taxation

The question is not how we will pay for the pandemic, but how government can use its currency-issuing capacity to deal with the most pressing issues of our time.

Published by Anonymous (not verified) on Sat, 02/05/2020 - 9:38pm in

Rainbow window sign with the slogan "Miss you" during the COVID-19 pandemicImage by Sara Holland

‘Care homes have been top priority for the government’ so said the health secretary in a COVID-19 briefing earlier this week. Daily the evidence grows that this is yet more political rhetoric aiming to create a purposeful narrative of a government that has acted in the best interests of citizens. However, the growing dissonance between politicians’ words and day-to-day realities for NHS and social care workers and many others across the country continues to stand out in sharp relief.

Whether it’s health workers or social care workers, still lacking adequate PPE or working in unsafe conditions risking their own lives and the lives of their patients as a result of hitherto inadequate testing capacity, we are witnessing the dire consequences of 10 years of ideologically driven austerity, cuts to public sector services, the whittling down of Public Health and local government services, unforgivable planning failures and government inaction early on, despite the World Health Organisation’s advice.

COVID-19 has revealed the extent to which our social care system has been hollowed out as a result of ideological cuts to funding for public services dressed up as financial necessity. It has highlighted, in the most tragic way, what happens when governments fail to serve the public purpose. Whether we are talking about nursing and residential care or help in the home, social care is in a state of collapse.

At a local level, social care amounts to almost 40% of council budgets and as a result of local government funding cuts, authorities (having lost 60p out of every £1 in central government funding since 2010) are likely to face a £3.6bn funding gap in adult social care by 2025. The UKHomeCare Association estimated in its 2018 report that almost one third of councils in England had seen homecare providers closing or ceasing to trade during that year. In 2018 more than 100 private care home operators collapsed, bringing the total over five years to more than 400.

The government’s promised review of social care has been on the back burner for many months but the delays in addressing the issue go back years. Jeremy Hunt, the former Conservative Secretary of State for Health admitted in a speech in early 2018 ‘In the past 20 years there have been five Green or White papers, numerous policy papers and 4 Independent Reviews into Social Care’ And yet nothing happened.  

Although the government is promising additional funds to deal with the immediate impact of COVID-19, the damage already caused by cuts to public sector spending on social care will not be quickly remedied.  The fact is that just promising more money does not necessarily translate into the capacity to provide the necessary resources immediately whether that’s PPE, which is still in short supply, or indeed, trained care workers.

Figures show that currently in the care sector there are over 120,000 unfilled vacancies with a growing reliance on agency staff to fill in the gaps (with all the health risks that that entails) which is particularly the case now as staff fall sick to COVID-19 and cannot work. Unless the government deals with the systemic problems caused by austerity and its belief in market solutions for public service provision, where profits are the driver and the focus quantitative rather than qualitative, the long term the future looks bleak for anyone who needs support as a result of sickness, disability or growing older.

The Resolution Foundation’s report ‘What happens after the clapping finishes? The pay, terms and conditions we choose for our care workers’ highlights the plight of many frontline care workers whether in public or private care environments.  It noted that around half of care workers, some 1 million people, were being paid less than the real living wage. In private care settings where the majority of care workers are employed as many as two-in-three earn below the Living Wage threshold. According to the report, many experience significant job insecurity and are four times more likely than average to be employed on a zero-hours contract. The Foundation stated that ‘Insecurity has become a structural feature of working life in social care. Zero-hour contracts have not been used sparingly, but instead have become the new normal in many settings. Blunt in its analysis it said ‘’Clapping is welcome, but care workers will value better pay and conditions even more’ and that ‘better pay in care should have long been a priority given the vital role care workers play in protecting the vulnerable’

Those hitherto labelled by politicians as ‘low-skilled’ workers are suddenly being propelled into the limelight and being lauded, quite rightly, as vital. Not just to meeting the challenges that COVID-19 is presenting, but also to the good functioning of society. And yet for decades, their contribution to the economy and to the wellbeing of society has gone unrecognised. The nation is learning this lesson the hard way as it watches the tragedy being played out daily as their friends, neighbours and family succumb to COVID-19 – people, not statistics.

Boris Johnson standing outside No 10 clapping for care workers is a clever distraction being cynically appropriated by a government whose political decisions over a decade caused the decay of vital public infrastructure, the provision of which does not depend on the healthy economy they claimed was necessary. Quite the reverse. Over 26,000 deaths already from COVID-19 can be added to the likely death toll of those who will have died at home or found themselves unable to present for worrying symptoms during the lockdown and the 120,000 which occurred as a result of harsh austerity measures which cut health services and welfare for vulnerable people. So, when the government says that their strategy in dealing with COVID-19 has been to ‘put their arms around every single worker’ we should see it for what it is. An attempt to create a caring narrative and expunge their austerity record.

But what if the country’s appreciation for its vital workers were to be rewarded in better pay and conditions? How could this be achieved?

Firstly, the care sector should be restored to publicly funded and delivered provision, rather than the profit-driven model which has dominated for decades as part of the neoliberal notion that the market delivers better outcomes.

The CHPI’s (Centre for Health and Public Interest) 2016 report noted that around £14bn is spent on adult social care annually in England, both for residential and home care delivered through local authorities. Authorities whose budgets have been cut over the past decade, leading to a decline in the numbers of older people receiving state-funded care services and who have no alternative but to fund their own care from their own financial resources.

It also noted that a significant number of care home providers are large chains which are backed by private equity – leaving them reliant on risky financial structures and exposed to collapse (as discussed earlier). It observes that over the past two decades, as a direct result of privatisation both the quality of care and the terms and conditions of the workforce have declined. Yet private providers have still managed to achieve significant rates of return on their capital investment.

The FT reported in February this year that there are growing concerns about public accountability of some of the larger private equity-owned care homes, particularly as failures increase. It quoted Nick Hood from Opus Restructuring who said ‘what has happened is that care homes have become financialised. Their owners are playing with debt and expecting returns of 12-14% and that is simply unsuitable for businesses with huge social responsibilities.

In those final few words stands the crux of the problem and at the same time the solution. Bring back health and social care as a publicly owned, publicly funded, publicly delivered and managed service.

Of course, the next pressing question is how will it be paid for? As a former Chancellor and initiator of the first round of austerity in 2010 George Osborne, clapped on by others, has warned that further severe cutbacks may be needed in the future to ‘pay for’ pandemic relief. Not content with having overseen the dismantlement of public and social infrastructure on the basis of its supposed unaffordability, he is recommending yet more pain which no doubt will be ‘paid for’ by yet more cuts or tax rises (except for the rich). Bringing yet more suffering to the most vulnerable, as the last foundational posts of a functioning society are kicked away in the belief that the rich are the wealth creators and we have to give them free rein to create it.

Despite the huge sums of public money being created to address the pandemic, the narrative that there will be a price to pay in the future continues to be pushed by those with an agenda. This extraordinary event is an opportunity to challenge the predominant descriptions of how money works in the real world. If the public genuinely comes to value those services which lie at the heart of a functioning economy, which after all is us, then it has a responsibility to get informed. An economics degree is not necessary to understand in simple terms how money works, what really constrains government spending and how we can build a better society to serve all.

In the Resolution Foundation’s report referred to above, it said ‘…we have to recognise that we can’t just wish that social care workers were paid more and leave it at that. This is a large sector heavily reliant on public funding, that has been through an era of sustained austerity and operates on extremely tight margins. […] If pay is to go up, taxpayers or those receiving care will need to meet the cost’.

In short, we need to challenge the perception that there are financial limits to government spending and that if pay is increased for essential workers then there will be a price to pay in higher taxes. We need to get with the facts. The finances of a currency-issuing nation such as the UK are nothing like a household or business and there can never be any excuse for essential public services such as health and social care not to be properly funded. Quite simply, the UK is the monopoly issuer of its own fiat currency and neither needs to tax or borrow in order to spend. Social care does indeed operate on ‘tight margins’ but it does so as a centrally decided political choice. Local authorities as users of the currency have no alternative when their central funding is reduced – they either have to cut services or increase local taxes thus imposing even more economic difficulties for working people.

The real questions are about resources. In an article entitled ‘Can coronavirus bring Economics back down to reality’ in The Week, Jeff Spross wrote: ‘The coronavirus is going to teach – or, to be more precise, reteach – some hard economic lessons. One of them is probably going to be for policymakers to focus on money a bit less and real resources more. […] the coronavirus has forced us to grapple with the most concrete, flesh-and-blood questions: Do we have the equipment we need to protect the public and care for the sick? Do we have enough food to feed everyone? And if we do, how do we actually get the equipment and the food to the people who need it?

If a lesson is to be learned this is it, not how are we going to pay for it.

 

In February, we were delighted to have Professor Bill Mitchell and Professor Steve Hall speak at our events in London and Manchester. We recorded the events and decided that the quality of the Manchester recording was the better of the two.

Slides for Professor Michell’s talk are available here

 

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Modern Monetary Theory and the COVID-19 induced economic slowdown.

Published by Anonymous (not verified) on Sat, 25/04/2020 - 9:00pm in

Peter Martin with his bicycle next to a street name sign for Peter Martin StreetGIMMS welcomes this week’s guest MMT Lens author Peter Martin. 

 
Peter has always taken an interest in politics and economics and considered himself vaguely Keynesian. He first came across MMT around seven years ago and like many others found it rather strange at first but once the penny dropped economics suddenly started to make a lot more sense than it had done previously.
 
Along with one of the GIMMS founders, he organised the fringe event with Bill Mitchell which took place at the Labour Conference in Brighton in 2017.

 

 

Woman wearing face mask watching stock market fallImage by Gerd Altmann from Pixabay

“We are all MMTers now” is a phrase I’ve heard more than once recently. Governments are spending big-time to address economic concerns so this must prove they are converts! Or does it? The association of MMT with the printing press is a fallacy in any case. We all know that the COVID-19 virus is causing us lots of economic problems as well as health concerns. So, how do we use MMT to understand the issues?

The partial shutdown of the economy is causing both a reduction in aggregate demand and aggregate supply. The much-predicted coming recession won’t be like the last one; that was mainly a problem of lack of demand. So, we need to be careful about saying things like ‘pounds and dollars are just like runs on a scoreboard’, ‘the Government can never run out’ etc. This is as true as ever it was, but if there are supply reductions due to factories closing down, and crops not being harvested in the fields, the amount of produce which is available for the Government and everyone else to buy is going to be reduced too. A reduction in aggregate supply will inevitably make us worse off in total but the extent of the reduction, left to the workings of the ‘market’, is likely to be very uneven and add to the already previously high degree of inequality which was prevalent in our society. Probably we shouldn’t be too ambitious and try to use the crisis to reduce previous levels of inequality. We’ll be doing well to ensure they don’t become too much worse.

We can, generally speaking, divide up stay-at-home individuals according to whether their income has been significantly reduced, or even been lost completely, or whether they have managed to carry on nearly as usual, and are still receiving close to a full income. For the latter group, which might include both wealthy retirees and well-paid footballers, life may be somewhat boring in that they don’t have much to spend their money on right now. They are therefore very likely to notice a considerable improvement in their bank accounts. They still have spending power they would otherwise have used on holidays, restaurant meals, clothing, hairdressing, drinks in nightclubs and pubs, petrol for their cars, air travel etc. Those who are less fortunate and have been ‘furloughed’ will probably include those who were previously working in hotels, restaurants, retail, nightclubs and pubs etc. There have been fewer financial transactions after the lockdown than before it. There will likely be significant exceptions but, generally speaking, the ones who are doing well at the moment were the ones doing well previously. Those who weren’t doing so well are now likely to be doing even worse.

Many neoliberals have used the crisis to renew calls for a Universal Basic Income which isn’t at all a recommended MMT solution. Those who still have their full income don’t need any extra spending power just at the moment; this would cause additional problems further down the line when the economy does finally get started again. The MMT solution of a Job Guarantee (JG) is problematic at present because individuals aren’t allowed to leave their homes without good reason. But why not just use some lateral thinking and define a job as simply staying at home? This can be a valid temporary measure, providing it isn’t treated as a second job for those who wouldn’t take up a JG job in more normal times. A JG on this basis has the advantage that scarce resources are directed towards those who need them rather than being handed out indiscriminately.

We are starting to hear the inevitable ‘how do we pay for it?’ question from the neoliberals. The correct question should be if tax rises are going to be needed to prevent a surge in inflation when the economy starts to get underway again but productive capacity hasn’t fully caught up with aggregate demand. This is not certain, but it is possible. Those lucky enough to have received their full incomes during the lockdown may well decide to catch up with their spending; their healthier bank accounts will allow them to do just that. On the other hand, those who have been struggling won’t be able to compete and so they could lose out again in a flurry of price rises. It will be important to direct any tax rises that may be necessary towards the lucky group. One way this could be achieved would be to levy a one-off income tax targeted at earnings made during the period of the lockdown with, of course, an exception made for key workers. Inevitably this will be messy and throw up anomalies but some thought should be given to making sure that those who have had it relatively easy during the lockdown do lose some of their spending power afterwards, and those who have had it more difficult should be given a little more help, should overall higher taxes be temporarily needed.

What we don’t need from this Government is a repeat of the mistakes made by the Tory/Lib Dem coalition, spooked by a high deficit following the 2008 Global Financial Crisis, which erroneously cut government spending, and raised taxes, in the middle of the worst recession since the Great Depression. Yes, we should raise taxes, but only if we need to dampen down inflation. Otherwise, we concentrate on steering a sensible course between having too much unemployment on the one hand and too much inflation on the other. It’s probably not realistic to expect a JG just at the moment. We can rely on both the exchange rate and the Government’s deficit to take care of themselves.

 

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Fundraisers v Public Money for NHS

Published by Anonymous (not verified) on Mon, 20/04/2020 - 12:24am in

GIMMS is pleased to have permission to reblog this article from @pamos19. Originally published on her Idle Obs blog site here

 

“Charity is a cold grey loveless thing. If a rich man wants to help the poor, he should pay his taxes gladly, not dole out money at a whim”…Clement Attlee

 

We love our NHS

The NHS is the ‘jewel in our crown’, our ‘national treasure’…. we love our NHS. In fact, we love it so much we’re pained to see its staff struggling to cope with the COVID-19 outbreak.

Our hearts go out to the families who have lost their loved ones from this terrible illness, and to the NHS staff battling to save them, who sometimes have to make the most difficult decisions about treatment pathways laid down by NICE guidelines.

Understandably, talking about the NHS brings out our strongest emotions. Knowing that NHS staff and Social Care workers are not being provided with adequate Personal Protective Equipment (PPE) in too many settings – hospitals, GP surgeries, Residential homes, ambulance crews, community nursing/caring, it brings out a natural response: we want to help.

Hence, there has been an explosion of fundraising activity on social media platforms. The biggest has been organised by NHS Charities Together.

Text Clap NHS Charities Together advertisement

Run for Heroes Instagram account

NHS Charities Together Virgin Giving page

As someone who has been a proactive campaigner in support of #OurNHS for three years, I fully understand the desire to help.

However… Stop It! Our NHS Is Not A Charity

Be warned, you may find what you’re about to read controversial. I ask for your patience in reading all the way to the end. I might challenge your perceptions, but bear with me, I hope by the end you will have seen why I felt it was important to write this blog.

I’m going to set the historical context first. Then I’ll demonstrate how the context has impacted our NHS and why it’s in the position of needing help and support today. Next, I will put forward the macroeconomic context, and finally, I intend to show that Public Money should be the winner in a Fundraiser v Public Money for our NHS argument.

 

The NHS – brief historical context

NHS: the Early Years

In post-war Britain 1948, the Labour government launched our National Health Service

Government leaflet sent out in 1948 explaining the National Health Service

A publicly owned, publicly run, and publicly delivered comprehensive *National* health service free at the point of need for all.

Birth to death…from the cradle to the grave. Eyes, ears, nose, mouth, mind, limbs, internal organs, disease, infection… Midwifery, District Nursing, Consultations, Tests, Treatments, Hospital stays, and Prescriptions were free.

Aneurin Bevan, Health minister at the time said:

Nye Bevan image and quote "No society can legimiately call itself civilised id a sick person is denied medical aid because of lack of means"

Many governments have come and gone, making changes such as implementing prescription charges, centralizing and decentralizing the ambulance service, and in 1998 devolution had some impact…

“The UK’s four systems were created very similar at the high-water mark of British political unity. They were all ‘national health service’ (NHS) systems, with the government directly owning hospitals, contracting with primary care General Practitioners (GP) and employing most other staff in a system centrally financed out of general taxation and provided for free at the point of service.”

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5127421/

 

Corporatisation and Markets

The internal competitive market and Foundation Trusts (run as businesses) were introduced early to mid-2000s.
But… every Secretary of State for Health of whichever political party in government had the responsibility to provide comprehensive healthcare for its citizens… until the Health and Social Care Act 2012 passed into law.

NHS Death Knell – The Lansley Act

Professor Allyson Pollock (March 2013):

“The UK NHS was created by national consensus in order to ensure that every citizen was guaranteed health care. Underpinning these arrangements was the secretary of state’s core duty to provide or secure a comprehensive health service, a duty repealed by the first clause of the Health and Social Care Act.”

This was passed at a time when the country was still reeling from the 2008/9 global financial crash and the coalition government had imposed severe austerity measures on public services. But more on that a bit later.

  • The Act opened up all our NHS services to the external market except for acute emergency and obstetrics.
  • It opened the flood gates for private sector provision of health and social care services
  • The Act also gave birth to four quangos: NHS England, NHS Scotland, NHS Wales, and NHS Northern Ireland each responsible for the provision of health and social care. Although still called NHS it was no longer a National Health Service
NHSE – The US model of healthcare comes to England

The appointment as head of NHS England was given to Simon Stevens, worked for the USA giant United Health Insurance company, where he was president of their global health division and CEO of Medicare.

His job as NHSE head was to oversee implementation of the complete reorganization of our health and social care service in England, by splitting England up into 44 regional health economies – ‘footprints’.

The aim was to establish Accountable Care Organisations (an American model) which we now call Integrated Care Systems/Organisations.[1]

These ICS/ICOs are contracted out to a body (which can be a private business or a combination of local authority and private partnerships) who are responsible for the provision of health and social care across their ‘footprint’ within a fixed budget. They are run like a business, so must balance the books or make a profit… they cannot go into deficit.

Government Austerity and NHSE Combine for Maximum Impact
  • Under Austerity, we saw swathing cuts in budgets to our public services from 2010 onwards
  • NHS trusts told to make ‘efficiency’ savings, savings targets set and if not achieved, financial penalties imposed. A Trust could even be put into Special Measures for being in ‘debt’
  • Staffing levels were cut, wards and small hospitals closed, bed numbers dropped.
  • Businesses have taken over services such as diagnostics, Mental Health, phlebotomy, radiology, cleaning, catering, ophthalmology, and so on.

In the private sector, the leanest service they can give the more profit they make. Our health service and social care system began to feel the strain.

“Sustainability” became the mantra of Government and NHS England chiefs.

By 2016 Sustainability and Transformation Plans (STPs) were published. These were the plans which would transform our health service and social care into ICS/ICOs.

Some STP Boards held Public Consultations

As small gatherings of ‘the aware’ sat and listened to highly paid NHSE employees give glossy presentations, telling us that our NHS will not survive unless we make these changes, which would improve the service… make it sustainable so it’s there for the future.

They asked for our views, which in practice were never going to make the slightest difference to their grand plans.

And Here We Are…

2019 saw our fragmented, under-resourced, under-funded, and under-staffed system in a very poor state:

  • 43,000 nurses and 10,000 GPs short
  • Hospital targets abandoned because they consistently couldn’t be met
  • Worn-out staff working longer shifts than they were being paid for
  • Cancelled appointments and operations a common occurrence
  • Little to no mental health support
  • 3 week waits to see a GP
  • Apps being touted as the answer to everything

People were dying who shouldn’t have been…

“Like many junior doctors who have worked in overwhelmed and understaffed A&E departments, I’ve seen things happen as a result of the overstretched conditions that I believe should be classed as “never events”. Since 2016, nearly 5,500 patients have died in England alone as a direct result of having waited too long to be admitted to hospital. To put that in perspective, that’s nearly twice the number of people killed in terror attacks in the UK  since 1970. We should be outraged”

https://amp.theguardian.com/commentisfree/2019/dec/10/doctor-johnson-thousands-deaths-nhs-patient

Now in 2020, the pandemic has hit an already ‘in crisis’ health care service (exacerbated by a chronic problem in social care)

 

Our NHS… Macroeconomic Context

It is political!

To all the naysayers who shout “Keep politics out of our NHS”… you can’t.

“What does the Government do?

The Government is responsible for deciding how the country is run and for managing things, day to day. They set taxes, choose what to spend public money on and decide how best to deliver public services, such as:

    • the National Health Service
    • the police and armed forces
    • welfare benefits like the State Pension
    • the UK’s energy supply

What does Parliament do?

Parliament’s job is to look closely at the Government’s plans and to monitor the way they are running things.

Parliament works on our behalf to try to make sure that Government decisions are:

    • open and transparent – by questioning ministers and requesting information
    • workable and efficient – by examining new proposals closely and suggesting improvements, checking how public money is being spent and tracking how new laws are working out in practice
    • fair and non-discriminatory – by checking that they comply with equalities and human rights laws and by speaking up on behalf of affected individuals”

https://www.parliament.uk/about/how/role/parliament-government/

Government has control of the public purse its role is to spend public money for public purpose and social benefit.

“If the job is to be done, the state must accept financial responsibility“

Nye Bevan quote "Society becomes more wholesome, more serene, and spiritually healthier, if it knows that its citizens have at the back of their consciousness the knowledge that not only themselves, but all their fellows, have access, when ill, to the best that medical skill can provide. But private charity and endowment, although inescapably essential at one time, cannot meet the cost of all this. If the job is to be done, the state must accept financial responsibility."

 

So what is the public purse and public money?

  • The public purse is not a fund, and public money is not taxpayers money
  • The public purse is the Bank of England and public money is the creation of pounds sterling by keystrokes – entering numbers into banks’ reserve accounts so they in turn can credit the account of a person or company selling its goods or services to the Government – as instructed by the Treasury.

Having said this, I can hear you ask… but where does the money come from? It must come from somewhere?

The keyword is “creation”

The UK Government is the sole issuer of our sovereign fiat currency. Every time the Government (of whichever colour) spends, it creates pounds sterling out of thin air. If the government needs to purchase goods or services which are for sale in GBP, then it simply instructs the Bank of England to do so via the Treasury. The Chancellor of the Exchequer provides the Budget Statement ie ‘shopping list’ and this is administered by the Treasury’s Debt Management Office (DMO) and the Monetary Policy Committee (MPC) at the Bank of England.

There is no taxpayers money funding Government spending. The only constraints on spending are the availability of resources (goods, services, labour) and inflation caused by resource shortages.

Now ask yourself…. when the global financial markets collapsed in 2008 what shortage did this cause?

Government told us “There is no money! We have to tighten our belts… Austerity!”

Did anyone shout back “Hang on a cotton-picking minute… you create money!”

[To be fair, some did. But the response they got (and still do, but from fewer people) was “Venezuela” and “Zimbabwe”… which demonstrated how little they know about those countries’ economies.
See my blog https://idleobs.wordpress.com/2020/03/29/coronavirus-economic-stimulus-but-how-will-you-pay-for-it/ ]

The Truth: Our Government can NEVER run out of money

 

The Final Argument – Why we should not have to fundraise for the NHS

Current Shortages in our Health and Social Care Services
  • Nurses, Doctors, Radiologists, Social Workers, Care-workers ie labour
  • Equipment, especially PPE, COVID-19 Tests, and Ventilators ie goods
  • Diagnostics/Testing laboratories ie services
Labour – the workforce

500,000 volunteers have come forward to help our ‘NHS, there must be jobs that these volunteers are doing, and that is great. Practical help at a time of most need.

No shortage of people willing to work for no pay – although government could pay them via a Job Guarantee programme, and this could encourage more people into care-worker jobs.

However, the shortage of clinical staff and social workers needs addressing urgently through government investment in bursaries, decent wages, and free education, but will not help in the immediate crisis.

Goods

Through a combination of incompetence or deliberate policy, the government did not purchase goods listed above prior to the pandemic, despite being forewarned in the pandemic simulation report 2016. Government’s initial ’do nothing’ strategy exacerbated the situation as global demand for equipment and tests grew. By the time Matt Hancock and NHSE tried to get hold of, or refused to deal with certain suppliers of, what we needed, the goods aren’t there (although that’s debatable)

Volunteers across England are making PPE out of the goodness of their hearts and donated material. Practical help at a time of most need.

Services

Although slow to start, government are negotiating contracts with laboratories. Money is being created to purchase these services.

 

Conclusion

There can never be a shortage of public money to purchase anything if it’s available for sale in our own currency

There is not a shortage of money to attract, train and retain staff, only the shortage of will by the government to do it

There is not a shortage of money to purchase equipment, only the shortage of will by the government to do it, and at the right time

So why does the NHS need money from charity when government can provide it with public money?

It doesn’t and shouldn’t!

If the government keeps getting away with not accepting financial responsibility, they will keep starving our NHS of money to pay for the facilities, staff, equipment, and resources it needs to exist!!

Please stop giving money to charity for the ‘NHS’

Demand from government that it carries out its duty to use public money as it was meant: for public purpose and social benefit.

[1]Accountable in a financial sense, ie accounting Integrated in an admin sense ‘backroom stuff’

 

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The cost of government austerity has been a one of infrastructure decay and human suffering. Our nation has paid the price. Are we ready yet to re-imagine our world?

Published by Anonymous (not verified) on Sat, 18/04/2020 - 9:09pm in

Blackboard with the slogan "Upgrade thinking" written in white chalkImage by Gerd Altmann from Pixabay

‘No society should need permission from wealthy people to operate in a high functioning way’

Nick Hanauer

 

A day of reckoning is coming. The exponential rise in deficit spending to manage the COVID-19 emergency is coming to crush future generations and will need action to address the prospect of a future burden of higher taxes to pay for it. Or so a briefing paper published by the Social Market Foundation claimed this week. The SMF (funded by Vodaphone, Barclays and KPMG amongst others) states in its report that public sector net borrowing could rise above £200bn per year which raises the prospect of an ‘Austerity Round Two’ leading to tax rises and spending cuts once the worst of the crisis is over. It calls for the economic costs of responding to the coronavirus pandemic to be shared fairly across the generations and says that ‘as we emerge from the crisis, older generations must uphold their part of the contract by bearing a fair proportion of future tax rises and welfare reforms.’

In short, it is suggesting that there will be a financial price to pay for the government’s increase in spending and recommending that the ‘triple lock’ which ensures substantial rises in the Basic State Pension should be replaced with a ‘double lock’ tying increases to earnings or inflation. This it says could contribute £20bn to deficit reduction over the next five years and reduce the fiscal burden on the working-age population.

Economic orthodoxy lives on. After the initial positive buzz which resulted from the government’s announcement of a huge spending programme to manage the economic and human fall out of the COVID-19 crisis (before we realised its shortcomings) the debt sirens are back beating the debt drum. Not surprisingly. The neoliberals have caught up with the challenge to their economic and monetary supremacy and are fighting back by posing the customary question about how it will be paid for. We can expect more as the weeks roll on. On this line of thinking someone, somewhere has to pay the financial cost sooner or later and the question will be who.

Of course, the usual response to the question is the taxpayer and that narrative is not just the line pursued by the right-wing. The household budget narrative dominates both on the right and the left. On the right, low taxes are the aim and have justified the slimming down of public services and infrastructure. Those who rightly wish to address economic inequality, do so by falsely suggesting that tax avoidance or evasion is a drain on the public purse, and we must ensure that the rich pay their fair share. The ‘solution’ on the left is to bring back that ‘ol magic money tree’ located in the Cayman Islands. Indeed, earlier this week, an editorial in the Morning Star suggested that the government should open up tax havens and tax the super-wealthy to raise the extra funds needed for welfare benefits, job support, training schemes and public services including the NHS.

The truth is that we are not dependent on the rich (or indeed anyone) paying their tax to fund public services and we don’t need to grovel or expect them to do the right thing as if somehow it is a charitable exercise in goodwill. We need instead to recognise the currency-issuing powers of government to pursue a public purpose agenda which serves the interests of the nation. Make the rich pay their tax for the right reasons, which are to do with redistribution of wealth through progressive taxation and not because it funds government spending. It doesn’t.

We need to recognise that the real costs of austerity are not financial but human ones. In fact, we are now paying the costs of that burden imposed in 2010 by the Conservatives when they cut public spending on our public and social infrastructure including our public services and welfare. The burden was never the financial one it was dishonestly described as; it has been the subsequent burden of infrastructure decay and human suffering as a result of austerity. We are now seeing its effects on the lives of our friends and families as we struggle to cope with the effects of lockdown; counting the harrowing cost on our financial, physical and mental health. It is a sad thing indeed that it had to be coronavirus that brought it to our attention as life as we know it stopped like a broken clock.

Past austerity has cut our productive capacity. That has built in the potential for inflationary pressures which could prove to be an issue with a critical global shortage of PPE and other vital equipment and import restrictions from affected nations.  While the government isn’t like a household in financial terms, it is clear that it has failed our nation on the very yardstick it chooses to measure itself by.  It has run down the essential supplies of critical equipment and materials to keep the public safe and compromised our national security by running the NHS at full capacity without the slack required to cope in a crisis. This will be the deficit that we inherit; not the spreadsheet balances. As Fadhel Kaboub noted in a recent podcast ‘It’s not about having the money it’s about having the real, physical productive resources’

And yet the economic orthodoxy that precipitated this destruction still looms like a bad penny on our horizon. Once again, the neoliberals are proposing to hit those who can least afford to pay with the very real costs of any future austerity. The SMF’s economic illiteracy, which suggests that today’s government spending will have to be paid back at some point in time and would thus be a burden on future generations, is a blatant misrepresentation of the truth.

The government does not need to find savings now and scrapping the triple lock on pensions in order to restore what is referred to as ‘intergenerational fairness’ will quite simply create more pensioner poverty than already exists, which in turn will have a detrimental effect on the economy. Quite simply, whether it is retired or working people, involuntarily unemployed or underemployed people, less money in their pockets translates into less money being spent into the economy which is what keeps it turning. Tightening the money tap will quite simply send the economy into a death spiral if it is not already there. And that cost will be even harder to bear, not just for the most vulnerable in society but also for the future of the planet.

As Prem Sikka suggests in an article this week in Left Foot Forward, the SMF has failed ‘to assess the impact of pension reduction on the life of retirees. With reduced income, retirees will spend less on good and services and thereby reduce the multiplier effect. The SMF proposals would ensure that retirees surviving the coronavirus pandemic will face a future of severe poverty’.

That is the real burden a human one. The role of government is not to balance its budget, but to serve the common interests of its citizens and in that its function is to ensure that its economic policy decisions result in a more productive nation. Future generations, or indeed retirees will pay the heavy price of both ineffective government inaction today and economic decisions to impose yet more austerity or increase taxes in the future.

In short, today’s government debt will not in itself be a burden on future generations. The real burden will be government’s failure to spend adequately today to ensure a better future tomorrow. Cutting spending once the crisis is over would be tantamount to ensuring economic collapse if indeed we haven’t already reached it before then.  Using ‘intergenerational fairness’ as an excuse to cut spending is designed to create smoke and mirrors and conflict between generations and is a sleight of hand to place blame anywhere but at the government’s feet.

In conclusion, we end this MMT Lens with a quote from a blog by Bill Mitchell.

“…the inclusion of public debt and unfunded pension liabilities for government workers in the index are based on a misunderstanding of what actually will burden the future generation.

The fact is that the current government has as much ‘money’ now as it had yesterday and the same amount it will have tomorrow. That is, it has whatever it wants to spend. It always has that. It has no more or less capacity to spend today because there were surpluses in the past than it would have if there had have been deficits in the past.

[…..]

Every generation chooses its own tax rates. That is, the mix of public and private sector involvement in the economy is a political choice. If the future generations want more private and less public they will choose lower tax rates etc.

Currency-issuing governments do not draw down on the savings provided by the previous government’s surpluses. It is a nonsensical notion thinking that a sovereign government would ‘save’ in its own currency.”

 “The idea that borrowing ‘takes money from the pockets of future taxpayers’ is nonsensical. The funds to pay for the bonds originate in the government net spending in the first place.

 Clearly, deficits now are in part helping the current generation with income transfers and the like. But they also facilitate public education, public health and other infrastructure which provide massive benefits into the future for the current generation and their children. 

Once you understand that then the idea that there is a future burden will make you laugh.

 

 

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COVID-19 is our practice run. Our future survival may be at stake, but the solutions are within our grasp. NOW.

Published by Anonymous (not verified) on Sat, 11/04/2020 - 12:42am in

Planet Earch wearing a surgical maskImage by FunkyFocus from Pixabay

“How all this plays out ultimately depends on us. The emperor is now naked and the ground for a radical paradigm shift – one based on popular sovereignty, democratic control over the economy, full employment, social justice, redistribution from the rich to the poor, relocalisation of production and the socio-ecological transformation of production and society – is indeed more fertile than it has been in a long time. Yet change won’t come from above but only through mass mobilisation once the worst of the crisis is over.” – Thomas Fazi

 

 

The BBC reported this week that more than 150 top football players had launched an initiative to help generate funds for the National Health Service to ‘help those fighting for us on the front line’ during the Coronavirus Pandemic. It noted that whilst Premier League Clubs had previously said that they would ask players to take a 30% pay cut in order to protect jobs, the Professional Footballers Association had said that players were ‘mindful of their social responsibilities’. Matt Hancock, the Health Secretary, jumped on the solidarity bandwagon and according to the BBC ‘had warmly welcomed’ the ‘big-hearted decision’.

Of course, nobody would wish to deny public support for the NHS and its workers, or the growing solidarity with those who perhaps people are now just beginning to understand represent the backbone of our society without which nothing functions. As noted in an MMT Lens a few weeks ago, at this critical time people are beginning to realise the value of the public sector and other key strategic sectors of the economy. They are also beginning to question the long-promoted propaganda that society needs the rich to create wealth, which then trickles down from the top table like manna from heaven.

We cannot fail now to notice the huge wealth inequalities that have been created by the pernicious market-driven ideology, which have poisoned our human relationships with each other, sowed division and hatred, divided communities and working people and left our public infrastructure in a state of decay.

The upsetting and often poignant daily news reports which rend our emotions are making it ever clearer that something is very wrong, as the evidence piles up before our eyes as to the long-term consequences of austerity. Indeed, it was remarkable this week to hear a BBC journalist, Emily Maitlis, challenge the prevailing ideological dogma after having failed to do so for years when she said:

“They tell us Coronavirus is a great leveller. It’s not. It’s much harder when you are poor. How do we stop making social inequality even greater? You do not survive the illness through fortitude and strength of character, whatever the Prime Minister’s colleagues will tell us.”

A surprising but timely debunking of neoliberalism from an unlikely source. A challenge to the idea that individuals are alone responsible for their fate.  A first step? Let’s hope so.

It is also becoming clear that governments are much more powerful than they have been given credit for in a market-driven world. In fact, that the market is not an all-seeing god operating outside government control. That it is government alone, through political decisions, that provides the economic infrastructure for the market to exist. That only government can ensure that our public and social infrastructure is capable of operating in good times and bad and has the capacity to respond to emergencies like the COVID-19 pandemic or the very pressing challenges facing us with respect to climate change.

However, for too long, government has tipped its hat to democracy, relinquished its sovereign powers to deliver public purpose and served other masters all aided by a media owned by those same masters who manage the narratives for their own ends.

In recent weeks, however, we have been given an inkling of that sovereign power as the Chancellor of the Exchequer opened the spending taps, thus challenging the decade-long narrative of austerity that has been justified by the lie that Labour had overspent and that the State must now pull in its horns and get the public finances back into order.

It might be getting clearer, a week or so on, that these promises are not all they are cracked up to be, but it proves without doubt, that the world is not flat and that government, not the market, holds all the cards in terms of response, particularly when one notes the corporate queue at the door of the Treasury for handouts.  The government decides its spending priorities and indeed who benefits.

To return to the footballer story, on social media many noted the huge wealth inequalities that exist and expressed the view that it is only right that the rich, including footballers, share some of their wealth.  That, of course, would be a view that many of us would share and buys into the belief that we should all contribute our fair share in taxation for the public infrastructure that we all benefit from.  Indeed, for many people paying their tax is seen as their contribution to that infrastructure.

However, we need to challenge the notion that the public infrastructure requires charitable donations from the rich or for them to pay their tax to fund it. Because it is not true. The idea appeals to our sense of fairness and equity, particularly in the light of growing public awareness of the huge inequity and injustice which exists occasioned by governments who still favour tax breaks for the rich. But it reinforces the belief that without the rich we will all be poorer. The mantra of trickledown is still entrenched and this gives the rich more power, rather than diminishing it. The last few weeks make a serious challenge to the false assumption that the rich are needed as we realise what really sustains society when the chips are down.

We need to challenge the mindset that the NHS is a charity requiring donations. It does not. Aside from the fact that what is on offer is a mere drop in the ocean in respect to the annual NHS spend and would be a salve of conscience rather than real assistance, it is yet another example of the shift in public understanding that has occurred in recent years.

This has suggested that since money is ‘in short supply’, the Big Society, instead of the State should play a bigger role in public service – from lotteries to fund vital work in the community to the growth of charitable organisations providing services to volunteering to support the NHS and other public institutions, not to mention vital medical and other research.

The implication has been that the State can no longer afford to fund the public infrastructure and people’s generosity and desire to help has been cynically utilised to fill the gaps that have arisen by political choice.

In the meantime, COVID-19 has exposed – in the grimmest way – the state of our NHS, social care, policing and other public sector bodies like the civil service and local government. The poor state of these services being the result of government economic and spending policies.

We are at a crossroads in human history and as never before we need competent government to serve the people. COVID-19 may indeed be a practice for the greater challenges we will face in connection to climate change and human survival. We must strive to make it clear what is and is not possible and the constraints which will in future determine what can and cannot be done.

Essentially, that the government as the sovereign currency issuer makes its economic and spending decisions based, not on whether it has the money, but on ideological premises. Over the last 10 years, the coalition and Tory governments made a political choice to cut funding for the NHS and other vital public services and carried on the decades-old programme of privatisation.

There was, however, no shortage of money just as there is no need for the UK government to collect tax or borrow to fund its spending choices (although that is not an argument for not paying one’s tax and that is another matter). To reiterate the oft-repeated mantra – the government finances are not like a household budget.

We need to challenge our perceptions that government has a limited pot of money to spend and realise that the real constraints are real resources, not £ sterling. Indeed, there cannot be a starker acknowledgement as we are so poignantly reminded every day with the lack of PPE, ventilators, nurses and doctors and other facilities in an NHS cut to the bone.

The scale of the challenge may seem like a mountain to climb. This is not a moment, therefore, to challenge the validity of Modern Monetary Theory with spurious arguments as so many do, holding onto false narratives which suggest that we can’t afford to save ourselves.

We have nothing to lose by informing ourselves and challenging the entrenched notions which lead us by the nose. Indeed, our future depends on our willingness to do so.

 

 

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Norwood Hanson, Paul Krugman and MMT

Published by Anonymous (not verified) on Sun, 29/03/2020 - 10:00pm in

Phil Armstrong, University of Southampton Solent and York College

 2020

 

 1. Norwood Hanson: Is the sun going around the Earth or the Earth going around the sun?

 

Norwood Russell Hanson (1961) considers the conceptual foundations of science; he notes that the work of scientists involves observation. However, such observation is likely to be interpreted differently by different observers, as consistent with an acceptance of the view that all facts are theory-laden (but, importantly, not theory determined). Hanson focuses upon how we conceptualise what we see into general systems, ‘Let us examine not how observation, facts and data are built up into general systems of physical explanation, but how these systems are built into our observations, and our appreciation of facts and data’ (Hanson 1961: 3).

Hanson considers how different observers perceive things differently. He talks about Tycho Brahe[1] and Kepler looking up at the sky, and asks a question, ‘Kepler regarded the sun as fixed: it was the Earth that moved. But Tycho followed Ptolemy[2] and Aristotle in this much at least: the Earth was fixed and all other celestial bodies moved around it. Do Kepler and Tycho see the same thing in the east at dawn?’ (Hanson 1961: 5). Hanson argues that ‘people, not their eyes, see’ (Hanson 1961: 6) and develops his story by noting, ‘Tycho and Simplicius[3] see a mobile sun, Kepler and Galileo see a static sun’ (Hanson 1961: 17) and later notes, ‘Our sense observation shows only that in the morning the distance between the horizon and the sun is increasing, but it does not tell us whether the sun is ascending or the horizon is descending…For Galileo and Kepler the horizon drops; for Simplicius and Tycho and the sun rises’ (Hanson 1961:182). Hanson points out that ‘There is a sense, then, in which seeing is a ‘theory-laden’ undertaking (Hanson 1961: 19) and ‘The observer…aims only to get his observations to cohere against a background of established knowledge’ (Hanson 1961: 20).

 

2. Paul Krugman like Tycho and Simplicius

 

Moving on from the solar system to the financial system we move from asking whether the sun revolves around the Earth (or vice versa) to asking if taxes fund spending (or vice versa); specifically, when we consider the dynamic nature of the efflux and reflux of credit and debits in relation to government’s account we might conceptualise what we observe in two ways:  first we may ‘see’ the taxation (or borrowing) as funding the spending or (lending) [view A]  or second, as the spending (or lending) funding the taxation (or borrowing) [view B].[4]

In this context, we might reasonably compare Paul Krugman to Tycho and Simplicius. By way of example, I might consider a recent series of Twitter posts from Krugman (I have collected them into one passage below).

“I’ve been getting some questions from readers wondering about the cost of the not-a-stimulus (it’s actually disaster relief) package. “Where’s the $2 trillion coming from? Thin air?” Basically, yes. We went through this argument back in 2008-2009, when many people (including some who should have known better) worried that government borrowing was going to “crowd out” private investment. There are times when that happens, but this isn’t one of them. In the most immediate sense, the govt. is going to borrow the money — and its borrowing costs are near record lows, despite the surging deficit…But where does the borrowed money come from? Basically, right now we have trillions in private savings with no place to go, because private investment demand isn’t sufficient to use them; who’s going to invest in the face of a plague of unknown duration? So government borrowing just draws on this pool of excess savings. Furthermore, in so doing it helps prevent an even steeper economic contraction” (Paul Krugman, combined 5 tweets 27/03/20, emphasis added).

It is clear from the text that Krugman implicitly accepts view A. The italicised sections show this most clearly. By acknowledging the possibility of ‘crowding out’[5], arguing that ‘the govt. is going to borrow the money’ and that ‘government borrowing just draws on this pool of excess savings’, it is clear that Krugman conceptualises the government as a currency-user; a position that, as I will show below – in common with Ptolemaic astronomy -is not consistent with the evidence.

 

3. Modern Monetary Theorists like Copernicus, Galileo and Kepler

 

Returning to our discussion of the solar system we might note that the eventual triumph of heliocentrism did not come quickly or easily. Much hard work from astronomers was required but eventually, the battle was won and, ‘By the eighteenth century, after the successes of Galileo, Kepler and Newton, the universe was construed as an intricate geometric-arithmetic puzzle’ (Hanson 1961: 66). I might argue that shifts in worldview are prompted by the observation of some deeply significant anomaly (or anomalies) (Kuhn 1962). In this context,  Hanson (1961: 68-9)  notes, “We ask, ‘What is its cause?’ selectively: we ask only when we are confronted with some breach of routine, an event that stands out and leads us to ask after its nature and genesis.” Hanson refers to retroduction[6] and argues “A theory is not pieced together from observed phenomena; it is rather what makes it possible to observe phenomena as being of a certain sort, and as related to other phenomena. Theories put phenomena into systems. They are built up ‘in reverse’ – retroductively” (Hanson 1961:90).

In the same way that Tycho and Kepler ‘see’ the same things, those who conceptualise the government as a currency-user – such as all mainstream economists and many so-called ‘progressives’ such as Krugman – and those who conceptualise it as a currency-issuer – notably the advocates of MMT – ‘see’ the same things. The issue is how to decide which view is consistent with the development of a theory with the most explanatory power? Returning to the issue of anomalies – or unforeseen observations – we have a clue to the answer. The economics profession has long argued that heightened public deficits would lead to higher long term interest rates and, in turn, that these higher interest rates would lead to lower private investment or ‘crowding out’. This hypothesis follows from their view of the government as a currency-user which borrows from a ‘fixed pot’ of saving in competition with private borrowers.  This prediction was decisively falsified during, and immediately after, the global financial crisis when all the world’s major nations with their own currencies, operating under floating exchange rates, saw declines, not increases, in long term interest rates on government debt[7]. It is true that some, although by no means all – Eurozone nations did see a rise in long term interest rates. However, since MMT explicitly recognises the distinction between Eurozone nations (which have ceded currency-issuing power to another entity – the ECB) and currency-issuing nations, it recognises that Eurozone nations should be conceptualised as currency-users meaning that this outcome is exactly in line with the expectations of MMT[8].

An understanding of MMT removes the supposed element of ‘surprise’ from what is a highly significant anomaly from the perspective of mainstream economics, The advocates of MMT are able – retroductively – to posit the structures and mechanisms which explain this contrast between currency-issuing and currency-using states and I would, therefore, argue that MMT provides the basis for the provision of a satisfying explanation of observed phenomena – absent from mainstream thinking based upon ‘seeing’ the state as a currency-user.

In contrast to perspective which underpins the comments made by Krugman, above, Modern Monetary Theorists contend that when a nation has its own sovereign currency and operates under floating exchange rates, ‘borrowing’ by the state is not operationally required. The government should be thought of as a currency-issuer; it spends first and creates reserves, ex nihilo. It is never revenue-constrained as a currency-user might be. The so-called ‘borrowing’ operation which removes the reserves is voluntary (Mosler 2012). It could allow any untaxed spending to remain in the system. However, such a policy would result in the overnight rate falling to zero (if no other action was taken, such as the central bank agreeing to pay interest on excess reserves).

However, it must be conceded that the difficulties involved in replacing deeply-embedded theories (or paradigms in Kuhn’s [1962] terminology) should not be underestimated and I would argue that this is particularly the case in economics. The economics academy has been highly successful in reducing the ability of alternative perspectives to gain traction. Contrary to their professed acceptance of the principle of falsification, mainstream economists have introduced numerous ad hoc modifications to their apparently failed theories (Armstrong 2018) to avoid falsification. However, despite this disappointing situation, the position of mainstream economics is far from impregnable and the advocates of MMT must continue to challenge its hegemonic status. We can only hope that mainstream economics and its conceptualisation of the state as a currency-user is eventually destined to be consigned to the status of an episode in the history of economic thought, following in the footsteps geocentric thinking in astronomy.

 

References

 

Armstrong, P. (2018), ‘MMT and an Alternative Heterodox Paradigm’, Gower Initiative for Modern Money Studies, https://gimms.org.uk/2018/12/26/mmt-heterodox-alternative-paradigm/.

Bhaskar, R., (2017), The Order of Natural Necessity, Gary Hawke (ed.), Luxemburg: CreateSpace Independent Publishing Platform.

Galilei, G. (1632/1953), Dialogue Concerning the Two Chief World Systems (Dialogo sopra i due massimi sistemi del mondo), Berkley: University of California Press.

Hanson. N (1961), Patterns of Discovery, Cambridge: Cambridge University Press.

Kuhn, T. (1962), The Structure of Scientific Revolutions, Chicago: University of Chicago Press.

Mosler, W (2012), Soft Currency Economics II, US Virgin Islands: Valance.

 

 

[1] Tycho Brahe (1546 – 1601) was a Danish astronomer who developed a view of the solar system which recognised that the moon orbits the Earth and the planets orbit the sun, but retained the position that the sun orbits the Earth.

[2] Claudius Ptolemy (c. AD 100 – c. 170) was a Greek mathematicianastronomer and astrologer whose Ptolemaic approach suggests that the Earth is at the centre of the universe.

[3] Galileo compares the Copernican with the Ptolemaic systems in Dialogue Concerning the Two Chief World Systems (1632). In the text, Simplicio presents the case for the Ptolemaic system and argues against the Copernican alternative. The character’s name is generally supposed to be derived from that of a sixth-century follower of Aristotle, Simplicius of Cilicia.

[4] A third view might be summed up by the question, ‘Is the distinction important?’ I would argue that the distinction is important since the government can spend without prior tax revenue whereas prior spending (or lending) is logically and historically required for taxes to be paid. Thus only view B above is valid.

[5] The crowding-ou hypothesis suggests that heightened government deficits lead to higher long term interest rates and that,  in turn, these higher rates, reduce – or ‘crowd out’ – private investment. Little or no evidence to support this hypothesis exists (Armstrong 2018).

[6] In the retroductive moment, a scientist imagines a mechanism or structure which, if it were true, would explain the event or regularity in question. It is the use of the imagination to posit explanatory mechanisms and structures’ (Bhaskar 2017: 28).

[7] Armstrong (2018).

[8] Armstrong (2018)

 

 

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Rishi Sunak is wrong. ‘Righting the ship’ won’t require any taxpayers to ‘chip in’ to cover the cost of his spending plans – not now, in the future, or ever. 

Published by Anonymous (not verified) on Sun, 29/03/2020 - 4:37am in

Scientists wearing masks holding sign with the slogan "Together we do it"Image by Gerd Altmann from Pixabay

Marcus Tullius Cicero was a Roman statesman, lawyer and academic sceptic philosopher. He wrote ‘The Safety of the People shall be the Highest Law.’

This week, it was reported that the former health secretary Jeremy Hunt was in charge when medical advice to stockpile protective equipment in event of a flu pandemic was rejected on the grounds that stockpiling would be too expensive. By this decision, it would seem that this government chose deliberately to put cost over the health of its citizens, thus perpetuating the myths about the unaffordability of public services. The health and safety of the nation has been in the hands of a government which thought saving money was more important than keeping people protected. Jeremy Hunt claimed a while back, that public services depended on a healthy economy. That falsity will come to haunt him as we find out the hard way that it is, in fact, the other way around. A healthy economy depends on a healthy nation.

The neoliberal order which has dominated the global corridors of power for more than 40 years, combined with monetarist policies and more recently austerity following the global financial crash, has led to the destruction of public and social infrastructure not just here but in many developed nations around the world including the EU trading bloc. It lies at the heart of this crisis.

The horrors we are seeing in Spain, France, Italy, the US and other countries as the COVID-19 coronavirus compromises the ability of health and other public services to cope underline painfully the consequences of government decisions. Governments which rejected the power of the state to serve its citizens, promoting the god of the markets – the invisible hand – instead, have appeased it at every turn to favour the global corporations which have dictated the rules.

In the UK, despite the early advice from other experts in countries where coronavirus had already struck, government prevarication and failure to act expeditiously has allowed the disease to spread through the nation affecting many, not just those who are elderly with underlying health conditions. All human life is precious and yet this government has treated some as expendable and put the lives of those in the front line in the health service at risk.

As GIMMS noted in a previous MMT Lens, we will pay a heavy price for the ‘just in time’ approach to our health and public services and the lie that they were only affordable if the economy was doing well.  The media, having done little to hold the government to account for decades and especially in the last 10 years, has left us without sufficient nurses, doctors and health workers, beds, ventilators, ICUs and other equipment. Our health professionals are still crying out for Personal Protective Equipment (PPE) and are selflessly putting their own health at risk for others.  They are crying out for ventilators to keep people alive. They are crying out to be tested to keep themselves and their patients safe.

A healthy economy relies on public infrastructure, which is in short supply as a result of government choice. Ramping up the much-needed supplies is proving slow and difficult, not to mention demonstrating government incompetence. A good government delivering public purpose would have meant that we would have been better able to deal with this emergency and we might not be witnessing its current trajectory.

Our public infrastructure has been the victim of government cuts and we are now paying the price for the breakdown which is occurring as a result of limited or non-existent emergency planning, deregulation to suit market demands and privatisation – which have all been justified by the lie that the state had no money of its own and public services were a luxury determined by the health of the economy.

When the Chancellor got up to announce his spending plans and the measures to help those now unable to work, people cheered. If nothing else, this should have demonstrated quite clearly that the government was not constrained by tax or borrowing in order to spend, despite the charade that successive governments have played out about how its spending is paid for.

With big business queuing up for handouts (reminiscent of those banks that were too big to fail who were bailed out with public money) for others, it has been like squeezing blood from a stone. The very people who form the backbone of society, who keep it functioning and contribute to the economy through their work – the self-employed in particular – are being asked to jump through hoops to get any money at all, leaving them struggling and worrying about the future. People who for a decade have been living hand to mouth with scarce or no savings, working in zero-hours employment, the gig economy or in part-time work, will have to wait months for the government to pay up. Those in desperate need without employment are being asked to apply for Universal Credit for a measly £94.50 a week hanging on in telephone queues which can be as long as 90,000. It will not be long before those who congratulated the Chancellor for his largesse will have to think again, as bills go unpaid and people go hungry. People need support now, not later. The breakdown of society is in the offing if the government fails to act as it could now simply by authorising the central bank to make payments through HMRC who hold our data.

Alongside the tragedy which is playing out, the household budget narrative is never far behind, even in the words of Rishi Sunak who during his announcement of measures for the self-employed claimed that when this emergency was over we’d have ‘to chip in to right the ship’ promoting yet again that at some time in the future there will be a cost to taxpayers. Which in short there will not, since the government does not need to collect tax before it can spend!

Next, an ITV newsreader asked, ‘can the public finances take the strain?’ And this was followed by Robert Peston telling the TV audience that we’ll be ‘paying off the national debt for years’. To be clear – for the UK government, which is the currency issuer, there is no strain on the public finances and there will be no future burden on the taxpayer.

The Tax-Payers Alliance then announced that in future there would have to be ‘growth-enhancing’ measures and spending restraint’ both mutually exclusive positions which hark back to a false claim that cutting public spending could lift growth. The evidence is before us right now that this is not true.

Finally, the journalist Philip Inman suggested that Sunak’s budget spending spree could come at a high price, ‘fighting a war with borrowed money.’ Except that the government, as the currency issuer, does not need to borrow to cover its deficits; nor does it need to issue bonds in order to spend.

Our public and social infrastructure is under severe pressure and cracking under the strain, and people are suffering and dying. And yet they are still arguing about the financial cost of the Chancellor’s spending as if deficits and borrowing were the devil, balanced budgets the epitome of a government’s economic success or that there will be a price to pay if fiscal prudence is abandoned.

The ONLY cost in the future is the human cost we will face if the government fails to act in a manner that secures the lives of citizens, ensures they can pay their bills and eat during this emergency.  Fiscal prudence is the least of our worries!

We must today, tomorrow and in the future, keep holding to account government, politicians and all those who peddle the economic orthodoxy that there is no money. The Chancellor has shown that there is the possibility to spend without checking the public purse first. It is a political choice. So much is now at stake and we need as nations to keep pushing with more persistence until change happens. The battle lines are being drawn as we speak. The coronavirus, hard as it is, may be our societal wake-up call. Let’s hope so.

 

 

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The post Rishi Sunak is wrong. ‘Righting the ship’ won’t require any taxpayers to ‘chip in’ to cover the cost of his spending plans – not now, in the future, or ever.  appeared first on The Gower Initiative for Modern Money Studies.

A Short Comment on the UK Government’s Fiscal Policy in the Current Crisis

By Phil Armstrong, University of Southampton Solent and York College.

Man putting on protective mask and wearing latex glovesImage by Terri Sharp from Pixabay

The UK government’s significant fiscal expansion – in line with its ‘do whatever is required’[1] mantra – is, of course, welcome. However, I would argue that it is still far too small to deal with the massive demand shock associated with the coronavirus pandemic (Mitchell 2020a, 2020b) and also that it is incorrectly targeted. It pays insufficient attention to the poorest groups in society; the government has failed to take the necessary steps required to ensure the income of those most in need is adequately supported during the crisis. Clearly, the situation is evolving on a daily basis and, looking forward, it is highly likely that there will be continual calls for the government to increase its fiscal intervention from many sectors in society – not least business leaders who fear the effects of rapidly declining demand.

However, I would stress that the intervention is being enacted against an inapplicable theoretical and ideological backdrop, specifically the mistaken neoliberal framing of the so-called ‘government budget constraint’ (GBC). The logic of the GBC conceptualises the government as a currency-user, which might finance its spending by taxation, by borrowing (debt issuance) or ‘printing money’ (Mitchell 2011). According to mainstream thinking, each of these methods carries problems; increased taxation reduces non-government sector spending power and allegedly generates disincentive effects, ‘excessive’ borrowing leads to higher long term interest rates, in turn, causing ‘crowding out’[2] and ‘money printing’ inevitably results in inflation.   There is also an underlying ideology implicit in neoliberalism; that state expansion soaks up real resources which would be better (or ‘more efficiently’) used by the private sector.

In extremis, it appears that the Conservatives (who have shown a marked distaste for expansionist state intervention in the recent past) and even business leaders who would normally be opposed to increased government spending and enlarged deficits are now prepared to put their weight behind the fiscal expansion[3]. However, the underlying framing based upon the GBC is likely to come back to bite us all – hard – in the future. In line with the erroneous conceptualisation of the state as a currency-user, the government is presenting its current additional spending as being ‘financed’ by borrowing. The story is founded upon the idea that the government needs to spend significant extra sums now – owing to the severity of the crisis – and heavy borrowing is, therefore, essential (reinforced with the contention that it is cheaper for the state to borrow now than in the past as long term interest rates are very low) in the manner of household who accepts a very large credit card bill because there is no other way it can survive[4].

However, following this line of thinking will lead to a damaging and erroneous conclusion. It is highly likely that in the future – when the crisis has passed – mainstream economists will argue that there is a financial ‘mess’ to fix; ‘unacceptably’ large public sector deficits may well persist beyond the crisis alongside an ‘excessive’ national debt as a proportion of GDP. The narrative will then, no doubt, suggest that they need to be ‘dealt with’– possibly with another, even harsher, round of austerity than last time – and it will those least able to cope who are most likely to be the ones asked to bear the greatest share of the burden (as was the case the last time austerity was imposed).

This conceptualisation of the government as a currency-user suggests that money printing and bond issuance are alternative ways of financing a deficit, however, advocates of MMT conceptualise the state as a currency-issuer. From this viewpoint, in reality, they are not alternatives.  The government always spends by the creation of new money – both taxes and borrowing logically and historically follow spending (or lending). Only money that has already been issued by the state can be collected in taxes or used to buy state debt. When the government spends, it does so by crediting the bank accounts of its target recipients, simultaneously increasing the target’s bank’s reserve account by the same amount. When taxes are paid by a private sector agent, her deposit balance falls and her bank’s reserve account balance at the central bank (CB) is correspondingly marked down[5].  The purchase of government debt is best conceptualised as a reserve drain (Mosler 2012) which changes the composition of non-government sector holding of risk-free state debt but not its size.

I would argue that having this correct conceptualisation is the key to avoiding the return of austerity. In reality, the government sets its aims, determines its budget and spends by the ex nihilo creation of new money. When the operational reality of the financial system is correctly understood, then the expectation of a post-crisis ‘mess’ to fix disappears. Once the economy has recovered, that does not necessarily mean a need for austerity or even fiscal retrenchment – only the post-crisis economic outcomes such as growth, employment and price stability matter. If unemployment persists after the crisis has passed, then government net spending should still be regarded as being too low, irrespective of the size of the government deficit both in absolute terms and as a proportion of national income. Only in an economy suffering from inflation from excess demand would fiscal contraction be required.

These are challenging times for us all, but in the current crisis we have the opportunity to push forward the insights of MMT and to challenge established thought – particularly with respect to the inapplicable government budget constraint. If our understanding of the operational reality of the monetary system can be characterised by the insights of MMT, the full scope of existing fiscal space can be understood and importantly, the likely post-crisis push for fiscal retrenchment can be effectively countered.

 

[1] See Islam (2020).

[2] The crowding hypothesis is based on the contention that higher interest rates will lead to lower private sector investment, meaning that large government deficits effectively ‘crowd out’ private investment. Little, if any, empirical support for this hypothesis exists (Armstrong 2015).

[3] For example, Richard Branson expressed his support for fiscal retrenchment in 2010 (Stratton 2010) but changed his mind in 2020 when arguing in favour of a £7.5 billion government support package for the airline industry (Hockaday 2020).

[4]  ‘We are in an entirely new world. A wartime effort, with wartime deficits to cover it’, Rishi Sunak, quoted in Islam, F., BBC News online, 17 March 2020.

[5] It is important to stress that private sector debt or bank money cannot provide the final means of settling a tax bill which occurs when a taxpayer’s bank’s reserve account at the central bank is debited in favour of the Treasury account (Armstrong 2019).

 

References

 

Armstrong, P. (2015), ‘Heterodox Views of Money and Modern Monetary Theory (MMT)’

https://moslereconomics.com/wp-content/uploads/2007/12/Money-and-MMT.pdf

 

Armstrong, P. (2019), ‘A simple MMT advocate’s response to the Gavyn Davies article ‘What you need to know about modern monetary theory’, Gower Initiative for Modern Money Studies,

https://gimms.org.uk/2019/05/27/phil-armstrong-gavyn-davies-response

 

Hockaday, J. (2020), ‘Airline bosses to ask for £7,500,000,000 bailout to survive coronavirus.

The Metro online, https://metro.co.uk/2020/03/14/airline-bosses-ask-7500000000-bailout-survive-coronavirus-12399300/

 

Islam, F (2020), ‘Coronavirus: Chancellor unveils £350bn lifeline for economy’, BBC News online, 17 March, https://www.bbc.co.uk/news/business-51935467

 

Mitchell, W. (2011), ‘Budget Deficit Basics’ 4 April

http://bilbo.economicoutlook.net/blog/?p=14044

 

Mitchell, W. (2020a), ‘The coronavirus crisis – a particular type of shock – Part 1’, March 10,

http://bilbo.economicoutlook.net/blog/?p=44484

 

Mitchell, W. (2020b), ‘The coronavirus crisis – a particular type of shock – Part 2’, March 11,

http://bilbo.economicoutlook.net/blog/?p=44488

 

Mosler, W. (2012), Soft Currency Economics II, US Virgin Islands: Valance

 

Stratton, A (2010), ‘Richard Branson backs Tory plans to cut spending sooner rather than later’, The Guardian, 16 February,

https://www.theguardian.com/politics/2010/feb/16/branson-back-tory-deficit-cuts

 

 

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The post A Short Comment on the UK Government’s Fiscal Policy in the Current Crisis appeared first on The Gower Initiative for Modern Money Studies.

Affordable housing, homelessness and the upcoming federal budget

Published by Anonymous (not verified) on Fri, 20/03/2020 - 10:14am in

I’ve written a ‘top 10’ overview of things to know about affordable housing and homelessness, as they relate to Canada’s upcoming federal budget. The overview is based on the affordable housing and homelessness chapter in the just-released Alternative Federal Budget.

A link to the ‘top 10’ overview is here.

Affordable housing, homelessness and the upcoming federal budget

Published by Anonymous (not verified) on Fri, 20/03/2020 - 10:14am in

I’ve written a ‘top 10’ overview of things to know about affordable housing and homelessness, as they relate to Canada’s upcoming federal budget. The overview is based on the affordable housing and homelessness chapter in the just-released Alternative Federal Budget.

A link to the ‘top 10’ overview is here.

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