My Own Munchings (that’s for you, Mom)

I’m supposedly on vacation this week and next, yet I somehow find myself caught in the interwebs. Anyway, a few things of mine came out recently that you might have missed.

Fear: The History of a Political IdeaOnce upon a time I wrote a book on fear. I hadn’t been thinking much about that book  in recent years, but Sasha Lilley, host of the fantabulous radio show “Against the Grain” out in the Bay Area, tracked me down for a one-hour interview about it. Turned out to be one of the most engaging interviews I’ve done, all thanks to Sasha’s excellent questions. It’s every author’s dream to be interviewed by someone like Sasha. You might want to check out some of her other interviews as well.

Fear: The History of a Political IdeaComing on the heels of our roundtable on Obama, the London Review of Books asked me to write a piece on the debt ceiling crisis. I’m glad they did because it gave me a chance to step back from the immediacy of Obama’s presidency and take the long view.  The really long view. Like 400 years long. So, by way of Charles I, Louis XVI, and Marx, I reach the conclusion that:

Liberals often have a difficult time making sense of these movements – don’t taxes support good things? – because they don’t see how little the American state directly provides to its citizens, relative to their economic circumstances. Since the early 1970s, with a few brief exceptions, workers’ wages have stagnated. What has the state offered in response? Public transport is virtually non-existent. Even with Obama’s reforms, the state does not provide healthcare or insurance to most people. Outside wealthy communities, state schools often fail to deliver a real education. In such circumstances, is it any wonder ordinary citizens want their taxes cut? That at least is change they can believe in.

And here Democrats like Obama and his defenders, who bemoan the stranglehold of the Tea Party on American politics, have only themselves to blame. For decades, Democrats have collaborated in stripping back the American state in the vain hope that the market would work its magic. For a time it did, though mostly through debt; workers could compensate for stagnating wages with easy credit and low-interest mortgages. Now the debt’s due to be repaid, and wages – if people are lucky enough to be working – aren’t enough to cover the bills. The only thing that’s left for them is cutting taxes. And the imperialism of the peasants.

Which prompted a friend of mine to ask: “Did that really take 400 years to prove?”  Tough crowd.

Had I had more space and time, I would have liked to have explored the idea, inspired by a conversation with Alex Gourevitch, whose blog is must reading, that there is a fundamental tension in a democracy between funding government operations through debt or taxes. It’s an old debate, which goes back to Jefferson, Hamilton, and Paine (and before that to the debates between the court and country parties in Britain).  But the current crisis cries out for revisiting those old themes. Alas, no time, no space.


  1. stephen August 18, 2011 at 11:14 pm | #

    Agreed that your interview with Sasha Lilly was a good one. I enjoyed it greatly and was happy to be turned on to the working you’re doing.

  2. Jon August 19, 2011 at 12:03 am | #

    Prof. Robin,

    You write ” there is a fundamental tension in a democracy between funding government operations through debt or taxes.”

    Historically, this is true. In such a perspective, debt and taxes may be thought of in the same context. However, given the realities of our modern monetary system, debt no longer plays the role we are most familiar with.

    For instance, as a sovereign issuer of our own currency, we are not obligated to rely on global capital markets to fund our deficit. Interest rates are set by the central bank (in this case the Federal Reserve). Since our debt is denominated in US dollars and the Federal Reserve has a monopoly supply of US dollars and can create them at will–there will never be a situation when the United States will default on its debt. This fact is the reason interest on long-term treasuries have plunged in recent weeks despite the debt ceiling charade and S&P downgrade. Investors are not concerned about a potential default (they are more concerned about recession–in this case investors happen to be correct). Well respected economists such as James Galbraith have espoused this view. For a primer on Modern Monetary Theory (MMT) see this straightforward tutorial :

    There is no doubt the tension between spending and taxes has played a role in shaping our history. Indeed, this tension is present in current times and has spilled over into our monetary operations as the Tea Party is frothing over the “money printing” etc. of the Federal Reserve.

    However, a lot of this is misunderstood. The Fed is not “printing money” and the federal government does NOT have to “borrow” money in order to spend it. It merely credits bank accounts which presumably lends it (this requires strict regulation or public banks as a private bank makes more profit speculating than lending). Taxes are used merely as a measure to control inflation–not to ‘raise revenue’ or pay down debt. In the past, governments have constrained themselves by pegging their currency to resources or precious metals. Starting in the 1970s, in the US, that is no longer the case (it never is with fiat currency).

    That said, this changes everything. Or maybe not–for perception is reality–and currently, most voters are clueless. However, given the reality, we shouldn’t be talking about ‘tax and spend’–instead, we should be talking about the role of government in society. After all, what and who is government other than the people? Granted, if our politicians understood our monetary system, they may use it for nefarious purposes (to pay cronies and fat cats), but if the public understands it–that changes everything. For our monetary system, this traditionally cuts out the middleman–we don’t have to tax in order to spend–and that is a fast track to stimulating the economy and full employment. A public that understands will demand much more–and settle for a whole lot less. That is important to note!

    This changes the dynamic completely as far as I can tell. It is about time we spread the message.

    • Jon August 20, 2011 at 1:33 am | #

      Obama at a town hall the other day:

      “When folks tell you that we’ve got a choice between jobs now or dealing with our debt crisis, they’re wrong.

      They’re wrong. We can’t afford to just do one or the other. We’ve got to do both. And the way to do it is to make some — reform the tax code, close loopholes, make some modest modifications in programs like Medicare and Social Security so they’re there for the next generation, stabilize those systems. And you could actually save so much money that you could actually pay for some of the things like additional infrastructure right now.”

      Obama, the leader of the Democratic Party, is warning voters of a “debt crisis” and the possibility we might be unable to “afford” Social Security and Medicare. His proposed solution is removing COLA and raising Medicare eligibility to 67 years of age.

      Notwithstanding the former is solvent for 25+ years and Medicare has a cost-containment issue not an entitlement problem, this speaks volumes. I suspect this rhetoric will be a cornerstone of Obama’s re-election campaign.

      The contrast will be between the Republican who wants to wholesale dismantle the programs and the Democrat who wishes to substantially reduce but not eliminate them (all for the good of country).

      However, given the way our modern monetary system works, there is no “debt crisis” and our ability to “afford” spending programs is never in doubt. Yet, Obama continues to misrepresent the role of debt in our monetary system.

      This has profound implications. Obama’s insistence the United States should be concerned about non-existent (not “invisible” as Krugman describes them, but literally imaginary) bond vigilantes provides cover for a non-existent jobs program–our only hope for stimulating an economy close to recession.

      In the same town hall, Obama said:

      “We can close the deficit and put people to work, but what’s required is that folks work together.”

      The argument presupposes large deficits and full employment are contradictory. Not only is this grossly inaccurate, but this leads to the logical conclusion that contractionary fiscal policy is expansionary–a right wing talking point fully embraced by the GOP and now, Democrats.

      What appears to be happening is an all-hands-on-deck (think “Grand Bargain”) effort to create a deflationary spiral that will allow large multinational corporations to privatize and monopolize various industries throughout the economy after financial collapse, consolidating political power once and for all.

      The same dynamic is playing out in Europe. In fact, they are way ahead of the curve, just as they were in the Great Depression.

      This underscores the importance of truly understanding how our monetary system works. It totally annihilates the position of our elites. If that were to occur–and the public ceased to be coerced–anything could happen.

      Unfortunately, the population may be too distracted or entertained to notice.

      As boring as understanding our monetary system may seem–generally speaking–it has profound political consequences.

      I feel this message needs to be hammered into the ground.

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