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
http://www.rodgermitchell.com

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.”