JG requires more federal programs to be successful --- it’s not as effective as the aff will claim!

The Job Guarantees positive economic effects are often overstated by MMTers. In a 2010 JG simulation Scott Fullwiler shows that the private sector economic impact is meager when compared to other policy options. As can be seen below, the JG adds just 1.73MM jobs over the 2 years coming out of the deepest recession of the last 75 years when compared to doing nothing. This might not sound like a small gain, but to put things in perspective – a full payroll tax cut adds over 4.25 MILLION private jobs during this same period when compared to the JG scenario. Meanwhile, the government workforce will swell to ~16 million workers!

Interestingly, the JG doesn’t prove much more effective than the stimulus plan that was enacted and proves far less effective than a payroll tax holiday. According to Fullwiler the JG would cost ~$324B over this period while the stimulus cost ~$600B. The stimulus adds 3.13MM jobs while the JG adds just 1.73MM jobs. So while the JG gets slightly better bang for your buck the difference is negligible.

The JG also doesn’t prove to be much of a liquid buffer stock as MMTers often claim it is. Over the course of 2 full years the government workforce grows to ~16 million and just 10% of this contributes to new private sector work. MMTers often claim that the JG will be a more liquid buffer stock, but the JG simulation doesn’t prove to translate into much of a private sector transition program at all. The simulation clearly shows that the stimulus package provided almost twice as many jobs for twice the cost – a negligible difference when compared to the JG option. Perhaps more importantly, it proves that the JG is only highly effective when combined with other stimulative programs of which the other program appears to bear the brunt of the load. In this case, the tax cut clearly provides the most firepower in terms of job creation:

The simulation also shows unimpressive overall economic impact when compared to tax cuts or doing nothing. The JG scenario adds 0.9% to annual GDP coming out of the Great Recession when compared to doing nothing. The fiscal stimulus package, though costing more, outperforms the JG at 1.3% per year. And the full payroll tax cut once again proves to be the primary driving force of economic growth over this period with a substantially larger boost to GDP at 1.9% per year when compared to the JG scenario and a sizable 2.85% per year when compared to the no stimulus scenario. In other words, the positive effects on both economic growth and private employment are underwhelming according to MMT’s own analysis.

Some MMTers have claimed that full employment and optimizing output go hand in hand. But that’s clearly not the case based on this evidence. The JG requires additional policy to optimize growth. Full employment is not nearly enough to achieve this. So there’s a clear inconsistency in the MMT idea that the JG is consistent with optimizing growth.