One of the most confused suggestions of my recent session with Positive Money (PoMo) was their stance in favour of PQE, which they are happy to admit is just printing money without first raising taxes. IE they are spending first.
So if they are prepared to justify it on that basis what do they propose to say to those who will undoubtedly point out that inflation will increase (some will be drawing comparison with Zimbabwe and so on)?
Additionally, surely Positive Money should be engaging with the multipier effects of both health and education spending, where government will get back more than they spend, or, in the admiitedly currently highly unlikely, scenario that inflation takes off, say that they would be prepared to increase taxes?
PoMo actually parked my questions on inflation and multipiers without answering them. Which I confess did not impress. When I persisted, they said simply that taxation was not part of their remit.
My contention is that the ‘Positive’ pole of money creation is by definition connected to the ‘Negative’ pole of taxation so if you are proposing creating money you really need to take on board the whole process of taxation.
It is, I would suggest, nothing to do with PoMo’s (self imposed) remit. Perhaps in their new found role as a think tank, and as they bid for research funding, they are over conscious that they don’t want to research taxation? But if they want to create money, unless they are happy to pump into the economy any part of the roughly 38% of GDP that is government expenditure every year without clawing any of it back, then tax and inflation are an intrinsic part of the process of money creation. Or as the Po Mo founder, now at the Bank of England, suggests ‘stability’ is an intrisinically important part of money.
Still, PoMo is due to launch a new website in the very near future, which will, they have indicated, have space for MMT economists to promote their policies.
That is to be commended. But if they accept that “balancing the budget” is an idea at odds with the needs of a nation, they also need to recognise the role of tax in a stable money supply.
Otherwise HM Treasury will be beating Positive Money to a proper understanding of how money works.
If Positive Money really believe that if we can do it, we can pay for it, then they have to recognise the role of tax.