This is the speech I would make if I were President Obama:
My fellow Americans, let me get right to the point.
I have three bold new proposals to get back all the jobs we lost, and then some. In fact, we need at least 20 million new jobs to restore our lost prosperity and put America back on top.
First let me state that the reason private sector jobs are lost is always the same. Jobs are lost when business sales go down. Economists give that fancy words -- they call it a lack of aggregate demand.
But it's very simple:
Restaurants and other businesses lay people off when their customers stop buying, for any reason. So the reason we lost 8 million jobs almost all at once back in 2008 wasn't because all of a sudden all those people decided they'd rather collect unemployment than work. The reason all those jobs were lost was because sales collapsed. Car sales, for example, collapsed from a rate of almost 17 million cars a year to just over 9 million cars a year. That's a serious collapse that cost millions of jobs.
Let me repeat, and it's very simple, when sales go down, jobs are lost, and when sales go up, jobs go up, as business hires to service all their new customers.
So my three proposals are specifically designed to get sales up to make sure business has a good paying job for anyone willing and able to work. That's good for businesses and all the people who work for them. These proposals are bipartisan. They are supported by Americans ranging from Tea Party supporters to the Progressive left, and everyone in between.
So listen up!
My first proposal is for a full payroll tax suspension. That means no FICA taxes will be taken from both employees and employers. These taxes are punishing, regressive taxes that no progressive should ever support. The Tea Party, of course, is against any tax. So I expect full bipartisan support on this proposal. Suspending these taxes adds hundreds of dollars a month to the incomes of people working for a living.This is big money, not just a few pennies as in previous measures.
These are the people doing the real work. Allowing them to take home more of their pay supports their good efforts. Right now take home pay is barely enough to pay for food, rent, and gasoline, with not much left over. When government stops taking FICA taxes out of their pockets, they'll be able to get back to more normal levels of spending.
Many will also be able to better make their mortgage payments and their car payments, which, by the way, is what the banks really want -- people who can make their payments. That's the bottom up way to fix the banks, and not the top down bailouts we've done in the past.
The payroll tax holiday is also for business,which reduces costs for business, which, through competition, helps keep prices down for all of us, which means our dollars buy more than otherwise.
So a full payroll tax holiday means more take home pay for people working for a living, and lower costs for business to help keep prices and inflation down, so sales can go up and we can finally create those 20 million private sector jobs we desperately need.
My second proposal is for a one time $150 billion Federal revenue distribution to the 50 state governments on a per capita basis with no strings attached. This will help the states to fill the financial hole created by the recession, and stay afloat while the sales and jobs recovery spurred by the payroll tax holiday restores their lost revenues.
Again, I expect bipartisan support. The progressives will support this as it helps the states sustain essential services, and the Tea Party believes money is better spent at the state level than the federal level.
My third proposal does not involve a lot of money, but it's critical for the kind of recovery that fits our common vision of America. My third proposal is for a federally funded $8/hr transition job for anyone willing and able to work, to help the transition from unemployment to private sector employment. The problem is employers don't like to hire the unemployed, and especially the long term unemployed. While at the same time, with the payroll tax holiday and the revenue distribution to the states, business is going to need to hire all the people it can get.The federally funded transition job allows the unemployed to get a transition job,and show that they are willing and able to go to work every day, which makes them good candidates for graduation to private sector employment.
Again, I expect this proposal to also get solid bipartisan support. Progressives have always known the value of full employment, while the Tea Party believes people should be able to work for a living, rather than collect unemployment.
Let me add here that nothing in these proposals expands the role or scope of the federal government. The payroll tax holiday is a cut of a regressive, punishing tax, that takes the government's hand out of the pockets of both workers and business.
The revenue distribution to the states has no strings attached. The federal government does nothing more than write a check.
The transition job is designed to move the unemployed, who are in fact already in the public sector, to private sector jobs.
There is no question that these three proposals will bring drive the increase in sales we need to usher in a new era of prosperity and full employment.
The remaining concern is the federal budget deficit.
Fortunately, with the bad news of the downgrade of US Treasury securities by Standard & Poor's to AA+ from AAA, a very important lesson was learned. Interest rates actually came down. And substantially. With that the financial and economic heavy weights from the 4 corners of the globe made a very important point. The markets are telling us something we should have known all along. The US is not Greece for a very important reason that has been overlooked. That reason is, the US federal government is the issuer of its own currency, the US dollar. While Greece is not the issuer of the euro.
In fact, Greece, and all the other euro nations, have put themselves in the position of the US states.
Like the US states, Greece and other euro nations are not the issuer of the currency that they spend. So they can run out of money and go broke, and are dependent on being able to tax and borrow to be able to spend.
But the issuer of its own currency, like the US, Japan, and the UK, can always pay their bills.
There is no such thing as the US running out of dollars. The US is not dependent on taxes or borrowing to be able to make all of its dollar payments. The US federal government can not go broke like Greece.
That was the important lesson of the S & P downgrade, and everyone has seen it up close and personal and they all now agree. And now they all know why, with the deficit at record high levels, interest rates remain at record low levels.
Does that mean we should spend without limit and not tax at all? Absolutely not! Too much spending and not enough taxing will surely drive up prices and inflation.
But it does mean that right now, with unemployment sky high and an economy on the verge of another recession,we can immediately enact my three proposals to bring us back to a strong economy with good jobs for people who want them.
And some day, if somehow there are too many jobs and it's causing an inflation problem, we can then take the measures needed to cool things down.
But meanwhile, as they say, to get out of hole we need to stop digging,and instead implement my three proposals.
So in conclusion, let me repeat these three, simple, direct, bipartisan proposals to speedy recovery:
Thank you and God bless America.
Follow Warren Mosler on Twitter: www.twitter.com/wbmosler
My fellow New Yorkers,
I have a proposal to help our retired NYC workers that you can all pass, and it will be fully paid for.
I propose that all retired NYC workers be given 20 subway tokens per month so that they can better afford to ride the trains.
And to pay for this program, I propose that for every 10 subway tokens we collect at the turnstiles, one token will be set aside to be given to the retirees.
Yes, I know we have a long term token deficit problem, as each year we issue many more tokens than we collect. And as you know, we have established a committee to deal with this by Thanksgiving.
But, as I said, this program will be fully paid for, with tokens set aside as we collect them....
I love the idea of a WPA style program that will solve two problems at once. We need a lot of work done and a lot of people need work. It would have been fantastic to start this way two years ago, but I honestly believe that nearly all the experts got the the severity of the drop wrong.
Is $8 an hour competitive with unemployment benefits? I don't know.
There is one thing that bothers me a little. Some people, Patrick Buchanan for one, will often claim that inflation is an implicit default. China is also making noises along these lines. I'm not sure what to make of this exactly. Is there any explicit guarantee that the currency will retain its value? Don't they sort of float around, up a little down a little? Over time currencies generally tend to inflate don't they?
Default means not making payments as legally contracted.
There is no legal requirement for 0% inflation.
And China's inflation rate is much higher than ours.
And if anyone would prefer lower inflation they are free to vote for candidates who they believe represent their thinking.
from your mouth to Obama's (big) ears!!! LOL (please God...please!)
I know it is not your fault but you, President Obama and his economic advisors don't know how US monetary system really operates.
Mainstream macroecoeconomics doesn't know either, it couldn't predict the Great Recession coming, it still doesn't have the right Rx. We need new macroeconomics textbooks in our universities.
Meanwhile this small book is a good start for some selfeducation:
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
http://www.newdeal20.org/2010/12/20/reality-check-why-truth-will-protect-social-security-30569/
and educate yourself further by getting aquainted with Modern Monetary Theory, of which Warren Mosler is one of the founders. This book is very much worth a couple of hours of your time:
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
It is very clear that this crisis is continuing simply because of government inaction.
I wish Obama would say something even remotely resembling this - however that is not likely to happen.
I would have put it on the front page to improve a bit the odds that President Obama sees it.
Now the chances are close to zero, but thank you anyway, Huffingtonpost.com !
Otherwise, good article
Government debt in its own currency - and especially to its own central bank which refunds the interest - is about the same thing as coining money.
This plan would make things worse, not better. For small businesses, which are arguably the biggest generators of new jobs, payroll taxes are a minor cost of doing business, especially when compared to health insurance premiums for employees.
Large companies, on the other hand, would stand to make millions from any scheme to cut or eliminate payroll taxes, but most large companies could easily see the same savings if they would reduce executive compensation for even a short period of time.
Furthermore, any reduction in payroll taxes would eventually have to be made up for by taxpayers.
There are no “three simple steps” to fix the economy, but some first steps the US should be doing would be:
1) Single payer healthcare. Ask any OECD country. The US is paying at least double what they should be paying, and this figure is calculated on a per capita basis, including the fact that some 50 million Americans are uninsured, so the actual cost per insured citizen is much higher.
2) Bring back regulations to the financial industry, including caps on credit card debt and laws against recalculating interest on credit card debt.
3) Increase taxes on the rich
4) Re-visit trade & tax agreements that presently reward companies for destroying American jobs by moving manufacturing to low wage countries with no real labour or environmental protection laws.
Yes, companies of any size with pricing power will benefit more than companies without pricing power, but that's a different issue addressed by other measure.
Yes, some day if unemployment is somehow deemed 'too low' and aggregate demand deemed too high, the nation might favor a tax to reduce aggregate demand and cool things down, but, by then, hopefully we are sufficiently knowledgeable to know how to cool things down without throwing millions of people out of work.
As for health care, see my single payer proposal from a few years ago:
http://www.moslereconomics.com/2009/03/02/mosler-health-care-proposal/
And see my 'narrowing of the financial sector' proposals:
http://www.moslereconomics.com/?p=8968
And also see my proposals that work to keep the institutional structure from supporting incomes of 'the rich' in the first place.
And read The 7 Deadly Innocent Frauds free online at:
http://www.moslereconomics.com/?p=8662/
where you can see how imports are real benefits and exports real costs,
and how we can both import all the world wants to sell us and sustain high levels of domestic employment and prosperity.
Warren Mosler
Regarding your 4 points - they make sense. The #3 should be amended to specify that tax increases on the rich should be offset by tax reductions on the poor. If tax reduction on the poor are not possible - then the same amount should be spent by the government with spending being directed to help the poor.
If you just tax the rich - that could reduce spending by the rich and thus affect the economy and the poor.