FJG vs. UBI: An MMT Perspective
When we think of our economy, and ways that we can repair it from years of abuse at the hands of both neoliberal and neoconservative policy-makers, it's hard not to want to go for the quick, easy solutions. When we needed something desperately many years ago, it's hard to feel compelled by ideas which don't seem to put money into the hands of those who need it, as soon as possible. ...Especially when your hands are some of those that need it.
In contrast, a UBI is presented as quick, simple, 'immediate relief'. People are hurting right now, why wouldn't they want a quick, easy solution that needed to happen a long time ago? This is the hook that brings many UBI proponents in. Nobody can realistically deny that a need exists, and has for quite some time. The differences all come in the form of opinions about what is to be done about the problem of wealth distribution in this country.
We’re already talking about a UBI, so let’s continue with that proposal first. Meaning "universal basic income", a UBI is a welfare entitlement that would make sure that every adult made at least a certain amount, over and above what they may make in wages, or other sources of income. Recently proposed at a level of $1,000 per month, this money would simply be delivered to everyone in the US, in one form or another, every month.
One of the problems associated with doing this, is that many view a UBI as a replacement for social safety nets already in place, and there is much data to back up that claim. In fact the previously mentioned, recently proposed legislation would force anyone who accepts the money to choose whether they continued to accept those other forms of assistance, or accept the $1,000 per month. It directly, immediately replaces those other social assistance programs.
Countries like Canada that have already experimented with a UBI have had similar replacements occur, with similar unwanted outcomes.
That already sounds bad enough, but in order to fully appreciate the negative ramifications of a UBI, we need to take a moment to put our MMT glasses on. In order for these glasses to work, we must put in some work ourselves. ...At a time when people are already short on time, short on patience, short on attention, and most importantly short on hope.
Learning MMT would help them see how a FJG is actually better not just in the long run, but right now. Unfortunately, the vulnerability that allowed them to get hooked into a UBI in the first place is the same one that prevents them from gaining the understanding required to see above it. Thankfully, you don’t have to have a degree in Economics to glean important facts about MMT, and we are here to help you through the tough bits!
Modern Monetary Theory proponents speak of a Federal Job Guarantee, but it often seems to come across as a lofty, unrealistic option requiring patience, diligence, research, and all manner of other work - in the ears of the desperate. That's why ideas like having a UBI are so popular, they would be immediate, simple, quick, regular.
In order to understand why a UBI is inherently less desirable, we need to address a central tenet of MMT, and that is the relationship between currency, and real resources.
You may have first heard or read about MMT from a source which either didn’t understand it, or sought to intentionally undermine your understanding of it. If that was the case, then you may have heard it mischaracterized as a belief that we can just “print our way to prosperity” by writing everyone a check for 100 million dollars, or something equally silly-sounding. It’s meant to sound preposterous, and it is. No MMT proponent worth their salt will ever try and tell you that we should do that.
The reality is that, while we ARE fully capable of purchasing whatever we need as a nation without having to borrow, or having to “find the money” for it, we must spend within our economy’s ability to absorb that new money into it, if we want to avoid inflation. In other words, it’s not the money which is the main issue, it’s the ‘stuff’ we need to buy with it.
...Which brings us back to a UBI. While that extra $1,000 per month is something that probably 85-90% of people could directly, immediately benefit from, that situation is likely to change rapidly. Why? Because that money is not directly linked to real resources or labor, and is therefore inherently inflationary. What that means, is that we are extremely likely to see increases in the prices of things like rent, and basic utilities, almost immediately upon passage of a UBI.
You may have seen someone referring to a UBI as “a gift to the rentier class”, and that is why.
With the cost of enough vital amenities raised, that extra $1,000 per month could become absorbed quickly, leaving people in the exact same position they were in, only now they have no social safety nets to fall back on. They can opt back into their old services, but their cost of living has just gone up, whether they’re getting that stipend personally or not.
Many of the attacks against a FJG go something like this: "Candidate A offers you $1,000 per month. Candidate B gives you a shovel. Which will you choose?" This attack relies completely on two myths: 1) A UBI is beneficial in the long run, and 2) A FJG represents 'busy work', 'make work', or 'shit work' that nobody wants to do.
We’ve already gone over some reasons why a UBI is not beneficial in the long term, now let’s explore some of the reasons why the second statement is a myth.
First of all, a Federal Job Guarantee is not ‘charity’, it’s a way to pick up the slack from decades of neoconservative/neoliberal policies against public spending. Because these markets are not considered financially lucrative for private investors or businesses, they don’t get graced in budgets. In other words, elderly people in senior living facilities still need to have sweaters crocheted for them, but there is no government funding to do so, due to the lack of money to be made doing it. A FJG would spend money into the economy as payment for your talented services, if you chose to take that guaranteed job.
In fact, there are many things which communities everywhere are hurting from, whether it be unsafe areas, pollution, a lack of culture & the arts, education & counseling needs, care for the homeless, all sorts of things that your community might need, but are not currently available to it.
And just like a UBI, it would be paid for by passing a budget through Congress. The only difference being that a UBI is inflationary, and a FJG is not, because it is based on a specific real resource - labor. As long as we spend within our economy’s ability to ‘absorb’ that new money, then our Congressional ‘power of the purse’ will allow us to fix virtually any problem we face as a nation.
Only problem with that, is that "Congressional power of the purse" just doesn't resonate in some people, the way that "An extra $1,000 a month" does. They just can't see the same potential for immediate, personal empowerment, when they really need it.
But think about it this way: the FJG is a way for all of us to plug into our country's spending power on a direct, individual basis. We hear of CEO's within the MIC making millions from Congressional spending. Why should they be the only ones with their hands on the tap, when ALL of us have something to contribute to the betterment of society? That money is supposed to help everyone. It belongs to everyone. If the Constitution says that we are supposed to spend for the common defense and the general welfare of all citizens (which it does), then why shouldn’t we spend for them comparably?
As an artist, would I rather have an extra grand per month that would soon get eaten by inflation, or would I rather get paid to make art, and display it in a gallery?
Let’s say the local mega-market decided that it was too expensive to post security outside of their store, even though people continued to get attacked at night on the way to their cars - and so they fired you. Would you rather give up many of your social safety nets to take $1,000 that won’t seem like that much at all in a month, or would you rather have your job back, with a raise, and benefits?
And yet the debate rages on. Other facets of their argument against a FJG, and in favor of a UBI center around the (mostly false) idea that a FJG will be too large and complex in scope, will require work, and will require too much of an investment in time.
When you're actually trying to destroy the fundamental roots of poverty at the national level, rather than just throwing money at a problem in order to fix it, you have to expect that to take some time, work, planning, and patience. In spite of that, the effects of a FJG program would be felt almost immediately, because no matter how huge and complex the project is, the planning has all been done already. Like so many other progressive policies, it’s the passing that is likely to be the hardest battle, not the implementation.
What’s even more frustrating, is that we are probably going to need a combination of a FJG and a UBI eventually (or another option like expanding Social Security), so fighting about it in such opposing terms is not really even realistic, let alone healthy. A UBI should be used as sparingly as possible to avoid its possible inherent inflation risk, A FJG has no such limitation - in fact it is designed to combat inflation. Beyond that, they are not directly opposed ideas. They are both intended to help different kinds of people, in different situations.
A criticism that we often hear goes something like this: “There are many kinds of inflation. Even if you MMT people are right, and the FJG doesn’t cause one kind of inflation, that doesn’t mean that it won’t cause another kind. There will always be people who jack their prices just because they can.”
While it’s true that corporations threaten to increase prices for completely political reasons, one of the best things about a FJG, that few are talking about, is that it offers a source of real competition to established rackets that are prone to squeeze out newcomers. It empowers people to offer alternatives to consumers, helping to stabilize prices. If the stipulation is that there must be a need within the community, then having a more even playing field can help communities decimated by corporate monopolies to bring prices back down again.
In addition, the wages offered are “non-poverty” wages, which even if a $15 per hour minimum wage were not passed, this would help that manifest in the labor market. It would force monopolies to not only have more competitive wages, but better benefits, as well.
It could essentially help reverse the trend we’ve been seeing for the last few decades, where small, mom & pop outfits are increasingly bullied by corporate heavies, to the point where there are very few left. These remaining monopolies have established a system of oppressive pricing and employee policies, in the lack of any viable competition.
According to a paper published by the Center on Budget and Policy Priorities:
“A job guarantee would fundamentally transform the current labor market in the United States. Our current conception of full employment is inadequate; we discuss a bold policy in this paper to bring the United States to a permanent, more accurate indicator of full employment—by which we mean that everyone who seeks a job can find one at non-poverty wages. Beyond providing full employment, the job guarantee could be a turning point for American workers. Workers are faced with stagnating real wages and a continued erosion of labor’s share of income. The job guarantee could significantly alter the current power dynamics between labor and capital—particularly for low-wage workers and traditionally marginalized groups.”
In other words, it would provide not only a job when one was without one, but a chance to do the same or different job, with higher pay, and more benefits. When they talk about “significantly altering the dynamics between labor and capital”, what they’re talking about is fixing this:
If you’ve been keeping up with politics, or progressive economics for the last 10 years or so, then you’ve probably seen that graphic. It’s a chart that represents the rise in US productivity over time, plotted against the changing rate of pay. It is fairly self-explanatory, it represents not only a major problem which needs to be fixed, but an extremely dangerous trend that will only get worse, the longer we wait to act.
Now, consider that a UBI would go to every adult. ...Everybody, including billionaires who won’t even have to spend it at all, let alone at an inflated rate. The obvious result of this is even more income inequality. In contrast, a FJG would only target those people and areas most in need of services.
And in the process, we can help artists, musicians, writers, clothiers, dancers, choreographers, teachers, counselors, play-writes, poets, plumbers, electricians, carpenters, adult care specialists, physical therapists, and cottage industrialists everywhere to not only have a job, but have a competitive, market-changing job in their own field. If you have a skill, it can likely be put to use for the betterment or enlightenment of society at large. If you don’t, then there are still things you can do, and no matter what it is, you will be able to make a decent living at it.
One of the less obvious benefits of that, is the ability to achieve full employment, to not only maximize our economy & Congressional spending power, but reduce poverty. The language of the proposal is wide in terms of beneficiaries, but specifically mentions those who further the arts, and after 30 years with no federal funding for individual artists in the US, it’s hard to imagine many affected people who would not favor that.
So to summarise, a UBI will probably be necessary to a small degree, and possibly to a much larger degree at some point in the future, but as a standalone policy it is beyond counter-productive, it is a Trojan horse. Even if it wasn’t, there is still the issue of all of the work that needs to be done in this country, which gets ignored due to its lack of profitability. That work would continue to not get done under an exclusive UBI system. In stark contrast, a Federal Job Guarantee fixes the things that need fixing.
...Including our economy.