A reader’s letter in response to the Oct. 14, 2016 article “America’s Hidden Unemployment Crisis” by Stephen Gregory.
The crisis of “real” unemployment, estimated at up to 23 percent of the U.S. workforce, can be countered as it was during the Great Depression—by creation of jobs funded by the federal government.
Under a Job Guarantee program, jobs could be delivered locally through non-profits, social enterprise groups, and municipalities, and might include provisions for care of the elderly, educational activity for young people, arts and cultural performances, and initiatives for environmental protection.
This job pool would rise and fall counter-cyclically to the needs of the private business sector which would have a ready pool of active workers from which to hire. The Job Guarantee thus provides macroeconomic stability and has been successfully tried in other countries, such as Argentina where 2 million new jobs were created for low-income heads of households.
After the financial crisis of 2008, trillions were spent bailing out big corporations and large financial institutions. The issue is political not fiscal. Will government do for Main Street what it happily did for Wall Street?
In general, there cannot be inflationary pressures arising from a policy that sees the government offering a fixed wage to any labor that is unwanted by other employers. The JG involves the government “buying labor off the bottom” rather than competing in the market for labor. By definition, the unemployed have no market price because there is no market demand for their services. So the JG just offers a wage to anyone who wants it.
The essential insight of Modern Monetary Theory is that sovereign, currency-issuing countries are only constrained by real limits. They are not constrained, and cannot be constrained, by purely financial limits because, as issuers of their respective fiat-currencies, they can never “run out of money.” This doesn’t mean that governments can spend without limit, or overspend without causing inflation, or that governments should spend any sum unwisely. What it emphatically does mean is that no such sovereign government can be forced to tolerate mass unemployment because of the state of its finances—no matter what that state happens to be.
Virtually all economic commentary and punditry today, whether in America, Europe, or most other places, is based on ideas about the monetary system which are not merely confused—they are starkly and comprehensively counter-factual.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.