The Right Way to Pay for the NDIS

Ask US economist Warren Mosler whether the national disability insurance scheme should be paid for by a new levy or by spending cuts, and you’ll get a jarring answer – neither.

He’ll also tell you the question shows both the government and the opposition don’t really understand how public services are funded in a modern economy.

”Julia Gillard’s DisabilityCare does not require a tax at all,” Mosler says. ”Despite what most of us think, no modern capitalist government ever taxes to raise money to spend. Their real motive, even if they don’t know it, is to reduce aggregate demand and slow the economy.”

That means Tony Abbott’s insistence on spending cuts to return the budget to surplus is wrong too. ”When the economy is at less than full employment, spending cuts can only make matters worse.”

What’s really needed, Mosler adds, is both a simultaneous cut in taxes and an increase in spending to cover NDIS costs. That will restore what ought to be an essential fixture of Australian, and world, economies: good, healthy, productivity-enhancing deficits.

Read more: SMH

Whilst I have a few differences with the article, it is nice to see Modern Monetary Theory (MMT) get some time in MSM in Australia. I will say Centre of Full Employment and Equity (CofFEE) agrees with Warren Mosler as it was founded by his colleague Bill Mitchell, also a creator of Modern Monetary Theory. Together with L. Randall Wray, they make up the big three of MMT.

In my own small way I advocate MMT, there are those three and then they are the ones with the great PR skills who are Stephanie Kelton and Mike Norman. I do not always agree with the way the message is sold but I do agree with the message. MMT economists are a small but growing group.

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