An NPR report yesterday discussed an unpublished government white paper from the year 2000, speculating on the consequences of a then-anticipated payoff of the US federal debt. The Clinton-era mix of spending priorities and progressive taxes resulted in anticipations that the debt, which my generation grew up hearing grim prophecies about, would end by 2012. What could be finer?
Well, quite a lot, actually. As reporter David Kestenbaum discovered, America’s federal debt is backed with Treasury bills, in which the government sells futures on revenue it expects to raise. Take a look at the report for more details, but the upshot is simple: without a certain amount of government debt, the government has no ability to control economic variables. It has no ability to plan for the future.
But that seems the problem with our current economic structure.
When President Obama was elected in the wake of the 2008 economic meltdown, he promised to “restore” American confidence in the economy, and when he couldn’t deliver on that promise in his first two years, the electorate gave the House of Representatives to the opposition party, hoping they could do what the President couldn’t. The Republicans have also failed. Neither seem to wonder why.
Perhaps they have failed to take into consideration that the prior economy was based on credit, which, when stripped of terminology, is a promise of how good things will be in the future. The housing bubble relied on cheap loans which people hoped to pay off in the indefinite future, while the tech-stock boom gambled that websites would create or distribute information in a way that added value. Both proved unrealistic.
Both failed, I contend, because they want to live in the present on the rewards of future effort. Credit cards allow users to put effect before cause. Collateralized debt devices and related derivatives, which propelled the economy during the rah-rah Bush administration, let buyers live in the future output of others’ labor. The entire pre-meltdown economy existed in the present tense.
Parents raising children try to reinforce that we cannot have our rewards before we invest our effort. We cannot earn our allowance until we’ve completed our chores. We cannot get our grades until we do our homework. This early lesson in applied ethics should, hopefully, carry this ethic into adult life and professional roles.
At the factory every day, I see people socking money away, accepting overtime, and taking on labor they don’t need but could use for future rewards. These blue-collar types have remembered their parents’ lessons about ethics. They do not live on credit, in many cases because they cannot. They enjoy the reward only after they have invested their efforts.
Reading the financial pages, I can only wish these lessons carried over for the people who manage our monetary investments. The whole of modern high-stakes finance relies on getting money now for investments that exist only hypothetically. When people leverage one promise on top of another, we shouldn’t act surprised when people who haven’t internalized their childhood ethics jump ship.
The word “economy” comes from a Greek term meaning “the management of a household.” It refers to the idea that we handle money and distribute resources according to a value system intended to increase well-being without empty effort. Aristotle said that an economy is a moral instrument. People forget that Adam Smith, father of capitalism, wasn’t an economist, but a professor of morals and ethics.
The Bible does not permit the kind of collateralized debt we accept today. Exodus 22 and Leviticus 25 make plain that anyone who charges interest on the poor has violated the will of God. Accepting a worker’s house, land, or clothing to secure a debt, according to the Books of the Law, puts a loan holder in opposition to the people. These millennia-old principles are motivating the current economic protests.
To discover that the government cannot function, to discover that we cannot balance our society’s obligations without selling promises on the future, breaks my heart. Our society really cannot function, in its current arrangement, without ignoring the lessons learned at our parents’ knees. The organizing power structure in modern America fundamentally violates our private ethical premises.
I only hope the implications penetrate for those who, according to Kestenbaum, chose to keep the 2000 draft report under wraps. If our society is so fundamentally unethical, we need to take a hard look and what we want, and whether it reflects our values. Right now, we fail that basic test.