Mosler’s 11 steps to fix the economy
1. A full ‘payroll tax holiday’ where the US Treasury makes all FICA payments for us (15.3%). This will restore ’spending power’ and, by allowing households to make their mortgage payments, will fix banks from the bottom up. It may also keep prices down as competitive pressures may lead businesses to cut prices, passing on their tax savings to consumers even as sales increase.
2. A $500 per capita federal distribution to all the states to sustain employment in essential services, service debt, and reduce the need for state tax hikes. This can be repeated at perhaps 6 month intervals until GDP surpasses previous high levels at which point state revenues that depend on GDP would be restored.
3. A federally-funded $8/hr job and healthcare benefits for anyone willing and able to work. The economy will improve rapidly with my first two proposals and the private sector far more readily hires folks that are already employed. In 2001 Argentina implemented this proposal, putting to work 2 million people who had never held a ‘real’ job. Within 2 years, 750,000 of those 2 million were employed by the private sector.
4. Making banks utilities. The following are disruptive, serve no public purpose and should be done away with:
–Secondary market transactions
–Proprietary trading
–Lending against financial assets
–Business activities beyond approved lending and bank account services.
–Contracting in LIBOR. Fed funds should be used.
–Subsidiaries of any kind.
–Offshore lending.
–Contracting in credit default insurance.
5. Federal Reserve — The liability side of banking is the wrong place to impose market discipline.
The Fed should lend in the fed funds market to all member banks to ensure permanent liquidity. Demanding collateral from banks is disruptive and redundant, as the FDIC already regulates and supervises all bank assets.
6. The Treasury should issue nothing longer than 3 month bills. Longer term securities serve to keep long term rates higher than otherwise.
7. FDIC
–Remove the $250,000 cap on deposit insurance. Liquidity is no longer an issue when fed funds are available from the Fed.
–Don’t tax good banks for losses by bad banks. This serves only to raise interest rates.
8. The Treasury should directly fund the housing agencies to eliminate hedging needs while directly targeting mortgage rates at desired levels.
9. Homeowners being foreclosed should have the option to stay in their homes at fair market rents with ownership going to the government at the lower of the mortgage balance or fair market value of the home.
10. Remove ’self imposed constraints’ that are disruptive to operations and serve no public purpose.
–Dump the debt ceiling – Congress already votes on spending and taxes.
–Allow Treasury ‘overdrafts’ at the Fed rather than forcing it to sell notes and bonds. This is left over from the gold standard days and is currently inapplicable.
11. Federal taxes function to regulate aggregate demand, not to raise revenue per se, and therefore should be increased only to cool down an overheating economy, and not to ‘pay for’ anything.
[top]
3. A federally-funded $8/hr job and healthcare benefits for anyone willing and able to work. The economy will improve rapidly with my first two proposals and the private sector far more readily hires folks that are already employed. In 2001 Argentina implemented this proposal, putting to work 2 million people who had never held a ‘real’ job. Within 2 years, 750,000 of those 2 million were employed by the private sector.
Wouldn’t that cause a big shift as fast food, retail and hospitality operations would have to raise their wages in order to staff their operations? They would have to raise their prices causing people to use their services less. The weaker players would fail.
To many people an easy fed job is much better than working hard in fast food, retail and hospitality. Plus the healthcare benefits! you would have to pay at least $10 + healthcare benefits to get people to work in the private sector.
NOTE: There is a lot of evidence that people with healthcare benefits (health insurance) over consume healthcare even to the point where the marginal healthcare consumed has a negative effect on health.
Better an hourly wage subsidy.
Also would this not also increase the draw for immigrants perhaps creating other problems?
Anything that improves the US economy will increase the draw for immigrants.
A sane united states would welcome the beneficial immigrants, and think twice about taking on the others.
Right now the way immigration works, it’s easier for an illegal mexican agricultural worker to immigrate than a foreign national graduating from Harvard.
The solution to this is not to wreck the US economy
I am pro immigration, my point is that if Americans see immigrants getting these $8/hour + health insurance easy work jobs they may resent it an act politically against immigration and immigrants. Certainty the Mexican agricultural worker befits more from entry into the USA that does a Harvard grad.
Totally depends on which country the Harvard Grad comes from. Also, think about which person the US gets most out of.
Now think about who has an easy job immigrating, and who has a hard job immigrating. And which way that immigrant will consequently vote. And who they will displace. That tells you everything you need to know about immigration policy.
Open borders will be the next stop on the Obama Express!
Warren looking at your plan “Macro” are you saying just give me control of the printing presses? TRUST ME?
I was reading the comments on Reuters, a lot of deficit terrorist mind set.
I still think 99% of the banking industry needs to go away, nothing but leaches on the system. Too late for them to “Change there evil ways”
First, if the $8 is deemed to potentially be too disruptive to the private sector it can be lower than that. I thought it was low enough to be non disruptive for the most part, but I’m open on the actual wage. see ‘full employment and price stability’
Second, I’m not advocating a change of control of how govt spending is determined. just what options are available
BTW another alternative to the $8/hour job, which I bet would turn into people pretending to work and would also require drawing managers from the private sector, would be writing a check (or better making a direct deposit) to all USA citizens each week for say $200. People as diverse politically as George McGovern and Charles Murray have advocated such a system as an alternative to much of the current byzantine welfare system.
PS having worked for Gov. and then the private sector I think that we should keep the number of people working directly for Gov. to a minimum. Having lots people pretending to work is expensive.
maybe you just had a bad experience or crappy mngt. I work for the govt. and we don’t sit around pretending to work. We work.
Floc- writing checks has completely different dynamics than requiring people to sell their time.
Floc 2- the $8 plan does minimize public sector. Remember, the unemployed already are in the public sector, and for the most part they will be switching to the $8 jobs, and then get hired by the private sector as agg demand is restored to full employment levels by the payroll tax holiday and the per capita revenue sharing for the states
My problem is not with the unemployed who would get jobs but with those currently employed in the private sector who would quit their current jobs to get a Gov. job that pays $8/hour and provides health insurance. Gov. jobs are highly desired because of multiple factors, so some people will accept considerably lower pay from a gov. job than from a private sector job. I think that we can agree that most people currently earning less than $8.00/ hours and those with jobs paying less than $11/hour that do not get health insurance through their jobs. You would also need to higher management capable people to run these jobs plus provide equipment.
BTW it would also contribute to the perverse incentives of employment connected health insurance.
Now if something needs to be done by Gov. like build roads police streets clean litter now is a good time to do more of it.
As Warren said, if you think $8 would suck too much talent out of the private sector, make it a $6 job. Or a $5 job. You get the idea.
The people who manage all the welfare stuff would manage this program instead. It’s the same thing, it just tackles unemployment directly.
You could also use the folks who measure unemployment to manage it, as unemployment (by definition) would fall to zero.
There are lots of potential problems with it too — political capture, bad implementation, unintended consequences up the wazoo. It has zero chance of being implemented so all that is moot.
A program like that with $5 or $6 I could get behind.
So McDonald’s hamburgers would become more expensive. Is that such a bad thing? In general, a society does not become richer by depending on low-skill workers – it becomes wealthy by replacing such workers with machines that can do more work.
One of the reasons the south was such a backward area for so long was the abundance of low wage blacks who could be counted on to do the backbreaking work of harvesting cotton, reducing the incentive for growers to make the capital expenditures to mechanize the harvest. It was only in the boom after WWII and the huge migration of their black labor force to the northern factories when the southern landowners finally got it together enough to develop mechanical cottonpickers. We see the same thing today with the southwestern growers, demanding more and more low-wage Mexicans and claiming that they are “irreplacable”. Many historians see the reliance on slave labor to be the primary reason the Romans, so advanced in other areas, never developed any large-scale mechanized industry. The Japanese, due to their declining workforce and a reluctance to import labor, lead the world in robots.
In general, a persistent shortage of low-wage labor is the best inducement to technological innovation there is.
“…society does not become richer by depending on low-skill workers…”
The low skill worker values low wage more than his low skill (that’s why he trades it) and the purchaser of the low skill values it more than the low wage he pays to the worker.
So both get richer and since they are both part of society, society does get richer.
So McDonald’s hamburgers would become more expensive.
It is always the delta that gets you. If it was a slow smooth transition from lower price burgers to higher priced burgers that would be fine but it would be a shock that might put many of the weaker burger places out of business. The workers would most certainly be less productive working for Government and also may become a dangerous voting block subject to political manipulation.
Look at Major Clifford Douglas’s “Social Credit Theory”
Give each citizen a refundable tax credit of $25,000.00 dollars.
Eliminate Unemployment Insurance,Social Security,Welfare and all bureaucracies providing these services as these would not be needed,nor would a minimum wage.No taxes on earned income until 4 times the basic credit. This would simplify the lives of most people.After $125,000.00 dollars,a tax of 10% up to 1 million,then 20% up to 5 million,25% up to 10 million,35% up to 25 million,40% up to 50 million,and 50% on all over. The basic credit of $25,000 is taxable income to State and local taxing units,thus with a combined tax of 20% State and local would get $5,000 per capita income and this would leave each citizen $20,000.00 for food,housing,etc.If you wanted more income,you could seek employment in the private sector.
Floccina writes:
If there’s “a lot of evidence” then it should be very easy to cite to it with a link. So, where’s the link? Nothing from Heritage, please!
which is why i like my healthcare plan