Thursday, April 7, 2011

The New "Moral Imperative"

In Paul Ryan and the “M” Word, New Deal 2.0's Richard Kirsch reports,

"USAction President William McNary, one of the most powerful voices of my generation, often reminds us that budgets are not about numbers; budgets are moral documents, a statement of our values and priorities. Paul Ryan, the Republican Budget Committee Chair, agrees with McNary’s attention to values, saying that the goal of his proposed budget plan is to '… leave our children and our grandchildren with a debt-free nation. It is a moral imperative.'"

"Moral imperative?" True or false?

MMT says false. The national debt is actually the total amount of nongovernment saving of net financial assets accumulated from previous deficits. The only way that nongovernment can net save is through fiscal deficits that inject net financial assets into nongovernment. Balanced budgets inject no net financial assets, and budget surpluses reduce net financial assets.

Paying off the national debt would amount to destroying nongovernment net savings denominated in US dollars. Doesn't sounds so good in that light now, does it?

Bill Mitchell explains:

"It is impossible for the private domestic sector to be saving overall (a necessary condition to reduce its overall level of indebtedness) if the external sector is in deficit and the government is in surplus. It would violate the National Accounts.

"If both the private domestic and government sectors tried to reduce their net positions and push into surplus, while growth was being additionally drained by the external deficit, then the negative income adjustments would push one or both of them into deficit (depending on what was being cut and their starting positions). The private domestic sector would face reduced savings while the government sector would face lost tax revenue and increasing welfare payments.

"So it is impossible for them both to be paying back debt (in net terms) at the same time with an external deficit."

With the amount of private domestic debt outstanding, the Ryan budget would push the US into depression unless the US would become a net exporter to the degrees of offsetting the desire of the public to save and pay down debt while government in retrenching. The only way this would be possible is by depreciating the US dollar to the degree that the price of gas would tank the economy.

So we would have a depression after removing the safety nets. Moral? More like stupid.


Matt Franko said...


The Right side of this debate was the first to use the word "moral" and also the first to bring the word "God" into this. (ie "They started it!" ;)

I think ultimately Ryan can be had on 'moral' terms via his seduction (and acknowledgement thereof) by Ayn Rand's Objectivism.

"Beware that no one shall be despoiling you through philosophy and empty seduction, in accord with human tradition, in accord with the elements of the world," (Col 2:8)

He's waaaaay outside the teachings for sure here. If he purports to be a Christian (by his name I assume Roman Catholic), there is no way he can support his own policies via the scriptures and the teachings of Christ Jesus. Quite the contrary.

However, I can see how you could support his policies if you were a believer in Objectivism and 'reason'. One could easily 'reason' with oneself and others like minded, and come up with this unintelligent and depraved policy.

If Ryan was challenged on these terms, he has no defense other than 'reason', and to me, that is not a moral argument.


Tom Hickey said...

Matt, in ancient times, it was believed that sin creates a debt. The idea of forgiveness applies to both sin and debt (jubilee). So the connection of "debt" and "sin" is ancient. The etymology of the two terms is related.

It is still a lively theological question among Fundamentalists as to whether debt is a sin. Many believe it is. Romans 13:8 — "Owe no man any thing...." There is a significant faction of normative Christianity holding that debt is immoral. Google "sin" and "debt." So the debt and deficit kerfuffle is complicated by theology.

But the question is whether it is moral to leave one's debts to one's offspring. I think that most people would say that this is bad behavior.

The counter is, of course, that this is nonsense wrt government debt.The point is using public funds wisely in order to leave offspring with real resource availability to meet their needs, and if possible their wants, too, as well as with policy that leads to prosperity rather than depression. Ryan's budget is a depression budget.

Matt Franko said...


Right.. if the public sector doesnt create the liabilities to account for our needed settlement balances, then the non-govt sector solely has to create the liabilities and then that is what I would call a 'debt' in the Biblical sense. ie A contract establishing financial liabilities and associated required interest payments ("usury") between PEOPLE.

With Ryan trying to, if he had his way, completely eliminate govt sector liabilities, he is delivering us completely into a system that functions solely on this Biblical "debt" (private sector balance goes into deficit for people to be able to consume).

I dont think that Ryan can see that for our economy to operate, somebody has to establish liabilities. And all liabilities are not created equal so to speak. Not all liabilites are "debt" in the Biblical sense.

So when the Judge asked Mike last night "when do we pay it back?" perhaps this can form the basis of a response... ie govt sector liabilites need to "stay established" in order for our economy to function appropriately.... these continuous liabilities function to facilitate non-govt sector transaction settlements??

Ryan's is not a nuanced understanding of this issue. And as usual, often when we 'reason', there are "good intentions" on the surface, but destruction and chaos underlying and resultant. Ryan is "caught up".

As far as Theologians discussing this issue: They may know the scriptures, but with no understanding of the macro realities as revealed by MMT, they CANNOT appropriately interpret many of the lessons in the Bible imo.


Tom Hickey said...

Ryan doesn't get that all money is "debt" in the sense of someone's liability. All liabilities in the private sector involve a creditor and a debtor in the private sector. His plan would vastly increase indebtedness for real people that would have to pay down the debt. The canard for our children and grandchildren paying down the national debt is bogus.

Matt Franko said...

Right Tom,

By advocating his "balanced budget" policies in the spirit of an earthly philosophy of 'reason', he accomplishes exactly the opposite of what his "good intentions" appear to obtain for him.

Instead of 'freeing' the next generation from "debt", he dooms them to have to borrow from a bank to be able to maintain purchasing. If we maintain our current "free markets" policy of unbridled net imports, it just makes the situation even worse as many remain/become unemployed. I believe it would become unbearable for many.

Then what: wars, famine, disease, death?

I believe this is how 'it' works.