A good part of the reason I started blogging was because I went to a history conference at a UT branch up between Dallas and Fort Worth and found that, contrary to belief, many well known academic historians have found community history projects to be invaluable because of their focus and details. Photos rated high. Photos with details rate high. Interviews with participants in events rated high. Interviews with older people rated high if you cover their experience and perspective.
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“Protest works. Just look at the proof”


The last place you will hear about the new American labor movement is in big American outlets.

Via lambert, via susie. See them, their blogrolls, Twitter hash tag #1u and just about any other outlet where citizens can get the word out.

The Coalition of Immokalee Workers (CIW)

The CIW is a community-based organization of mainly Latino, Mayan Indian and Haitian immigrants working in low-wage jobs throughout the state of Florida. Via.


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Hope you don't mind if I take some time

A week off from blogging. Title is from Take Some Time by 13rd Project, which was on my Best Music of 2008. Back next week!

Will gangland-style executions of police officers be enough?

Years ago - I don’t remember where or when, or I would give credit - I heard the line “don’t pay attention to what’s in the news; pay attention to what’s not in it.” Media cultures often develop story lines and decide what is newsworthy based on how well if fits the narrative.

The protests in Wisconsin a few years ago were a really clear example. Large corporate outlets have been long settled into a neoliberal economic framing. Capital mobility is the new reality. International agreements that facilitate it are merely expressions of that reality; issues like collective bargaining and establishment of community standards are fondly regarded but antiquated notions in our brave new world.

So when Madison erupted over union representation, many outlets didn’t have any sensible language for describing what was going on. As a result, a huge story was mostly ignored. (Interestingly, many of the themes from it foreshadowed the Occupy movement later that year, which was similarly blacked out in its first weeks.)

Sometimes, though, a story gets ignored because it has simply become too routine to be considered news any more. Gun violence in urban areas like Chicago is not a national story now (if it ever was), and school shootings appear to be getting regarded as less and less newsworthy. After Tuesday’s shooting in Oregon, CNN initially tucked it under an “OJ 20 years later” story. CNN’s Wes Bruer initially tried to explain why it was right to do so, but ending up falling back on a defensive “the other guys aren’t covering it either” reply. Perhaps related: CNN followed up the next day with a “this is becoming the new normal” story.

Treating the proliferation of gun violence as routine means relegating certain stories to the sidelines. A four hour pursuit and standoff with an automatic weapon-wielding gun nut that winds through neighborhoods, evacuates schools and concludes with the suspect getting smoked out? No body count, so don’t bump it. Bulletproof blankets to shield kids during school shootings? Just another day in America.

We might be starting to see some changes, though. Some on the left have urged the media to make the connection between violent right wing rhetoric and metastasizing gun violence. While that isn’t a new observation, it’s starting to get picked up in established outlets. One of my regular reads, Esquire blogger Robert Bateman, has announced his intention to focus his post-military career on the issue. Moms Demand Action has a passionate and grassroots approach reminiscent of Mothers Against Drunk Driving, and I don’t think many people would dispute MADD’s success in changing both laws and culture on that issue.

If none of that is considered a sufficiently compelling news hook, how about this. I know the Republican establishment is currently voiding its bowels over the teabaggers claiming the immaculately coiffed scalp of Eric Cantor, but the gun violence coming from the ammosexuals has a character to it that demands a response from GOP leadership. We now have armed right wing extremists targeting law enforcement officers for summary execution. That’s not just a horrific crime, but a political statement as well.

John Boehner and others at the top of the party should be very specifically and persistently asked how they characterize political murder, and where they draw the line between a horrific crime and domestic terrorism. The execution of police officers doesn’t qualify for Boehner. OK, fine - then what does? Does Boehner consider the Oklahoma City bombing domestic terrorism? Since he doesn’t consider the Las Vegas murders to be, we know that at a minimum he draws the line somewhere between the two. Where is it?

Here’s another thought. The Las Vegas killers were trying to use murder to launch a revolution. That’s something that unfortunately has a history in our country, most infamously with Charles Manson. Does Boehner think there is any difference between Manson and the Las Vegas killers? If so, what are they? He shouldn’t be allowed to keep doing his cigar store Indian impression on this issue, no matter how unfavorable the political environment is at the moment.

Revolutionary violence has a history in our country. So does domestic terrorism. It’s entirely appropriate to link contemporary violence to comparable events in our past, and to get our leaders on the record. Where on the continuum do they place those events? They don’t happen in a vacuum or exist in isolation. Pressing leaders to clarify where today’s gun violence fits in our history might reveal some interesting positions. Might, you know, make some news.

Trying to make sense of a manic monetary theory

Economics is a closed system; internally it is perfectly logical, operating according to a consistent set of principles. Unfortunately, the same could be said of psychosis. What’s more, once having entered the closed system of the economist, you, like the psychotic, may have a hard time getting out.

- Judy Jones and William Wilson

I had planned to follow up last week’s post with at least a couple others, but the various discussion threads have persuaded me that it’s probably best to just do a single “summing up” post, go through the comments, and leave the topic for the forseeable future.

My main reservation with Modern Monetary Theory is this: It is named a monetary theory, yet its proponents expand its scope - in all directions, it sometimes seems - to include topics that have nothing to do with monetary theory. I think it’s reasonable to expect a monetary theory to describe the way money works, and nothing else. Here is how money is created. Here is how it is destroyed. Here is how it gains value. Here is how it loses value. Here is what governments must do to increase its value, here to decrease it.

Yet proponents insist that other things, things that have nothing whatsoever to do with monetary theory, are part of Modern Monetary Theory. I’ll illustrate using my exchange with letsgetitdone since it’s fresh, but I think it’s also representative.

He writes that “economics ought to be practiced, as Galbraith, the elder said, to fulfill the public purpose,”1 that Modern Monetary Theory “is an approach and not ‘a theory’” (!!) and that “‘public purpose’ is core to MMT.” Public purpose may be core to economics, but not a monetary theory. A monetary theory exists to describe how money works. One may advocate for public purpose, as one understands it, and show how it works under a given monetary theory - but that is no longer monetary theory.

If he (and other advocates) would just call the thing Modern Monetary Policy or Modern Monetary Advocacy or anything else that encompasses “public purpose” commentary, I wouldn’t have any argument. But you can’t have it both ways: If you want to present your ideas in the dispassionate, technocratic, scientific-sounding mantle of monetary theory, then you need to stick with monetary theory.

Proponents of Modern Monetary (not a) Theory choose instead to use the monetary theory as a launching pad for a bewildering, sometimes contradictory, variety of prescriptions. For instance, the un-theory endorses a basic income (“Job and income guarantees are complementary policies”), except when it doesn’t:

basic income guarantees are unlikely to achieve the objectives of alleviating poverty, income inequality or poor standards of living, because the proposals have an inherent highly inflationary bias with disastrous consequences for the currency.

Modern Monetary Theory has no equivalent of Keynes’ General Theory of Employment, Interest and Money (which, incidentally, advertises itself as something more than a monetary theory).2 Without an identified creator and foundational text, everything is up for grabs. And untethered from actual monetary theory, proponents are free to turn it into whatever they want.

Turning again to letsgetitdone’s comment, he took advantage of that opportunity (“I wrote a 16 part series on this subject”), but given his tendency to lapse into incomprehensible jargon (“a new ecology of self-organized voting blocs and electoral coalitions fueled by an IT application enabling people to create a metalayer of constraints”) I don’t feel inclined to jump in. Oh, and also: his reference to getting “the right people in charge” has a really creepy, totalitarian ring to it.

There’s just too much. It’s all too scattered, too open-ended and waaaaaay too verbose for anyone outside the closed system to get an easy grip on. Rainbow Girl may have put it best:

Does this mean that “MMT” is whatever one’s “construct” or “definition” of it is? Like a Roscharch test? Is it even possible to provide citations or links in responding to a discussion or post about MMT that consists of a “construct” or “definition” or “interpretation” of the large opus of MMT — which is a corpus of separate writings by separate people several of whom seem not even to agree with each other on essential features like “public purpose,” “tool” vs. “Policy,” etc. (for example: you and Ben right here; another writer responding to a critique of Wray’s “no taxes” post at NC saying “Wray is not MMT”).

Simply focusing on the monetary theory part of Modern Monetary Theory ought to be enough to occupy any proponent for now. Calling for austerity with “we don’t have money” is factually wrong; those who say it should be made to look foolish. Pushing back against that line, emphatically and persistently, until it gets discredited, is a tall order.

Succeeding won’t by itself end the austerity narrative. Those who invoke it have a deep hostility to social programs, and will just find another story to attack them. But looking foolish will erode austerians’ credibility, which makes austerity budgeting harder to justify. It’s too bad that isn’t seen as a sufficiently ambitious goal.


NOTES

1. Galbraith, the Elder is also the name of my heavy metal band.
(Back)

2. Some might recommend Mosler’s Seven Deadly Innocent Frauds as a foundational text. If so, fine - but he doesn’t describe it as a modern monetary theory (or even use that phrase). Call it Mosler Monetary Policy, get everyone to defer to Mosler as the final word on MMP, and order starts to form out of the chaos.
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MMT's job guarantee: oasis or mirage?

I’ve gotten some pushback from Monday’s piece on MMT and plan to address the criticisms in some upcoming posts. Next week I hope to get to inflation and taxes. For now I’d like to cover something I didn’t even mention in the post but that popped up almost immediately in the comments: a job guarantee.

MMT, at least as advertised to liberals, postulates a job guarantee. One of my problems with MMT is the way various proponents’ wish lists get conflated with the theory. Stripped to its barest essence, MMT is the theory that:1

governments with the power to issue their own currency are always solvent, and can afford to buy anything for sale in their domestic unit of account even though they may face inflationary and political constraints
There are no policy prescriptions contained in that, or even implied. One may apply that theory in different ways, but the thing itself requires nothing. The case for the job guarantee is a moral one, not something intrinsic to the theory itself.

Randy Wray makes the moral case with his analogy between disease and unemployment. He spends an entire post describing how MMT can accommodate a job guarantee. Yet he also concedes that “some other advocates of MMT do not accept the human rights angle” (oof), and concludes:

Can you separate the MMT explanation of the cause of unemployment from the policy to cure it? Yes.

Should you? Of course not.
In other words, MMT does not require a job guarantee, but it would be unjust to omit one. Of course, that also means that the prospect for one under MMT would be contingent on the policymakers charged with implementation sharing Wray’s sense of justice. That’s hardly an economic imperative demanded by the theory.

The problem right now is not that we lack the tools or economic model to address unemployment. The Federal Reserve ought to be terribly concerned. The problem is that no one in Washington actually is - not enough to act decisively, anyway.

MMT would (theoretically) transfer currency creation from the Fed to Congress or the president, which I suppose would make monetary policy marginally more responsive to public sentiment. It would hardly be a revolution, though. Who among our current elected leaders do MMTers see treating the problem of unemployment with the urgency of a national disease? What we need is for our representatives to have a different estimation of what equity demands, not a new theory of currency.

MMTers also envision a wildly optimistic outcome for the job guarantee. It certainly sounds wonderful, and MMTers are content to let everyone believe in a full employment worker’s paradise if MMT is implemented. That’s the Utopian version. How about a dystopian one? Instead of hoping for the best why not consider a less cheerful outcome?

Let’s just imagine for a moment that Washington is willing to listen to MMTers and consider adopting MMT. What will you need to do in order to get policymakers to sign on? Lawmakers would need to be sold on, or more crudely bribed to accept, the concept. I think we all know cutting taxes on the rich is a perennial favorite in the capitol. So liberal MMTers concede on tax cuts in order to get a job guarantee. Fair trade off, right? And if aggregate demand becomes an issue down the road we’ll just deal with it then.

So great, slash income taxes and you plebes can have your precious job guarantee. And as part of the job guarantee legislation we’ll just go ahead and zero out the minimum wage since MMT obviates it. But hey, victory! We’ve got a job guarantee! Now, how to implement it. Pavlina R. Tcherneva and L. Randall Wray have some thoughts:

the actual hiring of most of the workers would be highly decentralized, and undertaken by not-for-profit community organizations, and state and local governments.
OK then. How could we expect that to work out based on recent history?
  1. Federal government block grants job guarantee money to states.
  2. States cut income taxes.
  3. States divert portion of money to rainy day funds that require Noah’s Ark levels of rain to tap into.
  4. States use rest of remaining money to “partner” with contractors who are charged with creating jobs.
  5. Contractors extract rent.
  6. Contractors design half assed program that employs entirely inadequate numbers with the kind of punitive, angry, pinch-faced resentment that state social programs are famous for.
  7. With no minimum wage, those who are (inexplicably!) unable to find a job under the job guarantee will just have to accept whatever best offer they can find elsewhere.
  8. Where’s my fucking pony?
Oh, and one more thing. Before long it turns out, who could have known, that aggregate demand has become an issue. Guess we’ll have to raise some revenue. Ladies and gentlemen, allow me to introduce you to the Fair Tax. Problem solved!

One would hope MMT’s leading lights would have favored a simpler model that has actually been successful:

  1. Federal government employs people, pays them.
Why opt instead for a circuitous route that is so ripe for fraud and abuse? It won’t work as promised and only discredit the very idea of a job guarantee. That can’t be any MMTer’s preferred outcome, right?

And as with unemployment, why not make the ethical argument directly instead of routing it through a value-neutral vessel like MMT, then hoping for the best? Hammer away at the moral urgency of the situation and say we’ll work out the details later. The people who oppose policy like a job guarantee do not do so because they haven’t been introduced to a sufficiently persuasive economic model. They do so because they are ideologically opposed to federal social programs, and if you take away their current argument (“because no money”) they will just substitute it with the next handiest one (“because inflation”). But that’s not a legitimate problem, you say? No it isn’t. Neither is insolvency. Has that deterred them so far?

There is nothing, absolutely nothing, in MMT that requires a sense of public purpose. Inculcating that is the work of democracy, not economics. Harnessing that project to a monetary theory will only cede its direction, sooner rather than later, to those who value money first among all things.


NOTES

1. Yes, Wikipedia. New Economic Perspectives is touted as one of, if not the go-to source for MMT. If you go there wondering “hey what is this MMT thing anyway?” you can buy the brochure, buy the book (MMTers definitely practice their “show me the money” ethos) or start wandering through the maze of hyperlinks in the primer looking for a concise description. And MMTers are confounded that their work is considered inaccessible.
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MMT as antagonist of democracy and tool for entrenching inequality

Disclosure: I am not an economist and have no formal training in the field. What follows are the observations of a layman.

1. Clerics

Last week Naked Capitalism had a post by Randy Wray about Modern Monetary Theory (MMT). The theme was taxes and inequality, and the comment thread on the post is fascinating. Funny enough, while (unbeknownst to me) the debate there was raging over there, I was on Twitter having a much less edifying argument with an MMTer on roughly the same topic. Sublime to the ridiculous, as it were.

Between the two I was able to bring into focus some nagging, amorphous reservations I’ve long had about MMT. Here is my brief understanding of the concept, and corrections/clarifications from knowledgeable theorists are appreciated:

Taxes do not fund spending, and there may in fact be no connection at all between the two. Their macroeconomic purpose is to, as Wray writes elsewhere, prevent a “huge increase of aggregate demand, [which] could cause inflation.” The federal government simply determines what it wishes to spend on, creates the reserves to fund them, and spends away. Taxes are, at best, a distant concern in MMT. They may in fact be entirely irrelevant, as evidenced by the very first two words in Wray’s headline: Forget Taxes.

If that sounds like an oligarch’s wet dream to you, you’re not alone. Dan Kervick thought so too and commented (emph. in orig.) (also - “schmunding” is my new favorite word):

The Federal government cannot simply create all the dollars it wants and spend them without blowing up the currency. It has to tax back at least a substantial portion of what it spends. Now some think it it is really important to jump up and down at this point and say, “That’s not funding! It’s…it’s…schmunding!” But it doesn’t matter. From a policy point of view it’s the same thing. You can and should convince people to run reasonable deficits. It would be nice to convince people at the same to make sure the Fed holds treasury rates down next to nothing so that Federal deficits aren’t a tool for the rich to rent-farm the public treasury. But the free-wheeling, what-me-worry fiat money mania that MMT has allowed itself to be turned into is for the birds. It’s both a political and economic dead-end.

There was a time when its seemed like the MMTers were going to get serious about price theory, about defining the inflation constraint in more precise theoretical and mathematical terms, and about coming up with policy rules that turned an airy framework into something policy-makers could really grab hold on. But instead they decided to stop doing research, stop engaging with any other economists and focus everything on marketing and “framing” with slogans and pictures.

And of course it matters what we spend public money on, and not just that we spend it. But if you want to expand the state, expand public education, build a national health care system and build an honest-to-goodness national pension program that works, you’re going to have to raise revenues. Every hour spent kneecapping the people who want to go this route by imagining that there is a magical free money path that lets us spend freely, lets all the billionaires keep their money, and that even a hedge fund manager could love, is an hour wasted an an agenda which will never succeed politically and is crackpot policy in any case.

Lambert responds: “I don’t recall claiming there was a bottomless money well; and I’m thoroughly familiar with the ‘ZOMG!!!! Zimbabwe!!!’ argument and how to debunk it.” He doesn’t do any actual debunking, though. This is one of my reservations about MMT: its adherents seem extraordinarily reluctant to address concerns head on. I’ve followed MMT casually, and I’ve seen lots and lots and lots of (virtual) ink spilled about how government can simply fund what it wants, period. MMTers are nothing if not voluminous. But boy howdy does inflation get treated lightly. You’ve really got to comb through the writing to find it, and it typically is relegated to a brief, oblique reference (“when potential inflation threatens” and such).

In the same comment lambert writes “If you want MMT to propagate widely, its exposition needs to be simplified and popularized.” That’s exactly why Kervick is right on this one. The way MMTers put the goodies front and center, and barely (if at all) discuss the risks, makes the “bottomless money well” caricature stick. They may discuss it substantively elsewhere, but it is not presented in commentary packaged for public consumption. Again, not addressed head on. If the best response MMTers have to that is “please see [48 page PDF],” then popularization fail. Requiring casual readers to have a near-comprehensive understanding of a topic is called a contradiction.

As for the charge that MMTers have stopped doing research, engaging with other economists and focused everything on marketing, at least one adherent essentially pleads nolo contendere. Joe Firestone describes himself as something of an authority on MMT (“one of the MMT writers, immersed in the MMT community”) and had this to say about Warren Mosler’s prospects before a theoretical Congressional committee:

Warren would have the support of the other [MMT economists], all academic economists with plenty of publications…Warren’s really brilliant; all the others I’ve named really think so, and his common sense wrap is very plausible. Finally, he’s unflappable, and knows his theory very, very well.

Epistemic closure? Check. Absence of an economic model? Check (also, I should hope he knows his own theory very well!) Emphasis on marking? You betcha. What’s being described here is not a field of technical expertise but a priesthood.

What emerged in both my Twitter shitfight - where the individual I was arguing with could not get off the “taxes don’t fund spending!” talking point even after I had conceded as much four times - and the thread at Naked Capitalism was an almost bristling opposition to discussing tax policy, at least among some MMTers. Lambert (“Obviously, we should tax the rich painfully,”) and Joe (“Measures like that worked in this country for a very long time to reduce inequality, and I think they can work again”) are in favor of taxing the rich, but they - and MMTers generally - only say so parenthetically. Forget taxes, right? The justification for taxes, if it exists at all, does so outside the ordinary scope of MMT. Taxes, as characterized by MMT’s would-be popularizers, exist only as caveats and footnotes.

This makes MMT a tool that can be used for progressive ends or regressive ones. The MMT church of lambert, Firestone et. al. includes a book that calls for taxing the rich. A more fundamentalist denomination would seem to consider that book apocryphal, heretical even. After all, the next step after forgetting taxes is to do away with them entirely. Raise them? Burn the witch!

2. Wizards

There is a kind of magical thinking among MMTers about the possibilities of their new theories, combined with a steely-eyed realism about the shortcomings of the existing system. I’m not quite sure how to reconcile that. For instance, Wray says this about the rich: “Trying to punish them with taxes is a fool’s errand.” (How does he explain the increase that occurred when the Bush tax cuts expired?) His preferred solution? “Put a thousand of Wall Street’s ‘finest’ behind bars.”

So, trying to increase the top marginal rate: A pipe dream. Having a starved and captured regulatory authority assemble the monstrously complex case required to prosecute individual executives - when the Attorney General of the United States has already explicitly said these very people have been granted a free pass - THAT, my friends, is the real-world approach MMT favors.

And what kind of bullshit is this:

Let’s raise sin taxes on the rich to reduce the sin of ill-gotten gains.

How high? 100%? Nay, 1000%. Take everything: all their income, all their wealth, the house, the car, the dog. Don’t let crime pay.

Calling prosecution a “sin tax” is a transparently phony way to get people to think a fundamentalist MMTer is actually (finally!) proposing a tax. The only problem is that it doesn’t, you know, actually tax anyone - most especially not our precious, irreplaceable rich. Nay, not 1000% thanks. How about we start with a marginal income tax of, say, 75% at $5 million? And leave your sin tax in that fabulous world that has a functioning justice system for elites.

More magical thinking. Lambert has no illusions about the problem of translating additional raised revenue into just and equitable spending: “Suppose we raised a trillion new dollars with progressive taxation, and then blew it on a manned space mission that the oligarchs to build Galt’s Gulch on Mars?” Yes, that sort of useless outcome is a very real possibility - and given our recent history even a likely one.

Yet look at how Firestone characterizes the MMT alternative: “using by platinum coin seigniorage [PCS] to fill the TGA with enough to pay down the debt and cover deficit spending for a long time to come.” How exactly does PCS get used for such a public-spirited purpose when existing (and probable future) spending mechanisms get wrenched by the 1% to their own purposes? Is the novelty of PCS our secret weapon? If so we’ve only got one shot; it will just be re-appropriated for boondoggles once the powers that be know to expect it. (Um, shouldn’t we be taking this discussion offline?)

The liberal denomination of MMT is already getting set up for a “MMT cannot fail but only be failed” outcome. They want it to be used to create just and popular policies, but seem to think MMT will provide some kind of painless shortcut. No, the fight is the same either way, and it will inevitably be ferocious. There’s no sneaking it past anyone. As soon as MMT gets traction in Washington, it will be used to slash taxes on the rich, and pre-distribution will go where the current owners wish. At which point, please spare the rest of us your “where’s my fucking pony?” outrage.

Instead of going to all the effort of establishing a new economic paradigm, one that is agnostic on taxes and as likely to be hijacked as the existing one, why not have the fight right now on the same ground? Because it’s not, as Yves Smith incorrectly notes in her introduction to Wray, about redistribution for redistribution’s sake, but redistribution for democracy’s sake:

Scandalous as it may sound to the ears of Republicans schooled in Reaganomics, one critical measure of the health of a modern democracy is its ability to legitimately extract taxes from its own elites. The most dysfunctional societies in the developing world are those whose elites succeed either in legally exempting themselves from taxation, or in taking advantage of lax enforcement to evade them, thereby shifting the burden of public expenditure onto the rest of society.

(Fukuyama’s piece is a bit, shall we say, heterodox. For as resonant as I find the preceding quote, there are some other items that are a bit eye-opening. For example, on the newly installed Obama White House: “Administration principals thought they had a mandate to move the country sharply to the Left…But as it turned out, Obama was not riding a tide of left-wing populism. While the Democratic majorities in Congress succeeded in moving this ambitious legislative agenda forward, the results fell far short of expectations.” That’s not quite the 2009 I remember!)

Taxing the rich is important because it measures our health as a democracy. It’s not something to put, as Firestone would, at the end of several “staging initiatives.”. Or rather, maybe that’s an acceptable sequence from an MMT perspective but it’s completely unacceptable from a democratic one. Demonstrating the ability to once again extract wealth from elites needs to be one of our highest priorities, not an afterthought. And it needs to be done directly via the income tax.

Wray has literally no proposal for extracting wealth from elites, and once again: the intellectually dishonest “sin tax” he describes ain’t it. Firestone approves of taxing the rich; but he also wants to “diminish the importance of conventional corporate forms in our society, and measures limiting total compensation of executives,” and to do so by “legislating structures of vigilance” (needz moar popularizing!) But again, that just highlights the problem with MMT: It’s being sold as a theory that is inherently just and progressive when it’s just a tool. It might liberate those who have suffered the most under the current system. It might be inequitable and exacerbate current problems.

Why re-invent the wheel? The answer to Firestone’s structures of vigilance is hinted at by washunate: “We still have the IRS, too. And the SSA. Taxation and social insurance are two of the things that have survived the assault on Constitutional governance and rule of law, comparatively speaking, the best over the past few decades.” The link between being able to collect what is owed and the provision of public goods is underappreciated. Both are key for equitable redistribution, but the former is also radically democratic because it extracts wealth from elites. The fact that the both agencies are objects of great antipathy among the wealthy is also instructive.

As for the argument from MMT that the rich will just get new loopholes, give themselves raises, and otherwise subvert any attempt to extract their wealth, the response is simple (though not necessarily easy): Prioritize and fund tax collection. Think of it as democracy insurance, and like with other insurance you get what you pay for. Consider this from Econned (pp. 187-8, emph. added):

But there are much deeper problems with risk management as commonly practiced. The junior risk managers will earn more if they can apply their analytical skills on the product side. Anyone who is thinking about making that change is unlikely to ruffle the feathers of the producers. In addition, risk managers are bound to sound some false alarms. If they escalate every one, they wind up looking like nervous Nellies and lose credibility. And if they win and have exposures cut back on what turns out to be a nonevent, the traders will be sure to broadcast how much they “lost,” as in failed to make, thanks to the interference.

That narrow view illustrates a deeper problem: risk management is a form of insurance. Effective insurance is costly. You expect to miss a few calls, quite a few. But the noise back from the “money colonels” and the perceived importance of maximizing current extractable value means that the expense of taking protective measures is deeply resented. The predictable result was that the banks wound up being underinsured.

In fact, the obvious failings of risk management reveal an ugly truth: it is an exercise in form over substance. If a firm was serious about this sort of thing, it would not structure a supposedly crucial activity in such a way that guarantees that it is politically weak and easily suborned. Risk management is often an exercise in providing cover for managers and directors, and thus serves as another tool to hide looting.

If the IRS is viewed as being linked to social insurance, Smith’s point is especially true: good insurance costs money. (And the ongoing attacks against the agency are an attempt to make it politically weak.) If you raise taxes on the rich, you damn well better be prepared to purchase a good policy for enforcement. The IRS would need to be expanded, its agents made knowledgeable of loopholes and encouraged to go after tax cheats (instead of its current state), and generally have to become much more robust than it currently is. It would need, in short, to be an object of screaming horror among the rich.

But the point is, the needed mechanism already exists. We don’t need a new one, or some comparable thing, we just need to make use of what we’ve got. And we also need to understand that efforts to address inequality will never be settled. It will always be a fight, and each generation will have to fight it. There is no spell that will vanquish it for all time. MMT is being sold as just that, as a cure-all. It isn’t. It’s a tool. Why not just use the tools at hand? It will be a struggle no matter what. Why make it harder than it already is?

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