Talking to Grandma About Fiscal Sustainability
My friend Ralph writes about the fiscal sustainability issue:
”Real. Simple (but accurate). Language. Why should people be scared about the Peterson agenda? What are they trying to distract the public’s attention from? What do the American people deserve from their government’s economic policy? Why is this not “leftist” but in fact mainstream — even conservative — anywhere else in the world?
”Explain it like you’re talking to my grandmother. Make it real, real simple, especially given that she’s dead.”
So, here goes. Let’s have a dialogue with Grandma, but with a real live and skeptical one, who’s far from dead yet.
Why Should People Be Scared About the Peterson Agenda?
Grandma: Joe, I’ve been reading about these people, the Peterson Foundation. They say the way things are going our country will owe so much debt and our interests rates will be so high, that the United States will either run out of money, or taxes to pay off the debt will be so high for you, my Grandson, that you’ll be poor. They say we have to bring all this spending under control now, and that the best way to do it is to raise the eligibility age for social security and cut back my Medicare. What about these people. They’ve got “dollar Bill” Bradley on their side, and President Clinton, and lots of Senators, and lots of financial experts. Don’t you think they’re right? After all, like any family the Government can’t live beyond its means forever. We can’t keep spending like drunken sailors.
Joe: Gran, these Peterson folks and their allies are really, really scary. Remember Herbert Hoover? He kept saying we had to balance the budget and that prosperity was just around the corner. Well, these Peterson folks have been acting like him. They’ll make the recession last ten years, while saying that it ended months ago, ’cause they’re alright Jack! They’ll make things so bad that even if we never run out of money because we can always create more of it, we could get inflation, not mainly because of the Government spending, but because, they will destroy our ability to produce the goods and services, the real wealth, that gives our money its real value. You know what I’m saying. By slowing down our economy with austerity, these fools could destroy enough of our real wealth, our ability to actually make things and create and deliver services, so that we have so much unemployment that when the Government moves to do something about it by finally spending enough money to solve the unemployment problem, the point where the demand created by such spending exceeds how much we can actually produce will be reached very soon, and before we can solve that problem.
If they have their way, by the time I get to be your age, I won’t have social security because they’ll have raised the age of eligibility so that I don’t qualify. Also, if they have their way, there’ll be deep cuts in Medicare. They’re trying to say that there won’t be cuts in medical care, only in waste, fraud, and abuse. But they won’t control price increases by Doctors and Hospitals, and God forbid they should actually force the providers to modify their systems to save money, so how are they gonna cut Medicare without cutting actual care? By the time I’m old enough to have Medicare, I’ll be lucky if they pay 50% of the costs. Also, if we do what they want, we won’t be able to fix our roads, or educate our children, or get away from using imported oil. You know Gran, I’d really like to stay here close to you, but the way these bozos are acting, I’m thinking I’d be better off taking us and your Great-Grandchildren to a place like Canada, Australia, or New Zealand where the damned corps don’t run everything, and where somebody can go build a life where they don’t have to worry about getting driven into bankruptcy by Doctors and Hospitals, or dying because they can’t get good care at all without health insurance, or failing to provide a good education for their children because the public schools are crap city, and the ordinary working people can’t send their kids to college. I don’t want to scare you, and I’d hate to leave you; but, what the hell, I wouldn’t have to learn some foreign language, College is nearly free for the kids, and I could actually get to the Doctor. If Peterson gets what he wants, it’ll be more gold for him, and more shit sandwiches for the rest of us, while he tells us he’s better than we are because our moral character is flawed, or we wouldn’t want any special favors from the Federal Government. Have you ever noticed that all those folks who go to Peterson’s meetings are rich? What’s that about? Why don’t they ever hear from working people like us, or, God Forbid, even poor people?
Gran: Joe, where I can go to give this Peterson a piece of my mind?
Joe: Dammit Gran, I don’t really know. Peterson announces “Fiscal Summit meetings” and doesn’t invite the Public or even tell people where they will be. He must think he lives in a country run by the rich, and that all the rest of us are peasants. Do you think he’s afraid that you’ll come and give him a piece of your mind if he announced the venue of his meeting? Look, here’s the thing: if they get away with their austerity program, every new Law that would do something for people using Government spending (that means through people all acting together through their Government) would be very, very hard to pass, because the same choices would always come up. Do we cut other programs, do we tax the very wealthy, or do we borrow from the Chinese. Never Mind that we don’t have to do any of those things) So. Nothing. Important. Will. Ever. Get. Done. Like this crazy health care “reform,” my behind, bill they just passed, it will all be pretend.
But the worst thing about this is that the reasons Peterson gives for needing to have an austerity program are Baloney Sausage, Gran. Peterson says the Government is like a family. But the Government is not like any family I know, because families are limited in what they can spend by what they can earn, get from investments, or borrow. The government, unlike a family, has an unlimited ability to credit private accounts, regardless of whether it taxes or borrows relative to what it spends. What family can do that? Peterson also thinks, that Government debt, like family debt, has to be paid back, and so it does. But only as it comes due, and only in Dollars which can be created by the Government at will. Nobody, nohow can make the US pay what’s due in anything but dollars. And as long we keep it that way, we don’t have to worry about our not being able to pay our debt obligations. Now, next comes the Petersons saying: well what about interest rates? What about interest costs going so sky high that they “crowd out” expenditures on other budget items?
Well, Gran, unless they’re awfully stupid, which I wouldn’t put past those Peterson folks, that can’t happen. First, it can’t because, again, the Government can always spend what it needs to spend to meet its obligations, since its ability to credit private accounts is unlimited. And second, if the interest costs on the debt are getting too high, then the Government can stop selling Treasury Securities to the private sector at high interest rates by not selling any securities at all. If the Government does this it will flood the private sector, the banking system, with reserves; but so what? All that will do is to drive short-term interest rates down to zero or close to it. That will take care of Government interest costs being too high and will also mean less profits and growth for the bloated banking sector. What’s wrong with that? I think it’s just what America needs.
What Are They Trying To Distract the Public’s Attention From?
Gran: Are these PGPF people trying to hide something from us? Are they so seemingly so worried about the deficit because they’re even more worried about other things they’re hiding?
Joe: now Gran, that’s a very good question. I just can’t imagine, can you? Do you think that perhaps they’re trying to distract attention from the fact that some of the very same people pushing entitlement reform now, also pushed “previous reforms” in which the Government “borrowed” from “social security” while promising to pay back the borrowed funds. But now, suddenly, when they say social security will run out of money they have nothing to say about “paying back” the funds they borrowed. Maybe they want to distract attention from that because they don’t want us to understand that their commitments are no good. Maybe also, they want to distract us from the fact, that much of their gloomy deficit forecast is based on their keeping taxes relatively low for the wealthy, which ballooned the deficit they now condemn during the years when many of these “hawks” were so influential. But maybe it’s neither of these things. Maybe it’s just that they want us to forget that they threw away all kinds of money on an unnecessary war in Iraq, which they funded without ever worrying about the deficit, and another war in Afghanistan, whose great length and great expense were unnecessary if only the boys who now call for austerity figured out a different kind of strategy that didn’t involve trying to conquer and pacify a large area with a relatively small number of troops.
Or maybe what they want us to forget is that the deficits we have now are the result of recovery efforts and the operation of our safety net measures that were made necessary by the venality and incompetence of these very same people in regulating the financial industry, and creating the conditions that fostered the Crash of 2008 and the destruction of so much of the wealth of working people, and that they also want to distract us from their post-crash policies which have added to the wealth of those in the financial industry at the expense of all of this, and maybe they also want us to forget about the prosecutions for thievery and fraud that should have occurred after the crash, but never have.
But maybe, Gran, it’s none of these things. Maybe what they want to distract us from with their deficit bogeyman is the truth. Namely that there is no deficit bogeyman. That deficits, the national debt, and the other things they talk about are themselves unimportant, and are only effects of their own failure to manage the economy competently. And that the real causes of the failure of the economy, are, as they were in 1929, the very failure of the reigning business leaders and politicians to regulate, to distribute income and wealth more equitably, and to make sure that there was full employment for all who. wanted to work. In other words, Gran, they want to distract us from the fact that the answer to our problems is not austerity. It is to remove them from influence in the Government, and to bring in other people who will face the reality that Government has no spending limits in nations like the United States where the Government is spending nonconvertible currency of its own making. Maybe these new people will figure out that we can restore prosperity and full employment, and also re-invent our economy without Government austerity causing private sector austerity and national decline.
What do the American people deserve from their government’s economic policy?
Gran: Well, Joe, if our Government has been behaving so badly for so long, what do we deserve to get from them now?
Joe: We deserve a Government that will work in the interests of most of the American population, and that won’t give us excuses like: “We’re running out of money;” “The Chinese will raise our interest rates,” “Our children and grandchildren will have to pay our debts, and “Do you want to be like Zimbabwe and Greece? Gran, all these excuses are based on a severe misunderstanding of economic systems, like the United States that run on non-convertible fiat currencies. None of the views behind these excuses are based on facts and theories about the economics that have proved even remotely true. Instead, their proponents are the same people who have lead into the Crash of 2008. Their “resumes” show that their economic “wisdom” is false. Let;s not listen to it anymore.
Why is this not “leftist” but in fact mainstream — even conservative — anywhere else in the world?
Gran: But Joe, aren’t you talking “socialism?”
Joe: What have I said that’s “socialism?” All I’ve talked about is the government not practicing austerity, but doing what’s necessary to guarantee full employment, universal health care, a good education for everyone who wants one, and plenty of investment money for people who want to help us remake our economy and create a wave of prosperity for ourselves and our children and grandchildren. The economy would still be dominated by the private sector, individuals would still own businesses and get rich, many people would still be relatively poor, the stock market would still exist, but the safety net would be a lot stronger than it is now, and the banks and Wall Street would be a lot more closely regulated than they are now with people going to jail for a very long time if they defraud investors and consumers. Now that’s not socialism, Gran. It’s just good American practicality. And it’s what’s necessary if we’re going a hand a prosperous Democracy over to our children and grandchildren, instead of a plutocracy run by a few people like Pete Peterson and his followers.
Fight For Real Fiscal Sustainability
To do what’s right for Gran and ourselves we have to fight for real fiscal sustainability. That kind of sustainability is not about deficits, national debts, and debt-to-GDP ratios. Instead, it’s about the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purposes, which is an entirely different view of sustainability than that championed By Peterson and this Administration. It is the point of view of Modern Monetary Theory (MMT), or as I sometimes like to call it, Value Economics. In order to fight for “real fiscal sustainability,” you have to understand what it is. And this is going to require some education.
A great step toward getting that education is to come to the Fiscal Sustainability Teach-in Counter-conference. This event will be held on April 28th in Washington, DC from 8:00 AM to 4:00 PM at The George Washington University’s Marvin Center in Room 310 (The Elliot Room). The event is free and open to the public. You can find out a lot details about it here. Please help us make this Teach-in Counter-conference a success, and follow up by spreading the word about Value Economics throughout and beyond the progressive community. All of our futures depend on it.