Visionary's Plan Could Wipe Out Unemployment

VISIONARY'S PLAN COULD WIPE OUT UNEMPLOYMENT

Ron Wiggins

Warren Mosler, a partner in AVM LP, a West Palm Beach-based investment firm, is an economics visionary and one-man think-tank who, I am convinced, understands the way money works better than anybody, and that goes double for Alan Greenspan.

Less than two years ago I switched my entire 401(k) into bonds on the strength of one thing he said to me, and I quote to the best of memory: "The government is starting to run a surplus. The government doesn't have to run a deficit, but it must not run a surplus. Government must spend at least as much as it taxes, or people have to borrow to pay their taxes and that causes recession."

If you want Mosler's comprehensive theories, go to www.warrenmosler.com and pull up his treatise entitled Soft Currency Economics. Bring your business calculus book.

Mosler, who three years ago bought Enterprise Bank in North Palm Beach and pledged 25 percent of its profits to cancer research, has recently offered a quirky yet convincing plan for bringing prosperity and peace to Palestinians.

"How," he asked me, "are you going to bring peace to the area with employment running 30 percent and even as high as 70 percent?"

You'll find the answer in Mosler's 2,000-word Palestinian Development Plan on his Web page. Or you could trust me to summarize.

The big problem with the Palestinian economy, according to Mosler, is that there isn't one. Almost all of the Palestinian Authority's $50 million-a-month economy is donated by Arab oil-producers. To rely on hand-outs from your friends and have the bulk of your best-paying jobs in Israel is tough on Palestinian pride.

Mosler's brainstorm is to give everybody who wants work a public service job, thus improving the daylights out of the public works infrastructure.

Forget for the moment the question of who would pay for the labor, and imagine the difference if the 30 or 40 percent of the able-bodied population found themselves doing work that was needed and took home pay that went with the jobs. Think of the roads that could be built, the water treatment plants that might be completed, the medical, social and educational services that would follow from 100 percent employment.

How Mosler proposes to finance such services will have you scratching your head and saying, "That sounds like the proverbial free lunch, so it couldn't work. Could it?"

Patience, gentle reader.

Here's how.

"The PA imposes a requirement that all residence owners submit receipts each year for 200 hours of public service per residence," Mosler proposes. In other words, the government sees your house or apartment and says, "I don't care who lives there, one person or 10, this household has to perform 200 hours of public service and produce the receipts to prove it."

Or what? They sell your property. Like when you don't pay your taxes. This scheme even harkens back to feudal days, when serfs were compelled to work on the king's roads. The same principle applies. A household must perform four hours of public service a week, or buy receipts proving that someone has put in the hours.

Since not everyone will be able or willing to do the work, those who do not earn those public service receipts will have to get them somewhere.

As head of a Palestinian household, you have two choices.

1: Send somebody from your household - yourself, your first cousin, Grandpa, or the whole gang, but somebody has to work off those 200 hours and earn the receipts.

2: Buy someone else's receipts. Why not? If you've got a swell job fixing trucks in Israel, you don't need to work the 200 hours when there are guys who will work to earn extra receipts, knowing they can sell them.

Under Mosler's plan, the receipts would be fully transferable and issued in denominations of one, two, five and 10 hours. The receipts would be called Palestinian Authority Receipts or PARs and would be worth whatever people would pay for them. The marketplace would set the price, not the government. PARs would eventually pass as a second currency.

Let's see how this might work in practice. Bill repairs trucks for $10 an hour and his son, Bill Jr., a student, works 150 public service hours. So Bill needs another 50 hours of PARs. Since 30 percent of the population is unemployed and thrilled to work more than 200 hours, Bill can go into the marketplace and cover his obligation by buying surplus PARs.

How much will he have to pay? Probably a lot less than the $10 an hour he earns fixing trucks. If he had to pay more, he'd be better off working the community service himself.

What if much too much public service work is done and the marketplace is awash in PARs? Not likely, since people wouldn't work beyond the minimum unless there was a healthy demand for PARs.

Another question arises. What if not enough people turn out to do the work? That would result in a desperate bidding war for the PARs in circulation. The receipts would become so valuable that the unemployed would scramble to earn more PARs to cash in on the bonanza, and down would come the price.

That's Mosler's Palestinian Development Plan, but it's not just for the Middle East. Mosler says it will work anywhere and could help everycountry achieve 100 percent employment.

"If the United States imposed a public service 'tax' of 50 hours a year per taxpayer and made the proof of labor receipts transferable in an open market, we'd have zero unemployment and more roads, bridges, airport runways, hospitals and public buildings that cost nothing for the labor."

If that doesn't sound like the conventional wisdom, ask yourself how much money the conventional wisdom did for your investments last year.

ron_wiggins@pbpost.com

Originally published in The Palm Beach Post on Thursday, June 7, 2001.