Money is No Object: Why We Should and How We Can Achieve Full Employment
1. Why We Should
and
How We Can
Achieve Full Employment
Stephanie Kelton, Associate Professor, Univ. of Missouri-Kansas City
Presentation to the Jobs Now! Coalition, in Memory of MLK and FDR, January 19, 2012
2. Since the Start of the Crisis
• The world has added 27.6 million people to the
unemployment rolls
• Produced a vulnerable employment rate of 50.1%
• Created an additional 40 million working poor
• Led 1.7 million youths to simply drop out of the labor
force altogether
- United Nations, Non-Governmental Liaison Services (NGLS) 2011
3. Share of People Unemployed 12+ Months
Nearly one-third of Americans have been looking for work for a
year or more
In the US, more than 1.4 million (15% of total) have been unemployed for more than 99 weeks.
4. The Cost of Persistent Unemployment
Social and Economic
• Direct Costs
– Lost output/income
• Indirect Costs
– Social exclusion and the loss of freedom
– Skill degradation
– Psychological harm, including increased suicide rates
– Poor health and reduced life expectancy
– Loss of motivation
– The undermining of human relations and family life
– Loss of social values and responsibility
• The indirect costs are often hard to quantify but
clearly substantial given qualitative evidence
5. The Cost of the “Lost Youth”
Includes the 6.7 million American youths (16-24 yrs) who are out of work and out of school
Total cost to
society
Source: White House Council for Community Solutions, January 17, 2012
7. The Daily Cost of Unemployment
“Just say it to yourself – every day, the US government is allowing $9.7 BILLION to go down the
drain in lost income just because they are too stupid to implement sensible direct job creation
strategies.” ~ Bill Mitchell
9. Corporate Profits and Hiring Since 1990
Growth of
Corporate
Profits
Employment growth
10. The Lesson
• Simply making businesses more
profitable will not create the millions of
new jobs our economy needs
• Businesses hire more people when they
are swamped with demand not when
they have higher profits
• Our problem continues to be a lack of
aggregate demand
11. We Need More Demand!
• Sales Create Jobs
• Income Creates Sales
• Spending Creates
Income
12. But Who Will Spend?
Households Account for
• Consumption: If unemployment 70% of Total Spending
remains high, home prices remain
depressed, and the price of oil
remains high, consumption will not
improve significantly
• Investment: If consumption is weak,
businesses will have little reason to
invest in new capital or hire
additional workers
• Government: The bulk of the
stimulus has ended, and the federal
government is looking for ways to cut
the budget. Not much appetite for
further stimulus.
• Net Exports: The US is a net
importer and has been for several
decades. We aren‟t going to export
our way to prosperity.
12
13. Spending Cuts Lead to Unemployment
• Spending creates the income that leads to sales
• Unemployment means there are people who
want to work to earn dollars
• When the government cuts spending, it limits
income, which reduces sales
• The result is unemployment
14. “The government, just like every American household, has to live within its means.”
-- Ross Perot
Why Does the Government
Limit its Spending?
The United States government has run “out of money.”
-- President Barack Obama
15. Is the Federal Government Like a Household?
• No – not anymore
• We abandoned the gold
standard
• We ended Bretton Woods
• We have “modern money”
that is created by keystrokes
on a computer
• But we act as if we are
still hamstrung by the past
17. Why are the PIIGS in Trouble?
• All 17 members of the Eurozone gave up their
keyboards
• Now Ireland is like Idaho. And Greece is like
Georgia.
• They can’t spend more than they can collect or
borrow from others – and lenders know they don‟t
have keyboards!
• That‟s why the bond markets have so much power
• And why so many governments have been forced to
adopt job-killing austerity programs
18. The US is NOT Like Greece
• The US Government
cannot go broke
• It cannot “run out”
of money
• It spends modern
money
• It cannot run out of keystrokes any more than
Arrowhead Stadium can run out of points!
19. Money is No „Object‟
• As Chairman Bernanke
explained on 60 Minutes
in 2009:
• (PELLEY): Is that tax
money that the Fed is
spending? $29 Trillion?
(BERNANKE): It‟s not tax
money. [W]e simply use the
computer to mark up the size
of the account.
20. The ISSUER of the Currency Can‟t Go Broke
“[A] government cannot become insolvent with respect to obligations in its own
currency. A fiat money system, like the ones we have today, can produce such
claims without limit.
~ Alan Greenspan, 1997
21. Why Do We Run Flat Earth Policy?
• Policymakers (and most economists) don‟t understand how our
monetary system works
• They think the government faces the same kinds of constraints that
a household or a private business faces
• They say we can‟t afford to care for the sick and the elderly,
rebuild our crumbling infrastructure, provide our kids with a
world-class education, etc.
• They tell us There Is No Alternative
– TINA
• And they ask for “shared sacrifice”
22. What Would MLK and FDR Say?
• Dr. Martin Luther King, Jr. had seen enough sacrifice
for a lifetime
• He called upon the government to create jobs using the
power of the state
• FDR‟s vision for a Second Bill of Rights also
emphasized the importance of economic security
though job creation
“We have come to a clear realization of the fact that true individual
freedom cannot exist without economic security and independence.
"Necessitous men are not free men." People who are hungry and out
of a job are the stuff of which dictatorships are made.”
~Franklin Delano Roosevelt
23. How do We Get There?
• We begin by recognizing that Money is No Object
• And then we institute:
1.) A full payroll tax holiday
– Employer and Employee
2.) $150 billion in revenue sharing, distributed on a per-capita
basis to state and local governments to alleviate on-going
budget woes
3.) A federally funded job guarantee for anyone who remains
unemployed after 1.) and 2.) have been implemented
Notes de l'éditeur
Vulnerable employment is defined as the sum of the employment status groups of own-account workers and contributing family workers.
Domestic Abuse, Divorce, Depression, etc., etc.
Source: Bill Mitchell’s blog.
Whenever a firm lays off workers, the BLS asks executives the biggest reason for the job cut. In 2010, 0.3 percent of people who were let go were fired because of “government regulation/intervention”. 25 percent were laid off because of a drop in business demand.
Both inflation-adjusted. Profits rebounded quickly and sharply. Jobs, not so much. Corporations sitting on record profits. Some $2 TRILLION on the sidelines.