MMT Does Do Policy

Well it’s very easy to reduce the inequality that results from low income, from poverty, from low wages; all you have to do is offer jobs. Minsky did a calculation [in] 1974 and Professor Kelton and I did one around 2000. We showed that if you just give a job to anyone who wants to work you will eliminate two thirds of all poverty, even if you pay only the minimum wage. We would like to see the job pay more than that, but even at a minimum wage you eliminate two-thirds of all poverty. So most poverty is due to joblessness. People who cannot get jobs or maybe they get jobs that last a few months and then they are unemployed again. We need permanent jobs that pay a decent wage and you’ll eliminate most poverty. You’ll still need some kinds of anti-poverty programs but the jobs are the best anti-poverty programs there are, then you need something else to fill the gaps.

Now that still leaves inequality due to extremely high income at the top. This program by itself doesn’t address that kind of inequality. I do think you need to address that, not because a lot of progressives think we need to tax the rich in order to spend on the poor. That’s just wrong, we don’t need to tax the rich more to spend more on the poor, because our sovereign government can’t run out of money, it can always spend more on the poor without taxing the rich. You want to tax the rich because they are rich, you don’t tax them in order to give more to the poor. You tax the rich because they’re filthy rich and so you shouldn’t link the two in policy. In the public’s mind we need to do both, but they are separate policies. You set the tax on the rich not to equal spending on the poor. You set the tax on the rich and make it high enough so that they’re not rich. If that’s your goal – get rid of the excessive riches of the rich -you tax enough so they are not excessively rich. It’s an extremely hard thing to do politically. The final thing is rather than trying to do this with taxes, which is hard because once people have income, especially high income, they have an incentive to protect it, the means to protect it, the means to influence policy, and they are extremely powerful. In practice I think in the US, it is actually impossible to take away income from the rich through taxes because they buy off the politicians, they get special exemptions, they never pay high tax rates, they hide their income, they put it overseas, and so on. The only way that will work in a country like the U.S. is to prevent them from earning the income in the first place.  You have to do something like set maximum pay for CEOs. There is no reason why a CEO should be earning 300, 500, or 600 times more than the average worker. Set a maximum and say if a corporation pays more than the maximum, it should not be more than 50 times the average employee. If a corporation pays more than that they lose their papers of incorporation.