Selected Posts

Comment: Taxes are, in fact, “demand drains” and so reduce the capacity of the non-government sector to spend. Taxpayers do not fund anything. They just lose or gain purchasing power as the national government manipulates the policy parameters.

Mosler: Tax liabilities precede spending.


Comment: Taxing always has to be looked at as the final step in the process. Never view it as taxing as the precursor to spending. Interest payments to wealthy and big corporations are a political choice, not a functional necessity. It is not efficient monetary policy.

Mosler: However, tax liabilities do come first, which creates sellers of goods and services that can then be purchased by the state. Actual tax payments follow state spending or lending.


Comment: The U.K. government first mobilises real resources by data entry into its spreadsheet, adding numbers denominated in its unit of account, the £. Taxes reverse the process, deleting numbers and driving demand for its currency. Smart folk have known this for decades.

Mosler: I like to begin the story a bit before that, where the UK gov. first imposes a tax liability, payable in £ that come only from the gov or its agents, which creates sellers of real goods and services needing the gov's spending of £ to pay their taxes.


Comment: An MMT critique from the man who bailed out the banks. Others have already shares strong words about this.

Mosler: MMT teaches sequence- tax liabilities, spending, tax payment/bond purchase- thereby eliminating solvency consideration, and the source of the price level is prices paid by gov. And they have the rate thing backwards. No new tools, just a new (for them) understanding of the tools.


Comment: There are three sentences here. The first is, at the very least, neutral with respect to MMT. I presume Stephanie Kelton would say that affordability is never an issue. She can correct me if I’m wrong on that. The second appears to be ...1/n

Mosler: Think sequence- spending from single supplier of that which is required for tax payment adds the $ that subsequently pay taxes/buy tsy secs, so (nominal) 'affordability' and 'debt burden' inapplicable.

All Posts

Comment: So dig holes and fill them in again, then. Non-jobs to create demand. Keynes.

Mosler: Why tax so much if gov doesnt want those unemployed by the tax?


Comment: Since we're reporting the Fed's 2013 'profits' today, here are some reasons to view the term with skepticism.

Mosler: Fed profits are, functionally, just another tax.


Mosler: The tax liability is the arm of today's 'invisible hand' ;).


Comment: Sorry for namby-pamby econospeak. Much #trade-induced #offshoring has caused #job loss in advd #manufacturing.

Mosler: That's a good thing, it means taxes can be that much lower for a given size government to employ all.


Comment: The Quantity Theory and Neutrality of Money in an Endogenous Money System.

Mosler: Coercive taxation obviates neutrality.


Comment: "Rising import competition from China reduced US employment growth by between 2.0 & 2.4 mln jobs between 1999 & 2011”

Mosler: A good thing! But wrong policy response! Taxes can be lower and/or spending higher to sustain full employment!


Comment: It's time to dethrone the dollar & bring back the jobs.

Mosler: Imports real benefits exports real costs-so cut taxes and/or hike spending to boost jobs instead of dethroning $US!


Comment: In today's Republica magazine (Donna), my piece on why Google, Tesla, Apple must pay back 4 risky state investments’

Mosler: The real beneficiaries are the users of the output. Most corp taxes are ultimately highly regressive.


Mosler: Taxation necessarily functions to create 'unemployment' as defined.


Comment: That’s monetizing the deficit. As said, the last hope for heterodox econ.: spending creating its own income.

Mosler: All gov spending is printing $, all taxing is unprinting $, and $ are just tax credits.


Comment: How do you achieve that though if high savers get the breaks, not lower percentiles. They'll just save. No trickle down?

Mosler: If the tax wasn't cutting spending it had no reason to be there so keep adjusting fiscal untill output gap closes.


Comment: The level of unemployment indicates that public spending it was too low.

Mosler: Yes or taxation too high.


Comment: " The Fed’s profits [have cut] aggregate deficits by about 8% since 2010."

Mosler: Seems that are always effective alternatives to regressive taxation.


Mosler: Anything that even remotely suggests the 'neutrality of money' in the face of coercive taxation lacks any credibility whatsoever.


Comment: “The obvious solution ... is an increase in America’s gasoline taxes"

Mosler: Regressive taxation seems to always be the obvious solution? :(


Comment: But enforcement is not the same as coercion. Coercion punishes deviant behaviour.

Mosler: Rephrasing: enforced taxation obviates the main stream's neutrality of money arguments.


Mosler: Negative rates are a tax, and only Congress can enact taxes, no?


Comment: But, yes, nobody is forcing you to earn money.

Mosler: Taxation forces the macro economy to obtain that which is need to pay taxes.


Comment: Think perfectly flexible prices & wages, full-employment, very classical etc. Stuff you would hate ;-)

Mosler: Understood, and 'money' is only a numeraire. Ever try modeling a currency as a public monopoly? ;)

Mosler: Ever try modeling taxation as a coercive govt. intervention, thereby obviating neutrality? ;)


Comment: What Taxes are For.

Mosler: The purpose of taxes is to create unemployment (as defined) so govt. can hire those it unemployed to provision itself.


Comment: Let's not give (the great) Bernie Sanders special treatment. A 'tax on Wall Street speculation' wouldn't pay for.

Mosler: The purpose of the tax would/should be to reduce the activity, and not to raise revenue per se.


Comment: I know this is hard to grasp but govt spending is loan (gilt) financed..taxes are a consequence, not a source of public & private spending.

Mosler: Tax liabilities create sellers of goods and services, gov then can buy which provides the funds to pay taxes and to buy the gilts.


Comment: Is it also what I said? I don't like that language, probably because I hear "today's debt = future taxes" and it burns my ears.

Mosler: Just saying that your 'one kind of financial asset' is in fact just a tax credit, and an outstanding one at that... ;)


Comment: The "inventor" of modern money (MMT). Federal gov does not need to tax anybody, sovereign countries issue own money.

Mosler: Tax liabilities are required to create sellers of goods and services desiring that currency in exchange thanks.


Comment: "There is broad consensus on some of the best ways to pay for cutting both the individual and corporate tax rates." Ha, ha! "pay for".

Mosler: Government spending does require enforced tax liabilities though not "revenue" per se.


Comment: The whole "cost to taxpayers" meme, while rhetorically enticing, has no *economic* meaning when applied to spending of the US government.

Mosler: Tax liabilities are required, though not revenue per se.

Comment: I'm talking about this kind of stuff: Trump Tower security costs $146 m per year.

Mosler: That spending is supported by about/maybe $100 million of our tax liabilities.


Mosler: 0% is the natural rate of unemployment for any society. Only after taxation is introduced is there any of what we define as unemployment.


Comment: But govts of monetarily sovereign countries don't need tax collections to fund their spending needs, right? So why keep worrying about taxes? Just convince the govt to spend as u see fit.

Mosler: Those Governments don't need tax revenue per se, but they do require sufficient tax liabilities be in place to sustain a 'need' for that currency.


Comment: Taxes are, in fact, “demand drains” and so reduce the capacity of the non-government sector to spend..Taxpayers do not fund anything. They just lose or gain purchasing power as the national government manipulates the policy parameters.

Mosler: Tax liabilities precede spending.


Comment: That’s not what MMT says. Tax has many purposes. As @RichardJMurphy would say. But financing spending is not one of them. Thus, Speaking of the need to tax to finance the NHS is hugely damaging. #MMT takes a lot from Keynes. More so than most orthodox economists today.

Mosler: I say it this way: tax liabilities, and not tax revenues per se, function to create sellers of goods and services in exchange for the state's currency, which the state can then buy.

Mosler: That is, there is a distinction between tax liabilities and tax revenues.


Comment: So if taxation is not the acceptance of state liabilities, what then exactly is state liabilities and when and where does it come into play? Genuine question.

Mosler: Tax liabilities are expressed in units of the state currency, so those units are best understood as tax credits. The state accepts its tax credits as the means of extinguishing its tax liabilities.


Comment: Taxing always has to be looked at as the final step in the process. Never view it as taxing as the precursor to spending. Interest payments to wealthy and big corporations is a political choice, not a functional necessity. It is not efficient monetary policy.

Mosler: However, tax liabilities do come first, which creates sellers of goods and services that can then be purchased by the state. Actual tax payments follow state spending or lending.


Comment: A job guarantee is not antithetical to capitalism. A job guarantee is there to pick up those *left behind by free enterprise* FDR was not anti-capitalism. FDR wanted to secure employment as a basic human RIGHT.

Mosler: As taxation is by design the cause of unemployment for the further purpose of provisioning the state, it’s better said the unemployed have been left behind by that state?


Comment: To argue that the JG would be the "single largest government intervention in US economic history" betrays the author's poor understanding of history.

Mosler: Taxation is the intervention that creates unemployment by design for the further purpose of the state being able to hire those it's tax caused to be unemployed. The JG works to transition the unemployed back to private sector employment and optimize output.


Comment: Thanks Warren Mosler @wbmosler - Deadly Innocent #Fraud #1:The federal government must raise funds through taxation or borrowing in order to spend...government spending is limited by its ability to tax or borrow. (FALSE- they can spend w/o these funds).

Mosler: Yes, tax liabilities are what create the sellers of goods and services.


Mosler: Responses to 'how are you going to pay for it?': 1. The Tsy instructs the Fed to credit the appropriate account. 2. The $ to buy bonds or pay taxes comes only from the gov and its agents, so gov spends first, and then taxes are paid or bonds paid for.

Mosler: 3. So gov borrowing supports rates, it doesn't fund expenditures. 4. Likewise interest is paid by instructing the Fed to credit the appropriate accounts, and likewise those $ are paid first, and then taxes are paid or bonds are paid for.

Mosler: The public debt is the $ paid by gov that haven't yet been used to pay taxes and remain outstanding as cash, balances in reserve accounts at the Fed, or balances in securities accounts (tsy secs) at the Fed until used to pay taxes.

Mosler: What about inflation?' The funds to pay taxes come only from gov or its agents, so gov is necessarily 'price setter', and the price level is a function of prices paid by gov when it spends. And don't confuse a relative value story with an inflation story thanks!.

Mosler: Thought exercise- if all prices go up and the gov doesn't pay those higher prices, gov spending goes to 0 and the price level deflates until gov spending is sufficient for tax payments due. Not that it's 'good policy' to do that, but to reveal the source of the price level!

Mosler: And it's all in my very short free online non technical book thanks!

Mosler: Including the understanding that tax liabilities function to create sellers of goods and services (who then need that currency) so the gov. can then spend it's otherwise worthless currency.


Comment: Gov borrowing supports rates, it doesn't fund expenditures.

Mosler: The public debt is the $ paid by gov that haven't yet been used to pay taxes and remain outstanding as cash, balances in reserve accounts at the Fed, or balances in securities accounts (tsy secs) at the Fed until used to pay taxes.


Comment: Warren Mosler says there is no unemployment in a non-monetary economy and explains why Tax pays for nothing, its prime purpose is to create demand for the currency.

Mosler: The way I say it is that tax liabilities function to create sellers of goods and services in exchange for the state's funds, and for the further purpose of provisioning the state.


Comment: Seems better the convo I got in between where people were arguing that MMTers are shills for rich and Warren has apparently made some qualifying statement in podcast that he confirms he now believes that taxes are necessary to pay for policies.

Mosler: I said tax liabilities are used to create sellers of goods and services.


Comment: The government doesn't use tax revenue from any source for spending on anything JP. It all gets deleted from the national debt. The Tories are *choosing* to starve the NHS. Learn Modern Monetary Theory #MMT. Check out how the government actually spends.

Mosler: Right, the gov uses tax liabilities to create sellers of goods and services in exchange for the currency.


Comment: The Case for a Guaranteed Job by Robert Skidelsky - Project Syndicate.

Mosler: ??? The govt. created unemployment, by design, by imposing tax liabilities, for the further purpose of provisioning itself by spending it's otherwise worthless currency. Residual unemployment is the evidence that the tax liabilities created more unemployed than the gov hired.

Mosler: Assuming Gov is fully provisioned, it can 'correct its mistake' by lowering the tax until they return to the private sector. The JG promotes that transition from unemployment to private sector employment because employers don't like to hire the unemployed, etc. etc.


Comment: There is no taxpayers money as money is created by the government and the currency-issuing government does not depend on tax collections to spend. Please do watch that video.

Mosler: True, government depends on tax liabilities to create sellers of goods and services, and not tax collections to provide funding.


Comment: The state's purpose, after all, is to improve/enrich its citizens, not to make a profit itself. It just needs to be a "going concern" to perform these functions.

Mosler: For a state for purposes of this discussion, 'going concern' means it can enforce its tax liabilities.


Comment: Former ICE Gov Dir. Tom Homan shows no respect to Rep Jayapal during a House hearing today after going over his time, shouting out, “I'm a taxpayer, you work for me!”

Mosler: More nearly correct would have been 'I have tax liabilities, I'm working for you.'


Comment: The explanation of how the federal government does not need taxes in order to spend. Those who claim otherwise must provide their explanation.

Mosler: It's about needing to impose tax liabilities, rather than needing to get the $ to spend...


Comment: "Retained indefinitely" - because no debits exist?

Mosler: The tax credits are assets, and the euro deposits created as payment are liabilities.


Comment: Like i was saying, with possibly 200 million Americans with no assets, it makes sense that half of them aren't working. if, like @wbmosler MMT says, people only work to prevent the government from taking their stuff...

Mosler: Tax liabilities create sellers of goods and services who want $ in exchange.


Comment: Full exposure Why do journalists, academics and leftist keep repeating the lie that taxes R needed for government spending, didn't they just see a multitude of governments spend billions & billions to save businesses & banks without so much as thinking ab raising taxes for it.

Mosler: It's tax liabilities that are needed, etc... ;)


Comment: This is it. This is what the entire main stream economics animosity towards MMT is based on. So the question boils down to is money an IOU or not? Yes? : MMT is correct. No? : Neoclassical is correct. Who can tell us if Money is an IOU or not, and settle this once and for all.

Comment: Be interesting to hear from @wbmosler for a pithy reply ?

Mosler: $US are US Gov tax credits, accounted for as liabilities, so it's not wrong to call them IOUs in casual conversation.


Comment: Does MMT have a proper theory with regard to the demand for money?

Mosler: Tax liabilities function to create a demand for that which is needed to pay the taxes, plus, generally, a residual demand to save those tax credits.


Comment: One limit could be that people in general, or the last person standing, has had enough of working despite the government creating jobs to be undertaken. They simply want a rest.

Mosler: Think tax liabilities.


Comment: The private sector doesn't have enough productive jobs for everyone; the demand simply isn't there. It is a 10 dog, 9 bone system. So you need the government to somehow redistribute income and keep everybody fed and sheltered, because that doesn't happen naturally.

Mosler: The example is about gov tax liabilities of, say 10, and gov only spending 9, for example.


Comment: What prices are government agents setting, exactly?

Mosler: With every purchase govt. defines the value of its currency whether it knows it or not. The econ needs govt spending to comply with coercive tax liabilities. It's about who's pitching and who's catching. It's a simple case of monopoly. Elementary game theory / disparity of power.


Comment: I’m talking about the price level, Warren. Not interest rate.

Mosler: And re 2), payment of taxes is via the Fed debiting member bank reserve accounts, where those balances come only from the Fed. So tax liabilities create a need for reserve balances to avoid penalties for non payment. The Fed credits reserves on instruction from Tsy/Congress.


Comment: Warren, you're missing a whole class of models where markets do not clear in the conventional sense. See work of @farmerrf in particular.

Mosler: Seen it, thanks. Animal spirits is about private sector def spending/changes in savings desires. Asset support attempts to support private def spending but the (unlimited) option of public def spending can always eliminate unemployment for example by offering a job to anyone.

Mosler: Demand for the $US comes from tax liabilities+(residual) 'savings desires.' Increased savings desires/lower animal spirits=more unspent income=higher unemployment that requires more public def spending or higher animal spirits/higher private sector def spending/lower sav desires.


Comment: Perhaps you, or @AlanKohler could elaborate as to what happens when people lose trust in the underlying value of the infinite fiat that is issued for them to store/exchange, um, value?

Mosler: If it was about trust it would have collapsed a long time ago. It's a tax credit needed to satisfy coercive tax liabilities.


Comment: The MMT insight - which is literally what created it as a body of theory - is that a JG can be used as a buffer stock approach to stabilise wages. Saying the JG is not part of the theory just says that you don’t understand the theory.

Mosler: The MMT insight (and a contribution to the economic history of thought) is that tax liabilities are the cause of unemployment as defined=unemployment is a monetary phenomena caused by gov by design to hire the unemployed to provision the gov with its otherwise worthless currency.


Comment: The MMT insight - which is literally what created it as a body of theory - is that a JG can be used as a buffer stock approach to stabilise wages. Saying the JG is not part of the theory just says that you don’t understand the theory.

Mosler: So the base case for analysis is the gov imposing tax liabilities then hiring those the tax liability caused to show up for gov employment.


Comment: I’m not JG fan either, as I view govt’s role as “fairness” over “efficiency.” I don’t think long term growth would benefit from increases in state workers. But, I do support increased fiscal spending during recession- preferably on infrastructure/education/healthcare.

Mosler: JG functions first to facilitate the transition from unemployment (necessarily caused by gov. tax liabilities, by design) to private sector employment. You are against that???


Mosler: For regions within a nation gov public services received are benefits paid for via tax liabilities and so are, functionally, imports. Gov spending on labor for production of its public services is a real cost for those regions and so are, functionally, exports.


Comment: Pitch your best short idea and in one tweet (no threads) explain exactly why you hate money.

Mosler: Monetary tax liabilities- the continuous requisite coercion that supports highly beneficial and desired collective action- instils a permanent, pervasive, fundamental insecurity of running out of tax credits (money) that brings out the worst in people.


Comment: This kind of thing gets said a lot. I would like to know which MMT propositions are *not* special cases of the neoclassical synthesis. What precisely is new? [Not saying there isn't anything, but I strongly suspect it's much less than some people think].

Mosler: The 'special case' is the assumption that state currency itself is a case of monopoly with the state and its agents the sole source of the funds that can be used to satisfy state tax liabilities. The rest follows.


Comment: Labour, mental & physical is a resource, the main one! Money is merely an 'activator'. Spending draws resources to particular uses , if they're already being used rather than being idle then there's an opportunity cost. How money is spent & resources used is a political question.

Mosler: Tax liabilities are the motivator... ;)


Comment: So money is government debt? and the only obligation for them is to take it as tax? moreover the demand for it, via taxes, comes from citizens wanting to work? Am I on the right track?

Mosler: Tax liabilities create the demand.


Comment: Can I settle my tax liability to US govt (such as it now is) with Bitcoin?

Mosler: US tax liabilities are denominated in $US and the US government doesn't provide a fixed exchange rate for gold, bitcoin, or any other asset.


Comment:

Mosler: Unemployment is necessarily the consequence of the gov- the currency monopolist- not spending enough to cover the tax liabilities it imposed + 'savings desires'.


Comment: “Any tax avoidance shows the tax system is too complicated. It needs to be simplified as per @wbmosler recommendation”.

Comment: Can you point to what Mr Mosler proposes for the simplification?

Mosler: Eliminate all current tax liabilities, to be replaced by a Federal real estate tax, and a job guarantee of course....


Comment: Absolutely worth watching. HOWEVER, I disagree w/almost everything. @hendry_hugh appears to believe the cudgel of massively negative rates is the same as the carrot that encouraged innovation in gold leaching. Beatings shall continue until morale improves.

Mosler: In any case unspent income and lack of borrowing is a good thing in my book. It means, for example, that for a given level of public spending tax liabilities can be that much lower. Or, alternatively, for a given level of tax liabilities, public spending can be that much higher.


Comment: Issue 1: Debt is a stock (a total you have at one time) and GDP is a flow (the total over a period of time). Better to compare stocks to stocks (or flows to flows). Not hard to pay off $20T of debt when US GDP totals about $4 quadrillion going forward.

Mosler: That debt already is the money- $ in cash+ reserves+ securities accounts, all Fed liabilities (functionally) = net financial assets of the economy= equity that supports the entire private credit structure=net money supply.


Comment: It must upset you to consider that all private sector economic activity is subsidized by the public sector in one way or another.

Mosler: Yes, as the money story begins with coercive tax liabilities which renders the economy dependent on receiving govt. tax credits ($US, for example) to avoid penalty.


Comment: Remind me which sector public sector workers spend their money in again? Another example of how "my taxes pay for this" drives private sector workers to not only accept downward pressure on their own wages, but to sabotage the sector on the whole via lost income. Bizarre.

Mosler: Unemployed are also in the public sector, as tax liabilities/fiscal balance removed them from the private sector. So it's about both decent pay/full staffing and supportive unemployment benefits, and a JG to help transition unemployed back to private sector employment.


Comment: You basically said what I said. So if I give you good and services in exchange for money backed by debt or tax obligations, then you write it off or don't pay it, you have taken something from me and have removed your obligation to at some stage give me something in return.

Mosler: Tax credits are accounted for as liabilities of the issuer and assets of the holder.


Comment: You said it was a failing of MMT not to recognise that fiat money is backed because it is a liability of the issuer. You are wrong.

Mosler: Tax credits are accounted for as liabilities of the issuer and assets of the holder.


Comment: New Zealand government writes to its central bank about stabilizing rising property prices.

Mosler: Seems shifting tax liabilities from income and sales tax to property taxes would dramatically reduce price pressures from non residents and investors and it could be drafted so residents pay about the same as they do now. Plus lower compliance costs= higher real wealth.


Comment: An MMT critique from the man who bailed out the banks. Others have already shares strong words about this.

Mosler: MMT teaches sequence- tax liabilities, spending, tax payment/bond purchase- thereby eliminating solvency consideration, and the source of the price level is prices paid by gov. And they have the rate thing backwards. No new tools, just a new (for them) understanding of the tools.


Comment: We weren't individually prepared, and could not have insured ourselves against covid if we tried. The govt support and financing is a call on an insurance policy maintained by all past and future generations, one that we contribute to a bit ourselves in analogies to premiums.

Mosler: It's about the currency monopolist (gov) no restricting supply. Demand for gov spending = tax liabilities + 'savings desires'.


Comment: You’ve been at this for almost three decades, what have you found works well?

Mosler: Explain how it's about the tax liabilities, not the tax revenue.