Yes, I had a chat with Warren not that long ago where he critiqued an article of mine - and he pointed out the error of my ways. However, I'm happy to give Warren his due - as the 'father of MMT' – he is licensed to interpret MMT in whatever way he likes. :-)
Job Guarantee, inflation, monetary sovereignty: Warren doesn't agree with MMT economists on any of these topics. In fact - unless I picked him up wrong - he doesn't even like the word inflation itself.
Robert Tressell.described a sovereign fiat currency and how it could be used in his book: 'The Ragged. Trousered Philanthropists' which makes him the Grandfather of MMT.
You are right: I did ask him some questions to clarify things he's written about the idea that taxes cause unemployment: things that I had not found in his writings on the topic. Sadly I can't remember his reply right now - but I do remember that whatever he told me - it suddenly made more sense.
Thanks for this! I kind of struggle with the idea that (Federal income) taxes are imposed to make me go to work to earn U.S. dollars to pay my income tax requirement. In our system, if I didn’t go to work at all, I wouldn’t earn anything, and I wouldn’t owe any taxes. I go to work because I want to eat and have a roof over my head, not because I owe taxes regardless of whether I work or not. I suppose it’s true that since the taxes I owe as a consequence of working must be paid in U.S. dollars, I am incentivized to work for dollars instead of bitcoins or something. But can you please explain again how the imposition of taxes in our system gets people to do what the government wants us to do (go to work in healthcare, making stuff etc.) in the first place? Or am I misunderstanding something? Thanks!
Your points are legitimate Suzanne. I'll try to explore what you are saying.
It's true to say, " if I didn’t go to work at all, I wouldn’t earn anything, and I wouldn’t owe any taxes". But if you are not working and not earning, how would you eat, find a home and do all of the other things you need to do to exist in our modern society? I.e, the things you say you want. At this point in history we no longer live in moneyless communities living off the land - while sharing/supporting each other.
Even if you worked and earned in peanuts or bitcoin: the government considers that as income - which you need to pay taxes on: so you need to convert your peanuts/bitcoin into the government currency to pay your taxes.
When the government imposes a tax and tells you that you have to pay in their currency: they are forcing you to find that money. They then offer you way to get that money, i.e., work for the government as a teacher, nurse and so on - or – work in the private sector (which, in practice they create/enable).
They provide the currency and the legal structures that allow modern markets to operate (and of course the private sector produces stuff and services that the government buys).
Without the government currency and the legal frameworks there are no modern private sector markets. Unless you can imagine a society without a public police force; without the rules that allow people to buy and sell with trust; without a shared national currency; without commercial banks (which are basically satellite offices of the central banks) without welfare support for people when they are out of work; without public infrastructure and without a range of public services?
A central authority has always been at the heart of all modern monetary systems. In modern times we call that central authority, the government.
There are more taxes than just income tax, so you still by one way or another are getting unemployed thanks to the government imposing taxes, fees and fines.
Suppose it was just a flat land tax. Then you could say you are not the one directly unemployed by the tax, however you still are indirectly, since the land owners will be upstream of all business firms, who will be paying the rent, so the landlord can pay the tax, which is why you are unemployed in the state's currency units, since you need to get groceries and whatnot from the business firms.
"Unemployed" = 'seeking to exchange your goods or labour for the state tax credit.' That BY DEFINITION means tax is causing all unemployment. Unemployment is not a condition of "not working", these are different categories.
Neil Wilson uses this MMT insight to make the following point:
My Q: “Does taxing the rich actually reduce their power?”
Neil: “No. They just pass the cost on like any other cost. Legal tax incidence isn’t economic tax incidence. All taxes end up being taxes on jobs and causing unemployment. It’s just a question of how many price/wage adjustment hops to get there. Competition and increased supply capacity is the way to tax the rich.”
He wrote a chapter in the GIMMS book where he states the 2 principal reasons to tax:
1 To drive the denomination.
2 To release the resources (for public sector employment).
The other reasons are mostly political. Which is why in my opinion “tax the rich”sounds great until you look through the MMT lens. It doesn’t do much besides give the truly powerful the ability to decide who gets taxed. To reduce their power you’ve got to regulate them out of existence. Break up trusts. Confiscate assets. Encourage competition.
Below is a single, deduplicated set of Modern Monetary Theory principles distilled from both *Modern Monetary Theory (MMT) in 67 Bullet Points* and *Modern Monetary Theory (MMT) in 70 Bullet Points*.
(Where two bullets in the sources said the same thing in different words ChatGPT kept the clearer wording; where they overlapped only partly ChatGPT fused them.)
1. MMT is an evidence-based description of how modern monetary systems actually work, not a speculative model.
2. Money is a state-issued unit of account—essentially a tax-credit—that has value because the state demands it in payment of obligations.
3. Taxes drive the currency: compulsory liabilities payable only in the state unit create demand for that unit.
4. A currency-issuing government cannot run out of money in its own free-floating currency; it can always credit bank accounts.
5. The real limits to public spending are productive capacity and inflation, not revenue or solvency.
6. Government spending (keystrokes at the central bank) creates net financial assets for the non-government sector.
7. Taxes delete money; they do not “pay for” expenditures made earlier.
8. Bond sales are interest-rate maintenance operations that swap reserves for securities; they are not a financing necessity.
9. Public “debt” is the non-government sector’s net financial wealth—the cumulative money not yet taxed away.
10. The government’s financial deficit equals, to the penny, the domestic plus foreign sector’s surplus (sectoral-balance identity).
11. Persistent government surpluses remove net financial assets from the private sector and are typically contractionary.
12. Unemployment is evidence that the state has not spent enough to cover tax obligations and desired saving.
13. Because taxes create unemployment, the state has a duty to offer employment—hence the Job-Guarantee proposal.
14. A Job Guarantee (JG) provides a living-wage job to anyone ready, willing and able to work, stabilising both prices and incomes.
15. The JG acts as an automatic stabiliser and a superior price anchor compared with an unemployed buffer-stock.
16. Price stability comes from spending discipline relative to real capacity, strategic taxation and (in JG) a fixed public wage.
17. Raising interest rates is a fiscal stimulus (adds interest income); it is often a poor inflation-control tool.
18. Modern money is mostly bank deposits created endogenously when banks lend; the central bank accommodates reserve needs.
19. Central-bank independence is operational, not financial; Treasury and central bank form a single consolidated government sector.
20. “Debt limits” such as the U.S. debt ceiling are self-imposed political constraints, not economic necessities.
21. In an open economy, external deficits imply higher domestic public deficits if private saving is positive (sectoral balances).
22. Exchange-rate regimes matter: monetary sovereignty is fullest with a free float and liabilities only in the home currency.
23. Nations that borrow in foreign currency or peg their exchange rate give up degrees of fiscal freedom and face solvency risk.
24. Real resources—not finance—constrain green-transition, health-care, education and infrastructure programs.
25. Progressive taxation is desirable for equity and for draining excess purchasing power, not for “raising revenue.”
26. Targeted taxes (e.g., carbon) can shift behaviour toward societal goals while freeing capacity elsewhere.
27. Financial crowding-out is a myth for sovereign issuers; the state’s spending creates, not competes for, bank reserves.
28. Public deficits should be sized to close the output gap while keeping inflation inside a tolerable band.
29. The appropriate interest-rate target is normally zero; positive rates are an unnecessary subsidy to wealth-holders.
30. Inflation episodes are usually supply-shock/cost-push events; broad fiscal tightening may be ineffective or harmful.
31. Government can always afford to buy anything for sale in its own currency, including all idle labour.
32. Monetary operations (open-market purchases, repos, QE) merely exchange assets of differing maturities and returns.
33. Banks are never reserve-constrained in making loans; they are capital- and credit-worthy-borrower constrained.
34. The “money multiplier” story is backwards: loans create deposits; reserves are added later.
35. Fiscal policy, not monetary policy, is the primary tool for full employment and price stability in an MMT framework.
36. Because public deficits equal private net saving, sustained attempts to run balanced budgets force households into debt.
37. Currency users (Euro nations, U.S. states, households) must finance spending; currency issuers never face that constraint.
38. Deficit hysteria distracts from the real risks of under-utilisation, inequality and ecological breakdown.
39. Sound finance for a sovereign means matching spending to resource availability, not to arbitrary debt or deficit ratios.
40. Public money creation is ethically neutral; outcomes depend on what the state purchases and who it employs.
41. A well-designed Job Guarantee can improve productivity, skills and community infrastructure while anchoring wages.
42. Full employment with price stability is a political choice, not an economic impossibility.
43. Sovereign governments should target public purpose, not balanced budgets: deficits are a tool, not a score-card.
44. Digital central-bank money or coins change the plumbing, not the macro truth that spending creates currency.
45. Import tariffs alter relative prices; real terms-of-trade, not “paying for imports,” are the relevant constraint.
46. Industrial and climate policy should be evaluated in resource/inflation terms, not on whether taxes “cover the cost.”
47. Household analogies (“government should tighten its belt”) are category errors for currency issuers.
48. Metrics such as debt-to-GDP are accounting ratios with no operational meaning for a sovereign issuer.
49. The politics of money—who gets to spend, tax and allocate—matter as much as the mechanics of issuance.
50. Democratic accountability, transparency and ecological limits should guide sovereign spending powers.
This list captures every distinct idea appearing in at least one of the two source documents while eliminating literal or near-literal duplicates.
-------
Then I asked ChatGPT to create imperatives for governance. It gave me the following:
MMT-Grounded Imperatives for Governance
1. Guarantee work for all. Run a publicly funded Job Guarantee that offers a living-wage post to anyone ready, willing and able to work, providing both social inclusion and a price anchor.
2. Let deficits do their job. Set the fiscal balance high enough to close the economy’s spending gap and keep everyone employed; a deficit is a tool, not a sin.
3. Tax for purpose, not payment. Use taxes to cool excess demand, redistribute wealth and steer behaviour (for example, via carbon levies). You never need them to “fund” spending.
4. Keep interest rates low. Treat a near-zero policy rate as normal; rate hikes are a regressive fiscal stimulus and an unreliable anti-inflation tool.
5. Protect monetary sovereignty. Avoid borrowing in foreign currency or pegging the exchange rate; issue obligations only in your own free-floating unit.
6. Budget to real resources. Plan spending around the labour, skills and materials actually available. Inflation—not “running out of money”—is the true limit.
7. Reject austerity and sustained surpluses. Draining money from the private sector weakens growth and widens hardship.
8. Scrap self-inflicted shackles. Debt ceilings and similar rules create payment crises without restraining inflation; they should be abolished.
9. Use bond sales only to manage rates. Swapping reserves for bonds fine-tunes interest rates and liquidity—it is not “borrowing to spend.”
10. Judge programmes by resource and price effects. Whether it is climate work, health care or infrastructure, ask: Do we have the inputs? Will it overheat prices? Not: “Can we raise the revenue?”
11. Demand democratic, ecological accountability. Because new money begins with a political keystroke, citizens must set priorities—and respect planetary limits.
12. See public “debt” as private wealth. Government liabilities are the financial assets of households and firms; treat them as a policy variable, not a burden on “our children.”
13. Treat unemployment as fiscal failure. If people lack jobs, spend more or tax less until the labour market clears.
14. Anchor prices humanely. Use the Job Guarantee’s fixed wage as your buffer stock instead of tolerating mass unemployment.
He also doesnt like the term "Job Guarantee" because he would rather call it a transitional job.
Fadhel uses monetary sovereignty. He doesnt like that either.
Yes, I had a chat with Warren not that long ago where he critiqued an article of mine - and he pointed out the error of my ways. However, I'm happy to give Warren his due - as the 'father of MMT' – he is licensed to interpret MMT in whatever way he likes. :-)
Job Guarantee, inflation, monetary sovereignty: Warren doesn't agree with MMT economists on any of these topics. In fact - unless I picked him up wrong - he doesn't even like the word inflation itself.
Robert Tressell.described a sovereign fiat currency and how it could be used in his book: 'The Ragged. Trousered Philanthropists' which makes him the Grandfather of MMT.
He often speaks in hieroglyphics and shorthand that leave his "pearls" for only the hardiest
You are right: I did ask him some questions to clarify things he's written about the idea that taxes cause unemployment: things that I had not found in his writings on the topic. Sadly I can't remember his reply right now - but I do remember that whatever he told me - it suddenly made more sense.
Thanks for this! I kind of struggle with the idea that (Federal income) taxes are imposed to make me go to work to earn U.S. dollars to pay my income tax requirement. In our system, if I didn’t go to work at all, I wouldn’t earn anything, and I wouldn’t owe any taxes. I go to work because I want to eat and have a roof over my head, not because I owe taxes regardless of whether I work or not. I suppose it’s true that since the taxes I owe as a consequence of working must be paid in U.S. dollars, I am incentivized to work for dollars instead of bitcoins or something. But can you please explain again how the imposition of taxes in our system gets people to do what the government wants us to do (go to work in healthcare, making stuff etc.) in the first place? Or am I misunderstanding something? Thanks!
Your points are legitimate Suzanne. I'll try to explore what you are saying.
It's true to say, " if I didn’t go to work at all, I wouldn’t earn anything, and I wouldn’t owe any taxes". But if you are not working and not earning, how would you eat, find a home and do all of the other things you need to do to exist in our modern society? I.e, the things you say you want. At this point in history we no longer live in moneyless communities living off the land - while sharing/supporting each other.
Even if you worked and earned in peanuts or bitcoin: the government considers that as income - which you need to pay taxes on: so you need to convert your peanuts/bitcoin into the government currency to pay your taxes.
When the government imposes a tax and tells you that you have to pay in their currency: they are forcing you to find that money. They then offer you way to get that money, i.e., work for the government as a teacher, nurse and so on - or – work in the private sector (which, in practice they create/enable).
They provide the currency and the legal structures that allow modern markets to operate (and of course the private sector produces stuff and services that the government buys).
Without the government currency and the legal frameworks there are no modern private sector markets. Unless you can imagine a society without a public police force; without the rules that allow people to buy and sell with trust; without a shared national currency; without commercial banks (which are basically satellite offices of the central banks) without welfare support for people when they are out of work; without public infrastructure and without a range of public services?
A central authority has always been at the heart of all modern monetary systems. In modern times we call that central authority, the government.
There are more taxes than just income tax, so you still by one way or another are getting unemployed thanks to the government imposing taxes, fees and fines.
Suppose it was just a flat land tax. Then you could say you are not the one directly unemployed by the tax, however you still are indirectly, since the land owners will be upstream of all business firms, who will be paying the rent, so the landlord can pay the tax, which is why you are unemployed in the state's currency units, since you need to get groceries and whatnot from the business firms.
"Unemployed" = 'seeking to exchange your goods or labour for the state tax credit.' That BY DEFINITION means tax is causing all unemployment. Unemployment is not a condition of "not working", these are different categories.
Neil Wilson uses this MMT insight to make the following point:
My Q: “Does taxing the rich actually reduce their power?”
Neil: “No. They just pass the cost on like any other cost. Legal tax incidence isn’t economic tax incidence. All taxes end up being taxes on jobs and causing unemployment. It’s just a question of how many price/wage adjustment hops to get there. Competition and increased supply capacity is the way to tax the rich.”
He wrote a chapter in the GIMMS book where he states the 2 principal reasons to tax:
1 To drive the denomination.
2 To release the resources (for public sector employment).
The other reasons are mostly political. Which is why in my opinion “tax the rich”sounds great until you look through the MMT lens. It doesn’t do much besides give the truly powerful the ability to decide who gets taxed. To reduce their power you’ve got to regulate them out of existence. Break up trusts. Confiscate assets. Encourage competition.
I agree with all of these points. Thanks ijin. :-)
Point 42 is semantics. Tax payers don't fund spending, regardless if they pay tax.
Mosler is also an Israeli fanboy which makes two subjects he is incorrect on.
💯
Thanks for sharing this
Below is a single, deduplicated set of Modern Monetary Theory principles distilled from both *Modern Monetary Theory (MMT) in 67 Bullet Points* and *Modern Monetary Theory (MMT) in 70 Bullet Points*.
(Where two bullets in the sources said the same thing in different words ChatGPT kept the clearer wording; where they overlapped only partly ChatGPT fused them.)
1. MMT is an evidence-based description of how modern monetary systems actually work, not a speculative model.
2. Money is a state-issued unit of account—essentially a tax-credit—that has value because the state demands it in payment of obligations.
3. Taxes drive the currency: compulsory liabilities payable only in the state unit create demand for that unit.
4. A currency-issuing government cannot run out of money in its own free-floating currency; it can always credit bank accounts.
5. The real limits to public spending are productive capacity and inflation, not revenue or solvency.
6. Government spending (keystrokes at the central bank) creates net financial assets for the non-government sector.
7. Taxes delete money; they do not “pay for” expenditures made earlier.
8. Bond sales are interest-rate maintenance operations that swap reserves for securities; they are not a financing necessity.
9. Public “debt” is the non-government sector’s net financial wealth—the cumulative money not yet taxed away.
10. The government’s financial deficit equals, to the penny, the domestic plus foreign sector’s surplus (sectoral-balance identity).
11. Persistent government surpluses remove net financial assets from the private sector and are typically contractionary.
12. Unemployment is evidence that the state has not spent enough to cover tax obligations and desired saving.
13. Because taxes create unemployment, the state has a duty to offer employment—hence the Job-Guarantee proposal.
14. A Job Guarantee (JG) provides a living-wage job to anyone ready, willing and able to work, stabilising both prices and incomes.
15. The JG acts as an automatic stabiliser and a superior price anchor compared with an unemployed buffer-stock.
16. Price stability comes from spending discipline relative to real capacity, strategic taxation and (in JG) a fixed public wage.
17. Raising interest rates is a fiscal stimulus (adds interest income); it is often a poor inflation-control tool.
18. Modern money is mostly bank deposits created endogenously when banks lend; the central bank accommodates reserve needs.
19. Central-bank independence is operational, not financial; Treasury and central bank form a single consolidated government sector.
20. “Debt limits” such as the U.S. debt ceiling are self-imposed political constraints, not economic necessities.
21. In an open economy, external deficits imply higher domestic public deficits if private saving is positive (sectoral balances).
22. Exchange-rate regimes matter: monetary sovereignty is fullest with a free float and liabilities only in the home currency.
23. Nations that borrow in foreign currency or peg their exchange rate give up degrees of fiscal freedom and face solvency risk.
24. Real resources—not finance—constrain green-transition, health-care, education and infrastructure programs.
25. Progressive taxation is desirable for equity and for draining excess purchasing power, not for “raising revenue.”
26. Targeted taxes (e.g., carbon) can shift behaviour toward societal goals while freeing capacity elsewhere.
27. Financial crowding-out is a myth for sovereign issuers; the state’s spending creates, not competes for, bank reserves.
28. Public deficits should be sized to close the output gap while keeping inflation inside a tolerable band.
29. The appropriate interest-rate target is normally zero; positive rates are an unnecessary subsidy to wealth-holders.
30. Inflation episodes are usually supply-shock/cost-push events; broad fiscal tightening may be ineffective or harmful.
31. Government can always afford to buy anything for sale in its own currency, including all idle labour.
32. Monetary operations (open-market purchases, repos, QE) merely exchange assets of differing maturities and returns.
33. Banks are never reserve-constrained in making loans; they are capital- and credit-worthy-borrower constrained.
34. The “money multiplier” story is backwards: loans create deposits; reserves are added later.
35. Fiscal policy, not monetary policy, is the primary tool for full employment and price stability in an MMT framework.
36. Because public deficits equal private net saving, sustained attempts to run balanced budgets force households into debt.
37. Currency users (Euro nations, U.S. states, households) must finance spending; currency issuers never face that constraint.
38. Deficit hysteria distracts from the real risks of under-utilisation, inequality and ecological breakdown.
39. Sound finance for a sovereign means matching spending to resource availability, not to arbitrary debt or deficit ratios.
40. Public money creation is ethically neutral; outcomes depend on what the state purchases and who it employs.
41. A well-designed Job Guarantee can improve productivity, skills and community infrastructure while anchoring wages.
42. Full employment with price stability is a political choice, not an economic impossibility.
43. Sovereign governments should target public purpose, not balanced budgets: deficits are a tool, not a score-card.
44. Digital central-bank money or coins change the plumbing, not the macro truth that spending creates currency.
45. Import tariffs alter relative prices; real terms-of-trade, not “paying for imports,” are the relevant constraint.
46. Industrial and climate policy should be evaluated in resource/inflation terms, not on whether taxes “cover the cost.”
47. Household analogies (“government should tighten its belt”) are category errors for currency issuers.
48. Metrics such as debt-to-GDP are accounting ratios with no operational meaning for a sovereign issuer.
49. The politics of money—who gets to spend, tax and allocate—matter as much as the mechanics of issuance.
50. Democratic accountability, transparency and ecological limits should guide sovereign spending powers.
This list captures every distinct idea appearing in at least one of the two source documents while eliminating literal or near-literal duplicates.
-------
Then I asked ChatGPT to create imperatives for governance. It gave me the following:
MMT-Grounded Imperatives for Governance
1. Guarantee work for all. Run a publicly funded Job Guarantee that offers a living-wage post to anyone ready, willing and able to work, providing both social inclusion and a price anchor.
2. Let deficits do their job. Set the fiscal balance high enough to close the economy’s spending gap and keep everyone employed; a deficit is a tool, not a sin.
3. Tax for purpose, not payment. Use taxes to cool excess demand, redistribute wealth and steer behaviour (for example, via carbon levies). You never need them to “fund” spending.
4. Keep interest rates low. Treat a near-zero policy rate as normal; rate hikes are a regressive fiscal stimulus and an unreliable anti-inflation tool.
5. Protect monetary sovereignty. Avoid borrowing in foreign currency or pegging the exchange rate; issue obligations only in your own free-floating unit.
6. Budget to real resources. Plan spending around the labour, skills and materials actually available. Inflation—not “running out of money”—is the true limit.
7. Reject austerity and sustained surpluses. Draining money from the private sector weakens growth and widens hardship.
8. Scrap self-inflicted shackles. Debt ceilings and similar rules create payment crises without restraining inflation; they should be abolished.
9. Use bond sales only to manage rates. Swapping reserves for bonds fine-tunes interest rates and liquidity—it is not “borrowing to spend.”
10. Judge programmes by resource and price effects. Whether it is climate work, health care or infrastructure, ask: Do we have the inputs? Will it overheat prices? Not: “Can we raise the revenue?”
11. Demand democratic, ecological accountability. Because new money begins with a political keystroke, citizens must set priorities—and respect planetary limits.
12. See public “debt” as private wealth. Government liabilities are the financial assets of households and firms; treat them as a policy variable, not a burden on “our children.”
13. Treat unemployment as fiscal failure. If people lack jobs, spend more or tax less until the labour market clears.
14. Anchor prices humanely. Use the Job Guarantee’s fixed wage as your buffer stock instead of tolerating mass unemployment.
https://x.com/ptcherneva/status/909461578038304768?t=CmA4E7DtXL5sv2Ock0WO4w&s=19