The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
Debt / deficit
I’ve mentioned previously that all of mainstream economics is based on a simple semantic misunderstanding, specifically the misunderstanding of the word “debt,” and by reference, the word “deficit.”
In everyday life, “debt” generally is a pejorative. Having debt, meaning owing money (as opposed to owning debt, i.e. being a creditor) is seen as dangerous, and having too much debt can be financially fatal. The recent (or current?) recession was caused by too much debt without the means to pay what is owed to creditors. “Deficit,” the precedent for debt, is equally feared, by anyone whose means are limited, which includes every man, woman and child, every business, every state, every county and every city, town and village in America.
All are of limited means, even Bill Gates and Warren Buffett. We simply do not have the unlimited ability to create money enough to service unlimited debt. The U.S. federal government, being Monetarily Sovereign, does have this ability, which is why, for the federal government, the words “debt” and “deficit” mean something entirely different than when applied to people, and therein lies the confusion.
In federal financing terms, “debt” means the net total of T-securities created out of thin air, since the beginnings of this nation. Because current law requires that T-securities be issued in parallel with federal deficit spending, the net total of T-securities happens to equal the net total of federal deficit spending for the past 200+ years. Rather than “debt,” we should call it “T-securities sold,” which may remove its negative connotations.
“Deficit” means the arithmetic difference between federal tax collections and federal spending in any one year, though there actually is no financial connection between the two. Federal spending does not require federal taxing. Either may proceed without the other.
Since federal spending creates money, while taxing destroys money, we should replace the word “deficit” with “net money created.” That not only might relieve the confusion, but because our actions are ruled by semantics, such a change might put us on the right economic paths. Rather than fearing federal debt and deficits, we would welcome them as necessary for our economic well-being.
Which brings us to the second semantic misunderstanding
Fundamentalist / Originalist
In every religion there are fundamentalists – people who accept the literal interpretation of their holy documents. A fundamental Jew is an Ultra Orthodox. He believes in the strict word of God as written in the Torah (the first five books of the bible). By way of example, he will not even touch an object that is being touched by a woman not his wife.
Of most importance, he believes the bible should not be interpreted according to current mores, but rather should be read and followed according to the original meaning of the original words. He is an “originalist.”
Fundamental Muslims believe in the original words of the Koran. Those who do not are infidels, and murdering infidels seems to be an approved fundamental act. Fundamentalists do not believe any allowance should be made for centuries of human progress. Fundamentalists are originalists.
For many people, fundamentalism may seem a “better” or “purer” form of belief, as though any departure from strict dogma represents a lapse, tantamount to sin. In a sense, this is the club fundamentalists hold over our heads, the appearance they are closer to God are than the rest of us.
In the U.S. we have our legal fundamentalists. They are the Supreme Court, self-styled, “originalists,” most notably Antonin Scalia and Clarence Thomas. They subscribe to “original intent” and its close cousin, “original meaning.”
“Original intent” means the Constitution should be interpreted according to what the founding fathers intended to mean, regardless of subsequent events. “Original meaning” means how people, who lived when the Constitution was adopted, would have interpreted the words of the Constitution. Scalia and Thomas generally are considered to be in the “original meaning” camp. Had Scalia been Abraham, he might well have sacrificed his son, and surely he would have stoned sinners, especially women.
While most Americans frown on of the excesses of religious fundamentalism, especially as practiced by extremist groups like the Taliban, legal fundamentalism is admired by those closest to what is called the political “right.” They may not recognize that the excesses of fundamentalism, not only are practiced in religion, but also in politics. They also may not recognize that fundamentalism, taken to its logical end, is totalitarianism, where the one God is the dictator. The similarities between religious fundamentalism and legal fundamentalism (aka originalism), may explain why the religious right tends to be fundamental. The mind-set is the same.
People become fundamentalists (or originalists) for many reasons, but one reason may be ease. Fundamentalism requires less mental effort than does, for instance, liberalism. All decisions have been made. One need only to obey the Word, unquestioningly and unwaveringly. There need be no second thoughts; there need be no thoughts at all. What was, is. And what is, will be. Simple.
While the Constitution was a masterwork, it was not created by omniscient gods. It was created by fallible humans, who were capable of error and who could not see two hundred years into the future, and who had individual, political agenda. So, to consider the Constitution a perfect instrument, from which variance is forbidden, is foolish at best and harmful at worst. That belief represents a dereliction of judicial duty, for if a judge cannot consider circumstance, he/she is a judicial automaton, unworthy of the title, “judge.”.
Of course, one could say that where the Constitution becomes obsolete is should be modified, which would give moral shelter to the fundamentalists, who decry “activist” courts. But the amending process is so lengthy and so difficult, very little can be done to modernize it. For all practical purposes, we remain locked into a document that year by year becomes less appropriate to the times, which puts greater responsibility on the three branches of our government.
It is time our citizens recognize the dangers in all sorts of fundamentalism, religious, legal and political, and insist that our lawmakers do the same. It is time our jurists realize they were chosen for their judgment (root word, “judge), and not for their ability to parrot 200+ year old phrases or to see into the minds of men long dead.
Otherwise, let the stoning of infidels begin.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”
10 thoughts on “The great semantic misunderstandings of our time: Debt, deficit, fundamentalists, originalists–”
Technically speaking, the budgetary balance is equivalent to the increase or decrease in non-government net financial assets, and the the national debt is equivalent to accumulated non-government net financial assets, i.e., national saving in the currency. It might be objected that some of the saving is foreign. The answer is that the currency never leaves the country. Even cash held abroad is eventually repatriated and saved here or spent. Currency has no value outside the currency zone.
Another great post. When are you standing for president?
What you see here is the natural progression. All the ‘holy books’ were written by dead men in the context of their time – much as the American constitution was.
The American constitution is undergoing the same transformation – into a tablet of ston full of ‘ancient wisdom’. Quite why we go in for this ancient wisdom stuff I don’t understand. Our understanding of the world today is vastly superior than it ever was.
The ‘right to bear arms’ made very good sense in the late 18th century given the political situation and the dangerous terrain. Less so in an advanced technical nation with automatic weapons. (Arguably an original interpretation of that bit of the constitution should mean the right to carry a musket).
One of the arguments for the British ‘unwritten constitution’ approach is that it is better able to move with the times. That’s very arguable as well.
Technically speaking, federal debt is merely the total of outstanding T-securities, and though legally related to deficit spending, the debt is not financially related to deficits or to anything else.
We could and should stop creating T-securities, in which case there would be no federal debt.
Rodger Malcolm Mitchell
That is why I phrased in in terms of “nongovernment net financial assets.” NFA created by deficits is of zero maturity, i.e., increase in deposit accounts. That nongovernment asset (NFA as a zero maturity government liability) is then shifted to a non-zero maturity form of government liabilities (tsy’s) at the macro level, i.e., the flow of NFA creation is toward NFA saving because of the politically imposed but operationally unnecessary $-4-$ deficit offset requirement.Since this is operationally unnecessary, the interest paid on the non-zero maturity government liabilities in the form of tsy’s constitutes a subsidy for special interests (bondholders). It should be eliminated as prejudicial (not in the public interest) and inefficient (wasteful).
Agreed, though we also have to consider that federal interest spending is stimulative.
Right, but should we be giving it to the top of the town instead of committing it to public works or at least subsidizing the needy in bad time, where stimulus is most effective. I am not absolutely against all subsidies, but subsidizing corporations and wealthy individuals is pretty low on my list. The problem is that this is where a lot of the subsidies go, including interest.
Basically agree, though keep in mind that money seldom stops. Money paid to wealthy corporations, is spent on goods and services, some of which are supplied by those lower on the money scale.
From Mr. Thornton Parker:
This was a particularly good post, and I have one thought to add. Constitutional originalists and strict interepertationists are not faithful to their dogma. A word search of the Constitution fails to turn up the word “corporation.” The whole body of law that gives corporations many of the rights of human beings rests on the opinion of one “activist” judge in the 1890s case of Santa Clara County vs. Southern Railroad. This was recently compounded by deciding that dollar contributions are a form of “free speech.”
Viewed this way, “original meaning” and “strict interpretation” are little more than flags of convenience.
The two of you are fortunate to work on something together that both of you can believe in. Keep up the good work.
Thornton “Tip” Parker
Tip, you are 100% correct. Worse than flags of convenience, “original meaning” and “strict interpretation” are flags of deceit. My opinion is that Justice Scalia is smart enough to know when he is acting as a shill for the ultra right wing, though I have doubts about Justice Thomas.
The notion that a microscopic group of cells, smaller than can be seen with the naked eye, constitutes a human being, is something our founding fathers could not have anticipated. Nevertheless, the originalist Justice Scalia assumes they had this ability.
Although he professes to detest judicial activism, whenever he get the chance, he actively will vote to repeal long standing laws pertaining to abortion.
By the way, who are the “two” of us/
Rodger Malcolm Mitchell
Anyone who knows anything about American history or constitutional law knows that the “originalist” doctrine is an ideological ploy being used politically.
It is the same in religious Fundamentalism. For example, there is no list of “The Ten Commandments” in the Bible, and Catholics, Protestants, Orthodox Christians, and Jews different on what they are. “The Ten Commandments” means the evangelical Protestant version for Fundmentalists.
“Originalism” is an attempt by the far right to impose a political and theological ideology on the US through capture of the executive, legislative and judicial branches. It is closely related to “dominionism, the imposition of biblical law a originalists interpret it on the entire world.
BTW, it should be noted that constitutional originalism is different from strict constructionism, and they do not imply each other. For example, Scalia has clarified that he is an originalist but not a strict constructionist. He does not think that strict constructionism is defensible.
Moreover, there are conservative originalists and liberal originalists. “Originalism” just means that an interpretation of the Constitution should be reasonable in light of what the document implies about the FF’s intentions. That allows looking at the Federalist Papers, for example. Scalia argues that there is no right of women to non-discrimination in the Constitution, and in fact, women were not granted suffrage in the original document, so it is reasonable to assume that the FF did not intend certain rights and privileges for women. LIberals would argue that not only did this change with the 19th Amendment so that it is improper to look at original intent after this amendment, but also the country and world have moved on.