We know that the government cannot default, and printed money that threatens to increase inflation can be taxed back out. So what do we do with this? MMT proponents advocate the eradication of involuntary unemployment through a public option for work. You may have heard of this as “The Federal Jobs Guarantee,” part of the backbone of the Green New Deal and popularized by politicians like Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez. With this guarantee, the federal government establishes a voluntary pool for any unemployed person to enter. Once put into that system, the government will direct them to work on some project they have created through discretionary spending. Generally, the plan advocates spending it on infrastructure, education, or research and development, fields which historically “pay back”. These fields also help connect people to their own local communities and allow them to see the fruits of their labor (Kelton, 2020). While this program would always be in place, it would likely see more use during a recession or depression. To this day, no economist has figured out how to eradicate the “business cycle” of economic downturns, and what a Federal Jobs guarantee would do is soften its effects.
Critics of MMT say this would crowd out the private marketplace, but this should not be the case. The key feature of the jobs guarantee is that it is voluntary. The jobs guarantee is not a program which will always and forever prevent the private market from innovating and growing. Workers will only enter here if they cannot find work otherwise, and they will do this by keeping wages low (but humane) so that when a private sector job is available, they will leave the program to go work with them (as a rational decision in the market). Put simply, there is no crowding out because, well, they are not taking any jobs away. Theoretically, if the private market obtains full employment, then the federal jobs guarantee would have “0” people available in its pool to work. And if there were people in the program, then it would mean they were there because they could not find work on the private market. It helps the workers who need a job, and it should not prevent employers from filling a position. To the contrary, it may be beneficial to the private sector. The longer someone is out of work, the more their skills depreciate, and the less attractive they become to employers (Kelton). A jobs guarantee ensures they would retain their skills, discipline, and talents.