Why I Am Not Wildly Enthusiastic about Sanders’ Plan to Tax Amazon

By Lambert Strether of Corrente

Here is a summary of the Sanders’ “plan” (which I put in quotemarks for reasons I’m about to explain). Common Dreams:

To Force Billionaires Off Welfare, Sanders Tax Would Make Corporations Fund 100% of Public Assistance Their Low-Paid Workers Receive

Declaring that this ever-growing gulf between the obscene wealth of top executives and the poverty wages of workers—which is hardly unique to Amazon—is morally unacceptable, Sen. Bernie Sanders (I-Vt.) announced on Friday that he will introduce legislation next month that would impose “a 100 percent tax on large employers equal to the amount of federal benefits received by their low-wage workers” in an effort to pressure corporate giants into paying a living wage.

Under the new legislation, “if an Amazon worker receives $300 in food stamps, Amazon would be taxed $300,” the Vermont senator’s office noted in a press release. The tax would apply to all companies with 500 or more employees.

So — and I really didn’t expect to have to put on my yellow waders here — I went to the links supplied for the “press release” by Common Dreams. Turns out the link is to a Tweet. Here is the Tweet:

The tweet — oddly, not from a Sanders staffer, so what was Common Dreams thinking, here? — contains two screenshots of the putative press release, but no link to the actual press release. So I Googled for the first sentence: no joy, as of August 26, 1:31:40PM (here; here). At the same time, I checked the Sanders Senate site’s for a press release; the last press release is on August 13. Finally, I searched the Sanders site for “Bezos”; again no joy. In fact, what we have is an online petitition, a Facebook page, and a video on Facebook and Twitter. Let’s look at each of those in turn, to see what we’re dealing with and to get the current state of play on the record:

First, here is the petition, in its entirety:

Mr. Bezos: It is long past time you start to pay your workers a living wage and improve working conditions at Amazon warehouses all across the country. It is beyond absurd that you would make more money in ten seconds than the median employee of Amazon makes in an entire year.

Meanwhile, thousands of Amazon employees are forced to rely on food stamps, Medicaid and public housing because their wages are too low. I don’t believe that ordinary Americans should be subsidizing the wealthiest person in the world because you pay your employees inadequate wages.

Second, the Facebook page, also in its entirety:

I am introducing legislation on Sept. 5 to demand that Mr. Bezos, the Walton family of Walmart and other billionaires get off welfare and start paying their employees a living wage. Our legislation gives large, profitable employers a choice: Pay workers a living wage or pay for the public assistance programs your low-wage workers are forced to rely upon.

The greed of the billionaire class is having an horrendous impact upon our economy and the moral fabric of this country. Together, we’re going to change that.

Third and fourth, the videos, both on Facebook, which sadly I cannot embed (thanks, Mark), and Twitter, which I can:

In relevant part:

Meanwhile, Mr. Bezos continues to pay many thousands of his Amazon employees wages that are so low that they are forced to depend upon taxpayer-funded programs such as food stamps, Medicaid and subsidized housing in order to survive. And you know who pays for those programs? You do.

So it appears we do not have a “plan”; we have a plan to have a plan. We do have an example of the Sanders “digital media empire” in operation, and very effectively, too, given that the Sanders media operation has induced the normally sensible Common Dreams (and the Daily Beast, too) to treat an unsourced screen dump as a press release, and no, it’s not OK when “our guys” do it. I know actually wanting to see a concrete, fleshed out proposal[1] is Boomer oldthink, but holy moley!

* * *

Well. I certainly didn’t think I’d have to start off what I had intended to be a short post with a media critique, but that’s where we are these days. Let me now turn to the problems with Sanders’ plan to have a plan. There are three defects in the idea as presented:

1) The framing reinforces the notion that Federal taxes “pay for” Federal spending, so Sanders traps us in the austerity box;

2) The framing turns public assistance into a public-private partnership, since Amazon would now pay its “fair share” (my shudder quotes);

3) Even if you accept the “pay for” model, only cost of the services conveyed is covered, so the government would still be subsidizing Amazon for administrative costs.

Let’s look at each of these defects in turn.

Federal taxes do not pay for Federal spending, nor do taxpayers.. It is not true, as Sanders says, that “you pay for it.” You don’t. (I’ve helpfully underlined the places where Sanders reinforces this falsehood.) I won’t rehash the fact issue here, since most NC readers are familiar with the debate, but see “Taxes For Revenue Are Obsolete,” Beardsley Ruml, 1946; Ruml was Chair of the Federal Reserve. Unfortunately for us all, the implications of Sanders’ framing are horrific, whether for the left, or liberals of good faith, if any. Joe Firestone at NC on fiscal myths in campaign 2016:

The process of using fiscal myths to undermine Senator Sanders’s message has already begun with an attack by Laura Meckler of the Wall Street Journal on key elements of his program.

The attack was easily turned aside by progressive supporters, such as Gerald Friedman, who showed that the fiscal proposals being criticized as “fiscally irresponsible” were sure to net save at least $5 Trillion, rather than cost $18 Trillion over a decade, as the WSJ was claiming, because they would replace current expensive programs, and deliver huge out of pocket savings for Americans. His views were particularly effective because the WSJ had relied on his study for the data informing its critique.

Apart from Friedman’s decisive critique of Meckler’s article other notable instances of progressive pushback came quickly from James Kwak, Robert Reich, Joshua Holland, Matthew Yglesias, John T. Harvey, (who alone brought a Modern Money Theory (MMT) perspective to the debate), and John Geyman.

An important characteristic of the defenses of the Sanders agenda, with the exception of John Harvey’s, is their emphasis on the point that we can afford Bernie’s agenda because it pays for itself with increased tax revenues from various sources. These defenses are within the neoliberal framework and reinforce that framework. They pay silent homage to the fiscal myth that the Government can only get money to pay for programs by taxing or borrowing, and that this is important because the Federal Government, like a household, a State Government, and all private organizations have Government Budget Constraints (GBCs).

Attacks on other proposed fiscal policies on the Senator’s agenda in the infrastructure, climate protection and job creation areas are sure to intensify in the coming weeks and months as these policy proposals get increasing exposure and scrutiny. Critics will say that the likelihood is high that policies in these areas, will require substantial deficit spending, and increases in the national debt, and also that deficit reduction and deficit neutrality should be targeted as the first principle of responsible fiscal policy outweighing all other considerations.

But this assumption belongs to a constellation of fiscal myths that are all false. Nonetheless, as Campaign 2016 develops, faux fiscal responsibility deficit and debt memes, fueled by a chorus of think tanks where the Very Serious People (VSP) sit and talk only to one another, will take center stage in political debates. At that point, mainstream critics in the media will use these myths to whip the Sanders proposals unmercifully as the ravings of a “pie in the sky” “socialist” who knows nothing about public finance and the need for fiscal responsibility.

As indeed they did. The “fiscal myth” that taxes pay for Federal spending is already being used to attack #MedicareForAll. When Sanders asks and answers “You know who pays for those programs? You do,” he’s teaching an entire constituency a falsehood that actively works to undermine working class interests in universal concrete material benefits! Why on earth would Sanders do this?[2] To the next points, which are shorter–

2) Public assistance should not be framed as a public-private partnership. Follow the money. Under the Sanders plan — leaving the morality of “greed” out of it — Amazon “pays back” the government $300 (say) for the Food Stamps the government gave its employees, so that they can survive on the miserably inadequate wages that Amazon pays. In other words, Amazon and the goverment have become partners in provisioning the working class such that its members can reproduce their labor power. Surely this means, in principle — and I know that legislation would have to be introduced for this to happen — that Amazon could reduce its share of Social Security matching, and have the government make up the difference there?[3] Why not? Suppose Amazon wants to start “reforming” Food Stamps, on the grounds that, as a partner, it should be getting value for the $300 it spent?

3) The Sanders plan is still a subsidy. Conveying goverment services to citizens has adminstrative costs. So — assuming for the moment that Federal taxes do indeed “pay for” Federal services — the $300 in Food Stamps that Amazon “reimburses” the government for should be marked up to reflect those costs. That seems like a careless, sloppy omission (unsurprising, considering the process through which the plan to have a plan was released).

* * *

To cure these defects, Sanders — and I do hope some staffer is reading this — should do the following:

1) Make sure the false idea that Federal taxes “pay for” Federal spending is not enshrined in legislation, even in the preamble. Contact Stephanie Kelton if you don’t believe me;

2) At least, for pity’s sake, de-emphasize that false idea in campaign materials;

3) Frame “the greed tax” as openly punitive (removing the “pay for”/reimbursement aspect entirely);

4) Make Bezos suffer more; I suggested triple damages; Yves thinks that’s the right number.

Of course, this leaves aside the whole question of whether the tax system can be used to achieve the desired effect; but that is a topic for another day. Oh, and from the 30,000-foot level, the Sanders idea would apply to other ginormous malefactors, like Walmart. And Sanders is going after individual corporations, like Disney. I like that, too. But if the left is to become “the party of ideas,” as seems to be happening, those ideas need to be fully worked!


[1] It’s worth noting that Sherrod Brown (D-OH), with whom Sanders has a legitimate beef (see also), had a similar concept, which he called the “Corporate Freeloader Fee.” From Brown’s 77-page white paper, “Working Too Hard For Too Little: A Plan for Restoring the Value of Work in America” (PDF), pages 44-45:

Some forms of employee marginalization, such as wage theft, anti-unionizing efforts, and unpredictable schedules will be addressed by the improved labor standards described above. Raising the minimum wage to $15 an hour will help lift millions of American out of poverty, and requiring part-time workers to get the same access to retirement plans as full-time employees could increase savings for millions of workers. But it is possible that through the denial of hours or other means, employers may maintain policies that keep their employees impoverished. In these instances, the companies are not investing in their employees and instead are relying on taxpayers to subsidize the cost of their workforces. Taxpayers should be reimbursed for subsidizing a company’s workforce through a fee, called the Corporate Freeloader Fee here. The fee would be based on the percentage of staff earning wages less than 200 percent of the federal poverty rate for an individual person, or $23,760 for 2016. The fee would be assessed only on employers that have paid $100,000 in payroll taxes a day for 180 days in the last year,266 and it would be scaled based on the percentage of a company’s workers below the poverty threshold. For example, a fee of 25 basis points of total payroll would be levied on employers with 25 percent or less of their workforce earning wages at the poverty level or lower. The fee would increase to 50 basis points for companies with between 25 percent and 50 percent of their workers earning less than poverty Clevel wages. The fee would be 75 basis points for employers with between 50 percent and 75 percent of employees earning less than poverty level wages and 100 basis points for more than 75 percent of employees and above. Companies could reduce their fees by 25 basis points if they provide healthcare benefits and make employer contributions to retirement. Conversely, companies that are already providing decent wages to their employees and are dedicated to staying in the U.S. should be rewarded.

To be unfair, I gotta say this strikes me as yet another liberal attempt at “problem-solving” through an insanely complex rejiggering of the tax code. Sander’s plan-to-have-a-plan of moving $300 out of Jeff Bezos’ pocket back into the government’s is a lot simpler to understand and explain. To be fair, Brown does attempt to address the fundamental issue — the power imbalance between workers and owners — with improved “labor standards.” To be even more fair, the words “monopoly” and “monopsony” don’t appear anywhere in Brown’s white paper. Since Amazon isn’t profitable — except for AWS — why not just turn the marketplace into a public utility? Neither Brown nor Sanders want to go there, however.

[2] It may be that here we have a case of the old adage that “science advances one funeral at a time.” Younger candidates like AOC are more receptive to ideas that reflect the real operations of the economy.

[3] Taxes do not have to pay for spending to make this problematic. Follow the logic to its conclusion, and you come to the idea that Amazon shouldn’t pay any taxes at all. Oh, wait

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. allan

    How could such a law come up with an ironclad definition of “workforce”?
    What about contract workers, who are not direct employees?
    Or workers at subcontractors up the supply chain? Or contract workers at sub-sub-contractors. Or …
    This can of worms looks like a full employment act for lobbyists and tax and employment attorneys.

    Instead, just raise the corporate rate to 50%, with no exemptions or deductions.

    1. jrs

      Yea tax the rich and support a safety net, but that’s a principle, and this is a gimmick. It’s a talking point masquerading as legislation, not that talking points aren’t useful, but they aren’t legislation.

      Making contract workers employees like any other, with all that limited protections that implies (it is still employment at will but it’s subject to overtime law, unemployment insurance etc.) would do more good than this. I mean it would be a real and straightforward non-gimicky law, the logic of which is easy to understand, although of course it can’t be passed now though the current Congress.

  2. jsn

    Anti-trust enforcement action.

    Amazon’s innovation was fully amortized when Bezos had his first hundred million, (can anyone really earn a hundred million?) after that it’s been all unearned rents subject to a power law.

    The distributional IT should be broken up and run regionally as local logistics utilities. In the same way that Uber’s tech could be used publicly to maximize the efficiency of urban living in terms of personal transportation rather than as it does the cash yield of larcenous con-men, Amazon’s tech could provide the same benefit for the movement of goods.

    Reduce copyright and IP protections to reasonable terms.

    When real network innovations recoup some multiple of their developmental costs or reasonable terms for IP expire, turn them into utilities.

    The second hundred million is an indicator of political dominance of markets.

    Each of these principals lead to all kinds of progressive policy options.

  3. Larry Goldsmith

    Wouldn’t it be easier, and no less politically feasible, to raise the minimum wage?

    1. JCC

      My thoughts exactly! Just pay them enough in hourly wage so that they don’t haveto rely on Food Stamps.

      Wouldn’t this just eliminate the whole “how do we pay for it” problem as well as avoid giving these companies, potentially, the “right” to tinker with things like Food Stamps?

      Complicating these battles just doesn’t make sense to me… just pay ’em!

    2. dcblogger

      you are correct. Also, get card check passed and other measures supporting collective bargaining. I had not considered lambert’s point about public/private partnerships nor the question of making complicated what should be simple. Also Amazon would just discourage people from applying for food stamps.

  4. clarky90

    Our NZ government is moving towards the “minimum wage” will be “the living wage”

    We have a (1) Labour (traditional liberal), (2) NZ First (nationalists), (3) Greens (progressive) coalition that is functioning harmoniously.(yes!)

    “The Living Wage has emerged as a response to growing poverty and inequality that continues to hold back so many Kiwi workers, their families and our economy. The Living Wage concept is very simple, yet such a powerful alternative – it’s the hourly wage a worker needs to pay for the necessities of life and participate as an active citizen in the community. It reflects the basic expenses of workers and their families such as food, transportation, housing and childcare, and is calculated independently each year by the New Zealand Family Centre Social Policy Unit.

    The Living Wage rate is voluntary and for 2018 has been calculated to be $20.55 per hour, $4.05 more than the minimum wage set by the Government.”


    “All public service employees to earn at least living wage”


  5. nihil obstet

    Today’s links include the Jacobin article Having the Hard Conversations, which is labelled as “Important.” It describes how organizing is necessary for success in improving worker pay and benefits, and includes the line, “What we needed was to have the private hospital workers — for example, registered nurses who are always very popular — leading the message about why taxes matter.” I understand your commitment to MMT, but I don’t think it will have the practical effect that you envision. Given our leanings towards things we see as benefiting ourselves, people could probably be converted to the idea that nobody needs to pay taxes. That leaves state and local funded services (schools, water and sewer infrastructure, mass transit) in some serious difficulty. And it leaves us struggling to explain that yeah, there do have to be taxes, just not to pay for federally financed things.

    Instead of focusing on “Taxes don’t matter”, I think it would have a better outcome to focus on taxing the hell out of corporations and going back to a 90+% top marginal tax rate.

    1. Jeremy Grimm

      I too was very impressed by the Jacobin article. One trouble with the MMT and taxes argument is the fine point which must not be skipped over — State and Local governments do not control their own fiat currency. Focusing solely on Federal Taxes I must agree with Lambert, technically. But while Lambert is technically correct I am not convinced MMT rhetoric would prove as effective as the argument that Taxes greatly benefit Corporations through the massive Corporate Welfare programs. [Unfortunately even this argument runs into trouble with an assistance program like SNAP since subsidies for Agribusiness played into its design.]

      I think the MMT and taxes argument needs be heard in its own separate forum to avoid complicating an already complex and difficult issue like public subsidies for the poor. [Strange how public subsidies for the wealthy receive so little discussion.]

      1. Jeremy Grimm

        I think taxes on wealth and income must be made highly progressive to eliminate the extreme disparity in political power wealth confers. We can have a society where some people have more than others allowing a difference where the pompous and silly can strut and act important without the power to do the kind of harm they are presently working.

        I am far more concerned with Amazon’s monopoly power than who pays for the meager food subsidy the government offers the poor, including Amazon workers. I am concerned about unjust laws vigorously enforced against efforts to organize and empower Labor while laws against monopolies and Cartels are ignored.

        1. kj1313

          I’m a believer in MMT but I want to return to Eisenhower’s tax rates since money does equal power. Billionaires should not exist. But that does not mean I don’t want to break up monopolies and possibly nationalize industries.

        2. MyLessThanPrimeBeef


          Amazon impacts in various ways. Its concentration of wealth disturbs.

          1. the monetary energy field.
          2. the political energy field.
          3. the consumers energy field.
          4. the workers energy field
          5. the environment energy field (more due to the way it delivers its products)

          It’s like living next to a big giant humongous mass of rock.

          Taxing it seems like a distraction here on Sanders part, next to others calling to break it up.

        3. Hepativore

          I agree with you, but what would your proposal be to stop the problem of corporations or wealthy private individuals moving their assets to foreign countries to evade taxes in the US? The trouble is that many of the national governments in countries that are used as tax shelters are complicit in helping said people set up offshore accounts or hide their assets because of the business it brings them.

            1. Hepativore

              What about also going after obscenely wealthy private individuals like the Koch brothers as they also hide huge sums of money in offshore accounts?

  6. Felix_47

    I agree with the taxation approach. There should be a wealth tax on all wealth. A 1% tax would raise a ton of money. If you have 100 million in stock you would pay a million per year. There should be a 75% tax on all income over a certain amount like 1 million per year. Everyone should pay income tax no matter how poor and it should hurt……not just be a time for a tax credit. Now just half of the people pay income tax and with no skin in the game they don’t vote and they don’t care how the government spends the money. There should be a hefty inheritance tax with elimination of all the gimmicks in the tax code. Why should white and Chinese and East Indian kids inherit tons of money while black and Latino Mexican kids inherit so little? And a stock transfer tax would make a lot of sense. Raising taxes might wake the American public out of its slumber and demand an end to endless war.

    1. False Solace

      > Now just half of the people pay income tax and with no skin in the game they don’t vote and they don’t care how the government spends the money

      Oh great, the “skin in the game” argument makes an appearance and once again it’s factually false. Every worker in the U.S. pays FICA taxes, 15.3% of income, which is totally regressive since it starts at dollar 1. No deductions whatsoever and those lucky enough to achieve a six figure income get to stop paying it. Everyone who works has “skin in the game”. Besides that, for some reason in modern democracies the vote doesn’t depend on one’s income. It’s as if whoever came up with the rules for the voting franchise decided how much tax one pays wasn’t relevant.

      Both political parties are owned by the rich. When a game is rigged, the people it’s rigged against rapidly lose interest in playing. Fix that, then complain about people not voting. Blaming the victim is way easier though.

  7. Inode_buddha

    Nah, I somewhat agree with Lambert. I’ve been saying for years that we need to bring back the 1986 tax reform, specifically harmonize capital gains with labor. Furthermore, you could push to eliminate the corporation tax and estate taxes IF and ONLY IF the conservatives agree that the minimum wage should be the living wage.

    Other issues such as healthcare in the USA can be dealt with separately, IMHO.

    1. jrs

      At best they’ll agree that minimum wage should be minimum wage to live in Kansas or somewhere equally low cost of living, which will already be LESS than the state minimum wages they have many places (and still not necessarily enough to live off of in any large urban especially coastal area – you know where the people and the jobs are).

  8. Don Cafferty

    If the stated purpose is “Mr. Bezos: It is long past time you start to pay your workers a living wage”, taxing Mr. Bezos the amount that his workers get in food stamps does not achieve a living wage for his workers. It simply achieves a “savings” in the food stamps program. The cost to society of underpaid workers is more than the cost of the food stamp program. The proposal by Mr. Sanders reflects lazy thinking.

    1. JTMcPhee

      Or maybe picking a target that can catalyze awareness and debate and maybe enough anger to force industries to stop externalizing labor costs?

  9. Jon Claerbout

    Suppose the Feds required Bezos to double salaries paid, and Bezos did it. Who then would get these double-pay jobs and who would be left without a double-pay job?

  10. ChristopherJ

    be much much easier to legislate for a living wage which is tied to a basket of goods including housing and healthcare.

    but we know that’s not going to happen.

    Good on Sanders for at least trying to frame the debate, even if his solution has the flaws you have described. He knows taxes don’t fund Fed spending, but the MMTers have hurt themselves by the use of the words, modern and theory, and I am looked upon as a conspiracy lunatic whenever I raise the issue with close friends. Even my brother who is high up in Prime Minister and Cabinet laughs at me.

    MMT needs to overcome centuries of indoctrination that taxes do fund government spending. This is why Sanders skips around the edges as he doesn’t want to come across as someone with radical views.

    1. False Solace

      I don’t use the term MMT. I just ask them where money comes from, get them to agree the government is the ultimate source, and then ask how it can ever run out. Hyperinflation and sectoral balances come next but only if they show interest. They still resort to lazy “taxes fund spending” thinking later on, though, so it doesn’t stick for long.

      I don’t think that’s the result of centuries of indoctrination, I think it’s the result of current and ongoing indoctrination, much like the people who blurt out Russia jokes in the middle of something totally unrelated. Too much mass media, not enough critical thinking. In some ways it’s like they’re asleep….

    2. witters

      “Even my brother who is high up in Prime Minister and Cabinet laughs at me.”

      Must be terrible.

  11. crittermom

    With so much being written about how crappy the jobs are at Walmart fulfillment centers (including the low wages, physical hardships of the job, need for food stamps, employees living in cars or campers, etc), evidently there are those who still think they’re great jobs.

    A case in point is the candidate in a tight race for Congress here in New Mexico.
    In his latest campaign ad he touts how he wants to bring jobs here & he will push to get a Walmart fulfillment center to enslave employ people in this, one of the poorest states.

    Unbelievable that he, his staff & supporters are so clueless. *forehead hits keyboard*
    Need I say he’s a Republican?

  12. crittermom

    Good grief!
    I’ll quit posting for today, as my second mistake was in saying it was Walmart.
    No. I’d meant to say an Amazon Fulfillment Center. (Craft show yesterday & I’m obviously burned-out)
    So Sorry!

  13. French75

    Re: Federal taxes do not pay for spending, nor do taxpayers

    It is possible to over-sell this point. (In)directly from Ruhl’s mouth:

    He goes on to explain how, with Federal spending not revenue constrained, the first function of taxation is to regulate the value of the dollar, which we know as regulating inflation

    Budgetary constraints don’t go away, they simply shift focus from deficit to inflation. This means there really is a finite pool to spend without overshooting the inflation target, and (to a first approximation) the size of the pool increases with tax rate.

    There’s another part of this which is that, just as the government can happily run a deficit if NGDP is at or below its inflation target, it must run a surplus if inflation rises too high.

    I am inclined to agree with commenter nihil obstet: I don’t think the “Taxes don’t matter” narrative is going to get us very far. Not only because because it’s not entirely true – see above – but because it is not a strong narrative. Corporate punishment is stronger, but we’ve railing against corporate fat cats for 100 years with little effect.

    One could, with some rather trivial math, cast this whole idea as a tax cut, by lowering the (nominal) corporate tax rate, and including wage-based penalties to shore up the difference. Full adherence would result in a lower tax burden than it stands right now. This is an accounting trick to back up more positive rhetoric, in the end it’s minimum wage by another name, and runs the same potential for loss of employment and so forth.

  14. Anonymous

    Help me to understand this idea where federal spending isn’t based on taxation. If federal spending is money creation, and taxation is “removing” that money, then why does the government sell bonds? Why owe bondholders anything, if to cover next year’s budget we can just create the money? Is it to stabilize the value of the currency?

    1. jsn

      It’s a holdover from the gold standard days when the Fed had to use interest rates to protect gold stocks.

      In our fiat world it is a subsidy to the rich, free money for those who already have it, and isn’t necessary.

      Another one of those institutionalized give aways to the rich everyone just assumes exists for some reasonable purpose.

    2. Woozel

      That’s the million dollar question. Certainly many people in positions of power over the economy genuinely believe that bond sales are the way for the Government to not create money when it spends. They’re wrong. That said, treasury bonds do have an impact on the interest rate. If the Government chose to stop matching bond sales to deficits, it would lose control of the interest rate.

    3. HotFlash

      Old habits die hard. Why are we still stuck with computers that resemble typewriters married to TV’s, cars that are self-propelled coaches, and say that the sun ‘comes up’?

    4. TroyMcClure

      Also the interest rate set for treasuries serves as a baseline for lending rates. Without this floor banks would compete the interest rate down to zero.

      This is why banks are actually public utilities and should be controlled as such.

  15. VietnamVet

    There is so much propaganda and beliefs in play that future consequences are ignored. One big one is the European Economic Community’s “free movement of goods, service, people and capital” which is destroying the Middle Class in the West. The high wages in the USA were due to the scarcity of workers, free public education, affordable healthcare and easily extractable resources. All are gone. Rebuilding America’s Middle Class requires family living wages, free public health and education, affordable shelter, mutual North America defense, aid for the disabled, and resource sharing.

    1. Synoia

      Being the only intact industrial economy after WW II is a better reason, coupled with the Bretton Woods agreement to make the US Dollar the king of the world.

      From what I read the US was a poor nation before WW II.

      1. VietnamVet

        No. The US was a rich country that speculative capitalism brought to its knees. My parents were teenagers during the Depression. My Mom’s family lived on a farm until the Naval Shipyard starting hiring carpenters and my Dad’s father’s business wasn’t foreclosed until the bankers realized that the Depression was over. He then borrowed more money and started a new one. They had enough resources is overcome the shortage of money. WWII kick started the economy with jobs for everyone. The transfer of wealth, offshoring and privatization starting in the 1980s well after Europe and Japan were rebuilt are the cause the current American workers income loss.

        1. jrs

          That’s an anecdote and it’s good your folks did ok. But from everything I ever read about the U.S. before WWII, it was a poor country, or at any rate the majority of people were poor (yes that’s right we are returning to that now, a very similar situation). Nutritional deficiency diseases then were common. Only the welfare state (yes probably and unionization) leads to any sort of capitalism in which the majority are not poor. Or at least ever has in the U.S.. The theme of U.S. history otherwise is the persistence of mass poverty and the impoverishment of the masses, only briefly interrupted.

          1. skippy

            C-Corps started looting in the 70’s after successful political inroads 50’s – 60’s, been down hill since. The unwashed are keep distracted by exceptionalism and constant external threats.

  16. Luke

    Vietnam Vet, I disagree that privatization and wealth transfer were that big as factors in income loss for U.S. workers. (Offshoring industry, yes.) I believe that immigration (legal and criminal both), women pouring into the workplace (both lowering wages since up supply lower the price Econ 101), and ever-increasing gov’t overregulation were all more significant.

    1. VietnamVet

      I include the lack of enforcement of the laws and regulations against corporate hiring of illegal immigrants under the heading “Privatization”. Women entering the workplace in part because it was opening up to them after the War, but also male worker salaries declined with inflation, and women had to go to work to make up for the lost money that their families needed. Now both sexes together don’t earn enough to afford a family.

  17. ChrisPacific

    I do think it makes sense to consider value for money even in an MMT context, if only to counter the “money tree” arguments. Spending government money does have some potentially negative consequences in that it expands the money supply and dilutes existing holders of currency. Ideally the thing it’s spent on should offer enough of a benefit (economic, societal or whatever) to offset that and make the overall transaction a sensible idea. There are plenty of possible spending choices that don’t pass this test – such as, for example, buying up ‘troubled’ assets at fictitious prices in order to prop up TBTF balance sheets and preserve executive bonuses.

    On the other hand, if you have identified something to spend money on that will deliver a good return (be it economic growth, benefit to society, or whatever) then it makes no sense to let availability of money to be a constraint on doing so, at least if you are a sovereign government with your own currency. I think that’s the main point on which MMT and neoliberal/austerity based approaches diverge.

  18. drumlin woodchuckles

    The Sanders proposal gives people a chance to discuss “better plans, real plans”. So that’s good.

    It also puts a spotlight on Amazon’s exploitation of public poverty-support-systems in hopes that the cameras will follow the spotlight, so that’s good too. Especially if the cameras really do follow the spotlight.
    It helps reveal Amazon’s intrinsic ugliness to the world. Here and there, the drip drip of ugly facts is beginning to erode Amazon’s beautiful facade. Here is an article I just ran across indicating how Amazon is feeling it has to respond to the drip drip.

    I still await posters or digital meme-pictures with the face of Bezos photo-shopped into the center of the head of Doctor Evil.

  19. paulmeli

    Understanding MMT leads to arguments for taxation that stem from other reasons than revenue-raising. It is a huge mistake to raise the revenue/funding issue when discussing taxation.

    There are many legitimate reasons to tax the wealthy, but it if progressive policy is important tying taxes to revenue adds a very big hurdle, because in addition to enacting progressive policies we have to fight to raise taxes, which may be the biggest hurdle of all. MMT decouples the arguments so that they can be fought for separately.

    Taxpayers don’t fund anything. “Pay for” is a ruse to keep us from acting on and passing progressive policies.

    The federal government funds everything, including Investment and loans (the banking system was created and is governed by Congress thru the Federal Reserve Act) and investment is made with the expectation that there is money on the table to win. Savings doesn’t fit the bill, drawing down savings is a short-term phenomenon and adds little, if anything to overall spending. The future will always cost more than today. GDP approximately doubles every 10 years. Savings can’t fund that. Only money creation can.

    Even at the local level, where it is accepted that taxes fund spending, it is not strictly true. Before any tax can be collected Income must be spent. Income that funds local/state taxes is generated by federal, investment and borrowed spending. At the local/state level spending almost always precedes taxation, and when it doesn’t (real-estate taxes for example) the tax is collected in arrears. The promise to pay is enough for local/state to formulate their budgets.

    So it is more appropriate to say that taxes reimburse spending at the state and local level, rather than fund it. The funding is more like a credit line based on a promise.

    1. drumlin woodchuckles

      GDP will stop doubling when resources run short. GDP will start shrinking when resources run shorter. Any argument or belief which makes sense in a world of rising GDP will be overtaken by events when GDP stops doubling every ten years, then stops rising at all, and finally begins its Long Shrinkdown.

      Will MMT thinking cope in that coming reality?

      1. paulmeli

        GDP will stop doubling when resources run short.

        Maybe but then that wasn’t the point of my post. That said, GDP is mostly labor and profit. Currently human resources are too plentiful, and that appears to be getting worse. Also see below.

        Will MMT thinking cope in that coming reality?

        Yes and no. MMT just “is”. Like gravity. No matter what the laws of arithmetic will not change. MMT won’t “solve” problems with resource depletion, nor will it “solve” population growth.

        Any solutions to the resource problem (when it gets that bad) are likely to be impoverishment or the elimination of much of humanity, at which point our problems are much greater than budgeting.

        The point re GDP was that growth is not possible without growth in spending, hence growth in the money supply. Nothing else was inferred.

        #1 no-one is arguing that GDP will double into infinity just that so far over the past 100 years it has and will for the foreseeable future. As long as there is growth money will have to be created (or recycled). Or we will be impoverished.

        #2 Human resources will not run out unless nature (or stupidity) kills most of us. In which case your argument is moot.

        #3 Numbers double but resource depletion doesn’t (necessarily) – see inflation.

        #4 Diminishing resources pose a real problem for humanity that has nothing to do with being able to afford things. MMT tells us that we can always afford to buy what’s for sale. We can’t buy what isn’t. That problem is therefore self-governing.

        #5 When and if your shrinking scenario comes to pass the problem becomes more one of distribution than growth. The problem now is also one of distribution but it will become much more so.

        #6 MMT has nothing to do with resource depletion. MMT is based on the accounting record of something that has already taken place. From that record one can infer future policies that might unemploy or impoverish fewer people. A snapshot of an accident can’t be the cause of the accident. See #4.

        The problem of resource depletion is kind of misleading. neither matter nor energy can be created or destroyed, only the composition can be changed. Nothing is going away. Everything can be re-used in principle. A big problem is the World economy is based on fossil-fuels…a huge battery that took billions of years to charge that is running down.

        The finite size of the planet is a problem for humans. Arithmetic will still be valid regardless.

  20. Steven Greenberg

    Here is a quote from Stephanie Kelton.

    For politicians, the challenge is really on them. Some of them ask me for specific advice on how to talk about debt and deficits, and my first answer is, ‘Don’t.’ The broad public reaction to those words tends to be negative, so my first rule of thumb is don’t bring it up. Do no harm. If somebody poses a question to you, and they inevitably will—‘Oh, what about the debt?’—then you’ve got to find ways to deal with it. I don’t think there’s a cookie-cutter response.

    This is from the article Stephanie Kelton Wants You to Ask: ‘What Does a Good Economy Look Like?’

  21. TroyMcClure

    Philip Mirowski describes how Hayek consciously stopped using the term neoliberal in the 1950’s as a strategy. By removing the moniker the philosophy could become simply “the way it is” or “common sense.”

    It may be time for MMT to do the same.

    1. JEHR

      Agreed, because MMT is describes how money works now and that’s all one has to say–Here is how money works today. . . .

  22. JEHR

    Lambert, could you now write an article on the steps to take to get rid of billionaires. Would breaking up the monopolies do the trick? How can governments prevent large companies from hiding money offshore? Are there new ways to get rid of billionaires that haven’t been thought of yet?

  23. Jeff N

    I am a single man with no dependents. I checked once and I literally qualified for like $59 / month in total unemployment benefits.
    Only people with children or dependents qualify for welfare.

  24. Temporarily Sane

    I don’t trust Sanders. I’m all for taxing obscenely wealthy individuals like Bezos and the corporations they run but this isn’t a plan for fair and progressive taxation. It is, as another poster mentioned, a gimmick. It smells like PR politics designed to make Sanders look good without requiring him to make any genuinely bold and decisive moves.

  25. ChiGal in Carolina

    And again, as Lambert notes, Sanders pretty much forces you onto social media if you want to go to the source. There’s gotta be a better way to get around MSM. Social media just reinforced the power of another “tech” leech, Facebook.

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