Wednesday, May 16, 2018

Matt Bruenig - Hyman Minsky’s Views on the “Welfare Mess”

Hyman Minsky inspired many leftist economists, like Steve Keen and Micheal Hudson, but on the benefit system it seems he was very right wing. Matt Bruenig gives Minsky's views a good hearing, but at the end he says that the benefit system has been a success at ending much of the poverty in the US.

I like the idea of lowering the retirement age to create more jobs and keeping youngsters in school longer to learn more skills. Alas, the trend has been to increase the retirement age. KV


Economist Hyman Minsky is often cited as the forerunner of the job guarantee movement. In order to get a better understanding of its origins, I decided to read a collection of his writings on the subject that was published by the Levy Institute in 2013. The title of the collection is “Ending Poverty: Jobs, Not Welfare” and unfortunately kind of tells you where Minsky is coming from on this stuff.
Minsky’s writing reveals a deep antipathy towards the War on Poverty, transfer payments, and the welfare state more generally. In his 1975 work “The Poverty of Economic Policy,” he writes that “a most striking aspect of the irrelevance and wrongheadedness of policy has been the recourse to the dole, not only in response to the current recession, but over the long run.” To clarify, he explained further that “a dole is the handing out of cash or services where nothing is required in exchange for the handout.”

Minsky goes on to describe welfare state measures as “the anti-employment thrust to policy,” a phrase that he uses to describe both benefit programs for able-bodied adults like AFDC, unemployment insurance, and food stamps and shifts to keep kids in school longer and lower the retirement age.
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It’s clear that Minsky viewed the job guarantee as a welfare state replacement program, at least in significant part. His views on welfare would today be classified as quite right-wing and are also just empirically wrong. The Columbia measure — a poverty metric based on the Supplemental Poverty Measure that includes transfer payments in its income definition — shows that poverty declined from 26 percent in 1967 to 16 percent in 2012, a fall of nearly 40 percent. Over the same period, poverty measured by market income did not fall at all and indeed ticked up slightly, meaning that the welfare state is solely responsible for the significant decline in poverty over the period.

21 comments:

Tom Hickey said...

There is a roaring twitter debate going showing that Bruenig doesn't know what he is talking about and citing references.

Kaivey said...

So its taken out of context?

Matt Franko said...

“Roaring twitter debate”

Oh Bruenig? I thought that was Charles Nelson Reilly.... my bad...

Tom Hickey said...

That is what Pavlina says, in effect. Bruenig seems to be to be familiar neither with Minsky's own work nor the scholarship related to it. So he is being pounded with STFU before making a further fool of yourself.

Tom Hickey said...

BTW, most of the MMT economists and associated cohort have migrate from blogging and commenting to Twitter and Facebook.

I don't report on that — no time. So if you are interested, you'll have to follow it yourself.

Matt Franko said...

I heard all the cool people have stayed with the blogging... the nerds all went on Facebook

Tom Hickey said...

Ha ha.

Calgacus said...

Any study that thinks poverty is better now than in 1967 is crazy revisionism. In one word: homelessness. Did not exist back then. Not in the USA, not in Europe, where it came back a bit later. It is probably making expenditure increases out as improvements in results. I really think most with beautiful modern electronic gadgets would trade them for a roof over their head. In any case USA 2018 is much richer than USA 1967 and should be far better than it is poverty wise.

Finally, the dole-centered welfare state of the 60s and after is a poor replacement for the earlier job-centered welfare state of FDR. By 1940, the USA had a more extensive welfare state than any market economy ever in history. We were more Swedish than the Swedes, don't you know? If we'd kept the same system, people could drive their flying cars to vacation on the Moon by now :-) (or similar great advances).

Brian Romanchuk said...

Bruenig is totally out to lunch.

Konrad said...

“I like the idea of lowering the retirement age to create more jobs and keeping youngsters in school longer to learn more skills. Alas, the trend has been to increase the retirement age.” ~ Kaivey

The ultimate dream of Wall Street is to privatize Medicare and Social Security.

In FY 2018 the US government will collect $1.238 trillion in FICA taxes. That $1.238 trillion supposedly funds Medicare and Social Security, but in reality the U.S. government will destroy that $1.238 trillion upon receipt. To fund Medicare and Social Security, the U.S. government creates money out of thin air by sending instructions to banks to change the numbers in accounts (i.e. by sending instructions to credit accounts).

If Medicare and Social Security are privatized, then that $1.238 trillion in yearly tax revenue will not to be destroyed, but will instead flow directly to Wall Street.

This way, Wall Street can steal $1.238 trillion a year while claiming that the money vanished because there was a “crash.” (Welcome to the “free market,” bitches.)

The Wall Street thieves will get away with this, because they are too rich to jail, and because the masses stupidly insist on believing the lie that Medicare and Social Security are “unsustainable” and are funded by tax revenue.

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Incidentally the U.S. government will create $4.407 trillion out of thin air for FY 2018 (not counting “off budget” items.) This money is all digital, since $4.407 trillion in hundred-dollar bills would weigh 48,477 tons. Not pounds; TONS. And that’s just for one fiscal year.

Money has no physical existence. Money is a strictly mental concept (like the number “1”) and is therefore infinite. And yet, most people think that money is physical and limited.

I just read a comment in a different blog that said, “Interest on the $20 trillion debt is already the fastest growing federal expense.” This is nonsense, since the U.S. government has no “expenses.” If you could use a computer keyboard to create infinite money out of thin air, you would have no “expenses.” A sports scoreboard has no “expenses” in points. We create or destroy points (and money) by simply changing the numbers.

Nor does the US government actually “spend” money. If you could use a computer keyboard to create infinite money in anyone’s bank account, then you would not be “spending” money. You would be CREATING money. “Spending” only makes sense for entities than cannot create money out of thin air.

State, county, and municipal governments spend, but the U.S. government does not “spend.” You and I spend, but the U.S. government does not.

Konrad said...

“Minsky’s writing reveals a deep antipathy towards the War on Poverty, transfer payments, and the welfare state more generally.”

In that case, Minsky must have really hated very rich people and big corporations, since they get the biggest government handouts of all. For every thousand dollars the corporations spend in bribing politicians, they get 10 million dollars in return.

Bernie Sanders once introduced an “End Polluter Welfare Act,” which would have reduced $135 billion in US government subsidies (i.e. government handouts) for fossil fuel companies. It went nowhere.

Unknown said...

Minsky's approach appears to have percolated down to his students, who are prominent in MMT economics. It shows in their antipathy to a UBI, and a reliance on a JG that relies purely on minimum wage (as opposed to prevailing wage - which BTW was the standard in the WPA and other programs of the "New Deal") - It is something that leads Pavlina Tcherneva to classify Clinton Democrats (represented by the Center for American Progress), as the "Left" which they most assuredly are not.

Unknown said...

Just for information, CAP was founded by John Podesta - see CAP releases donor list

Calgacus said...

Of course Minsky's approach has percolated down. Minsky wasn't always right, and he like to exaggerate, but he taught them many true things, things that few others in his generation had thought as carefully about. Not thinking as carefully is what leads to some of these true things like "work not welfare", "JG not UBI" getting unmerited criticism.

Antipathy to the UBI pretty much equates to understanding economics and arithmetic, not relying on magical thinking or not being a tool of plutocrats. No real, monetary UBI has ever worked or will ever work. Try it, sure. It cannot work.

Not having one universal fixed wage was a defect of the New Deal programs, not a virtue. For instance, some locales fought the programs and wanted lower wages because the New Deal took too many out from under the local politicians, bosses and capitalists thumb. It was a bit more justifiable then because regional markets were less connected, but not now. In any case, the bottom wage is the important, essential one. Any higher ones are not a guarantee and they just aren't and weren't macroeconomically or individually important. It is remarkable how people can consider wage differentials - that is, inequality - as left or progressive. I guess some animals are more equal than others.

Konrad said...

"No real, monetary UBI has ever worked or will ever work. Try it, sure. It cannot work."

Right.

UBI for seniors (aka Social Security) "cannot work."

The Mincome experiment in Canada "could not work."

Lifelong federal pensions for 20+ year military veterans "cannot work."

What a load of sewage.

Matt Franko said...

http://fox40.com/2018/05/08/us-employers-post-record-high-6-6-million-open-jobs/

Unknown said...

Calgacus

"No real, monetary UBI has ever worked or will ever work. Try it, sure. It cannot work."

Not true. Look at the experiments tried by Guy Standing in India, Africa and North Carolina. Worked extremely well. They worked much better than expected in all areas where it was tried. They were UBI, and not the means tested basic income tried in Finland - see Guy Standings lecture at Yale on Basic Income: Democratic Justice, Republican Freedom, Universal Security

Understanding economics and arithmetic does not mean that the understanding necessarily reflects real life.

Calgacus said...

UBI for seniors (aka Social Security) "cannot work."
The Mincome experiment in Canada "could not work."
Lifelong federal pensions for 20+ year military veterans "cannot work."
experiments tried by Guy Standing in India, Africa and North Carolina

They were UBI


No, they weren't. They have nothing to do with the UBI, because they aren't and weren't "U". The "U" is the virtue of the UBI - it applies to everybody. (But so does the Job Guarantee.) But it means UBI is spending a colossal amount of money. Inflation. The OPM the UBI spends so freely equates to other people's labor.

Underlying this is the deeper critique that UBI is an intrinsically bad idea - it is slavery. The only "real" quasi-UBI's in history are slave societies and the like. The "real people" get the income of the work of the "unpeople" = slaves.

Universal basic services - non-monetary UBI decided on collectively or supergenerous targeted welfare spending can be good ideas. Not a genuine, monetary UBI, which will explode the economy in no time.

Unknown said...

Calgacus I will call BS when I see it. The annual $700 B defense budget is as much or more so slave labor don't you think? Annual government spending on anything is slave labor don't you think? As has been said many times, by MMT economists no less, Government spending and taxation is a coercive act, without which neither Government nor money would be possible?

So spending on a JG or UBI or on Defense, or an any othe boondoggle is nothing more than a policy decision.

Calgacus said...

Yes, of course I am being a bit over the top, but not much. Comparisons to slavery clarify things. To think is to exaggerate. A UBI is uniquely appropriate for it because it demands a colossal amount of money and thus a colossal, impossible amount of labor, dwarfing the defense budget and anything else.
Living wage level of free income say 30,000 year, 300+ million USAns = ten trillion dollars in new spending per year. That isn't inflationary? If it is not inflationary, where are the extra billions of (wage-)slaves whose work will give that money value? And why don't these invisible extra billions deserve a UBI of their own? It's a pyramid scheme of Cantillon effects.

As has been said many times, by MMT economists no less, Government spending and taxation is a coercive act, without which neither Government nor money would be possible?

Glad you bring this up. I think they go a bit too far. The external coercion is only necessary if the government spending and taxing is unreasonable or people do not see the reasons for it. Often the spending and taxing is unreasonable, but often not - otherwise the world would not have become as rich as it is. Explain MMT to everyone, run the government that way, and external coercion would be very, very low; internal coercion, conscience would do almost all the work.

So spending on a JG or UBI or on Defense, or an any other boondoggle is nothing more than a policy decision.

Spending on a JG is always a good decision.
Spending on Defense may be a good decision.
Spending on a UBI is always and everywhere a laughably bad decision. Try it on a desert island with ten or two people - or even one person. Explain how it will magically make things better.

Everything but UBI is a something for something proposition. Reciprocity. One hand washes the other. The "real", "material" world moves along with the nominal, financial. But a UBI is something for nothing - universally. If it is non-inflationary, the wonderful beautiful recipients pursue the wonder of their wonderful existence doing wonderful things - but nothing for the lower people who collect their garbage, build their houses, run their power plant, teach their children etc, etc, etc., who have to work for their money. If that isn't slavery, what is? That's what Kuwait and other petro-states with quasi-UBIs look like. Rich citizens, real people who do nothing, and poor immigrants, slave unpeople who do all the real work.

Bob Roddis, Hyman Minsky, Abe Lincoln, Leo Tolstoy & me will share some beers laughing at one if it is instituted, but we will have to drink quickly to not avoid seeing the collapse.

Unknown said...

The basic income being talked about is not a living income, and not even a subsistence level income. The income in the Standing experiments was equal to the wages of about three days a month of minimum wage work (Indian Wages) - the original amount was calculated so as to be enough to make a difference for basic needs. This amount was calculated as about a quarter of the income of median-income families, at just above the current official poverty line.- this was all it took to see the remarkable social and individual effects and the effects were many, and some were quite unexpected. Please read the reports. Summary - Unconditional Basic Income: Two pilots in Madhya Pradesh

In general, it served as a buffer, resulted in an ability to bargain for higher wages, and prevented getting into unnecessary debt.

Then there is the North Carolina example - John Sutter, “The argument for a basic income”

Quote:
Sutter visits a town named Cherokee, North Carolina, where each resident receives, essentially, a basic income from the profits of the Eastern Band of the Cherokee Nation’s casino. This tribe owns all of the land in the town and decided to split the casino’s revenue equally among its contributing members, leading to initial dividends of a few hundred dollars but now reaching over $10,000 per citizen per year given biannually. This policy has led to long-term positive effects for Cherokee citizens in education, health, and poverty alleviation.

The net effects are similar in India as well as in NC.