1. Why We Should
and
How We Can
Achieve Full Employment
Stephanie Kelton, Associate Professor, Univ. of Missouri-Kansas City
Presentation to the Jobs Now! Coalition, in Memory of MLK and FDR, January 19, 2012

2. Since the Start of the Crisis
• The world has added 27.6 million people to the
unemployment rolls
• Produced a vulnerable employment rate of 50.1%
• Created an additional 40 million working poor
• Led 1.7 million youths to simply drop out of the labor
force altogether
- United Nations, Non-Governmental Liaison Services (NGLS) 2011

3. Share of People Unemployed 12+ Months
Nearly one-third of Americans have been looking for work for a
year or more
In the US, more than 1.4 million (15% of total) have been unemployed for more than 99 weeks.

4. The Cost of Persistent Unemployment
Social and Economic
• Direct Costs
– Lost output/income
• Indirect Costs
– Social exclusion and the loss of freedom
– Skill degradation
– Psychological harm, including increased suicide rates
– Poor health and reduced life expectancy
– Loss of motivation
– The undermining of human relations and family life
– Loss of social values and responsibility
• The indirect costs are often hard to quantify but
clearly substantial given qualitative evidence

5. The Cost of the “Lost Youth”
Includes the 6.7 million American youths (16-24 yrs) who are out of work and out of school
Total cost to
society
Source: White House Council for Community Solutions, January 17, 2012

6. The Aggregate Loss of Output
Pre-Crisis Path
Actual Path

7. The Daily Cost of Unemployment
“Just say it to yourself – every day, the US government is allowing $9.7 BILLION to go down the
drain in lost income just because they are too stupid to implement sensible direct job creation
strategies.” ~ Bill Mitchell

8. What IS a Sensible Job Creation Strategy?

9. Corporate Profits and Hiring Since 1990
Growth of
Corporate
Profits
Employment growth

10. The Lesson
• Simply making businesses more
profitable will not create the millions of
new jobs our economy needs
• Businesses hire more people when they
are swamped with demand not when
they have higher profits
• Our problem continues to be a lack of
aggregate demand

11. We Need More Demand!
• Sales Create Jobs
• Income Creates Sales
• Spending Creates
Income

12. But Who Will Spend?
Households Account for
• Consumption: If unemployment 70% of Total Spending
remains high, home prices remain
depressed, and the price of oil
remains high, consumption will not
improve significantly
• Investment: If consumption is weak,
businesses will have little reason to
invest in new capital or hire
additional workers
• Government: The bulk of the
stimulus has ended, and the federal
government is looking for ways to cut
the budget. Not much appetite for
further stimulus.
• Net Exports: The US is a net
importer and has been for several
decades. We aren‟t going to export
our way to prosperity.
12

13. Spending Cuts Lead to Unemployment
• Spending creates the income that leads to sales
• Unemployment means there are people who
want to work to earn dollars
• When the government cuts spending, it limits
income, which reduces sales
• The result is unemployment

14. “The government, just like every American household, has to live within its means.”
-- Ross Perot
Why Does the Government
Limit its Spending?
The United States government has run “out of money.”
-- President Barack Obama

15. Is the Federal Government Like a Household?
• No – not anymore
• We abandoned the gold
standard
• We ended Bretton Woods
• We have “modern money”
that is created by keystrokes
on a computer
• But we act as if we are
still hamstrung by the past

16. Afraid of Becoming the Next Greece

17. Why are the PIIGS in Trouble?
• All 17 members of the Eurozone gave up their
keyboards
• Now Ireland is like Idaho. And Greece is like
Georgia.
• They can’t spend more than they can collect or
borrow from others – and lenders know they don‟t
have keyboards!
• That‟s why the bond markets have so much power
• And why so many governments have been forced to
adopt job-killing austerity programs

18. The US is NOT Like Greece
• The US Government
cannot go broke
• It cannot “run out”
of money
• It spends modern
money
• It cannot run out of keystrokes any more than
Arrowhead Stadium can run out of points!

19. Money is No „Object‟
• As Chairman Bernanke
explained on 60 Minutes
in 2009:
• (PELLEY): Is that tax
money that the Fed is
spending? $29 Trillion?
(BERNANKE): It‟s not tax
money. [W]e simply use the
computer to mark up the size
of the account.

20. The ISSUER of the Currency Can‟t Go Broke
“[A] government cannot become insolvent with respect to obligations in its own
currency. A fiat money system, like the ones we have today, can produce such
claims without limit.
~ Alan Greenspan, 1997

21. Why Do We Run Flat Earth Policy?
• Policymakers (and most economists) don‟t understand how our
monetary system works
• They think the government faces the same kinds of constraints that
a household or a private business faces
• They say we can‟t afford to care for the sick and the elderly,
rebuild our crumbling infrastructure, provide our kids with a
world-class education, etc.
• They tell us There Is No Alternative
– TINA
• And they ask for “shared sacrifice”

22. What Would MLK and FDR Say?
• Dr. Martin Luther King, Jr. had seen enough sacrifice
for a lifetime
• He called upon the government to create jobs using the
power of the state
• FDR‟s vision for a Second Bill of Rights also
emphasized the importance of economic security
though job creation
“We have come to a clear realization of the fact that true individual
freedom cannot exist without economic security and independence.
"Necessitous men are not free men." People who are hungry and out
of a job are the stuff of which dictatorships are made.”
~Franklin Delano Roosevelt

23. How do We Get There?
• We begin by recognizing that Money is No Object
• And then we institute:
1.) A full payroll tax holiday
– Employer and Employee
2.) $150 billion in revenue sharing, distributed on a per-capita
basis to state and local governments to alleviate on-going
budget woes
3.) A federally funded job guarantee for anyone who remains
unemployed after 1.) and 2.) have been implemented