Conversation fragment overheard the other day:
“This deficit thing. It worries me. My grandchildren you know?” To which his interlocutor replies: “Yes, it worries me too. We just can’t keep this up.”
And so it goes. The grandchildren are trotted out. We shudder in collective guilt, thinking about the financial hardship that our selfishness imposes on the progeny of our progeny. We acquiesce to the necessity of it all, to the “deficit reduction” measures that we are told will, like some awful tasting cold medicine, go down hard but cure all.
And on the left, we the progressives, tip our hats in this direction when we urge tax increases in the midst of a recession or at best a weak recovery, when we quibble about the size of the “problem” and how it can “solved” at some later point, when we worry about sounding shrill and being left out of the debate lest we be viewed as not sufficiently “hard nosed” and “realistic.”
And so the game is lost without realizing it, and real pain, real costs, are imposed on our communities in the name of entries in some accountant’s ledger — the homeless really did suffer the knife of the Martin cuts, doctors really did disappear, nurses really did decamp for greener USA pastures, our health care system really was infirmed, welfare recipients really did suffer, the cause of social democracy really did suffer a body blow. But boy did that ledger look pretty. Somehow, on the budget debate, mesmerized by numbers and debt explosion equations, we lose sight of real people and real costs, something we normally excel at.
But here’s the thing. These real losses and the accountant’s logic behind them are all so pointless, so unnecessary, so strategically short-sighted, so “angels dancing on a pin head” in their futility. There is another way to tackle these issues, understand their dynamics, and pick away at what is admitedly a granite-like policy convention anchored in the concrete of the household budget metaphor. And that is to realize that debt — issued in our own truly sovereign currency (not Italy, not Ireland, not Greece, not Spain, not the Euro) — is nothing more than a distribution mechanism, a time machine of purchasing power from now and into the future, a legal IOU qualitatively different from cash only in its duration but prized by the financial sector for its ability to generate benchmark, rock-solid returns even in times of financial crisis. But it has no or little bearing on the real capacity of our society to produce now or into the future. It does not crowd anything out. It does not rob from the ability of our children and their children to consume food, live in homes, drive modern vehicles, attend or enjoy the benefits of a quality education without indenturing themselves for decades to come. Unless of course we let it. Budget cuts today work against all those things tomorrow — they erode education, they forestall necessary environmental action, they eliminate healthy food options, they put people on the streets.
As an MMT luminary likes to rhetorically ask : “How many vehicles have we sent back in time to 1947?” Think about that statement. The fact is that we are the beneficiaries of the spending — yes deficit spending — that came before us through the consumption of the real goods that this spending created. The schools, roads, water works, sewer treatment, agricultural output (subsidized no less), financial services, and so much more that the horrific, appalling deficit spending of yesteryear made possible. And yet the resulting “mountain of debt” (not even necessary debt but that is for another post) that was “imposed” on my parents or even my generation has never felt like anything other than a gift except when it was used as a powerful guilt-inducing metaphor to ram down budget cuts.
And so that this post doesn’t offend too greatly, so that my peers do not dismiss my post as the rant of yet another frustrated outsider but really an insider, I will conclude by urging the reader to check out this post by James Galbraith, the heretic whose graced the PEF with his presence a few years back. The salient bit: “When our Treasury wishes to make a payment, it sends a signal, by computer, to the payee’s bank. The bank posts the payment by changing a number in the bank account of the payee. The payee, on checking his or her account, now realizes that she or he has a larger balance, and so larger spending power. That’s all there is to it.” Or read this post by Randy Wray and Marshall Auerback where they rightfully demonstrate why so much of the US and Canadian left is just plain wrong about Obama’s recent budget.
Read these pieces a few times over. Let it sit. Follow the logic. And let’s prepare to fight the long hard fiscal battle that begins with developing the intimate knowledge of the institutional mechanisms that really do give us, our society, the power to make the world a better place for our grandchildren.
- Beating Back the Ghosts: Be Gone Appeals to Reinhart and Rogoff Authority. Welcome the Triumph of Reason. (April 16th, 2013)
- Ontario hiding savings from lower interest rates (October 15th, 2012)
- Household debt going from bad to worse (October 15th, 2012)
- Pour en finir avec la dette… (August 24th, 2012)
- Dead Money (August 23rd, 2012)