Will Americans Ever Realize That a Good Life Is More Important Than Money?
The political debate in the United States and Europe has focused attention on public financial deficits and how best to resolve them. Tragically, the debate largely ignores the deficits that most endanger our future.
In the United States, as Republican deficit hawks tell the story, “America is broke. We must cut government spending on social programs we cannot afford. And we must lower taxes on Wall Street job creators so they can invest to get the economy growing, create new jobs, increase total tax revenues, and eliminate the deficit.”
Democrats respond, “Yes, we’re pretty broke, but the answer is to raise taxes on Wall Street looters to pay for government spending that primes the economic pump by putting people to work building critical infrastructure and performing essential public services. This puts money in people’s pockets to spend on private sector goods and services and is our best hope to grow the economy.”
Democrats have the better side of the argument, but both sides have it wrong on two key points.
- First, both focus on growing GDP, ignoring the reality that under the regime of Wall Street rule, the benefits of GDP growth over the past several decades have gone almost exclusively to the 1 percent—with dire consequences for democracy and the health of the social and natural capital on which true prosperity depends.
- Second, both focus on financial deficits, which can be resolved with relative ease if we are truly serious about it; and ignore far more dangerous and difficult-to-resolve social and environmental deficits. I call it a case of deficit attention disorder.
To achieve the ideal of a world that secures health and prosperity for all people for generations to come, we must reframe the public debate about the choices we face as a nation and as a species. We must measure economic performance against the outcomes we really want, give life priority over money, and recognize that money is a means, not an end.
What We Borrow from Each Other
To realistically address the nature of the public financial deficits at the center of the current political debate, it is crucial to understand the nature of money and debt. Money is just a number, a system of accounting useful in facilitating economic exchange. A deficit occurs when expenditures exceed income. If, as a result, financial liabilities come to exceed financial assets, we go into debt. It is all basic accounting.
The key point, which the deficit debates rarely address, is that one person or entity’s financial debt is another person or entity’s financial asset. We can only borrow money from each other. The idea that we borrow money from the future is an illusion.
From a societal perspective, total debts and assets are always in balance. Consequently, if we say that one person or entity has excessive financial debt, we in effect say that another has excessive financial assets. Reducing the aggregate financial debt of debtors necessarily requires reducing the aggregate financial assets of the creditors.
In theory, we could instantly wipe away all financial debts through a universal forgiveness, a modern equivalent of the ancient institution of the Jubilee. The ancients recognized the significance of such action to restore the balance essential to the healthy function of the human community.
The deficit-hawks recoil in horror and assure us that we can reduce government debt while leaving the financial assets of the rich untouched. It makes perfect sense in the fantasy world of pure finance in which profits and the financial assets of the rich grow perpetually even as growing inequality and wasteful material consumption deplete the social capital of community and the natural capital of Earth’s biosphere.