This is fine, but it should be mentioned that the "public" debt (what should instead be called the "public sector's debt" or the "government's debt") represents an _asset_ for the public (outside the government), though much of that "public" is outside the US (in China, for example) these days. After WW2, the existence of treasury bills in a lot of peoples' savings helped create a cushion which significantly moderated the post-war US recession.
The debt also should be compared to publicly-owned assets, so that we should be looking at the government's net worth instead. Even that should be compared to the total GDP (as an indicator of the potential tax base). The US "grew its way" out of the extremely large (and extremely larger than now) debts at the end of WW2. We should also remember that Greece is in a very different situation than the US. It's not a hegemonic power; it can't devalue its currency; etc. Finally, the US government's debt is the basis of much of the US and world financial systems, since almost all banks and other financial institutions use T-bills and the like as safe assets that allow they to take risks. By the way, a relatively easy solution to excessive debt of any sort is to "inflate it away" (something that Krugman's column today suggests is preferable to deflation, depression, and destruction). This would represent a redistribution away from those who own a lot of assets denominated in money terms. On Fri, May 7, 2010 at 10:37 AM, Julio Huato <[email protected]> wrote: > (My stupid blog is not working well. But here's a few and rushed > thoughts on the public debt.) > > Media pundits, economists, and politicians claim that the current > level of public indebtedness in the U.S. and its further expansion are > "unsustainable." > > Seemingly, "our" profligacy is catching up with us. The day of > reckoning approaches. We should either prepare for a drastic decline > in social welfare tomorrow or accept a worsening of the economic > situation today -- e.g. the government should limit its meager > "stimulus" spending and allow the economy to slip into greater > joblessness to prevent the looming catastrophe. The crisis in Greece, > that many commentators attribute to a borrowing binge by the Greek > government, is now being alluded as exhibit 1. (Let alone the fact > that the sudden increase in Greek public debt may have resulted from > the financial crisis and the attempt of the Greek government to > salvage banks that are now downgrading its debt, as Costas Lapavitsas > claims here: http://bit.ly/cMQeMn.) One of the latest additions to > this parade of nonsense is Arianna Huffington's "Life in the Age of > "Much Worse Than We Thought It Would Be"" (http://huff.to/bu0txF). > > Economists, of course, will pretend that fundamental scarcity -- i.e. > the fact that society's total labor time and its productive force are > never infinite -- is at the root of the dilemma. Society's cake is > finite, and one cannot eat it and have it at once. Except that this > is a false premise. The public debt (or the private debt, for that > matter) has absolutely nothing to do with the finiteness of society's > resources and productive possibilities. It's not nature but social > convention or, more precisely put, social structure. > > Public debt is not about the limited production possibilities of our > society. Public debt is about how the wealth that exists (or will be > produced) is (or will be) held -- by whom and at whose exclusion. In > other words, it is about how the ownership over existing wealth is > distributed. It's about who owns today's wealth and, hence, holds the > enforceable claims over future production flows. It is not about how > large these flows can be with existing resources and productivity. > Wealth distribution is a social condition, not a fact of nature. It > is entirely within the reach of human capabilities to alter the form > in which wealth ownership is distributed. > > Of course, the smuggled pretension here is that the only conceivable > or legitimate way in which wealth ownership can be reshuffled in our > society is via the market mechanism: that private ownership is sacred. > But, any thought about it shows that the pretension is exactly > contrary to the very (contradictory) institutional framework and modus > operandi of modern capitalist societies. No modern capitalist society > would last long without a massive state -- tasked with enforcing and > protecting ownership rights, disciplining labor, undertaking social > programs to preempt unrest, waging wars, regulating commerce, and > plain taking from the poor (and the out-of-favor rich) to give to the > rich (and better connected). A massive state requires taxation and > the allocation of expenditures outside of the market mechanism. > > Furthermore, historically, under capitalism, high levels of public (or > private) indebtedness have always been resolved, partially or > entirely, through politically-sanctioned or politically-induced > processes of wealth redistribution -- from land reforms and outright > expropriation to price management to relatively benign inflationary > processes. > > The McKinsey Global Institute (http://bit.ly/8bQV8z) estimates that > adjusting the imbalances that led to the ongoing crisis will require a > (on average) 6-7 year long process of "deleveraging," which should > wind up reducing the ratio of debt to GDP by 25%! How can such a > massive transfer of wealth ownership ever happen anywhere without a > politically sanctioned process or carnage? Can any society today > accomplish this feat by heeding Andrew Mellon's dictum alone -- > liquidate, liquidate, liquidate? At what human cost. (Isn't the > point of an economy supposed to be "human welfare"?) > > Again, unless they are willing to see themselves reduced to chop > liver, working people are going to have to take matters on their own > hand. The Greek people are showing the way. And this is not an > endorsement of the methods of small groups of anarchists or > professional provocateurs. It's simply the notion that working people > will need to take action, rather than wait for the powers to decide > how to allocate the cost of the "adjustment." > > Just like the spike in public indebtedness in Greece followed the > financial panic and the government's effort to prop up its banks, > public indebtedness in the U.S. has next-to-zero to do with welfare > queens on Cadillacs or poor people getting over their heads with > subprime mortgage borrowing. It has mostly to do with war making, tax > cuts for the rich, the secular decline in the real income and economic > security of working people since the 1970s, the financial blowout, all > rooted in traits inherent to capitalism. > > There's nothing inevitable here, but the struggle. It is a class struggle. > > [Note to economic theorists: I am not claiming that distribution and > efficiency are independent variables under an abstract, pure, and > functional capitalist economy. Those theoretical constructs assume > that capitalism functions smoothly. In other words, they assume that > working people are reduced to perpetual political submission. I'm > referring to the fact that things do not have to be that way.] > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
