Hello ToK Community,

The other evening, I sent out an email on the concept of automatic stabilizers, using food stamps as an example. So now a brief description of the Job Guarantee proposal by MMT economists....

There are millions of people unemployed and underemployed. There simply isn't sufficient employment in the private sector.

Now conceptualizing unemployment at a macro-level, mainstream economics will see unemployment as what's called a "buffer stock" of unemployed people against inflation. That is, if everyone is fully employed, this would allegedly create inflation. So if employment gets "too high", the government can reduce spending, increase taxes, raise interest rates, or some combination of these three.

MMT economists, on the other hand, propose the Job Guarantee --- that is, offer employment in one's local community that is funded by the currency-issuing government, (e.g., the federal government in the U.S.), and locally managed. Thus, we have a buffer stock of employed people. Just as the central bank becomes the Lender of Last Resort when banks have to meet their reserve requirements (as discussed briefly in a previous email), the Federal government becomes the Employer of Last Resort with the Job Guarantee. (For a wage, a common proposal is $15 / hr.)

The JG would function as an automatic stabilizer. That is, if the economy takes a downturn, lots people will be laid off or have their hours cut. This translates into people having less dollars to spend, which in turn means less income for businesses...which means businesses have less dollars to keep people fully employed, let alone hire anyone...that is, a downward spiral in the economy.

And the first people to get fired, and the last to get hired are those at the bottom of the socioeconomic ladder.

So the JG is a counter-cyclical proposal. If the economy goes into a downturn, people who are laid off can enter the JG program. They can receive a paycheck that is federally funded, (meaning more dollars are injected into the economy when and where it's needed). The JG employee spends that paycheck, much of it in their local community, thus maintaining income for businesses. Businesses can receive income (and continue to be busy!), thus needing to hire people, plus have the dollars to do so. So now people can shift from employment in the local public sector to employment in the private sector if they so choose.

That is, the private sector can hire people from a buffer stock of employed people instead of a buffer stock of unemployed people, as is the current state-of-affairs.

And since these dollars added to the economy are coupled with real output (in the local public sector), any inflation risk is minimized.

So the JG would "smooth out" fluctuations in the economy automatically --- i.e., an automatic stabilizer. In a downturn, more dollars are added to the economy where and when it's needed. In the upswing, less dollars are added to the economy where and when it's not needed.

So what jobs could be offered in the JG? Well, look around your community. There's plenty of things that could be done...things that may not necessarily generate profit in the private sector, but nevertheless may have social value.

Perhaps a JG applicant likes to garden. Well, maybe they could plant flowers on a local hiking trail or do some work in a local community garden--- or help start a community garden.

Maybe he/she loves animals. Send them over to the local animal shelter.

Maybe he/she is passionate about the problem of domestic violence. Send them over to a local domestic abuse shelter.

Maybe he/she loves to read. Perhaps the local library could use some help.

Maybe he/she likes working with kids. I'm sure local schools could always use an extra pair of hands.

And we have an aging population. There are senior citizens in any community which could use help --- perhaps being driven to appointments, help with housework, or just a little company for psychological well-being.

In short, there's plenty to do in our local communities, Doing what can be done is limited by dollars and imagination.

And the JG becomes the bare minimum with how workers will be justifiably treated in our society, not only financially, but in terms of the amount of respect and dignity that should be afforded to everyone, as well --- regardless of socioeconomic position.

If you're interested in learning more about the JG, here's an excellent FAQ, by MMT economist and leading expert on the Job Guarantee proposal, Pavlina Tcherneva, economics professor at Bard College.

See you all later on today.

~ Jason Bessey