Episode 28 – Overcoming the Orthodoxy with Scott Fullwiler

Trump keeps telling us that unemployment is at an all-time low. Even if that were true, it wouldn’t stay that way. As our guest Scott Fullwiler explains, the private sector isn’t about creating jobs; it’s about profitability. So even if there were enough jobs for everybody who wants one, it would be a coincidence. And how can we design an economic policy around a coincidence?

In this special interview with host Steve Grumbine, Fullwiler says that we have a choice whether to have a buffer stock of the involuntarily unemployed or a buffer stock of the employed. He says that this is one of the revelations in Randall Wray’s seminal 1998 book, Understanding Modern Money: The Key to Full Employment and Price Stability. Another revolutionary concept was that the central bank is about interest rates, not the money supply, while government deficits are about money, not interest rates.

In a wide ranging conversation, Grumbine and Fullwiler revisit some of the key moments in MMT history — what Fullwiler calls the “hockey stick moments” — including Dr. Stephanie Kelton’s position as Chief Economist on the Senate Budget Committee, and Alexandria Ocasio Cortez’s public utterance of the phrase “Modern Monetary Theory.” As we all remember, after this was reported it was referred to in one article after another, carrying MMT, in name at least, into the public square.

Grumbine brings up the ongoing conflict between supporters of the Federal Job Guarantee and a Universal Basic Income. Fullwiler insists the two are not in competition. And because the UBI doesn’t have a solution for the guy who still wants to work but doesn’t have a job, we’re back at square one, with the choice of having an unemployed buffer stock or an employed buffer stock.

Professor Scott Fullwiler is in UMKC’s interdisciplinary program and a Research Scholar at the Global Institute for Sustainable Prosperity

Follow him on Twitter @stf18

ftalphaville.ft.com/2019/03/01/1551…uses-inflation/

www.global-isp.org/scott-fullwiler/

Macro N Cheese – Episode 28 
Overcoming the Orthodoxy with Scott Fullwiler 
August 10, 2019  

Scott Fullwiler [intro/music] (00:03): 

Now, the criticism that MMT has of the UBI is a separate criticism, which is the UBI can’t cash its own checks. You know, it’s kind of funny that these people that want to get rid of capitalism, their solution is to give everybody a bunch of money so they can buy stuff from the capitalists. 

Scott Fullwiler [intro/music] (00:22): 

So let’s just imagine that you can do a UBI that pays everybody $30,000, whatever, blah, blah, blah. Well, what do you do if there’s still people who want jobs and there aren’t enough jobs? 

Geoff Ginter [intro/music] (00:39): 

Now let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine. 

Steve Grumbine  (01:34): 

And yes, this is Steve Grumbine with Macro N Cheese. You’ve heard me talk to just about every MMTer out there, but there has been one guy that has been lurking in the background that is one of the most astute, sharpest guys in the bunch. And that gentlemen is Professor Scott Fullwiler. Let me give you a proper introduction.  

Scott Fullwiler is a Professor at UMKC’s (University of Missouri – Kansas City) interdisciplinary PhD program and a Research Scholar at the Global Institute for Sustainable Prosperity. He has been involved with MMT research programs since the late nineties, when his dissertation advisor recruited L.  

Randall Wray for his thesis committee. Several current projects that he’s working on in collaboration with UMKC PhD students that blend that social fabric matrix approach and MMT on an ecologically based macroeconomics, developing nations and monetary sovereignty, designing alternative indicators for evaluating macro economic policy outcomes and all around great Twitter guy. Let me bring all my guest, Scott Fullwiler. Welcome to the show, sir. 

Scott Fullwiler (02:44): 

Hi Steve. Thanks for having me. 

Steve Grumbine  (02:46): 

Man, oh man. It has been a long time coming. I think I’ve asked you at least 20 times over the last three years and I am so glad to finally get you here, man. Thank you so much. 

Scott Fullwiler (02:58): 

Well, thanks for having me. 

Steve Grumbine  (02:59): 

Absolutely. So we met face to face finally back at the First Annual Modern Monetary Theory Conference and it was just a really, really great time. It filled me up with excitement to meet you. And we sat there. We had lunch together a couple of times and you know, you guys have been our heroes for so long.  

It’s just kind of neat to put a face and a name to all the papers that we study so studiously. And wow, what a great opportunity is to talk to you, man. 

Scott Fullwiler (03:29): 

Thank you. It’s fun to be here. It’s kinda overwhelming that somebody is interested actually. 

Steve Grumbine  (03:35): 

So economics is about as boring as watching paint dry or grass grow. And then all of a sudden this rogue strain of economics, heterodox economics, MMT with you guys and Mosler and Kelton and Wray and Mitchell and Fullwiler. And you know, it lit a fire in me for sure. I know going through grad school, you know, I did not enjoy my economics at all.  

In fact, I just wanted to get through it. So you guys definitely shined a light on what I considered to be the most amazing discovery of them all. It’s almost like finding the new world or, you know, finding the cure for cancer. We figured out how fiat works. 

Scott Fullwiler (04:21): 

Yeah. Doing something wrong, I guess, if somebody is reading my stuff and finding it exciting. I’m trying really hard for that not to happen. 

Steve Grumbine  (04:28): 

So, so let me ask you, you’ve been doing this now for a long, long time and you happen to have a catbird seat there at UMKC, which is kind of like ground zero for a lot of the training and new development of PhD students learning MMT. Can you talk a little bit about what it’s like to be a professor at UMKC and what this whole thing has meant to you as you’ve watched it grow? 

Scott Fullwiler (04:51): 

Yeah, sure. I suppose, you know, and I’m assuming, you know, and many people know that I’ve only been at UMKC for three years. So I have been associated with UMKC since early two thousands. I was previously at a liberal arts college in Northern Iowa, Northeast, Iowa. And they had the Research Institute down here, the Center for Full Employment and Price Stability that Mat Forstater was running.  

And I would come down a few times every single year. So I knew what was going on here. I knew the program and knew grad students, et cetera, et cetera. So I wasn’t here, but I was still, you know, I’ve always been, I guess you would say part of the team and then 2016, I guess it was 2015, 16, Randy retired from UMKC went to Bard Levy Institute.  

And so then I was hired to “take his place” even though there’s no such thing as taking Randy Wray’s place, of course. But yeah, there’ve been a number of, I guess you could say hockey stick moments in what’s been going on. So, you know, within our own little circles in originally post- Keynesian and institutional economics is where the crowds we mostly traveled within, you know, there was a hockey stick moment in the late nineties and few of them in the two thousands as well, but really you get to the financial crisis and the blogosphere and so forth.  

And that’s kind of where a lot of it started. And then Stephanie, of course, 2015, is at the Senate finance committee, Senate budget committee, I think. So there’s a hockey stick moment and then AOC talks about us and there’s another hockey stick moment. So yeah, what’s it, what’s it like, it’s kind of, it’s a bit surreal.  

I think the thing that has been the most interesting, or I don’t know if surprising is the word, but it’s been the most interesting thing to just sit back and watch. It’d be easier if the work I was doing with my colleagues wasn’t as involved, but to see this sort of self-reinforcing, to see this sort of positive feedback loop happening, that AOC talks about us.  

And then somebody in the media says, “Hey, AOC talked about them.” And then somebody else in the media says, “AOC talked about them.” And if you get a few months later and it’s just, they create their own tornado of momentum in many ways. It’s just been really, we don’t even have to do anything. They’ll just all go nuts about us positive and negative. And we just kind of sit there, you know, and watch it sometimes just amazed that how much mileage they can get off of us without ever actually reading anything we’ve written either.  

You know, they just read what somebody else has written about us and write that. So it’s been really interesting to see this take off. It’s been frustrating to see a narrative take off that has really nothing to do with what we’re talking about and to see how difficult it is to combat that narrative, I guess I would say, but all in all, I mean, we’re almost at a stage where I don’t want to say this and jinx us or anything, but some people have said things like no news is bad news kind of thing, or no press is bad, press, et cetera. 

Steve Grumbine (08:04): 

I think where you’re going is it’s interesting to see the popular interest in MMT, whereas, you guys were in a hole before and now all of a sudden — wham! Somebody cracked opened the ceiling and yeah, it’s just blowing up. 

Scott Fullwiler (08:18): 

Well, you know, it’s interesting too, because you’re right, we were in a hole, but at the same time, it’s a heterodox economics hole. At the same time, what we now call MMT always had more going on than that. And for instance, you look at, you probably know about, you know, Argentina’s Jefes Program (Jefes y Jefas de Hogar Desocupados), you know, the jobs program that was basically a guy at the labor ministry there, Daniel Kostzer, saw some of the research Randy, Bill Mitchell, Warren, Stephanie, et cetera, and Pavlina, and decided to try and put together a program.  

He ended up being the driving force behind that program. And it was really, he got the idea from MMT. So this is back in 2001. So we’ve always had some things going on on the side, right? I mean, we’ve had attention always from the financial community in some ways, thanks to Warren. And then you look at the program here at UMKC, early two thousands, mid two thousands was huge for the number of faculty they have.  

It’s just unheard of to have a program is, I mean, a hundred graduate students, 150 graduate students. 

Steve Grumbine (09:25): 

Wow! 

Scott Fullwiler (09:26): 

From all over the world. And we’re talking early, mid two thousands, you know, I mean, Eric Tymoigne from France and a number of people from Latin America and various places. I know I’m leaving all kinds of people out, but so there’s always things going on here. In the mid two thousands, this was a place that, you know, heterodox economists would take their sabbatical here.  

So we’ve always had stuff going on. Obviously it’s a different scale now than it ever was. 

Steve Grumbine  (09:51): 

Absolutely. So I want to try and dig into a few things. You know, obviously, you know, I watch social media and I see Twitter and we’re always looking for every little nugget, wherever MMT sticks its head out, we try and find it either good or bad. Good, we want to lift it. Bad, we want to debunk it.  

And I’m watching you and Stephanie and Rohan and some of the others, Nathan and you guys are knee deep in the fight as folks like Jared Bernstein and more importantly like Paul Krugman. And then you’ve got Simon Wren-Lewis and others, you know, Medway and on and on all these people pop their head out of the clouds, Tim Worstall, who you’ve taken on several times.  

I mean, these people, they don’t have any interest whatsoever in actually understanding MMT, but they take an incredible amount of time as you’ve stated to critique MMT. And it’s not even MMT, they’re critiquing, it’s like some fantasy that they’ve come up with that they’re actually talking about. What is it like to work so hard at something so vital and to have so little regard given to you by the orthodox world or just academia in general, that just has gotta be frustrating. 

Scott Fullwiler (11:11): 

You know, it’s such well-worn territory. It happened from the start, really. Again, you look at Randy’s book in 1998, there’s a debate. I still remember it. I think Randy and others have probably talked to you about, you know, the listserv that they all sort of met on and in the mid 1990s. So after Randy’s book comes out in late 1998 “Understanding Modern Money,” there’s a debate going on there about whether Randy’s book, whether he’s reversed his view on bank money, right.  

They’re accusing him basically of going back to the money multiplier view. Right. And Randy’s like, you know, no, I haven’t quoting from his book, you know, blah, blah, blah. Right. Cause Randy was a big endogenous money guy. He was one of the main figures in that, in the late eighties, early mid nineties, but they just would not have it.  

And that has happened continuously. I mean, it doesn’t matter how many, you go down that literature on credit money and you can’t go through that without picking out dozens of articles by the people who, you know, we now call MMT, but you will see that everywhere in some of the critiques by heterodox economists, some of them the most recently written ones that everybody, you know, who’s watching this stuff has seen, are saying, you know, MMT is rejecting credit money and it’s sort of like, you know, my God, what have I been writing all my career if I’m rejecting credit money?  

So yeah. It’s come with the territory. The interesting thing is how at least in the heterodox world is how all of those critiques have never been able to stick in the sense that yeah, there’s a faction of people in the heterodox economics world that doesn’t like us. Never liked us. You know, it likes to write these sorts of things and never really understood either.  

There’s a faction of those folks that have always done that, but they’ve never mattered to where MMT has gone, which has been kind of interesting. Right. You know, and even Krugman and so forth does the same things. And he hasn’t really, I guess, within the mainstream he’s affected the interpretation of MMT, but you know, and he likes to say things like, “Well, they’ll just move the goalposts,” and so forth.  

It’s like, well, you know, MMT is a framework. MMT is a framework that has nuance to it. Right? And it has a number of moving parts and yeah, if you’re used to supply and demand or, you know, your undergraduate econ textbook kind of things, it might be a bit to put together. I mean the basics of are not hard except the hard part is unlearning.  

Right? But beyond that, yeah, there’s a lot of moving parts and we absolutely will never apologize for that. You know, the world’s complex. 

Steve Grumbine  (13:55): 

Absolutely. You know, it’s funny you say that, and this is great that you brought this up. I wasn’t even thinking about going here, but this is phenomenal. You know, as a grad student, an MBA grad student, I had to go through several seminars, if you will, deep dives into economics, macro and micro.  

And like I said, I was bored to tears, but I still went through it and I got good grades and I came out the other side and I was under every false notion known to mankind. I started with the whole fractional reserve idea. I went into the idea that if we print more money, we’re going to end up with inflation, hyperinflation.  

And I went through all these machinations of every single thing that MMT literally labors through to debunk and says has no basis of reality. The money story that Warren tells, you know, about why we tax and what the dollar is, a tax credit, et cetera, all of these things flew counter to everything that I learned. What in your mind defines MMT? 

Scott Fullwiler (14:59): 

Oh God. So I’m gonna, at least for starters, we could dig in if we want, but for starters, I’m going to punt a little bit on that one, or it might appear that I’m punting because for me, what is important about it is the method. And of course we’re looking at the monetary system. And so that’s the basics of it.  

And it’s obviously about the nature of money, et cetera, et cetera. But for me what’s different about it is the method, how we determined that we know something, right? How do you know what you know? And for us, one of the things that emerged early on was operations and accounting. Every single transaction in the economy affects the financial statements of the people that are involved.  

If you don’t know how the transaction affected the financial statements, you didn’t completely understand the transaction in the first place. Right? So for instance, something like trying to stimulate the economy, cutting interest rates versus trying to stimulate the economy by cutting taxes, just say, okay.  

In your standard, macroeconomics, every single textbook, et cetera, those are the same thing. It’s just sort of which one’s better, right? I mean, which one is, I shouldn’t say, which one’s better, there’s more trust in the mainstream framework, in a central bank to do that sort of thing. And you can’t let the politicians control those sorts of things because they’ll just, you know, they’ll just try and give everybody what they want and we’ll end up with hyperinflation, blah, blah, blah.  

But anyway, basic fiscal policy, monetary policy, right? And they’re both driving aggregate spending and the mainstream textbooks, and even the heterodox, we’ll look at those as if they’re kind of the same; and it’s sort of which one do you prefer for various types of reasons. But from our perspective, we looked at it and said, well, if you try and stimulate spending by cutting interest rates, what are you doing?  

You’re trying to stimulate spending by the private sector borrowing, spending more out of their existing income. If you’re trying to stimulate spending by cutting their taxes or, you know, increasing transfer payments, whatever job guarantee, you’re stimulating spending by increasing spending out of increased income.  

And those are fundamentally different things. So that’s the sort of thing that for us has been significant to our approach is to say, “How do we know that we know something?” Well, we know it because we’re looking at transactions. We better know how they affect financial statements. Right? We know that when the Fed does open market operations, that’s not the same as a government deficit, even though a lot of economists like to treat those as the same thing.  

So the other thing is operations. There’s a way that the Fed is attempting to hit its interest rate target. And there’s all kinds of central bank literature on this and primary sources. There are laws and regulations and so forth that drive how this all works. You’ve probably talked with Rohan and others about this sort of thing.  

So how do we know that we know? This comes from my background in institutionalism is there is this normative structure that’s built by institutions and the hierarchy of authority, the laws and the regulations and so on and so forth. That’s how we know the constraints within institutions behave. So we don’t just talk about behavior and why people do things because we’ve decided to do optimization mathematics or something like that.  

Right? We do it because we went out and found the primary sources that tell us, “This is how this works.” So for me, it’s the method. It’s the accounting and operations, I think has always been sort of the competitive advantage; the thing that we generally did better than everyone else, but that’s because of that and the institutional structure that that’s what we’re going at, we then put together this framework, that money is something that is created legally within a hierarchy of authority.  

It is not something that the private sector creates and the government has to borrow from the private sector, so on and so forth. So for me, that’s the basic. Now, if we want to talk about various details of that, we can. Oh, let me say this. And I said this at the MMT Conference 2018. If I were going to look at say, Randy Wray’s book 1998 and say what’s the basic thing — at least in terms of building a macroeconomic framework, there’s a lot of history there and so forth — but what’s the thing that comes out of that book for me, that heterodox economists almost never grasped and is so fundamental.  

There were three things. The first one is that monetary policy, central bank is about interest rates, not the money supply. Okay. Central bank cannot directly target the monetary base, basically. There is a way they can do it if they set interest rate reserves equal to the interest rate target, that’s kind of a technical thing.  

But at any rate, the standard way that everybody thinks about it, it was about interest rates. Whereas everybody was thinking about it in terms of money supply. Now, everybody thinks about in terms of interest rates; so we were ahead there, or Randy was and the others. So the first one is central banking is about interest rates, not “money” in quotes.  

The second one is government deficits are about money, not about interest rates, right? And normally when you hear people talk about government deficits, they think about the crowding out framework, right? The government has to borrow money, and so that’s going to push interest rates up, et cetera, et cetera.  

And the issue was no, central bank is setting the interest rate, right? The government deficit is creating quote “money.” And there’s a thing I need to add on there too. But let me go to the third point. The third point was you have a choice, involuntary unemployment buffer stock, or an employed buffer stock.  

That’s an inherent choice. That’s basically the only two choices in the world that you have for how to deal with the people that don’t end up with jobs. So those are three things, and those are three completely revolutionary things. The first one isn’t nearly as revolutionary anymore. Most everyone believes that now.  

The other two are still revolutionary. So those would be the three things that pop out of that in terms of a basic framework, there’s so much more going on, I mean, interdisciplinarity and so on and so forth; but if I was going to hit the basics, for me, those would be the three that come out of that. 

Steve Grumbine  (21:32): 

Let me stop you there. I am so blown away by one thing, mind you, I’m always looking for nuggets of gold, but the way you described the federal reserve, if you will, monetary policy being about interest rates and fiscal policy being about money, that was a revolutionary moment for me, that is just very concise and clean and easy to grasp. I really appreciate that immensely. 

Scott Fullwiler (22:00): 

You’re ahead of like 90% of the people that think that they’ve read that book. 

Steve Grumbine  (22:06): 

Well, I have read that book and not only have I read that book, but I listened to you guys religiously. And the way that you said that just about cutoff five minutes of talking, I have to do all the time. You just gave me the one minute. So that’s the bumper sticker, man. 

Scott Fullwiler (22:22): 

Yeah. 

Steve Grumbine (22:23): 

And the other thing that I want to touch on, cause you touched on it earlier in Jefes and the Argentina job program and the idea of an employed buffer stock of labor. You know, obviously the Green New Deal has come around and in terms of getting some popularity and some understanding and some energy behind it backed by obviously some of the most popular politicians on the planet being Bernie Sanders, Alexandria Ocasio-Cortez, and of course backed firmly by the MMT scholars and activists.  

What I would like to understand maybe is for the people that are wrapped up in this concept of a UBI, they have really been able to effectively target people that just aren’t paying attention. But there is a huge reason why a UBI versus a job guarantee is really core to MMT. I mean, I know there are different ways of fulfilling, if you will, the public purpose, but MMT is revolutionary in that it is advancing an employed buffer stock of people.  

That’s the goal, and that’s part of the Green New Deal, cornerstone of the Green New Deal framework is a job guarantee. What separates a job guarantee from a universal basic income? Why should our activists and voters, and other people that are trying to dig into these issues, why should they get on board with a job guarantee versus a UBI? 

Scott Fullwiler (23:53): 

Okay. So as I always do, I’m gonna throw a bunch of nuance here and make it look like I’m moving the goalpost just partly to confuse people cause I like that, but no, I’m kidding. So first off in terms of just the basic economics of it, I don’t see a UBI and a job guarantee as competing cause they’re doing different things.  

Okay? So it’s either an unemployed buffer stock of workers or an employed buffer stock of workers – those are your two choices. UBI isn’t one of those choices. So first off, so I’m reminded since you talked about going to an MBA program, I’ve told some people this before, but I remember seeing a tweet from somebody many, many years ago; and on the tweet, the guy had a picture of two books.  

One of the books was called “What They Teach You at Harvard Business School,” and the other book was called “What They Don’t Teach You at Harvard Business School.” And the line of the tweet was these two books contain all the knowledge of the known universe, which I thought was pretty good. But anyway, so there are two choices, right? There is a buffer stock of the employed and there’s a buffer stock of the unemployed. Those are the only two choices. That’s the known universe of choices there, right?  

So the issue with the I’ll hit the UBI here in a second, but the issue with the job guarantee versus the unemployed buffer stock is that it’s a coincidence if the private sector creates enough jobs for everybody that wants one. It’s a coincidence because the private sector isn’t about jobs. It’s about profitability.  

They have a survival constraint, which is a financial one. At some point they always have to worry about their financial constraint and they have to stop being concerned about how many jobs they’re creating — if they were concerned about how many jobs they’re creating in the first place — but at some point, cause they have a financial constraint, they have to worry about the financial constraint more and there’s nothing wrong with that per se, that’s the design, right, at least, you know, from sort of an abstract picture there.  

So that’s just the world live in. And so it will always be a coincidence if the number of jobs created is enough for the number of people that want jobs. And it’s really dumb to do employment policy based on a coincidence, it would seem to me, right, that your macroeconomic policy succeeds on a coincidence, not because you’re good at macroeconomic policy.  

So the thing there is that the history is that the private sector hasn’t created enough jobs for all the people that want jobs. Now, right now, the time that we’re in for about the last year, I think is the first time that the number of people efficiently unemployed are less than the number of jobs being advertised as available.  

So here we are in kind of a first, however, that doesn’t look at geography, you know, of where jobs are versus where the people are that want jobs, skill breakdown, et cetera, et cetera. But it also doesn’t count the fact that there’s a lot of people who aren’t officially unemployed that would like to work.  

So it’s, you know, two or three times as many people we’ve found. So you got that going. But then the second thing is because a job guarantee replaces involuntary unemployment, that means that it’s not competing at least in the economic sense with other macroeconomic policies for stimulating the economy.  

Right? So what I like to say is, no matter what macroeconomic policy you prefer to bring the economy to, you know, what we normally would call full employment, right, but which means you end up still with a bunch of people without jobs, no matter how low you think unemployment should go, you know, et cetera, et cetera, however much stimulus you want, UBI, whatever you still have that choice that you have to make for whoever is leftover of involuntary unemployed buffers stock or employed.  

So let’s just imagine that you can do a UBI that pays everybody $30,000, whatever, blah, blah, blah. Well, what do you do if there’s still people who want jobs and there aren’t enough jobs cause it could happen. Right? I mean, absolutely. Right. So they still have to answer that question right? Now, the criticism that MMT has of the UBI is a separate criticism, which is UBI can’t cash its own checks.  

You know, it’s kind of funny that these people that want to get rid of capitalism, their solution is to give everybody a bunch of money so they can buy stuff from the capitalists. 

Steve Grumbine (28:21): 

Right. 

Scott Fullwiler (28:22): 

And that they expect then that the capitalists keep voting for that solution right over time to, to, you know, especially in the age of Citizens United, right, where they can kind of control campaign contributions and so forth. And cause what I like to say is, you know, the capitalist has been pretty happy to just lend to us the last 40 years.  

They don’t need to give us money. They’re happy. But anyway, what I like to say about the UBI is there’s no such thing as a or the UBI, right. You have to specify who gets it and how much they get before we can even have a discussion. Right. So there’s a number of people that for them, a UBI is the thing that, you know, Alaska’s has been doing, which the maximum was like once they got $2,500 for a year or something like that.  

So they’re like, well, yeah, okay, you can do that. Right. But you know, you want to talk about things like $10,000 for every adult and $5,000 for every child or you know, even more — enough income so that they don’t have to worry about working. Or if you want to do that sort of thing, you’re talking about like $30,000, something like that.  

Well now you’re talking about doubling the government’s budget from, you know, 3 trillion to 6 trillion or whatever it is, or 4 trillion to 7 trillion, whatever. That’s a totally different thing. Right. And good luck doubling the government’s budget without doing anything else to reduce the inflation effect.  

So, that’s kind of what we mean by they can’t cash their own checks, right. That they’re giving everybody . . .that people can actually make the choice not to engage in the labor market. Then you have to give them a significant amount of income. And then what are you going to do to make sure that it doesn’t create inflation?  

Well we’re going to tax the rich or something like that. Well, okay then it’s not really a universal income, is it because you just basically tax perhaps even more of it away from them, what they received, from certain income groups. Right. Which, okay, fine, not necessarily against taxing the rich, but it’s not a universal basic income. It’s Robin Hood, sort of. 

Intermission (30:23): 

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Steve Grumbine (31:15): 

Let me ask you a question on that. So, you know, I look back and Milton Friedman had the negative income tax and he said, “The only thing wrong with capitalism basically is we need more capitalism. So let’s go ahead and sprinkle some money on the problem.” And I liken this to, you know, here in the local community, they talk about school vouchers.  

Well, shoot, if everybody gets 5,000 to go to the schools, you’ve got the status quo because the rich are going to still congregate to where they want to go. And the poor are still going to be left behind because of various things. What you’re really looking for is the real resource itself that comes out of that spending.  

Alan Greenspan and Paul Ryan on the social security front. I mean, my goodness, Stephanie puts that one out there all the time where he says, you know, the government can’t afford any of this. That’s not the issue. The issue is can we create an economy where the real resources are available for those purchases?  

Because you’ve just increased the purchasing power for all these folks. And I liken this to, you know, obviously it can’t be a universal basic income to your point. This ends up becoming once again, another push for giving some people something and other people, not anything. Whereas the job guarantee is there for everyone.  

If you want to get on it, you’re free to get on it. If you want to get off of it, and there’s another job for you, you’re free to get off of that. There’s no force here. However, I look at that as an activist, then I say, “Hey, here’s a great way to enhance democracy because now all those people are going to have to be active in their local community to start propping up what jobs they’re going to find.  

And then I start looking at well, shoot. Now all of a sudden, these people are working and they’re working a federal job and now they have federal benefits,” you know? And so now what? You’ve just exceeded everything that a UBI could ever do, even though they’re not in competition with one another per se, the reality is, is that you’re just giving people cash.  

You’re not giving them the goods or services. So what’s the price anchor? What is the thing that, to your point, what is it that keeps the inflation under control? And the job guarantee is a countercyclical automatic stabilizer that is going to, in my estimation, save us from the next global financial crisis where all of a sudden they’re vetting a million jobs out of nowhere.  

There’s going to be a job waiting for them right away. And they’re going to have benefits. They’re going to have healthcare. They’ve got all that good stuff right out the shoot. I mean, in my perfect world anyway. . . 

Scott Fullwiler (33:46): 

Yeah. I mean, they’re not competing in the sense that a job guarantee replaces involuntary unemployment and they’re not competing in the sense that no matter what macro policy you prefer, you can add a job guarantee to it because if you don’t, what you’ve done is added involuntary unemployment to it, right?  

And some macro policy ideas are better than others in the sense that some of them will result in a lot fewer people that would be leftover that would have to take a job guarantee job or be involuntary unemployment. Some of them would have more, right? The job guarantee doesn’t compete with UBI that way.  

There is competition in the sense of the way that you were describing though, for sure. And there’s competition in the sense of what’s more empowering to people? To receive a check from the capitalists, I shouldn’t say the capitalist cause of course I’m MMT and the money doesn’t come from people, but the capitalists are the ones who are giving all the campaign contributions to affect the vote and so forth.  

I’m creating a number of assumptions there, but they’re competing in the sense that do we want to just give everybody a big check or do we want people to have that community empowerment that you talked about, this stuff that Pavlina talked about when she did some case studies in Argentina and during the Jefes’ Program and so forth.  

And you know, the UBI people would respond with, well, that can happen as well with a UBI, right, because now you don’t have to work. You’re free from the labor market. And so you can go do those things anyway. There’s obviously the separate issue of how much money did you have to give them, how much income do you have to give them for them to not do that?  

Can you cash that check in the first place? Right? Anyway, there’s a number of separate issues that if it’s okay, I want to hit one thing here that I think is really, really different between a job guarantee and a UBI. You might’ve heard Nathan and Rohan and Raul talking about, and I can’t remember the book title, but there was a book about creating disability or something like that.  

For some reason, the book title is escaping me. It’s about basically how we have created various forms of disabilities because the way that if you can’t work in the current job market, then you’re considered basically disabled, right? If it’s because of your physical limitations and so forth, that you’re not able to do that.  

Right? And so a number of UBI people like to say, “Well, job guarantee . . . if you can’t work, what are you going to do?” Right. And so, and of course we’ve always favored, well, if you can’t work, you know, you should basically have a basic income then. But the flip side of it is somebody like my wife, right?  

My wife has had MS (multiple sclerosis) for 25 years. She walks with a cane. She can walk maybe a hundred feet with the cane. She’s also legally blind at the same time. So she can’t drive herself anywhere. And she can’t have jobs where she has to do a lot of paperwork and things like that. And she can’t have jobs where she has to be mobile, basically very mobile, but she has a master’s in social work.  

She’s worked in a maximum security prison. She’s worked in women’s shelters, being a child advocate. She’s done alcohol and substance abuse counseling. She’s done all kinds of stuff. She’s got tons of experience, but in today’s world, she cannot get a job because she is too much work. She is too much expense for a business to accommodate her needs.  

Right? And so this is the sort of thing we’re talking about in a job guarantee. My wife, yeah, we take a check, we throw it in the bank and, you know, earn the interest on it. And you know, it’ll turn into dividends, blah, blah, blah. But what she’d really like to do is go out and work 15 to 20 hours a week in the field that she chose and she loved, but she hasn’t been able to do for 15 plus years. Right? And a UBI doesn’t fix that. 

Steve Grumbine  (37:28): 

No, it doesn’t. That is an incredibly powerful statement. You know, I think to myself, I have a son with special needs and I wonder, you know, he’s only turning four here shortly. So it’s a little too soon to tell what he’s gonna grow up to be. But assuming that, you know, he has issues sasimilating, and we don’t know this for sure, but I would like to believe that he would be in a position where he could work in his local community.  

If he’s unable to ever come this and be able to be productive and feel good about himself. And when I say productive, I’m not talking about make work. I’m not talking about working for the man. I’m talking about serving the public purpose, serving his community. What a wonderful thing. If you think about this Scott, you have an incredibly powerful story right there.  

I mean, your wife’s ability to be able to do something empowering like that without feeling like a burden to the profit margin of some company. I mean, this is what it’s all about to be a human being, to have Maslow’s Hierarchy of Needs met and self-realization. The idea that we are just consumption units is not a terribly empowering position to be in, but now all of a sudden, I liken this also to, you know, there’s so much domestic violence out there.  

And the “Me Too Movement” really showed a light how prevalent it is. Imagine a woman that has been abused and in a terrible marriage, trapped and afraid to speak out has the opportunity for a job guarantee where she’s not only getting a living wage, but she’s got the living benefits package and she can pick up and leave and go to any place in the country; and the next day have a job waiting for period.  

No, let me fill out five forms, go through an employment check. You’ve got a guaranteed job, a job as a right. That is a very, very empowering thing right there that every feminist, every single humanist, every single progressive should be firmly behind; cause this is not about just trying to shame laziness or something.  

This is about empowering communities to once again, come together and bring about that making America great, maybe for the first time kind of thing. I love that. 

Scott Fullwiler (39:48): 

Yeah. You made me think of something there when you said a job as a right, cause this is another thing that happens is there’s two different levels here of talking about a job guarantee . . . well, there’s multiple levels; but in this particular line of thinking or part of the debate, there’s two different levels, right?  

There’s one level where we would say that a job guarantee should be a right, there should be a right to a job. And the one analogy for that is the right to public education, right? Nobody disagrees. I don’t think that everybody has a right to public education, right? Nobody disagrees with that. We have all kinds of disputes about how to pull it off.  

Right? There’s all sorts of disputes about those. And those are all legitimate disputes to sort of sit there and argue about. And you know, we haven’t necessarily done public education that well in many places and the job guarantee is the analogy there is nobody should dispute that everybody has the right to a job, especially in a world where if there were enough jobs without a job guarantee, it would be a coincidence, right?  

That’s the world we live in. So there should be a right to a job. We can have all kinds of disputes about how to pull that off, how we can have all kinds of debates and those are legitimate. But the problem is most of the people that I hear disagreeing with the job guarantee, leveraging that idea of whether or not they’re going to support a right to a job with a question like, well, but you know, if you’re a bad worker on the job guarantee, can you be fired?  

Right. Questions like that. You know, it’s just ridiculous. Right? I won’t support a right to a job unless, you know, it’s like saying I won’t support public education unless you tell me whether or not individual schools can expel students. Right. I mean, that’s like the dumbest thing ever, but that’s basically the level of internal inconsistency that we’re dealing with.  

And this is a way it’s always been for MMT, right? There’s nuance. There’s a lot of moving parts. And the vast majority of people that end up on the critique side have never absorbed those various moving parts. Now I’d love to see some sort of psychological analysis of why people end up agreeing or disagreeing because it’s not about intelligence whatsoever.  

There’s all kinds of super smart people that do not agree with us at all. And there’s all kinds of people who, you know, have never picked up an economics book who sort of like figure it out, right. It doesn’t mean they’re not smart. I shouldn’t sort of make that analogy, but there’s a number of people that come out this, you know, without having any background that grasp what we’re talking about more quickly than the people that have a ton of expertise in the area.  

So I’d love to sort of see somebody sit down and try and figure out what the common denominators are. 

Steve Grumbine  (42:35): 

You know, it’s interesting you say that, and I want to take a stab at this. I got the opportunity to interview Mark Blyth, who is from outward appearances would seem like a fellow traveler, but he’s not. And he had some, what I considered to be cynical views of the political system, which I think all of us share.  

But the difference I feel like between an MMT accepting individual and an MMT not accepting individual is the concept of cynicism. It’s almost akin to what you see with conservatives and what I would consider progressives in the sense that you see a lot of fear-based protections, fear of change, fear of a host of things on the conservative side, and you see more openness to change on the more progressive side.  

When it comes to people that I’ve encountered that are typically against MMT or start off from a position of rigid, that is not true kind of thing, they tend to be more fearful of the idea of a government monopoly on the creation of money. They tend to be more fearful of what happens if the government collapses, my God, what’s going to happen to my money.  

They tend to be people that are in general, just fearful and distrusting of government. And because MMT advocates, you know, are positing a state theory of money to some degree, and the understanding that money is a legal construct; it is a credit relationship; it’s these things; and that it comes from the authority in the state that frightens a lot of these people.  

And now I’m not saying it’s all, but I’m saying that in my experience, I’ve really come to believe that a lot of them just are cynical. And it’s a political cynicism that blocks the understanding of MMT because they’re how in the world could we ever expect Republicans to do this? Or how in the world could we ever expect this to happen?  

And so they write it off as fantasy. And then of course, we’re stuck dealing with the conspiracy theorists that have run rampant and the Zeitgeist Movement, and some of the other money crankery out there, you know, the Rothschilds, I mean, goodness gracious and all the other central banking, conspiracy logic, not really understanding even the role of, I mean, Warren jokingly, and maybe not jokingly says, that the Fed could be rolled into a spreadsheet and be done with it, you know?  

And if you think about it, you know, their marking accounts up, marking them down. I’m sure there’s more intricacies than that. But at the end of the day, the conspiracy theorists out there they like their James Bond. They’re a fearful bunch. They like feeling like they’re in the know, and this allows them a way of failing and pointing somewhere else instead of fighting through it to get to the other side for victory. That’s my belief anyway. 

Scott Fullwiler (45:31): 

Okay. So let me go at that. Cause you made me think of something there, which is where I go with some of what you’re saying is I go to remember I mentioned earlier methodology right. How you know what you know, et cetera. One of the problems, maybe the problem, I don’t know that we have with the people on all sides that disagree with us is we are coming at this from a different angle methodologically and there is no language yet developed for us to have a debate on sort of common grounds.  

There’s no standards for evaluating whether our statement is correct versus their statement. And I shouldn’t say there are no standards for evaluating. We have our standards, they have their standards. And so we all haven’t figured out a way to sort of have that conversation, cause we basically, part of the whole issue is we reject their standards, right?  

So from our perspective, we can argue within their framework and within ours and they can only argue within theirs. So there’s a difference there. 

Steve Grumbine  (46:34): 

Are you saying we’re bilingual? 

Scott Fullwiler (46:37): 

Anyway and I’m exaggerating a bit, but even with the heterodox economists, there has been that feeling of this common ground to just have this discussion in the first place, right? I mean, from the very beginning, thinking that Randy, for instance has rejected endogenous credit money. When if you read that chapter, it is so clear that he’s talking about endogenous credit money.  

I don’t know how you could read it and not think that, but he used this word leverage that just threw everybody off. And it was just the weirdest thing to me. It still is. But so to me, it kind of comes down to this methodology issue is very important. And one of the things I just want to hit, cause when I talked about the three things that are important, or I shouldn’t say the only three things that are important, but uh, in terms of the overarching framework, three things that come out of Randy’s book, right?  

Fiscal policy about money, monetary policies about interest rates, et cetera. Since this crude view of MMT is that MMT equals printing money, it’s worth going back to what Randy put in that first book and what Warren and everybody else was talking about back then, Matt and Bill and Stephanie and Pavlina, which is, if you go read the literature from the nineties, they’re very explicit.  

They say, “All government deficits are printing money,” right? And this is where this language of horizontal money and vertical money comes in. And those terms threw people off as well. So we don’t really use that anymore, but the vertical money was basically the government deficit, right? So that was called say “money” because the government deficit was creating effectively net financial assets for the private sector.  

And then the central bank had a decision about, I shouldn’t say the central bank, but there’s a decision about how are you going to set the interest rate target, right? Is the government going to issue bonds? The central bank can issue bonds. You’re gonna pay interest on reserves, et cetera, et cetera.  

But they’re very explicit. All the government deficits are creating our money creation. So if you go back and you look and you see that all government deficits are money creation, then you can’t write an article about MMT that says MMT wants to print money and not sell bonds. Right? Because the early literature is very clear.  

All government deficits are money creation. It doesn’t matter if we sell bonds or not. Right. We can keep selling bonds. It won’t have any more or less effect than if we do what everybody else calls printing money. It’s the same thing, right? So all these people that want to say MMT promotes printing money, no MMT promotes not worrying about the deficit, per se, as a number worrying about the state of the economy and not worrying about how you’re financing the government deficit, because that doesn’t really matter.  

If you think it matters and you want to keep selling bonds when you run a deficit, fine, it doesn’t matter. We don’t care. That’s not the thing that matters. But you look at the heterodox critics and the neoclassical critics and everybody else. They look at it through that standard lens of if you don’t sell a bond and you run a deficit, you’re adding jet fuel to that deficit and MMT has always rejected that.  

Anyway, that’s a really important thing that is occurring right now in the discussions that, I mean, you’ve probably read it right. 99% of the time we are being defined as we want to print money. And what print money means is your, you know, Econ 101 textbook view of dropping money from helicopters. Right? 

Steve Grumbine (49:54): 

Right. 

Scott Fullwiler (49:55): 

And like I said, if you go back and you read the early literature, it’s pretty clear that that’s not what they’re saying. 

Steve Grumbine  (50:01): 

I wanna touch on something that you wrote some time ago that I think is probably the most important insight that I’ve gotten from your writing. And that’s not to say every insight isn’t important, but this one in particular is the one that always stands out when I think of Scott Fullwiler. 

Scott Fullwiler [intro/music] (50:16): 

I’m just impressed you found one. 

Scott Fullwiler (50:19): 

Well, no, this is a powerful one. And others may say it may be universal amongst development team and other academics, but you wrote it. And that was getting rid of the concept of a arbitrary budget constraint and going to an inflation constraint and the idea of expanding our understanding of what that means.  

It was a very, very powerful article. And for those of you who are interested in looking it up, please go to New Economic Perspectives. It’s out there. But, Scott, talk to us about the difference between a budget constraint and an inflation constraint, because this right here might be the secret sauce to cracking the code to getting a Green New Deal. 

Scott Fullwiler (51:02): 

Yeah. Well, there’s a number of angles on that, of course, because that’s the way I do things, but yeah. So I wrote that post. It might’ve been the first time somebody used that exact language. I’m not sure I’m probably not, but it wasn’t something that any of the MMT economists would have thought was like, you know, Holy cow, I never thought of it that way.  

Right. So, but, one of the overarching points is the size of the deficit itself is not the point, right? Monetary sovereign — money doesn’t come from rich people. Monetary sovereign doesn’t have to worry about bond vigilantes, et cetera. And this is actually kind of a thing here, right? The printing money, the sovereign currency issuer, what really happens there, isn’t the ability to print money in the sense of the neoclassical view of, you know, just throw a bunch of money out there rather than issuing bonds.  

The thing that really matters is the ability to — we’re talking about Republicans — raise that military budget and issue those treasury bills and have those basically not be subject to bond vigilantes because the Fed’s target rate anchors it, right? That the interest rate is a policy variable, interest rate is not something that China sets or something like that for US government treasuries.  

That’s the thing that a sovereign currency issuer has. They have the ability to run a deficit and not worry about bond vigilantes. Anyway, so back to the budget constraint, inflation constraints. So if that’s the case, then the budget itself is not a constraint. So then, okay, what does matter? Well, what matters is the consequences, the economic outcomes of the government’s budget position.  

And this is just basic John Dewey and institutional economics, and my mentor, Greg Hayden, and Jim Sturgeon here at UMKC and Jim Webb, which is we evaluate macroeconomic policy by the outcomes it achieved versus our policy goals, you know, low inflation, low unemployment. And hopefully we have a lot of other ones, right, protect the environment, nobody’s in poverty, you know, healthcare, et cetera, et cetera.  

Right. So what I like to say is MMT ultimately isn’t about money, it’s about making money the least important thing, because you’re a currency issuer and you don’t have to worry about it, unlike everybody else that has a monetary survival constraint. So you can put all these other things first, one of them is inflation because of course that can be a negative consequence of having this ability to not worry about the bond vigilantes.  

Right now we extend that again in the piece that we published with Rohan and Nathan a few months ago on inflation, right? The MMT response to inflation, et cetera, et cetera. Right. Because Josh Barrow and a few others wanted to say, well, yeah, budget constraint, inflation constraint about the same thing cause you still have a constraint.  

Right. And yeah, maybe you have a few more degrees of freedom, but it’s really not that much. And so where we went with that, and I think Nathan wrote quite a bit of that piece. So I don’t want to take more credit than is due. Where we’re going with that piece is there are a lot of ways to keep inflation from rising, right?  

I mean, Bernie Sanders had a policy proposal last year, which was why don’t we make it so that no financial institutions can have assets greater than 3% of GDP? Okay. Well, 3% of GDP is about $600 billion. And if you go look, we got four or five banks that are over 2 trillion, right? So if you make the financial sector downsize that much, you might be able to slow down the economies push for inflation beyond what’s going on with the budget deficit.  

There are a number of ways that we can slow down inflation because inflation is about growth and a price index. It’s not this sort of inflation that you see in economists’ models. There’s actually a way that we measure it and you should link the government’s budget position to how prices are set and how they work into the way that we measure the price index that ultimately gives us inflation when it grows.  

What really we have as a number of additional degrees of freedom. It’s not a budget constraint, it’s inflation constraint. And there’s more ways to stop the inflation from happening than just reducing the government’s budget position by raising taxes or slowing government spending. There’s many, many ways that you can slow things down.  

You can regulate the financial system. You can do things that well anyway, I’ll stop there, but 10 or 15 of them listed in that piece. 

Steve Grumbine (55:16): 

So absolutely well look, Scott, I want to tell you right upfront, I’ve really enjoyed our friendship. And I really enjoyed talking to you tonight. This subject, obviously to me has become one of the most important things that I do with my day, every single day. I don’t know how to turn it off. And you are one of the people that has lit a fire under me personally and our entire organization at Real Progressives.  

We thank you so much for all the hard work that you and the entire development team and others on the same pathway have given us. And so with that, I hope that you’ll come back and see us again soon because we really love you. 

Scott Fullwiler (55:56): 

Yeah. I’d love to. And of course we have to mention that it goes both ways, right? That part of the hockey stick is you guys, right. Is people like you who are getting the message out and doing a fantastic job of it. So it’s kind of overwhelming. I never would have thought anybody would want to read anything I’ve written, and you probably still shouldn’t.  

But once we read it, but, it makes you kind of weird if you want to actually read that stuff. So . . . 

Steve Grumbine  (56:20): 

I accept that man. It’s better than Dungeons and Dragons, right? 

Scott Fullwiler (56:24): 

It’s completely humbling. I really appreciate the work you do. And all the other folks that are helping us out, I mean, we’re a team, right? 

Steve Grumbine (56:32): 

So, absolutely man, well with that, thank you again, Scott, and we look forward to seeing you soon. 

Scott Fullwiler (56:38): 

Great. Thank you. Bye. Bye 

Ending Credits (56:46): 

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts and promotional artwork by Mindy Donham. Macro N Cheese is publicly funded by our Real Progressive Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.We 

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