the banks to create almost all new purchasing power (Not that Wray opposes that!).

        2. Moneta

          Here is Canada, we do not have the reserve currency. In the 90s, our federal debt was bad which led to a free fall in our Cdn dollar. This forced our federal government to off-load expenses onto provinces which then off-loaded onto cities. Because of the suburbanization, the provinces forced mergers between municipalities to create mega metro cities. It was a huge muni money grab which was sold to the electorate as a gain through economies of scale. We did not want it but we still got it And the protest quieted down thanks to real estate gains which made Canadians quite happy.

          But we have seen nothing yet since our real estate is still in the stratosphere thanks to home equity and debt which have made muni tax increases affordable. The tsunami is coming while the sky is still blue.

          All this to say that he is assuming that the US dollar would have remained the reserve currency under a regime of huge federal deficits.

          1. Nathanael

            It would have. The UK pound remained the reserve currency for well over a hundred years under regimes of monumentally large national government deficits. Actually, it *became* the reserve currency *during* a period of massive deficits.

            Destruction of the UK in two world wars followed by the collapse of the empire caused it to lose reserve currency status — eventually.

            The reserve currency status is based largely on a country’s real production, not on financial nonsense.

            The only reason China hasn’t taken over reserve currency role is that the Chinese government is not trusted to (a) maintain convertibility or (b) reliably allow foreigners to buy stuff using its currency. In fact China still has foreign-exchange restrictions.

  11. Dan Kervick

    The call to put the 1% in jail is a crowd-pleaser, and the need to bring back the rule of law is obviously justified in itself.

    But mixing that issue up with the issue of inequality conveys the unfortunate impression that modern inequality is mainly the result of criminality. Laissez faire capitalism doesn’t destroy democracy, create hierarchy and generate massively unequal wealth and income spreads because its practitioners are all crooks. It does those things because it is laissez faire capitalism and that’s what capitalism does. Most of the rent-farming, the gigantic super-manager super-salaries, the exploitation and economic suppression of labor, the creation of monopolistic and oligopolistic empires, the free international flow of poorly governed, trans-political capital power and the emergence of a gated, neo-feudal aristocracy has all been perfectly legal. That’s the problem.

    We need to work on changing the rules by which our society operates, not just on enforcing the rules we already have – because the rules we already have aren’t good enough. The democracy-destroying and society-undermining forces of capitalism need to be contained and disciplined, and subjected to a more assertive regime of democratic control.

    I agree with Wray and Minsky that the earlier attempts to build a “great society” erred in placing too much emphasis on government transfers, and not enough on building a full employment society, and as a result these results created a destructive political gulf between the middle class and the poor. However, I think it is also the case that if a full employment program is not combined with a broader program for the leveling of economic inequalities and restoration of democratic society, then it can become just another a tool of plutocratic control.

    Any program for changing society is bound to be “socially divisive” in one way or another, especially while the struggle to implement it is going on. But was our society more or less divided in the 40’s and 50’s, when we had all those giant taxes in place.

    1. Banger

      You cannot have any functioning society that is dynamic in the modern sense when you have created a social class that is immune from the law. Income inequality is a secondary issue at this point. You cannot have a legitimate government when obvious law-breaking is routine.

      First enforce the law more or less equally in all sectors of society and then there can be some claim to moral legitimacy for the government to rally support of the population to take actions to reign in outlandish wealth. But, at this time the federal government does not have moral legitimacy and there’s no way to spin out of that one. Then when the government comes closer to representing the people changes can be made.

      I have little faith, btw, that this can be done given the corruption of the mainstream media so I still believe the best thing to do is to undermine the system and create alternative institutions between the cracks. Nothing good, at this time, can come out of the federal government–except in the smaller issues left to the discretion of honest bureaucrats.

      1. Nathanael

        The immunity from the rule of law was CREATED by the income inequality. In short, the obscenely rich billionaires BOUGHT their get-out-of-jail free cards.

    2. F. Beard

      Most of the rent-farming, the gigantic super-manager super-salaries, the exploitation and economic suppression of labor, the creation of monopolistic and oligopolistic empires, the free international flow of poorly governed, trans-political capital power and the emergence of a gated, neo-feudal aristocracy has all been perfectly legal. That’s the problem. Dan K

      Yes, and government backing for the banks is at the center of that since it subsidizes the rich at the expense of the poor.

    3. washunate

      Dan, I think you underestimate the impact of the assault on rule of law.

      But I think you also highlight the important debate – is our goal full employment or social insurance? In other words, should employment have a monopoly on income, or is that monopoly itself part of the problem?

      Wray, Mosler, Mitchell, and others simply decree the latter view wrong without any explanation or reasoning.

      1. Dan Kervick

        The assault on the rule of law is important, and is partly responsible for the financial collapse and the culture of gambling and flim-flam. I just don’t want people to get the idea that eliminating the lawlessness will eliminate the social and economic injustice. Capitalism has displayed a tendency toward financial instability throughout its history, whenever it has been allowed to run loose without powerful regulatory chains. Enforcing the laws doesn’t do the trick if the laws permit greed, predatory behavior, domination, oppression and enslavement.

        1. craazyboy

          Once upon a time we already connected dots between “Laissez faire” and “Robber Baron”.

          Certain types of laws scare “free” capitalism, ergo the pushback is to call for “free markets” as long as they can be rigged, the notion that competition keeps biz honest – as long as they can form oligopolies of good old boy networks, reduce taxation while increasing revenue from government spending (check the math on after tax income!) and legalize white collar crime so things don’t get unduly complicated.

          Once upon a time we already connected dots between oppressive government and our financial well being and general quality of life.

          The trick clearly is to make government oppress the right people/entities.

          The “catch 22” is this seems exceedingly difficult!

    4. Alejandro

      I agree that focusing on criminality without juxtaposing “legality”, while having cathartic appeal, is misleading if not intentionally deceptive. I would add that even this would be incomplete without weighing the disproportionality. However, I have to disagree with “the need to bring back the rule of law is obviously justified in itself”. If this “rule of law” does not tend towards fairness (marked by impartiality, honesty, free from self-interest, prejudice, or by favoritism), it seems that eventually it loses its credilibilty and trust, which IMO is it’s true long term sustaining power and not the heavy use of the ‘stick’ as is the popular belief.

  12. Working Class Nero

    If we cannot tax the rich, we can hardly put them in jail. Besides the OJ case, there have been numerous recent examples of the rich literally getting away with murder and not being jailed for it, even in the rare cases where they are convicted.

    As for wealth gaps, what are the common elements that characterize societies with healthy distributions of income? If we take two examples, Sweden until maybe twenty years ago and the US from 1945-1970, there are some common elements, with high taxes on the rich being but one; social cohesion being another.

    But besides those, the key element to healthy distributions was labor power in wage negotiations with capital. In both cases, high rates of labor union membership, trade tariffs, and tight immigration control meant capital had no option but to negotiate with local labor. With the onslaught of globalization, capital has become emancipated from their local labor and is free to scan the globe for the lowest bidder or to import low wage takers as replacements to high wage local labor.

    How will a JG impact the labor/capital power struggle? The JG will set a floor under which wages cannot go lower. And by increasing the amount of money flowing in the economy it way create more demand for employment, and the rich will simply quickly capture a certain percentage of these new flows and lock them safely away in their vaults.
    But if we switch to a globalization vs. nationalism prism it becomes clear that the JG can only be effective within in a nationalist context. In the current globalization paradigm, a JG combined with our current open borders will obviously attract cheap labor from around the globe for whom landing one of these jobs would be equivalent to winning the lottery considering their impoverished situations. So a JG would obviously need to be restricted to US citizens; which is in anathema to liberals and libertarians everywhere. Worse, the one thing holding back even further offshoring of jobs is the political impact that high unemployment has. A JG would free capital to unload the last of its well-paid local labor knowing these chumps would have a JG to fall back on and thus limit some of the political fall-out (not that any political alternative exists in the US for these people to turn to). Not only that, in labor negotiations, for mid-salary workers, capital can always present them the stark choice of a paycut that is still higher than the JG wage or a JG that is even lower. So in a globalized situation, a JG serves as a standard of living magnet that will drive down the wages of the working and middle classes. At best a JG could act as temporary palliative care that masks the symptoms of the globalization cancer that is wracking our societies. It would only set a base condition for labor, it would do nothing to impact the core of the problem, local labor’s weakness in the face of global capital’s strength. In fact it would tend to decrease labor’s resistance to globalization, as unemployment would no longer be an issue and the globalizers could point out how lucky the west’s poor have it compared to the third world.

    But within a clearly nationalist situation, a JG would be a useful tool in labor’s class warfare toolbox. The key though is once again, by means of trade and immigration restrictions, to chain capital to local labor. Once this occurs, a JG would serve as buffer during down times and as a minimum wage from which capital would have to distance itself to attract good workers. It would keep the bottom 20% at a reasonable wage and force capital to bid up the wages of the working and middle classes.

    And it is only on a broad front, by labor claiming and winning higher wages and in the process, lowering capital’s profit that the gap between the rich and the poor will ameliorate.

    1. F. Beard

      A jobs oriented approach is doomed by increasing automation unless we wish to become neo-Luddites. The solution is and always has been JUSTICE which will require redistribution of land and the means of production, not to the State ala Communism, but to the population plus ethical money creation to preclude backsliding into gross inequality.

      1. Working Class Nero

        In an open borders situation, you are correct, increases in automation and therefore productivity in the first world will only lead to more unemployment, although the presence of gluts of cheap labor will tend to slow down the drive towards automation. With closed borders, a wealthy society has a tendency towards demographic decline. Machines could help alleviate labor shortages brought on by declining birthrates and help maintain the standard of living of the elderly in the face of a shortage of labor.

        On the other hand the very worst thing to do is flood your country with cheap unskilled labor right on the cusp of an automation revolution that may soon make unskilled labor obsolete.

        1. F. Beard

          Guest workers need not be made citizens, a point we should not forget. And if the US provides an example of just sharing of GDP with ITS OWN CITIZENS then other governments will follow suit with THEIR CITIZENS or be excluded from our markets.

    2. financial matters

      Why would other countries want to lose their labor and therefore their manufacturing and service base? They can use their sovereign currency in the same way or a bloc currency in the case of Europe.

      The main battle now is with the finance industry and other FIRE sectors. They are hurting both real capital production and labor and need to be dealt with first. I see limiting the power of this sector as the current most important goal of taxation.

      1. Working Class Nero

        In poor countries, elites strongly support their excess population emigrating to the first world. Mexico howls with rage if any restrictions are put up. India strongly protested when Britain made it slightly harder for Indians to emigrate. In North Africa, where there has been a huge population explosion, elites strongly desire a population release valve towards Europe. Often these emigrants send money back, of which the local elites certainly take their share.

        But don’t take my word for it; just look what is happening in Morocco where hundreds of migrants storm the border fences trying the get into the Spanish enclave there. Or look at the boatloads of emigrants who regularly drown in the Mediterranean trying to get to Italian territory. If the rich countries gave a JG to all comers, these migration flows would increase at least ten-fold.

        The growth of the power of the FIRE sector is the result of the annihilation of labor’s position in the first world. Tying capital to local labor is the first step in taking on the FIRE sector.

        1. F. Beard

          Yep. It’s easier to allow the oppressed to immigrate than to have to deal with them.

          The US could serve as a model to the rest of world for good instead of a model for oppression by a government-backed usury cartel.

          Ah well, justice is coming anyway but we’d best settle out of court before then.

        2. financial matters

          We have to start somewhere and the ultimate goal is to empower labor. The basis of a living wage is to value humanity. It is the floor for unskilled labor. This labor can still be very valuable in many areas and can be further trained and educated on the job. This applies to the many people who are able and willing to work.

          1. F. Beard

            What labor when robots will soon be able to do nearly all work?

            Remember, people do not necessarily need jobs in order to work; they need land and a sufficient income and then they can find their own work to do or if they can’t they can then work for someone else for wages or even for free since they won’t need the income.

          2. Working Class Nero

            With strict border controls, yes a JG would have a positive impact on society. With open borders, it would be a disaster, working as a flytrap for poor migrants, and then when society had enough of being flooded with culturally divisive immigrants, they would vote the JG out but be stuck with all the excess low skill labor it brought in.

            1. financial matters

              Places like Japan that are more immigration adverse are developing bad demographics. Immigration has helped the US with better demographics. It has always been a melting pot and cultural diversity can be healthy. Like a well functioning rainforest. Give me your labor to help build a better country. Then other countries will have to improve conditions if they want to get it back and stop being western ‘colonies’.

              1. Working Class Nero

                “Bad demographics” is elite speak for labor shortages (and therefore increased leverage for labor). Japan has suffered less from globalization because they have rejected the immigration portion. Automation will help with a declining labor force and having fewer people in the country will be better for future generations.

                Once we get past all the sloganeering, diversity is synonymous with income inequality in the US and increasingly so in Europe as well. If we look Gini scores, the US states with the lowest (most equal) are in declining order are: Utah, Alaska, Wyoming, New Hampshire, Iowa, Wisconsin, Nebraska, Hawaii, Idaho, and North Dakota. Except for Hawaii, which is majority Asian, none of these states is known for their vibrant diversity.

                On the other hand, champions of diversity such as New York, Texas, California, Florida, Massachusetts, Connecticut, and District of Columbia, are in the bottom ten and have the most inequality in the US.

                So a look at the numbers shows that “Diversity is our Strength” is a slogan only an oligarch could use.

                1. financial matters

                  Demographics are vibrancy. Youth are the future. New ideas as well as providing economic support to others. But we have to enable them to be able to provide this support.

                  Similar to diversity. The palm oil tracts in Indonesia are an example of a hollow monoculture.

                  1. Working Class Nero

                    More sloganeering. Why not look at some data? The following are the list of the twenty nations with the highest birth rates; Liberia, Burundi, Afghanistan, Western Sahara, East Timor, Niger, Eritrea, Uganda, DR Congo, Palestine, Jordan, Mali, Benin, Guinea-Bissau, Yemen, Somalia, Burkina Faso, Chad, UAE, and Angola. This is not exactly an honor role of innovation and economic vibrancy.

                    Although hard to measure, one list of the most innovative countries in the world have the following top ten: South Korea, Sweden, United States, Japan, Germany, Denmark, Singapore, Switzerland, Finland, and Taiwan. Outside of the US, these are all low-birth rate countries, and in the US the portion of the population with high birth rates contributes next to nothing towards innovation. And outside of the US and Sweden, these are generally immigration-skeptic countries.

                    So in the real world there is seems that the countries with the “worst” demographics are the most innovative and the countries with the “best” demographics are somewhat lacking on the innovation front.

                2. MyLessThanPrimeBeef

                  Looking at the planet as a whole, the diversity is constant, no matter how you move people from one part to another.

                  TOTAL DIVERSITY is constant at any given moment in the world’s history.

    3. Lambert Strether

      “If we cannot tax the rich, we can hardly put them in jail.” Really? The tax cut mania was well advanced by the time Bill Black came along, and he put thousands of banksters in jail (as we should do again).

  13. F. Beard

    Sin? Dare Wray mention that? The banking system ITSELF is sinful since it subsidizes the rich at the expense of the poor and has dis-employed the poor with their own (legally) stolen purchasing power via bank-financed automation and outsourcing.

    But instead of a just share in the profits and leisure the poor worked for, Wray offers them more wage-slavery and they should be happy with that?!

    My consolation is that justice is coming and the family farms, orchards, vineyards, etc of the righteous will be fertilized with the ashes of the arrogant and evil-doers. See Malachi 4 for details, Mr. Wray since you dare talk of sin and read the rest of the Old Testament too while you’re at it. Then you might know what you’re talking about.

  14. David Lentini

    I think Dan raises good points. A culture that supports the unbridled accumulation of wealth—the “winner-take-all society”—will not only reject taxes but ultimately any check on wealth. This is why our Attorney General and many major academic economists support “Too Big to Fail” banks run by “Too Big to Jail” bankers. Such attitudes are at the heart of that neo-liberal manifesto, Milton Friedman’s Capitalism and Freedom. Wray’s argument that we need to jail the rich baddies but forget about raising taxes really begs the question, since jailng rich baddies assumes we want laws that put limits on how one gets rich, which utlimately means accepting limits on wealth. But those who support the latter would also support higher taxes to limit wealth as well.

    The real issue is power, as recognized by Karl Polya in The Great Transformaion. In short, Machiavelli was right—wealth is a means to power. Laizzez-Failre capitalism ultimately creates great wealth for a few and great poverty for many. The wealthy, who are the very definition of the virtuous in this system, will then use their wealth to perpetuate the status. In short, the winners of the game will seek to lock-in their winnings by changing the letter, spirit, and enforcement of the law to suit them. In a society governed solely by the persuit of wealth, that’s perfectly rational—and moral—behavior. The only way to stop such a self-destructive culture is to embrace values that transcend wealth. As R.W. Tawney, put it in The Acquisitive Society, we have to stop valuing what people have and value what they do.

    We forget that our great years of the middle class were built not just on the mood of the Great Depression, Second World War, and fear of Communisim, but on the Social Gospel wave that arose from the outrages of the first Gilded Age. The Social Gospel helped shape American society by offering a moral crtique to unchecked greed and the legal and social corruption that comes with it. The ’29 Crash and Great Depression provided the catalyst for the changes in politics and policies, but that couldn’t have happened without a set of values that placed humans above weath.

    In short, without a change in culutre there can be no change in law. And all changes in culture are “socially divisive” almost by definition. But without a revolution in our values, we can’t stop our descent into tyranny.

    1. Banger

      You make the essential point here–there is no way any substantial reforms of any kind can be made at this time–structurally it is impossible–the mechanism for true reforms as opposed to juggling which oligarchs get the biggest share of the loot, just can’t happen. Cultural change–and it has to be major, i.e., saying no to the culture of narcissism and yes to believing in something beyond hedonism and materialism.

      1. Dan Kervick

        Why are you so committed to persuading people of the impossibility of change and the impotence of political action? Cultural change and political change can mutually reinforce one another. One way to change the culture and the way people think and feel is to promote changes in the way they act and the rules they have to follow. The political discussions and activism promoting the latter have an impact on the habits of thought pertaining to the former.

        1. Banger

          Why? Because I lived in the swamp called Washington for most of my life. Significant reform cannot happen there at this point in history–it is like expecting to breathe underwater to expect reform to come out of Washington. If you want to organize for political change in Congress let me know–maybe I’m wrong.

          1. Dan Kervick

            The civil rights movement, to take one example, didn’t originate in Washington. It came from Georgia, Mississippi, New York, Arkansas, California and elsewhere. Washington is always the last place to get on board. But movements do sometimes succeed.

            1. MyLessThanPrimeBeef

              Can any modern movement succeed today under a total surveillance, sorry, awareness state?

              I think it’s hard to overcome technology with more technology, especially when you don’t print money, like an MMT insider can.

              I believe you can overcome technology with no or low technology, or Luddite-nology.

              1. David Lentini

                Yes. Poland, East Germany, the Soviet Union all are good examples. The question is whether the movement can endure to reach such a mass—i.e., change the culture—that the government loses credibility. Chris Hedges has written a lot about this recently.

                1. MyLessThanPrimeBeef

                  And they also had (well-organized, well funded) outside help as well.

            2. Banger

              I was around back then–Washington wanted the Civil Rights movement to succeed and both. Kennedy and Johnson made great effort to institute major efforts to see that it succeeded or at least appear to succeed for complicated reasons that were as much about international policy as domestic policy. At any rate there is very little similarity between that time and this in. Washington.

            3. Lambert Strether


              We might also mention gay rights (and ACT-UP, a movement of civil resistance in the medical field that, it just now occurs to me, could be useful to elder care advocates…)

              * * *

              OT I hope you got my apology on “drive by,” buried in that thread. My bad.

        2. Jackrabbit

          Why? Banger is a libertarian. He doesn’t want to fix government, he wants to get rid of it.

          Also, Banger is mostly right about big mass movements. They are very difficult to get started and to last until there is real change. However, I believe that there is a lot of merit to forming coalitions of small groups. Lambert, Diptherio, and others have made the case that small, focused movements and co-ops have been successful.

          1. Banger

            I am not what is generally regarded as a libertarian. My roots are in anarchism which has a different view of private property and individualism. I see individualism as, at this point in history, as toxic. I see cooperation and community as essential. The government as currently constituted is, in my view, illegitimate and unreformable. My type of anarchism is against rigid systems of government–different types are needed under different conditions.

            1. MyLessThanPrimeBeef

              Zhuangzi, or Chuan Tzu, was an anarchist too, from Burton Watson:

              Once, when Chuang Tzu was fishing in the P’u river, the king of Ch’u sent two officials to go and announce to him: “I would like to trouble you with the administration of my realm.”

              Chuang Tzu held onto the fishing pole and, without turning his head, said, “I have heard that there is a sacred tortoise in Ch’u that has been dead for three thousand years. The king keeps it wrapped in cloth and boxed, and stores it in the ancestral temple. Now would this tortoise rather be dead and have its bones left behind and honored? Or would it rather be alive and dragging its tail in the mud?”

              “It would rather be alive dragging its tail in the mud,” said the two officials.

              Chuang Tzu said, “Go away! I’ll drag my tail in the mud!”

              From: “Chuang Tzu, Basic Writings,” translated by Burton Watson, NY:Columbia Univ. Press, (1964), pg 109.

              1. Hugh

                The return to a simpler life, close to nature, especially in contrast to the suffocating nature of the imperial officialdom, is a powerful theme in Chinese literature. I like the Tang poet Wang Wei’s expression of it, in his Reply to Subprefect Zhang

                Now in old age, I know the good of quietness,
                Ten thousand affairs no longer occupy my heart.
                Turning inward, I have no grand plan,
                Except to return to the old forest.
                Wind through the pine trees blows my sash undone,
                The moon shines upon the hills; I pluck the qin.
                You ask me the reason things must end,
                The fisherman sings going back to the shores of the sea

            2. Jackrabbit

              Thank you for that the explanation. I also see cooperation and community as essential but we differ from there, I think.

              1. Alejandro

                This elaborates a little further. How Labels are used and often misused can be very confusing (not referring to Banger or anyone specifically).


                Tis to work, and have such pay
                As just keeps life from day to day

                In your limbs, as in a cell

                For the tyrants’ use to dwell
                Tis to be a slave in Soul, 

                And to bold no strong control. 

                Over your own wills, but be 

                All that others make of ye.

            3. OIFVet

              I have been slowly coming around to anarcho-socialism (one reason for my distrust and dislike of the EU), but I just don’t see how anarchism could possibly overtake the current system and its integrated security-propaganda-political apparatus. And how do you overcome both human nature and more than a century of nation-state propaganda on the evils of anarchism and the virtues of statism?

  15. washunate

    We shouldn’t do progressive income taxation because it’s not politically feasible? What sort of argument is that? I guess we shouldn’t advocate prosecution of war criminals and financial fraudsters because our political leadership won’t do that, either?

    And the notion that low-wage crap jobs address inequality is hilarious. When economists are willing to work for the same wages and conditions as the JGers, then we’ll have something interesting to discuss.

    1. Banger

      It isn’t politically feasible for structural reasons–there is no mechanism to institute reform so its absurd to argue for it. This is why simply agitating to enforce criminal laws is simpler and more effective, in my view, because we still have law-enforcement agencies even though they are pretty corrupt they at least exist.

      1. washunate

        We still have the IRS, too. And the SSA. Taxation and social insurance are two of the things that have survived the assault on Constitutional governance and rule of law, comparatively speaking, the best over the past few decades.

        If we’re leaving the realm of the ‘ideal’ and going into the realm of what is pragmatic, then I think that makes MMT even less reasonable. We know that taxation and social insurance can be provided within the existing context of our system of political economy much better than almost any other form of public policy.

      2. Andrew Watts


        They’re called primaries. Due to the fact so few people vote in them money is not as effective when well organized groups are motivated.

        1. Banger

          Ok, assume that you work hard to organize a primary challenge to a corrupt politician–guess what? The gang will figure it out and move major money to defeat you if they feel you’re a threat. Even against those odds you win and go to Washington–what awaits you is even more difficult–Mr. Smith goes to Washington type of stuff.

          Better, is to organize communities as political and economic units that begin to move away from the system–the system is the problem and, as things stand today, the system cannot be changed without being able to match the corporate money which is nearly unlimited, with raw political power. I’ve written about this in the past and don’t feel like going over it again unless you ask.

          1. Andrew Watts

            When did I say it was going to be easy? Enabling politicians to run unopposed in primaries isn’t going to make any difference either. While bleeding their candidates of time/money in the primaries makes them much more amendable to your views. After all they have to factor in the possibility that your ideas will come to dominate the local party.

            Civic participation is an important aspect of community. This includes awareness of what’s happening in your own backyard. Personally I’d be happy to see any organized movement away from the captive constituencies that dominate the political landscape.

              1. mellon

                GATS-illegal.They all run afoul of the WTO. And that trumps all of this warm and fuzzy stuff. How would corporations be profitable if people in every tom dick and harry country ran around doing stuff for free?

        2. RanDomino

          That was tried in 2006. The result was Democratic majorities in Congress and the Obama presidency. The Democratic Party establishment skillfully channeled the will for political change during the Bush era into more power for themselves.
          Targeting primaries is a strategy that has been tried and defeated.

          1. Andrew Watts

            Nothing substantial was demanded of the Democratic Party in 2006. Yes, the grassroots organizers wanted the Afghanistan/Iraq War to be over. By that time just about everybody in the country wanted that outcome including the Bush Administration. The sole demand they had beyond that was the Democrats not be pro-Bush Republicans. They received exactly what they wanted.

            I’d also like to point out that in the much lauded year of political change (’08) fewer than 10% of every county in the country switched political allegiance. This was a good indication that nothing had actually changed. Politics is local.

            1. RanDomino

              A generation of progressive activist-politicians attempted to acquire a degree of power within the Democratic Party. They tried to BECOME the Party, not make demands of it.

  16. Dan Lynch

    This article is 1% propaganda (Wray’s job is funded by hedge funder Mosler) and I don’t know why Yves continues to publish their propaganda.

    MMT has absolutely no plan to address the Gini coefficient. They don’t care about the Gini coefficient. Instead, MMT care about free trade and low taxes.

    1. David Lentini

      In a properly function ecnomy, i.e., one that reflects a respect for humanity above wealth, the Gini coefficient will take care of itself. Don’t forget, the coefficient is an affect not a cause.

  17. Andrew Watts

    This post is an absolute gem for all the wrong reasons. It combined the typical aversion of economists to power and a demonstration of the intellectual bankruptcy of American liberalism. An ideology that maintains a conflicting attitude of fatalism and optimism.

    When Wray proclaims the redistribution of wealth through taxation is doomed to failure he indulges in this political fatalism. As Dan pointed out it worked for quite some time. He demonstrated his sentimental optimism by proclaiming that Wall Street bankers can be jailed and have all their wealth confiscated. This is a feat that the New Dealers were unable to accomplish during the Great Depression.

    It’s a good idea to shift the burden of taxation from labor to unearned incomes that are collected by the rich. This policy will decrease barriers to employment by lowering the cost to employ human labor. One of the reasons we’re experiencing a jobless recovery is due to this economic burden. When the working/middle class has money they spend it into the economy. When the rich are burdened by an excess of money they utilize it to speculate. Which usually ends in a spectacular financial crash. As long as this vicious cycle continues we can expect every financial crash to drive more people into poverty and every recovery to lift fewer people out of it.

    The political action that will be required to affect this change will also be beneficial to our democracy. Western democracies have faded into a farce of top-down manipulation that operate in the interests of the oligarchy. By embracing a redistributive tax policy as a litmus test in local primaries/elections grassroots activists can solicit ambitious politicians into supporting this policy. It may also provide an all encompassing issue to unite small business owners and workers alike to cement a new political coalition that can successfully challenge the rule of the oligarchy.

    1. Banger

      Again, all fine and good but what is the mechanism for this political change. I believe Washington is largely immune to any kind of real reform of the system for a variety of realpolitik reasons. I see no road or path to reform you speak of. We’ve been beating this horse for how long now? When are we going to get it that we have to take an alternate route.

      1. Andrew Watts

        It’s going to take a pretty dramatic political shift in this country. The kind of attitude adjustment that is usually brought about by an economic depression. Most Americans didn’t care about wealth inequality until they realized how it had affected their lives. I do believe we’re past the initial phase of building awareness. The next challenge is organizing and formulating a plan of action.

        I know you know that Washington revolves around money but when hasn’t it?

        1. Banger

          It was much less focused on money during the 1932 to 1978 era for starters. I saw the change happen–the main agent of this was the degeneration of the Civil service system through “downsizing” and “re-inventing” government that brought substantial corruption into the mix in the eighties and nineties.

    2. Jim Haygood

      ‘When the rich are burdened by an excess of money they utilize it to speculate. Which usually ends in a spectacular financial crash.’

      Quite right: Bubble III is inflating even as we speak.

      The rich have learnt to profit from fiat credit expansion. MMT would institutionalize this process (while piously claiming they’d stop if inflation appears). But asset inflation IS inflation: the S&P 500 is close to tripling since March 2009.

      Got stocks?

  18. MyLessThanPrimeBeef

    We can tax the rich via Corvee.

    From Wiki:

    Corvée, or statute labour, was unpaid labour imposed by the state on certain classes of people, such as peasants, for the performance of work on public projects…

    For example, if you make $100 million a year, you will be ‘taxed’ for 6 months of labo(u)r digging and filling trenches.

  19. Benedict@Large

    It’s gotten to the point where I regret every time I try to read the Comments Section on MMT posts at Naked Capitalism. The amount of stupidity posted therein has become absurd, and it’s gotten to be a waste of time trying to correct all the idiots who just parrot the Quantity Theory or some other Friedman gem.

    While I appreciation your postings on MMT, it would probably be better if you simply shut the comments on these posts off. The knuckledraggers think they know it all, and are not interested in learning, and their comments are a waste of time for the rest of us.

    1. F. Beard

      Speaking of know-it-alls are you one of the “money must be debt” crowd I’ve had to constantly correct but you can’t seem to learn anyway?

      And now you cry for censorship?

      Run away little boy.

      1. Yves Smith Post author

        The comments on these posts are a tiresome parade of straw manning and dishonest argumentation. You don’t see it because you are part of the problem. Lambert spend a huge amount of time on the last MMT post trying to clean up the dishonest rhetoric.

        What is going on is the commentariat is trying to censor me in my choice of material. I will NOT tolerate that. I will shut down comments if that is what it takes for people to deal in good faith.

        1. Paul Boisvert

          Hi, Yves,
          I understand your frustration, but I think you should in fact be quite happy with the commentary on this, and, it now seems, all MMT-related posts on NC–sure, it’s intense, and sometimes childishly ad hominem, but there are also a lot of great ideas here from a good number of serious thinkers.

          All reasonably serious blogs on political economy have lots of straw-man argumentation. But that’s ok, as the best way to clarify and promulgate correct arguments is by pointing out the flaws in straw-man arguments.

          I also think that you, along with many commenters who take umbrage at such straw men, may overestimate the “dishonesty” of those arguing for them–in my experience, there are a lot of “honestly” bad thinkers out there. And many are only partially bad; even the most careful thinkers can fail to think through all the implications of a particular take or position–as I think has happened with even the best commenters in this case.

          Assuming your opponents are honestly misguided, and gently, tolerantly helping point out their teensy little logical flaws, seems to the best policy. Joe Firestone seems to do an excellent job of that–perhaps keep a model of some exemplary comment by him linked up, and when others veer into childish discourse, Lambert can just insert “Incorrect commenting paradigm–click here for correct model.”

          Kudos to Lambert, by the way, for keeping a pretty even keel here, particularly w.r.t. Dan Kervick, whose normally objective mode definitely ran a bit amok. The Michelle Obama and knee-jerk comments were way beneath him–so absurdly so as to be pretty funny, actually–unless you were Lambert, perhaps… :). Obviously MMT addresses ideas of such major importance to understanding capitalist political economy (which is why I, as a socialist, find it so valuable, even while not believing, unlike most NC readers, that capitalism can ultimately be “saved”) that even clear thinkers like Kervick can sometimes go off-rail in response.

          But lots of wheat amidst the chaff–good points made by many, including Kervick, Lambert, and particularly Working Class Nero, who tied it all back to labor, unions, and political contestation with capital. A solution must involve a revitalized labor movement creating workplace democracy and gaining political power. Choosing the best strategy and tactics to accomplish that is a very difficult undertaking, hence the intense disputation in the commentary. NC remains a great blog, and the comments definitely advance, on balance, people’s thinking about these crucial matters.

          1. Calgacus

            Paul: Working Class Nero makes some good points and means well, but he is quite wrong about how globalization works in an MMT/Keynesian/full employment/JG context. MMT, functional finance needs no changes for a globalized setting.

            Working Class Nero:But if we switch to a globalization vs. nationalism prism it becomes clear that the JG can only be effective within in a nationalist context. ..So in a globalized situation, a JG serves as a standard of living magnet that will drive down the wages of the working and middle classes.

            That is not at all what would happen. It is the opposite of what perfectly obviously would happen – permanent increase of working and middle class living standards. The JG works just fine – maybe better – in a globalized setting.

            The Bad Guys know very well that the JG is THE enemy. Against which they have no defense but killing. WIth a JG, they’re dead as a force, a great power. They’ve known it forever. They work very hard and very successfully to sow seeds of confusion, to make everyone else forget this. The Job Guarantee of 1848.

    2. washunate

      This is a rather illuminating mindset. I didn’t know people who opposed the Bush tax cuts were stupid, or that opposition to the police state is a Friedman gem simply because even people like Friedman and Paul oppose the drug war.

      I’m quite interested in learning how many JGers one tenured professor, police chief, prosecutor, doctor, or judge is worth. Please enlighten me.

  20. John

    Sorry for the partial post…

    I also don’t like taxation, even as just a palliative for inequality. I’ve long had a different idea – and yes, I’m a socialist.

    Use emiment domain to make public property of “too big to control” corporations.

    I don’t think the power of eminent domain requires legislation for its exercise, but I’m not a legal scholar. In any event, there’s no vesting of the power to Congress in the US Constitution, and its seems most often exercised by the courts.

    The takeover of corporations is, in my view, a modest expansion of the normal purpose of eminent domain. In this case, the assets and profits are what are to be acquired, so that those assets and profits can be directed to serving the public welfare.

    1. F. Beard

      Nice idea! And once the large corporations are seized, their common stock can be equally redistributed to the entire population.

      I’m NOT a socialist but I believe theft REQUIRES restitution and surely the large corporations were built with the stolen (via the government-backed credit cartel) purchasing power of the entire population.

    2. craazyboy

      I think that’s roughly the way it does work in those smatterings of “uncivilized” countries around the world.

      The big problem with that is their employees would then be called “government employees” and this would be bad for their self esteem. Next thing ya know they don’t listen to orders, get fat and lazy and ask for more money just to do the most dumb and menial things, Same problem the US government has with the US Military. :)

  21. RanDomino

    It’s futile to speak of political remedies as long as there is no real grassroots organizational power. Anyone who says, “What we need to do is (insert panacea du jour, to be implemented unilaterally by the federal government after their heart grows three sizes)” ought to shut up and consider the fact that anything that requires real democracy to implement is not going to happen since there is no real democracy in this country (or any other country for that matter).
    If instead you say, “What we need to do is (insert strategy for building grassroots power through a necessarily lengthy and difficult campaign as this proves skill and capacity, thereby showing people that it is in fact possible to win)”, then we can talk. Shouting answers from behind a keyboard is easy. Are you in a union? A business union (i.e. AFL-CIO, SEIU, and the like) or a truly democratic union? Are you working on building any cooperative businesses? Are you helping move homeless people into bank-owned houses? What are you DOING? You want to jail bankers, you have to start by building a new world from the ground up.

    1. F. Beard

      Organize and then what? Will your replacement system be any better than the current?

      Besides, who will oppose a Steve Keen universal bailout of the population and a Postal Savings Service except the usual thieves and their academic supporters?

      You go ahead and organize but you had better have a painless way to transition to a better society or it’ll be in vain.

      1. RanDomino

        There is no “and then what”. Organizing IS the product. That IS the way to transition.
        Who would oppose a universal bailout? The entire current governmental, economic, and social systems in power. It doesn’t matter if 90% of the population wants it. They’re not organized, so their opinion has no effect.

  22. jfleni

    I quite disagree! While a few comments are nihisistic or just plain silly, most have at least the germ of a good idea, even if not completely articulate or accurate.

    That’s called argument and discussion! Some dictator shutting it off, may satisfy dictators but not those who welcome ideas and discussion!

    1. MyLessThanPrimeBeef

      I just remind myself that sausage making is not pretty.

      Neither is giving birth to a new awareness.

      All we can hope for is some degree of civility.

  23. Andrea

    Let’s actually look at what ppl try to do, if they have the oppo’

    Ex. From Switzerland:

    – Minder initiative, CEO pay capped, gold parachutes scotched, and more, see google > accepted

    – the 1:12 initiative (ratio between highest/lowest pay not be exceeded) > rejected

    – the guaranteed minimum income initiative (about 2k Chf p.month precise sum not of interest here) > rejected

    – the 4000 minimum wage (monthly in chf. for unqualfied ppl), rejected

    …..> were all reactions to growing inequality.

    They opened up, or forced, a lot of debate. The minimum wage thing, the latest, will be the most effective.

    Many employers raised wages before the vote (e.g. Aldi and Lidl.) Big employers will now be shamed if they pay less, and more ‘collective contracts’ will be signed, as the opposition swore they would collaborate better. The socialists and some Unions will now have a kind of stick they can wield, an obligation to negotiate, to step up to the plate. Small employers can carry on at will, which seems to have been a major reason for the NO vote.

    Controls will be reinforced on those who break the labor laws, such as hours worked, time off, working conditions (which often include the provision to pay for / buy lunch, for ex.), illegals, dodgy sub-contracting, etc. (not pay, obviously.)

    What the next effort will be and who will make it idk. But one thing is certain: We are not finished here. No way.

  24. William Neil

    It’s hard to say what the most effective policy proposal actually is, because neoliberalism has an intense and fairly polished response to them all, poll and pundit tested. That philosophy was anti-government, anti-tax, anti-regulatory. The current “remedy,” before Piketty’s wave arrived, is to raise the minimum wage to $10.10, far too low, undercutting the SEIU’s campaign for $15.00, and not able to even win a ongoing link to inflation adjustments in a State like Maryland, where we will only get to 10.10 by 2018. But let’s not forget how we got to fighting for a higher minimum wage. James Galbraith proposed $12.00 per hour about three years ago, out of sheer exasperation that public job creation based on a new New Deal policy outlook – infrastructure repair and creation, better rail, and green energy rehabilitation and alternative installations – was an impossible sell even inside the Democratic Party. Wray apparently tried to pitch his guaranteed employment program to the AFL-CIO but they were not receptive, maybe because of his ditching the minimum wage as part of his package.

    The current wave of “populism” being pushed by the DC left broker think tanks looks like it is calling for “full employment,” and public job creation. I don’t see why linking a financial transaction’s tax ala Dean Baker’s idea and using it to pay for public job creation wouldn’t sell; just be prepared for the “red zone” reaction to crossing the ideological boundaries of “intervention” into the “markets” that the Right will erupt with. So be it, ideas are in motion at least on the left.

    And let’s not forget that Piketty said, when asked at EPI in DC recently, what was the one greatest worry or implication of his work, and he replied that it was inequality’s impact on democratic institutions. Give him credit for seeing the ideological logic of 30 years of neoliberalism: whose government is it? Piketty has been criticized in Thomas Frank’s review on his failure to understand the New Deal; that’s correct, he’s weakest on the policies enacted then, we didn’t get the great “compression” because of the impersonal forces generated by Depression and War…they were triggering events which policy did or did not respond to. Wray should keep in mind something else Piketty said in Chapter 7. That capital has maintained its 4-5% return over three very different centuries by its “apparatus(es)” of “repression” and “justification.” I haven’t seen anyone refer to these important words, and I called them to Frank’s attention. It suggests that Piketty is aware of what I am writing here, that we are facing an ideology in neoliberalism, and it will take a well thought out counter “ideology” of response and creativity to overcome it.

    Dan Kervick, thanks for your excellent comments above.
    Best to everyone.

  25. JEHR

    Michael Hudson is an historian and he posits the same solution as Wray. Here is Hudson discussing Piketty’s book:

    “And the solution isn’t simply to let the rich exploit the 99 percent by raising the prices you pay for your cable, for fridges, for transportation; it’s to take–to deprivatize these assets, to put them back in the public domain, so that you can provide basic services to people at a very low price instead of at an extortionate price that’s all meant to pay the 1 percent that basically has been foreclosing on governments and grabbing the public domain. And Piketty quotes the French novelists, in English, of the 19th century and points out why is it that novelists understand the problem that’s happening in the economy more than economists. Economists all talked about the economy becoming more equal. But if you read Balzac, he said that the origin of almost every great family fortune is a great theft, often undiscovered, and people think it’s just a part of nature. And it’s thievery and theft, as Bill Black, who’s often on your show, also points out every week: you have essentially the decriminalization of fraud. And what really pays is crime. And it’s the criminals that have risen most rapidly into the 1 percent. It’s the Wall Street bankers who’ve been doing the junk mortgages and engaging in the kind of fraud that we’ve been hearing about on Wall Street. This is not what Piketty discusses. He doesn’t say, throw the clerks in jail; he doesn’t say, have government regulatory agencies to prevent this kind of exploitation; he doesn’t say, reimpose anti-monopoly regulations to prevent monopoly profits from enriching the one percent; he doesn’t say, take all of these public utilities that Margaret Thatcher privatized in England and Ronald Reagan did in America and put them back in the public domain so that they can provide basic services to people at cost. All of this is a different topic from his book.”
    ( http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=11788 )

    I think the solution in the end will be multifaceted and will probably include an attempt to tax the rich as well as jailing those who committed criminal acts. What I do not know is what catastrophic event will occur to make both these actions to redress inequality possible.

    1. Hugh

      For anyone interested the original of the Balzac quote:

      « Le secret des grandes fortunes sans cause apparente est un crime oublié, parce qu’il a été proprement fait. »

      The secret of great fortunes without apparent cause is a forgotten crime, because it was well pulled off.

      Vautrin in Le Père Goriot

  26. kgilmour

    Put the Banksters in a cell with a roomie named Bubba? Why not Darnell? It’s more likely.

    I just read a piece on MICRO AGRESSION -The new improved standard for heterosexual whites – when engaging, or speaking of any other group. Some college kid had to withdraw and apologize for posting a picture of O kicking in a door… it seems the cartoon is an unfair characterization of black violence….. really. You cannot make this stuff up.

    It’s called micro aggression… like when a hapless Kansan reaches to feel a black afro…. IT”S A NO NO. Punishable by who knows next.

    BUT Bubba… it’s open season. Obviously a roomie named Darnell would be considered micro agression against favored groups… but Bubba? — he gets no sympathy. He’s probably white, rural, fat and blue collar.

    Anybody see this new PC agenda as a loser? Send all those Independents back into the arms of the GOP — Its called progressive over reach…. and it’s upon us all.

    Anybody else think it’s wrong for a lesbian TSA officer to grope Women? How is that different from a man groping a woman? Does that make me a hater? Insensitive to the equal -or more than equal rights of lesbians to feel up women at the airport — uh, only when absolutely necessary of course./….

  27. William Neil

    Let me take a stab at filling in and amplifying some of the fault lines and tensions running through the comments, the good, the bad and the ugly, and between pessimists and optimists.
    First, what I found missing is the fault line being created by the ecological left: Naomi Klein, Gar Alperovitz and Chris Hedges, among others. I think it is fair to say that all see a transformation in the nature of capitalism, its false hopes to save itself through traditional forms of growth, as paving the end of climate if not the earth as we know it. They also tend to be, especially Klein and Alperovitz, pessimists about capturing the “commanding heights” of political power, the traditional goal of both democracies and the left. They have become radical decentralizers, in good part because they are deeply pessimistic about the ideological standoff in DC. Alperovitz has said, rather too glibly, that the Federal Reserve will be able to handle any crisis that might come along, so the system won’t collapse. I’m not so sure. Ralph Nader is less consistent on this point: he nostalgically wishes for the “rumble in the streets” (I’m thinking of the commenters who asked for the missing grassroots pressure outside the Democratic Party) that was the threat that moved both parties in the late 1960’s and 1970’s, and he wanted a billion dollars from the billionaires he is having breakfast with to set up a 1,000 watchdogs and activists in each congressional district to create the rumble. So far the 1% he dines with haven’t coughed it up. Nor do they seemed inclined to cough up a billion in capital seed money to give a boost to Alperovitz’s co-operative economic institutions. In some ways Alperovitz’s directions (in “What Then Must We do?”) are the most radical and threatening to the neoliberals of both parties because they threaten the basis of ownership and private property. Yet Gar is so low key, and the way he envisions this evolving off the political radar has a dream like quality. Even though it goes beyond labor’s attempts at worker “control” in the 1930’s, Gar’s alternative will be so low key, so practical, that they will solve the left-right polarization problem by their shining practical success: who will object to what the co-ops in Cleveland have built? (of course they got federal money heavily lobbied for by the Ohio delegation…combined with other sources, private and non-profit.)

    Now the great “outside” pressure success story in American history, or one of the greatest are the abolitionists. And I’ve often thought that the gaps between any serious left that might develop and the American Right, rooted in the South and West, and the 10% all over, will still unfold in an electoral map – and a map of irreconcilables, like the 1850’s. The Right, the neoliberals have drawn such a rigid set of boundaries in the political economy that they create gridlock even with the Centrists democrats, with whom they share more than enough common ideology. With a rising and insurgent populist left, and it is stirring, which will pressure the Dems further to the left, does anyone think gridlock in DC will end? How long will it take for the populist left to drawn in the bottom 50% of voters who now sit it out in the Right’s geographical current bastions? I don’t know, but the radical de-centralizers are pessimistic about it and want to put their best efforts in locally and the state level, not exert pressure at the commanding heights of national policy.

    And let me stress that the studies on failed democracy and oligopoly, findings and rocket success of Piketty are changing the intellectual roots on the left, to add to the work Yves does, Nader, Klein, Hedges and Alperovitz and many, many other, have staked out. Yet remember the very successful abolitionists never converted the South; they altered the electoral map in the rest of the country and the South bolted, broke with democracy’s verdict in a presidential election. A lot now is in motion, and these fault lines – and the policy differences on display today on these pages are not trivial . But I’ll stick with my 1850’s analogy as the left rises and builds the pressures on the Democratic Party. Will it move left, or will we see something replace it that then will still have to square off against the Right; Nader’s new book and flights of fancy of a left-right alliance in “Unstoppable” are symptoms of the great strain. Yes, on NSA and Too Big Banks tactical alliances can form between the left and libertarians. On the great questions of the powers of government and political economy, I don’t believe the differences are reconcilable. They were not so inside NY Occupy as I followed the debate on matters of job creation and unemployment. Maybe that was not the best forum since the movement was not policy oriented. By a committee in NY had a serious debate and could not reach consensus despite the grim nature of our economic times.

  28. Joe Firestone (LetsGetitDone)

    I’ve read through the comments and I have to admit I don’t know why the reactions are so vituperative. All Randy has pointed to is the political difficulties of trying to “pay for” programs that will lift working people as a precondition for implementing those programs. He’s also advocated “pre-distribution” as more effective than redistribution for creating greater economic equality. I think he’s right on both counts.

    I don’t agree with him on the futility of heavy income and wealth taxation. Measures like that worked in this country for a very long time to reduce inequality, and I think they can work again. But what people have to expect from them is that they will be continuously attacked by the wealthy and must be continuously defended by institutions expressly devoted to maintaining greater inequality. I think our mistake the first time around with progressive taxation is that we began to think about it as needed to “pay for” programs and ceased to emphasize its importance for maintaining democracy. The next time we try it, we can hopefully remember this lesson and maintain progressive taxation measures in place, while building institutions to maintain them, for the sake of minimizing the political power of the wealthy rather than simply as a way of “paying for” stuff.

    All that said, when we consider the future, I think we have to be smart about staging initiatives that will bring lasting change. We have to look at things from the point of view of building increasing political support and not simply from the point of view of getting what we need tomorrow. So, I see this sequence:

    1. Pass measures that will give most people what they badly need in the short run such as: enhanced Medicare for All; a Federal Job Guarantee at a living wage, substantial increases in Social Security and other elements of the safety net including unemployment insurance, a student debt jubilee, debt relief for underwater homeowners. We should pay for these by spending/creating more reserves in the Treasury General Account. If authority for Treasury to do this directly isn’t forthcoming from Congress, then create pressure by using by platinum coin seigniorage to fill the TGA with enough to pay down the debt and cover deficit spending for a long time to come.

    2. Phase in badly needed infrastructure and education programs, along with programs re-inventing the energy foundations of the economy, and creating environmental and climate sustainability. These will be big programs creating jobs that will give people opportunities beyond the JG.

    3. While 1 and 2 are going on, pursue prosecutions of the financial elite control frauds. The purpose of this isn’t just to scare them, it’s also to get public hands on the records of the big banks and the financial institutions so we can find reasons to take the banks into resolution. That’s very important, because once they’re in FDIC hands, their political power is gone. No more campaign contributions to politicians to oppose elements of 1 and 2. Much harder for them to short-circuit popular campaigns to remove their power.

    4. When 1, 2, and 3 are done, the party that accomplishes these things will have tremendous popularity. That’s the time to introduce measures aimed at permanently safeguarding a reasonably flat structure of economic inequality. The reasons for it will be easier to explain to people then, and examples from their own past will abound. We can begin with various predistribution measures, including ones that greatly diminish the importance of conventional corporate forms in our society, and measures limiting total compensation of executives in corporations to some reasonable ratio of their total population to their lowest paid employees. But after we’re done with those we can move on to progressive income and wealth taxation of the sort enacted by FDR, and wealth taxes of the sort advocated by Piketty and Warren Mosler, and perhaps we can even think of legislating structures of vigilance to create a political firewall to prevent the wealthy and the corporations from regaining their political footing. Whatever we do, however, this will be an effort of eternal vigilance because the rich will always try to undermine democracy and create plutocracy. That is just what they do. They are about have-have not warfare, and if we want to stop we must do all we can we can to win the have-have not war, permanently.

    So, summing up, I’m proposing a mix of methods and a phased to lift 99% of Americans, and also to create greater and lasting economic equality by using a booming economy, energy and environmental sustainabilty, predistribution, redistribution, and law enforcement. Put simply, legal economic, social, and political justice all around, made possible in large part by MMT ideas about how the economy works. Can we stop fighting, and agree on that?

    1. Dan Kervick

      Joe, I agree with much of what you say here. But what you are talking about are a whole host of social and economic ills that need fixing. What Randy specifically purported to address was the topic of what to do about inequality, and I don’t think he comes up with anything even remotely convincing. He says he is for “predistribution” measures. Well, many people have discussed such measures elsewhere. They are sometimes thought to include such things as salary caps. Does he defend them? What specific predistribution proposals does he have in mind? He briefly mentions the topic, but puts nothing on the table and spends the bulk of the piece in a long diatribe against taxation.

      They he crosses over into total unseriousness with his red herring about about jailing 1% bad guys. Bill Black helped through thousands of crooked bankers in jail back in the 80’s and I haven’t noticed any impact on inequality, which has soared to stratospheric levels during the 80’s, 90’s and 00’s. What Black did was great. Enforcing the rule of law and eliminating bankster impunity is great and necessary. But enforcing the rule of law to promote financial stability is one thing; fighting inequality is another. They are separate issues.

      I get the impression that Randy thinks this whole inequality craze breaking out is just a big distraction he wants to nip in the bud. The piece was written in a flippant tone which suggests little serious thought on the issue of inequality, and nothing but impatience with the main ideas for doing something about it. Now maybe that’s fine. Not every economist has to think about every issue, and Randy’s specialties have been financial instability and employment. But then he shouldn’t throw out some half baked stuff and try to convince us MMT now has an “inequality plan”.

      Why is MMT turning “no new taxes” into a policy fetish? It’s like they’re back in the days of Reagan, Laffer and Bush Sr. The constituency for raising taxes on the rich is much larger than the constituency for, say, minting a platinum coin. The fastest route to getting more social spending is to convince people to raise taxes on the rich. This isn’t some pie-in-the-sky fantasy about doing things that have never been done. It’s a plan for undoing the effects of neoliberal tax policy and returning to policies that actually existed during the lifetimes of most Americans now alive.

      I don’t think anyone will ever be able to convince sober US policy makers to pay for a large expansion of government by simply creating balances in the treasury general fund and spending them. Hardly anyone is going to be convinced that that is a responsible approach to monetary policy. You couldn’t defend that approach in a Congressional hearing against competent professional economists, and neither could Warren Mosler. Mosler has a grand total of two peer reviewed articles, both co-written with someone else. Neither contains an economic model or any econometric analysis. When the tough questions came, all we would get is some hand-waving, some generic talk about tax-driven money and bank operations and Mosler’s personal opinion that demand-pull inflation is hooey. His “buffer stock” mechanism has massive holes in it, as does the idea that the government somehow fixes the prices of things by the prices it pays its suppliers.

      1. Lambert Strether

        Had you given consideration to reading the post completely? This is at least the second case I know of where you haven’t. You write:

        Why is MMT turning “no new taxes” into a policy fetish?

        Because it isn’t? (Leaving aside the point that MMT can’t, but MMTers can.) Wray writes:

        As I said in the first instalment, we don’t need taxes for revenue. We can justify taxes on the rich not for revenue purposes but as sin taxes. Look at it this way. Let’s raise sin taxes on the rich to reduce the sin of ill-gotten gains.

        How high? 100%? Nay, 1000%. Take everything: all their income, all their wealth, the house, the car, the dog. Don’t let crime pay.

        If that’s a fetish against raising taxes, it’s a weirder fetish than any I’ve ever seen. Now, Wray does claim that raising taxes won’t work, because the rich will evade them, but that’s a different claim, and it’s not the claim you say is MMT’s fetish.

        And finally, very interestingly, you write:

        The constituency for raising taxes on the rich is much larger than the constituency for, say, minting a platinum coin.

        I’m very glad you think that. Because the constituency* for predistribution programs like Social Security (or infrastructure, or free schooling) is far greater than the constituency for the redistribution programs that you advocate. That’s because they deliver concrete material benefits.

        Game, set, and match to Wray!

        NOTE * Let me just go back to the comment where I introduced the “constituency” term and argument on this thread — the comment you called…. What was it? Ah, I have it! “Knee jerk” –and see if you refuted any of it. No. And of course not. How could you have? You adopted it! [Tweaked formatting.]

        1. Nathanael

          I read it. Randy Wray’s post is puerile — actually infantile. Wray claims that we can’t tax the rich because they’ll bribe Congress to not pay taxes, but then Wray fantasizes that we can somehow organize workers’ coops and jail the rich — without them stopping us by, yes, bribing Congress.

          Randy Wray isn’t even playing a game. He needs to go back and learn something.

        2. Dan Kervick

          This notion of “sin taxes” presupposes that all of that income is “ill-gotten”. Why believe that. Inequality isn’t a consequence of the fact that something has gone wrong and the predators have stolen all their wealth. But they haven’t. Or at least that’s not the major factor. All that happened is that when we stopped taxing as much of their wealth and income away as we used to, and stopped helping labor fight for a healthy share of it, the wealthy started accumulating great heaping gobs of additional wealth and built a new world of stark social division and concentrated capital power.

          1. Calgacus

            No, Dan, the overwhelming major factor IS a sort of theft. Unemployment. Insane theft of the human right of a job in a monetary society. Demanding something from people which they would be happy to give, but preventing them from obtaining it: State Money. And taxation has to be hiked carefully in countries run as idiotically and unjustly as is the fashion, because making money less obtainable among the rich will make it less obtainable by the poor. Tax hikes simpliciter can just increase unemployment, inequality and misery, contrary to Good Intentions of the mathematically and economically challenged.

            Progressive taxation is dandy. But more progressive taxation was NOT the major factor. It just made implementing good policies easier. Unemployment is more important than everything else put together.

      2. craazyboy

        Bill Black didn’t get enough of them. He just worked on the fallout of the S&L crisis.

        In parallel we had the emergence of the “junk bond financing Kings”. This morphed into the current “private equity” crowd. This is basically predator finance and probably is the easiest area of the finance world to demonstrate how wealth inequality grows.

        But that would take a paid economist to spend the time researching it and still be able to eat while doing it.

      3. Joe Firestone (LetsGetitDone)

        Joe, I agree with much of what you say here. But what you are talking about are a whole host of social and economic ills that need fixing.

        Actually, I was talking about a political strategy that would be effective in tackling inequality. The strategy does more than that, of course. It also lifts the economy and solves lots of other problems. But, so what? The issue is can you address inequality effectively without addressing these related issues? I don’t think you can because if you try your ship will founder on various very large political boulders.

        I’ve got much more to say about your reply, but I have to run now.

      4. William Neil

        Dan I appreciate your comment here on this strange leaning against taxes in Wray’s argument. Doesn’t some of this flow from the deep structural argument of MMTers that fiat money creation by a nation’s central bank which issues its own currency is almost unlimited, especially under Great Depression and Great Recession circumstances? That what was done without inflation to rescue the banks could be done for job creation, infrastructure renewal, and a whole new alternative energy regime, including a new grid? So why fight these very difficult battles in having to raise the money as one goes – or at least some of the money since deficits don’t have the doomsday meaning in MMT that they do in neoliberalism’s austerity programs (and dare I say family budgets and state budget balancing imperatives…) .
        Seems pretty clear to me. And so is the current reality; that Krugman hasn’t been able to win in public policy circles an endorsement of sustained deficit spending to pull the economy out of its sluggish stalemate, under more conventional Keynesian arguments, and is clearly not ready to endorse the much more explicit heresy of MMters…

        Of course Randy can clear this up with a paragraph or two. But that’s my take on the sources as of now.

      5. Joe Firestone (LetsGetitDone)

        . . . What Randy specifically purported to address was the topic of what to do about inequality, and I don’t think he comes up with anything even remotely convincing. He says he is for “predistribution” measures. Well, many people have discussed such measures elsewhere. They are sometimes thought to include such things as salary caps. Does he defend them? What specific predistribution proposals does he have in mind? He briefly mentions the topic, but puts nothing on the table and spends the bulk of the piece in a long diatribe against taxation.

        Randy proposes workers’ coops and Job Guarantees above. He’s discussed the JG frequently in other posts. Why does he have to repeat here. On coops he records his agreement with Richard Wolff and links to his article. What more is necessary?

        He crosses over into total unseriousness with his red herring about about jailing 1% bad guys. Bill Black helped through thousands of crooked bankers in jail back in the 80′s and I haven’t noticed any impact on inequality, which has soared to stratospheric levels during the 80′s, 90′s and 00′s. What Black did was great. Enforcing the rule of law and eliminating bankster impunity is great and necessary. But enforcing the rule of law to promote financial stability is one thing; fighting inequality is another. They are separate issues.

        They are certainly not separate issue, Dan. I can’t believe you wrote that. First, Bill helped put 1,000 away according to him. If I recall correctly, he also said that the earlier crisis was much smaller in scope than the current one, and that if the conviction rate were similar to the savings and loan prosecutions, there might well be 70,000 convictions out of this one. I think it’s pretty clear that 70,000 banksters in orange jump suits would have a major deterrent effect on bank executives currently that would promote both financial stability in the future and promote greater economic equality by driving the bank executives back toward doing lower risk safe business that would drastically reduce their bonus income, and also, perhaps, make their excessive salaries less affordable for the banks.

        Second, enforcing the law against the banksters would also make clear that equality before the law does exist in the United States. This would make it much less likely that banks and other large corporations would continue to fleece consumers using various illegal and questionably legal schemes. An end to this fleecing would slowdown and in some cases prevent, the transfer of financial and real assets from individuals to these corporations, thus promoting greater equality.

        Third, a fearsome demonstration of equality before the law would affect the cultural background of all financial transactions and emphasize the importance of seeing to it that these transactions are legal. That too will strengthen the hand of regulators and legislators who want to see to it that deals between corporations and consumers are both fair and legal. That too, will slow down the transfer of wealth to the 1%.

        I get the impression that Randy thinks this whole inequality craze breaking out is just a big distraction he wants to nip in the bud. The piece was written in a flippant tone which suggests little serious thought on the issue of inequality, and nothing but impatience with the main ideas for doing something about it. Now maybe that’s fine. Not every economist has to think about every issue, and Randy’s specialties have been financial instability and employment. But then he shouldn’t throw out some half baked stuff and try to convince us MMT now has an “inequality plan”


        I don’t think he said MMT had a plan to foster greater equality. What he said, is that redistribution doesn’t work. As you from my reply above, I don’t entirely agree with him or Rick Wolff. I think both are giving up too easily because of the successful reaction against earlier progress of liberalism and progressivism. I think that learning from previous mistakes and being eternally vigilant can make progressive tax reforms work well to help maintain lower degrees of inequality if we can get back to those. However, that aside, I agree with Randy that there is no need to tie jobs and other programs designed, in part, to lower inequality, to either taxation “pay fors,” or debt financing. Insisting on “pay fors” only makes the task of legislating programs for the 99% more difficult that would be the case if we did not raise taxes along with establishing these programs. So, why should progressives shoot themselves in the foot. I say prosecute and lift up first, then when potential inflation threatens and you have a real policy justification lay on those inheritance and income taxes.

        Why is MMT turning “no new taxes” into a policy fetish? It’s like they’re back in the days of Reagan, Laffer and Bush Sr.

        I don’t see MMT creating a fetish out of this. We’re just pointing out that the politics is easier if separate the issues. You may disagree about that, but it’s certainly a reasonable point of view, and doesn’t suggest a fetish.

        The constituency for raising taxes on the rich is much larger than the constituency for, say, minting a platinum coin.

        That’s true, but that’s because the progressive side advocates for that and doesn’t even mention the platinum coin. The constituency for the platinum coin might well be larger in the future, if the President just fills the public purse and starts to quickly pay off the debt and to advocate for PCS-backed deficit spending benefiting the 99%

        The fastest route to getting more social spending is to convince people to raise taxes on the rich. This isn’t some pie-in-the-sky fantasy about doing things that have never been done. It’s a plan for undoing the effects of neoliberal tax policy and returning to policies that actually existed during the lifetimes of most Americans now alive.

        We disagree about this. The fastest route is for the President to make the $60 T platinum coin and the reserves it will bring to the TGA a fait accompli, and then for he/she to immediately advocate for deficit spending needed to create full employment, and solve our many other problems. The reason why this is the fastest way, is because getting rid of neoliberal fiscal policy will never happen until a political movement creates the demand necessary to get that through Congress. But, that movement will only gain strength if people come to believe that Government spending for full employment and other needs absolutely must happen. And, once they believe that, it will also become clear to the President that she/he need not wait for Congress to respond to the demand for spending by legislating both spending and the taxes to pay for it, because the President can greatly ease the process of legislative appropriations by filling the TGA with reserves first, and using them initially to pay down debt.

        Also, just because something has never been done doesn’t make it a pie-in-the-sky fantasy. Most liberal and progressive reforms had never been done before they were done for the first time. In making the argument you just did you’re just restating a classical conservative argument about why we shouldn’t attempt to do anything knew. It’s ridiculous for a progressive to make such an argument.

        I don’t think anyone will ever be able to convince sober US policy makers to pay for a large expansion of government by simply creating balances in the treasury general fund and spending them. Hardly anyone is going to be convinced that that is a responsible approach to monetary policy. You couldn’t defend that approach in a Congressional hearing against competent professional economists, and neither could Warren Mosler.

        The sobriety of US policy makers is greatly exaggerated, though their pretense at sobriety is unbounded. But, sober or not, the PCS proposal is about fiscal policy, not monetary policy, and whether or not it is seen as responsible will depend on the political context in which the President resorts to it, and the use the President makes of the funds. If the President responds to a debt ceiling crisis with the $60 T coin it will be viewed as responsible if the action saves a default; and if not right then it certainly will be seen as responsible as soon as the President pays down a few Trillion dollars using the reserves from the coin.

        As I’ve made clear in my writing, paying down debt using those reserves would be no more inflationary then rolling over the debt with new issuance would have been. So, when people see the debt go down and no change occurring in the rate of inflation any remaining credibility for the charge of inflation will be gone.

        In addition, Congressional hearings on the use of the coin might or might be held. Whether they are depends on whether the Republicans will retain a majority in one the chambers and be able to call them. The Democrats certainly won’t do that if their president in the White House.

        But even if there were hearings, I really don’t think a team of Jamie Galbraith, Warren Mosler, Randy Wray, Stephanie Kelton, and Scott Fullwiler would have much problem defending the placing of $60 T in reserves into the TGA against the likes of Douglas Holtz-Eakin, Greg Mankiw, Paul Krugman, Laura Tyson, Janet Yellen, or any other neo-classical economist who wanted to offer criticisms. Sure, the neo-classicals would give the Congressional critics lots of ammunition against the Administration; but the MMTers and Jamie, would defend pretty well, and once the public sees that debt disappearing without inflation resulting, that would be it for the irresponsibility BS as factor in elections.

        Mosler has a grand total of two peer reviewed articles, both co-written with someone else. Neither contains an economic model or any econometric analysis. When the tough questions came, all we would get is some hand-waving, some generic talk about tax-driven money and bank operations and Mosler’s personal opinion that demand-pull inflation is hooey. His “buffer stock” mechanism has massive holes in it, as does the idea that the government somehow fixes the prices of things by the prices it pays its suppliers.

        First, Warren would have the support of the others, all academic economists with plenty of publications. Second, the buffer stock theory is Bill Mitchell and Bill is a very good academic economist, with whom both Warren and Randy have explored the buffer stock theory. Third, Warren’s really brilliant; all the others I’ve named really think so, and his common sense wrap is very plausible. Finally, he’s unflappable, and knows his theory very, very well. So, I think you’re way underestimating him and his ability to persuade others.

  29. mellon

    Where have these people been the last 20 years?

    Now I am no expert, but reading your suggestions, it seems to me that MANY of these suggestions – especially the ones which involve public services, would clearly discriminate against multinational corporations – running afoul of trade agreements like GATS, TISA, TPP, etc.

    Discriminating to pay back a debt may be less FTA-illegal than discriminating in contract awarding but it also might be ripe for challenge before the WTO, and I doubt if a country like the US would want to risk their whole trade strategy and potentially get socked with a multibillion dollar (or euro) fine from the WTO.

  30. Step 1 Put their heads on sticks

    Huh. One of the most toxic threads. It’s not toxicity, it’s just the frustration of incomplete deprogramming. Anytime people start talking tactics the same thing happens – people can’t stop thinking about electoral politics, and soon everybody’s telling everybody else, That won’t work. And you’re right, of course, all of you. Anything related to electoral politics, if it’s any good, it won’t work. This is America, the land of bullshit fake democracy.

    This commenter was taught, when specifics prove divisive, you back up to generalities on which everybody can agree. It so happens, this work has already been done for you. By the entire world. Good solid work. And it’s not just a good idea, it’s the law.


    To justify full sovereignty, a state has to adopt and demonstrate compliance with said law. When people start quoting chapter and verse on relevant duties of the state, it becomes evident that this state has no reason to exist. It’s Transdniestria with nukes. Why bother to make demands to this shit regime? Go over its head to institutions with legitimacy. You’ve got access to an international normative and institutional framework that runs circles around AEI or Cato or Petersen Institute. And percolating all around is more civil society than you can shake a stick at,

    etc. etc.

    Then you’ll be ready when this state fails and falls apart.

  31. masterslave

    Nell : “” They are no longer fit for purpose and should be legally culled “”

    That is , of course , precisely what they have in mind for the socalled 99% . The great game is on – who is going to win the culling competitions ? Do you care to make a bet ?

  32. masterslave

    Mellon : “” the whole concept of some people being worth more than others will become more and more difficult to justify because machines will just do almost everything better and cheaper and faster than almost everybody “”.

    In a future where machines are substitute humans , you would find that some machines are indeed worth more than others because of market pricing factors such as supply , demand or even fraud . Meet the new reality , same as the old reality . Our problem as human beings is not to make sure that someone else does not get a bigger piece of pie ( worth more ) than ourselves , but to make sure we get our ” fair share “. Since you are a unique being , there is no quarantee that you will want or need as much of any particular pie as some other unique being . There is no universal equality . The question is one of ” fair share ” which may or may not be an equal amount – it would depend on various market factors also .

  33. masterslave

    Dan Kervick : “” But inequality in Europe is much less awful than inequality in the US “”

    Apparantly . It is a worldwide consensus that the majority of americans are ” woefully ignorant ” per Brezinski . Also , the USA apparantly has more world champion financial crooks than other countries .

  34. masterslave

    Vicky Else : “” The only proposal that matters right now is how it will be possible to radically change the power structure “”

    Exactly . Political power and wealth generally go hand-in-hand . Any serious redistribution of wealth would inexorably involve a redistribution of power . The wealth of our rulers and their power structures are awesome . ” Fair ” ( or maybe equality ) is not really in their vocabulary . The little people ( 99% ) must eventually realize how dead they will be if they do not come to grips with reality and solve this power and wealth distribution problem correctly . The elites cannot solve it for them ; their solution will be a culling .

  35. masterslave

    Moneta : “” the collective consciousness is still off but growing.””

    An essential glimmer of hope . There are still many americans whom do not quite realize that their preferred individualism cannot stand against our rulers highly sophisticated collective known as a plutocracy – or kleptocracy .

  36. masterslave

    Dan Kervick : “” the rungs of the social ladder are so far apart that nobody can climb from one to another.””

    The rulers ( NWO cabal ) are knocking the rungs out so fast that it makes you wonder if they were ever really any rungs there to begin with .

  37. Tyler

    Inequality would reduce if we got unemployment down to 1940s levels. Workers would have so much more bargaining power.

    1. washunate

      FYI, you might want to read up about the ‘bargaining power’ that workers had in the 1940s. I’m not sure the actual situation is what you mean to imply. The US instituted everything from rationing to strike prohibitions to wage caps to the draft in the 1940s.

      Indeed, today, decades later, we are still burdened by two of the more onerous developments, the Selective Service System and employer-based health insurance.

  38. Nathanael


    If, politically, you can’t tax the rich, then you can’t use the ballot box to reduce inequailty in any other way either.

    Mr. Wray: are you calling for revolution? If so, don’t be coy.

    If not, shut up and let us try the only thing which has ever worked for reducing the power of the rich through elections — taxes.

    1. Nathanael

      Here’s another way to put this.

      You call for the rich criminals to go to prison.

      It’s much, much easier for them to buy their way out of prison through bribing Congress and judges than it is for them to buy their way out of paying taxes. This is proven by history. Al Capone couldn’t be convicted of his actual crimes, but was caught for tax evasion. It’s hard to prove criminality to a judge’s and jury’s satisfaction — it’s easy to prove that someone has made a big pile of money and needs to pay tax.

      So if it’s politically impossible to tax them, then it’s also politically impossible to imprison them. At which point you need to call for revolution, or rethink your assumptions.

  39. Jon Fenelon

    I have not read all those comments, but a perusal suggests are all very serious. Whatever it is you decide to do- increased taxes or spending- you had better prepare for the appropriate political support. We live in the era of Citizens United. So if you decide your primary attack will be taxes, sin taxes or not, to address inequality, be aware those wealthy can spend hundreds of millions to defeat you and they can buy whatever elections they need to. And they can do this indefinitely.

    That suggests to me that we need to start on the spending side, on those things the public believes needs to be done, like infrastructure , VA improvements, unemployment. And we must concentrate on that and not wars like in Ukraine. Taxes are best left to the side. This will be a hard lift no matter which way it goes.

    MMT makes a lot of sense to me. It is also tough to get accepted, but that is another issue we must address.

  40. RNOLD

    “The Federal government cannot simply create all the dollars it wants and spend them without blowing up the currency.” I do not think this is correct, you completely miss where they spend the money…is all the cash that disappears in military adventures blowing up our economy? I think not..

  41. Jim Tucker

    “And give jobs to the rest.” This line gives me pause.

    As long as the culture thinks that jobs are given, it’s still a plantation and the 1% will always be in charge. We could jail all the bankers (which would be reason for a new national holiday) but a new group of rentiers, one that cooperates and uses finance and money as weapons would simply take it all away again from those who are, like today, essentially unarmed.

    In the 1950’s, a group of people in Spain under the dictator Franco thought about the same thing, but instead of thinking they would be “given” anything created their own study group, and learned the Rochdale Cooperative Principles, and enough technical engineering to build things. They then borrowed money from their neighbors, bought a small paraffin stove mfg plant and began the process of “taking” the wealth, the only way wealth is ever acquired.

    Today they are the Mondragon Cooperatives in the Basque region of Spain, with their own university, bank, and jobs. Wiki shows Revenue of 14.081 billion € (2012), and 80,321 employees. The entire operation is owned by the 99%. Their economics have been considerably better than even those in the country around them.

    The government can (and should) tax the wealthy the amounts they were being taxed when we were the most prosperous, because that serves as one of what should be a system that prevents a 1% from taking everything. They will, you know, because they don’t care about anyone else. They don’t even think about anyone else. Like Democrats, Republicans, and Hitler, they only care about winning, and think that excuses everything.

    The other side of this, however, is that if one wants to take over the assets and KEEP them, and run them, long-lasting, sustainable, and overwhelming power can only come from gaining knowledge and learning to cooperate, not wielding torches and pitchforks, and certainly not by just taking it from one hand and dumping it into another.

      1. Calgacus

        Right, Lambert. What Jim should understand is that a modern state is just one big worker cooperative already. It’s just that some of the animals on the farm have decided that they are more cooperative and equal than the others, because they understand how the cooperation system = money works, and they use it to fatten themselves and starve the others.

        Jim Tucker:the process of “taking” the wealth, the only way wealth is ever acquired. This is not the only way. The better way or better way of expressing the idea is “creating the wealth by your own work. ”

        A JG is the whole society giving jobs to or taking jobs from itself. Which is how it has always worked, the only way it could work. It’s just that a society with a JG is one that realizes this, one where everybody understands this trivial observation. A society that runs itself the way every human social enterprise is run, with the sole exception of whole countries that use money, the only place where unemployment is seen.

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