Empirics prove fear of government spending is nonsense

(Paul, HS teacher/Member of the Philadelphia Federation of Teachers, https://www.jacobinmag.com/2020/06/case-for-job-guarantee-review-pavlina-tcherneva)

The book adroitly addresses the question of how to pay for such an ambitious proposal. Recent events have already started to answer this question for many Americans. To deal with the economic fallout from the pandemic Congress passed a $2.2 trillion stimulus package, much of it going into corporate slush funds and stock buybacks. Somehow, money is always there for capital when it needs it. Ruling class calls for fiscal restraint are never applied to bank bailouts, tax cuts for the rich, and endless wars. Though the book is not a treatise on Money Monetary Theory (MMT), some of its guiding features are highlighted in order to explain the mechanisms of financing the federal job guarantee. Tcherneva asserts, as other adherents of MMT do, that a monetarily sovereign government like the US cannot really run out of money. But regardless of one’s views on MMT, the book makes a strong argument for the broad-based economic benefits a federal job guarantee could ensure. For one, it would end the pressure for states to fall over themselves offering subsidies to corporations in exchange for jobs. As states compete for investment they lose important tax revenue, and usually jobs bounce from one state to another anyway. A simulation from the Levy Institute found that the budgetary impact of a federal job guarantee would only be 1.5 percent of GDP. Findings also showed it would boost real GDP by half a trillion dollars and increase private sector employment by 3 to 4 million jobs, all without significantly increasing inflation. While a minimum wage increase could cause a one-time hike in prices, that does not constitute inflation because it isn’t continuous. There are historical precedents one can look at to support these conclusions. Tcherneva points out that in 1949 the minimum wage doubled without accelerating inflation. This was also a year when we were as close to full employment as we’ve ever been. Examples like these, along with the recent massive government stimulus, should do away with the idea that there is no money to provide quality employment to everyone.