Debt is fragility. We have lots of debt, and therefore lots of fragility. We should strive for surplus, not debt.
But not yet.
As Paul Krugman and many others have pointed out, we are still in a liquidity trap, thanks mostly to criminal banksters, and should concern ourselves with budget and debt only after we have escaped, employment levels are normal, and we have adequate tax revenue. It’s coming, but it’s not here yet.
Government austerity will not save us. A quick glance at Europe’s rampaging mess tells us that trying to pay down debt during a crisis makes everything worse, much worse. Disastrous austerity policies demanding low debt under stress have sickened the European economy, and ours to a lesser extent, when what we need is more tax revenue. More jobs and adequate wages for the non-rich will in time generate enough tax revenue to reduce our fragility. It wouldn’t hurt if the rich paid higher taxes too.
To be economically anti-fragile,
we should strive for surplus.
Fragility in this instance means having a budget and debt that makes us susceptible to great disruption in the case of a Black Swan event, such as the 2007 market crash. Having high levels of both personal and government debt, we had no cushion against displacement, and could only borrow to minimize its effects. Only now, five years later, is our level of debt showing signs of returning to more moderate levels.
It is ironic that Republicans profess to embrace the idea of low debt, yet for decades have promoted policies that have reduced income for everyone but the rich, and on top of that have reduced tax revenue from the rich. (See Nassim Nicholas Taleb’s book Antifragile. See also his “Stabilization Won’t Save Us“ in the NYT, which presents his ideas in a nutshell.)
We do not vanquish debt
by making people less well off.
We do not vanquish debt by making people less well off, less able to work, less able to save, less able to contribute to tax revenue. But that’s what we are doing. Instead, our policies must encourage well-paid employment. People must be able to put money in savings, which they can’t do when they are poorly paid. When we fashion tax breaks that give our wealth to the rich, who don’t need it, will not spend it, and find many ways to avoid paying tax on it, we are creating a more fragile condition. The rich, in their effort to amass infinitely greater wealth, contribute to economic fragility. If they seriously cared about debt, as they say they do, they would call for more jobs and better pay.
Lower income means less tax revenue. Less tax revenue means less ability to reduce national debt, or even balance the annual budget. And that’s what we have. It makes the country fragile, susceptible to “unexpected” events like the 2007 crash, which will be succeeded in several more years by yet another “unexpected” Black Swan event, part of an endless series that have become more frequent since the ascension of St. Reagan. Unless the economic situation of the non-rich improves markedly, the effect of the next crash will also be severe, because our fragile economy relies too heavily on debt we cannot escape because of low wages and high unemployment.
The antifragile economy
requires a vibrant middle class,
and low income workers
who can survive on what they earn.
The antifragile economy requires a vibrant middle class, and low income workers who can survive on what they earn. We have the opposite, with creeping losses for everyone but the rich, resulting in diminished tax revenue and wellbeing for most people. It is the conservative Republicans who are moving us in this direction, and the reason they do so is that they believe giving money to the rich will eventually make us all well off. Alas, it has been proven many times that making the rich richer makes everyone else poorer, and our economy more fragile. Yet they persist.