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Speaker 1: On the Netflix show House of Cards, there's a plot

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Speaker 1: line where fictional US President Frank Underwood announces a plan

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Speaker 1: to make sure every American has a job. Today, that

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Speaker 1: platform is no longer looking like fiction. A group of

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Speaker 1: serious economists wants to spend hundreds of billions of dollars

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Speaker 1: a year to create fifteen million jobs, and the plan

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Speaker 1: is picking up momentum. At least three potential Democratic candidates

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Speaker 1: for president support a job guarantee. So would this potential

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Speaker 1: policy give more Americans a better quality of life? Can

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Speaker 1: America even afford it? Or is this just the latest

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Speaker 1: political fad? Welcome to Benchmark. I'm Scott Landman, Economics editor

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Speaker 1: with Bloomberg News in Washington, and I'm Daniel Moss, Economics

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Speaker 1: row and her editor at Bloomberg of Community Newial. This

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Speaker 1: week on Benchmark, we're talking about this job guarantee proposal.

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Speaker 1: The economists behind it say it would create jobs for

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Speaker 1: fifteen million workers paying fifteen dollars per hour that's well

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Speaker 1: above the minimum wage in most parts of the country

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Speaker 1: and what many employees in the private sector are making.

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Speaker 1: And it would also create an additional four point two

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Speaker 1: million jobs in the private sector along with generous health benefits,

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Speaker 1: but some people have been criticizing the plan and say

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Speaker 1: it's not so feasible. Let's talk about it with one

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Speaker 1: of the principal authors of this proposal. L Randall. Ray

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Speaker 1: is a professor of economics at Bard College in New

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Speaker 1: York State and a senior scholar at the Leavy Economics

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Speaker 1: Institute there. Randy, thanks so much for joining us on Benchmark. Hi,

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Speaker 1: thanks for letting me come on. So Randy, why now

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Speaker 1: for this job guarantee proposal. Well, we've been working on

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Speaker 1: this for twenty five years or so, but there now

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Speaker 1: is an opening, an opportunity to get this out to

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Speaker 1: the public and out of academics. So that's that's why.

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Speaker 1: What's the opportunity, Well, it seems that a number of

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Speaker 1: people within politics but also at think tanks are starting

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Speaker 1: to realize that even after a decade of recovery, and

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Speaker 1: even after it appears we have reached something that many economists,

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Speaker 1: including people at the FED want a call full employment.

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Speaker 1: We know that there are millions upon millions of people

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Speaker 1: left behind, and so there's a I think a very

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Speaker 1: widespread recognition that we need to do something. Is there

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Speaker 1: any parallel for this, I mean, has this been tried

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Speaker 1: anywhere before? Oh? Sure, yeah, yeah, many times. Um. Now,

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Speaker 1: what we're promoting, and there are several other proposals there's

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Speaker 1: somewhat similar to ours, is a universal job guarantee across

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Speaker 1: the whole country. Usually what has been tried would be

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Speaker 1: smaller programs, maybe targeted programs, let's say the heads of

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Speaker 1: households with poor families, or they have been time limited

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Speaker 1: saying the depths of a deep recession or depression, including

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Speaker 1: the United States, we had the New Deal jobs programs

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Speaker 1: so on, either more limited or smaller scale. Yes, they've

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Speaker 1: been tried many times all over the world. In fact,

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Speaker 1: I would go further than that. I would say that

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Speaker 1: any country that has experience sustained truthful employment has had

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Speaker 1: at least one of these programs in operation, and in

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Speaker 1: many cases they've had many different variations of a job

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Speaker 1: guarantee in place. Randy, you're right on the Levy website

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Speaker 1: that the generous wage and benefit package would become standard

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Speaker 1: across the country, as all private and government sector employers

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Speaker 1: would need to match it to retain workers. And we're

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Speaker 1: talking about pretty generous health benefits here and so on.

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Speaker 1: Is this also another way to produce a kind of

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Speaker 1: universal healthcare system for the American public. Yeah, it's that's

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Speaker 1: a minimum wage and benefit package. My professor was Himan Minsky,

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Speaker 1: who's very well known for the financial instability hypothesis and

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Speaker 1: the so called Minsky moment that we went through in

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Speaker 1: two thousand and seven. But I remember him in the

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Speaker 1: classroom always asking the students, Hey, what's the minimum wage

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Speaker 1: now in the United States? And so of course some

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Speaker 1: bright student who was awake would say, oh, it's say no,

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Speaker 1: it's not. It's zero. If you can't get a job,

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Speaker 1: your wages zero. You can't have an effective minimum wage

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Speaker 1: unless there is a job available for everybody who wants

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Speaker 1: to work. So this would set the universal minimum wage

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Speaker 1: that anyone who wanted to work would be able to receive.

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Speaker 1: In the same way, whatever benefits this program provides will

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Speaker 1: become the national minimum package of benefits. I can imagine

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Speaker 1: the siren call on site Fox News give away for everyone,

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Speaker 1: welfare state, we can't afford it. How do you combat

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Speaker 1: that idea? Well, we have gotten used to the idea

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Speaker 1: of minimum wages. We've had minimum wages in place for

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Speaker 1: a very long time. And what the minimum wage does

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Speaker 1: is it's that's the minimum that you can legally employ

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Speaker 1: some buddy at I think that that is widely accepted.

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Speaker 1: I won't try to argue that of all economists support

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Speaker 1: the notion, but by far the vast majority do. The

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Speaker 1: idea is that that is a proper role for the

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Speaker 1: government to set a minimum standard with regard to wages.

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Speaker 1: But we also set many other minimum standards in the

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Speaker 1: way that you can treat your workers, and uh we

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Speaker 1: even set standards on the number of hours per day

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Speaker 1: and per week and so on. So I think that

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Speaker 1: is very legitimate. So we are moving toward provision of

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Speaker 1: time off when you have a new baby. Vacation time

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Speaker 1: now in the United States is way way behind in

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Speaker 1: comparison with any other rich, developed capitalist country in the world.

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Speaker 1: We uh, we don't if we don't mandate paid vacation time,

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Speaker 1: we don't mandate paid time off for new parents. Virtually

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Speaker 1: every other country in the world with a at least

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Speaker 1: a moderate living standard already provides those things. So these

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Speaker 1: are widely accepted among all of our comparison countries. So

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Speaker 1: there's there's nothing unusual about it. This is not extreme

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Speaker 1: at all. Now we just need to address how the

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Speaker 1: country would pay for this. Uh, you talk about proposing

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Speaker 1: that Congress would appropriate funds for it without new taxes.

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Speaker 1: But let's just take a step back for a second.

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Speaker 1: You're also the author of a number of books, including

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Speaker 1: Understanding Modern Money, The Key to Full Employment, and Price Stability.

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Speaker 1: So what is modern money theory and how does it

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Speaker 1: relate to this proposal? Well, there are several aspects to

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Speaker 1: modern money theory. One of the things that we've done,

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Speaker 1: also for about twenty five years, is study the way

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Speaker 1: that the government really spends. And um, I think that

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Speaker 1: virtually no academics really understood the processes that we go

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Speaker 1: through any time the government makes a payment. We completely

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Speaker 1: understand that, and we have tried to get these ideas

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Speaker 1: out in a variety of forms, including academic papers, but

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Speaker 1: also with more simple explanations for the average public. So,

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Speaker 1: if I wanted to say that very simply, the way

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Speaker 1: that the government spends today is through key strokes, that is,

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Speaker 1: credits to bank accounts, Alan Greenspan said exactly the same thing.

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Speaker 1: He said, we can't run out of money. All we

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Speaker 1: do is we created as we spend. Bernanke said the

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Speaker 1: same thing, both on sixty Minutes and before Congress when

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Speaker 1: he's asked where on earth did the FED get those

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Speaker 1: trillions of dollars that it used to bail out the

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Speaker 1: financial system, and he said, well, we have this new

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Speaker 1: device that's called a computer, and all we do is

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Speaker 1: key stroke entries into balance sheets. You know that that

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Speaker 1: is the way that the government spends. So how are

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Speaker 1: we going to pay for it? We're gonna pay for

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Speaker 1: it in exactly the same way that we pay for

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Speaker 1: all other federal government spending, which is key strokes. These

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Speaker 1: are sort of directed by the Treasury after the allocation

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Speaker 1: has been budgeted by Congress. The Treasury directs the Federal

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Speaker 1: Reserve Bank to make the payments for the Treasury. And

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Speaker 1: the way that the Fed does that is by crediting

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Speaker 1: bank reserves at private banks, and then those private banks

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Speaker 1: credit the accounts of the recipients of government spending. That

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Speaker 1: is how the government spends. So how are we going

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Speaker 1: to pay for it the same way we pay for

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Speaker 1: all other government spending. But doesn't this mean that the

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Speaker 1: bond market will provide an ultimate check? The government does

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Speaker 1: have to borrow this money. It would have to borrow it.

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Speaker 1: We're already seeing interest rates go up in the first

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Speaker 1: few months because of the Republicans tax cut plan and

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Speaker 1: some new government spending. Isn't this just going to push

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Speaker 1: it up so high that will become more difficult to

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Speaker 1: pay back the money in the long run. Well, the

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Speaker 1: real reason the rates are going up is because the

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Speaker 1: FED is decided that it's time to raise rates, and

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Speaker 1: they've been increasing the overnight rate target and using that

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Speaker 1: to try to push up longer term rates. So I

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Speaker 1: think that this is a matter of policy. Will the

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Speaker 1: FED continue to raise rates might at some point it

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Speaker 1: will decide to lower rates and then the rates will

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Speaker 1: go down. If the FED reacted to this program worrying

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Speaker 1: that maybe it would cause inflation, then the FED might

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Speaker 1: push rates up. But this is a policy decision, and

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Speaker 1: you haven't mentioned it yet. But we have run all

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Speaker 1: of the the programs features through a model that's used

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Speaker 1: by ecmoms all over the country and they've been using

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Speaker 1: it since the early seventies. It has a very good

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Speaker 1: track record, and the boost to inflation is very very tiny,

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Speaker 1: and we do run simulations with the FED reacting against

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Speaker 1: the inflation and it has a very insignificant effect on

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Speaker 1: the outcome of them simulations. So Randy, Ultimately, how realistic

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Speaker 1: do you think this is going to be? Don't you

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Speaker 1: think you'll need a strong Democratic Congress or control of

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Speaker 1: the White House to make this happen. Of course, I'm

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Speaker 1: not a political scientist. I'm an economist, and I do

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Speaker 1: the best that I can do to put the economics

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Speaker 1: out there and then see how far the politicians can

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Speaker 1: take it. I think it's very apparent that this idea

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Speaker 1: has captured the imagination not only of a number of

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Speaker 1: Democrats who are likely candidates in the next election, but

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Speaker 1: among the public at large. There have been polls that

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Speaker 1: find that this is the most popular program that has

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Speaker 1: ever been pulled, with support all over the country across

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Speaker 1: the political spectrum. So I don't think it's going to

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Speaker 1: die out. Do I think that a bill will go

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Speaker 1: through before the next presidential election? Probably not, But it's

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Speaker 1: still worthwhile to get the ideas out there. All right. Well,

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Speaker 1: it's certainly sparking debate in several corners of the economics profession,

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Speaker 1: and we're glad that you're able to come on and

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Speaker 1: explain it to us. So, Randy Ray, thank you very

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Speaker 1: much for your time. Thank you. So we just heard

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Speaker 1: from Randy ray that this plan isn't going to become

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Speaker 1: law of the land right away, probably has a long

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Speaker 1: way to go and is going to engender some more debate.

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Speaker 1: But for some more analysis, let's go to Ernie Twodsky.

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Speaker 1: Ernie is a policy economist and head of fiscal analysis

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Speaker 1: in Washington at ever core I s I and investment

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Speaker 1: research firm. Before that, he was a senior advisor and

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Speaker 1: economist at the Treasury Department during the Obama administration. Ernie,

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Speaker 1: thanks so much for coming on Benchmark. Thanks for having

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Speaker 1: me on. Guys. So, Ernie, is this the best way

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Speaker 1: to get to full employment? So? I think the short

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Speaker 1: answer is, we don't know. Um. There is limited experience

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Speaker 1: with job guarantees around the world. India has a sort

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Speaker 1: of a similar scheme to a Job's guarantee. Argentina had

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Speaker 1: one in the two thousands, and there have been limited

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Speaker 1: trial runs in specific geographies and urban areas, the most

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Speaker 1: prominent one being in New York City where they had

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Speaker 1: a a work fair program where they required you to

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Speaker 1: work for your local welfare check. That's why I actually

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Speaker 1: like Santor Corey Booker's idea to do a trial run

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Speaker 1: of Job's guarantee, I think that that would tell us

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Speaker 1: a lot. It would wade through the uncertainty and because

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Speaker 1: so many of the critiques of a job's guarantee are

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Speaker 1: really just about implementation challenges UH and the uncertainty about

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Speaker 1: how people would react. You know. That said I, I

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Speaker 1: think that a job's guarantee is just probably in my view,

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Speaker 1: to blunt an instrument to do what it wants to do. UM.

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Speaker 1: If we want to smooth macroeconomic cycles, you know, the

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Speaker 1: ups and downs of the economy over time, which is

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Speaker 1: a noble goal and an ambitious goal. You know, other

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Speaker 1: countries have been able, Other advanced countries have been able

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Speaker 1: to do that UM without using a jobs guarantee UM.

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Speaker 1: For example, if you look at Germany, the United Kingdom, Japan,

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Speaker 1: their labor force participation rates have been rising ever since

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Speaker 1: the Great Recession, even though you know, in in Germany

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Speaker 1: they had sort of a double dip slowdown over the

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Speaker 1: last couple of years as a result of the year

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Speaker 1: Zone crisis, and in the UK they had um Brexit.

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Speaker 1: Is they've been able to do it with UH sort

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Speaker 1: more of a pot pourri of different policies, things like

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Speaker 1: national health insurance. You know, um, Stronger wage controls and

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Speaker 1: wage subsidies, you know, protections particularly for women, I think,

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Speaker 1: for paid leave, stronger unemployment insurance and disability programs. Those

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Speaker 1: things I think would get us a lot of the

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Speaker 1: sort of you know, business cycle benefits of a Job's guarantee,

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Speaker 1: and they would be more universally enjoyed. The other thing

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Speaker 1: I'd say is, you know, if our goal with the

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Speaker 1: Job's Guarantee is to eliminate poverty and raise wages, then

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Speaker 1: there are probably cheaper, more cost effective ways of doing that.

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Speaker 1: There are There are certainly upsides and downsides of having

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Speaker 1: a fifteen dollar minimum wage, which is essentially which is

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Speaker 1: what a lot of jobs guarantee advocates are pushing for

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Speaker 1: through a Job's Guarantee. But if we think that that's

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Speaker 1: the right way to go, why not just raise the

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Speaker 1: minimum wage to fifteen dollars without having this very very

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Speaker 1: large fiscal costs associated with the program. Well, let's let's

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Speaker 1: talk about that for for a second. What what do

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Speaker 1: you think would be the fiscal cost of this program?

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Speaker 1: Is it feasible? Would it contribute to bond yields going

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Speaker 1: way up, which would make the program even more expensive

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Speaker 1: to pay back for taxpayers in the long run. I

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Speaker 1: think there's actually, you know, in in finance, we would

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Speaker 1: call it fat tails. That's just a that's a fancy

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Speaker 1: way of saying that there's there are two risks here, right.

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Speaker 1: There's there's a risk that the program is extremely small

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Speaker 1: and that actually far fewer people participated in it than anticipated,

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Speaker 1: in which case it wouldn't be that expensive, but it

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Speaker 1: wouldn't help the economy very much, and a lot of

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Speaker 1: the benefits that advocates tout probably wouldn't come to pass.

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Speaker 1: The other risk is on the upside, right, that lots

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Speaker 1: and lots of people participate in it um and it

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Speaker 1: ends up being much more expensive. One estimate from Mark Paul,

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Speaker 1: William Derrity, Derrick Hamilton's so their co authors who did

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Speaker 1: a version of this plan for the Center for Budget

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Speaker 1: and Policy Priorities. So they basically start from, you know,

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Speaker 1: there are eleven million people who are unemployed or underemployed

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Speaker 1: in America. Underemployed meaning that you're not getting all the

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Speaker 1: hours that you want even though you have a job.

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Speaker 1: And they assume that, I believe that they base their

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Speaker 1: the pay and their plan around the idea that workers

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Speaker 1: on a job guarantee should be above poverty for a

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Speaker 1: family of force. That translates to eleven dollars and eighty

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Speaker 1: three cents an hour um. So they calculate that that's

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Speaker 1: going to cost six billion dollars a year, which is

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Speaker 1: roughly on par with the Defense Department. But they also

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Speaker 1: say that if for some reason the job's guarantee program

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Speaker 1: ends up attracting people anybody who makes under eleven dollars

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Speaker 1: and eighty three cents an hour, now, that the cost

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Speaker 1: could swell to possibly over two trillion dollars a year.

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Speaker 1: That would be two trillion dollars right now during an

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Speaker 1: economic recovery. That is, you know, roughly, that would be

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Speaker 1: like a fifty increase in the size of how much

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Speaker 1: the federal government spends every year in the middle of

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Speaker 1: a recovery. You know, that's not that's not a countercyclical

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Speaker 1: move to address a shortcoming in aggregate demand. Right now.

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Speaker 1: That would be you know, two trillion extra dollars when

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Speaker 1: the economy is relatively good. Now, that's you know, that's

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Speaker 1: on the high end, and that's that that's sort of

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Speaker 1: an upper end range. But you know, this would be

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Speaker 1: a large program. So politically, does it have to wait

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Speaker 1: for the next recession to be viable. I think it

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Speaker 1: probably does have to wait until the next recession. I

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Speaker 1: think a job's guarantee was born out of sort of

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Speaker 1: how deep the two thousand and eight downturn was, and

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Speaker 1: and just the sheer depth of the two thousand and

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Speaker 1: eight downturn was something that not very many people had

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Speaker 1: even contemplated before two thousand and eight. It seemed like

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Speaker 1: a very low risk event. And now I think everybody's

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Speaker 1: worldview is different. And that, by the way, is you know,

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Speaker 1: even though I'm cautiously pessimistic on the economics of a

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Speaker 1: job's guarantee, I think it's asking the right question right,

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Speaker 1: which is that recessions are very damaging to people. We

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Speaker 1: we are only now within striking distance of recovering from

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Speaker 1: the two thousand and eight recession when you look at

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Speaker 1: things like employment in America. We we still haven't even

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Speaker 1: recovered from the two thousand and one recession when you

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Speaker 1: look at employment. So business cycles can be extremely damaging

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Speaker 1: to the well being of people, and and thinking about

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Speaker 1: ideas uh that could help mitigate those business cycles make

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Speaker 1: recessions less damaging. Are good ideas they're asking the right question,

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Speaker 1: and and just the fact that they're expensive. I don't

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Speaker 1: think we should be dismissive of those ideas just because

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Speaker 1: they're expensive. They are trying to be ambitious and what

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Speaker 1: they do. I think the problem here is that we

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Speaker 1: can do a lot of what a Job's Guarantee promises

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Speaker 1: to do with more targeted you know, like a potpourri

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Speaker 1: of more targeted, smaller programs, or you know, programs that

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Speaker 1: are ambitious things like national health insurance, but that would

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Speaker 1: be more broadly enjoyed. Let me ask this, is it

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Speaker 1: even possible to create a program that would have a

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Speaker 1: large bureaucracy to support say fifteen million jobs that the

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Speaker 1: proponents are talking about. I mean, you said this would

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Speaker 1: be a cost on par with the Pentagon, which is

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Speaker 1: obviously a massive, massive global apparatus. Is it even feasible

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Speaker 1: to create something new like this? I think it would

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Speaker 1: be extremely difficult logistically, and it would be even more

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Speaker 1: difficult to do well when you think about the right

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Speaker 1: to have a job and what that entails. I mean

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Speaker 1: that means that a Job's guarantee would have to come

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Speaker 1: up with jobs that were number one countercyclical, meaning that

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Speaker 1: there were jobs available and needed in the depths of

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Speaker 1: a recession, um that they would have to be scaled that,

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Speaker 1: you know, in that projects would have to be scaled

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Speaker 1: up or down depending on just how many unemployed people

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Speaker 1: were in any given community and whether or not people

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Speaker 1: showed up. I mean, remember, the whole point of a

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Speaker 1: job's guarantee is to set a sort of safety net

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Speaker 1: below you for when you're unemployed. If you find a

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Speaker 1: job the next day, um, you won't show up to

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Speaker 1: your jobs guarantee job and the projects that that local

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Speaker 1: communities choose to do that are funded under the job's

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Speaker 1: guarantee would have to be able to accommodate that. It

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Speaker 1: would have to be appropriate across geography. So you know,

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Speaker 1: you're talking about the kinds of jobs that would work

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Speaker 1: in you know, anywhere from you know, New York City

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Speaker 1: to Boise, Idaho, to a Native American reservation, and they

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Speaker 1: have to be tailored to low skill workers. So you're

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Speaker 1: gonna get unemployed people of all different skill levels, and

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Speaker 1: so you have to choose jobs that they're able to do,

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Speaker 1: and they have to be low capital intensity, because if

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Speaker 1: a recession suddenly strikes, you may not be able to

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Speaker 1: get heavy equipment to your community. Things like you know,

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Speaker 1: if you wanted to do a construction project, you may

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Speaker 1: not be able to get construction equipment to your community

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Speaker 1: very fast. And finally, they just I mean they have

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Speaker 1: to have a shared mission that's able to withstand all,

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Speaker 1: you know, the very high inflows and outflows from the

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Speaker 1: program that would inevitably arise from you know, from from

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Speaker 1: from people coming in and leaving. That's really hard to do.

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Speaker 1: You know, our experience with, for example, what New York

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Speaker 1: City did with their work fair program. Um. And you

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Speaker 1: would think of all places, you know, New York City

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Speaker 1: has a lot of resources, even during a recession, they

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Speaker 1: would have enough people I think of different skill levels

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Speaker 1: where you would expect that they would be able to

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Speaker 1: come up with lots of different jobs. What ended up

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Speaker 1: happening though with New York cities workfare program is that

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Speaker 1: people on workfare ended up doing mostly menial tasks, low

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Speaker 1: skill tasks, things like cleaning up Central Park, janitorial work,

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Speaker 1: and then in some cases some low level clerical work

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Speaker 1: as well. UM. Now, are these things valuable? Yes? Absolutely?

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Speaker 1: Do they build human capital? Do they you know, are

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Speaker 1: they going to make people more employable in the private

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Speaker 1: sector after you know, the economy recovers. I'm very skeptical

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Speaker 1: of that. Alright, well, Ernie, that is a lot to contemplate,

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Speaker 1: and when this becomes a topic in the Democratic presidential

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Speaker 1: primary debates, will be glad to have you back. Ernie

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Speaker 1: Tdsky of ever Core I s I thank you so

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Speaker 1: much for being with us on Benchmark. Thanks for having

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Speaker 1: me on Benchmark. Will be back next week. Until then,

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Speaker 1: you can find us on the Bloomberg terminal, Bloomberg dot com,

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Speaker 1: on Twitter. Follow me at at Scott Landman Dan You're

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Speaker 1: at moss Underscore ECOD The Levy Institute, where Randy Ray

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Speaker 1: is a scholar is at at L E B Y

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Speaker 1: E c O N and Ernie Tedesky is at E

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Speaker 1: h I. Benchmark is produced by Topher Foreheads. The head

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