Tuesday, January 31, 2012

Me Vs. The Libertarians - Round 57

The Argument:

Imagine you are in a family, and you have a dozen or so brothers and sisters. You all work. You are children of a single parent.
Your father, presumably very wise, tells you children that instead of having to stretch your meager paychecks across many different bills, that he will pay all your expenses. He requires that you contribute about a third of your paychecks to him (maybe a little more or a little less depending on what you make), but he’ll cover any expenses you accrue. Your school, your doctor visits, your car payments. No matter what you rack up, he’s going to pay.
So naturally you live a little beyond your means. You drive a car that’s more expensive than you would if you were looking at your own money, you eat out more often, etc. But the bills always get paid, so this seems like a good system.
Then one day… one day you find out that your dear old Dad doesn’t even have a job. He’s been paying all those bills (and his own, too!) with a combination of the part of your paychecks he collects (which of course isn’t enough) and putting the rest on credit cards. Massive, massive credit card debt has accrued as a result of this.
And that debt is still there when he dies, since he never had any way of paying it off. And you inherit it, because that’s the way debt works.
Welcome to government.


My Response

This is an example of a heuristic argument. I might be playing devil's advocate a bit here, considering I am a firm believer in paying debts on time, as I always have. However, your emotions tell you that debt is inherently a bad thing, so the government should not have one. However, this is in conflict with reality. For one, you present the common fallacy of comparing the federal deficit to a household budget, and there are a few holes in this. I recently read an article that showed that the US has only NOT had a federal debt for something like 5 or 6 out of the last 60 or 70 years. Despite monetary standard, political party in power, economic boom or recession, the debt is nearly always present, and has not stopped our way of life in its tracks.

In addition, while dad can die, The United States probably won't. When you say that the debt will be passed on to our children I guess you are technically correct, but it really just means next year's congress will have a budget deficit, and the next year's after that, and the next year's after that. It doesn't mean that a Chinese army is going to kidnap our population and throw us into debtor's prison, or repossess the state of Delaware. Operating in debt is a worldwide phenomenon, and if every monetary institution were suddenly and abruptly forced to balance their budgets, society as we know it WOULD cease to exist. Even the giant corporations that you hold in such high esteem operate with high leverage, the term for the ratio of actual liquidity to debt. When the bubble burst in '08, many of the investment banks were operating with ridiculously large ratios such as $40 of debt for every $1 of liquidity, but to a certain extent, nearly all profitable business operate in such a manner to a much smaller degree.

I also heard a piece today about how Newt is talking about returning to the gold standard, as if it were the magic bullet to control the deficit. While its probably true that it would control inflation by limiting the Fed's ability to just print more money, it's by no means a sure thing. Gold's value is subject to demand by countries, investors, and speculators, the same as any other commodity in the world. As Wyatt Cynac said when asked by Jon Stewart "But what about gold?", he responded, "Turns out, gold is just a shiny metal, Jon."

The problem is, wealth is an abstract concept. Therefore, so is debt. Now, debt may have real world consequences, such as a bank forces me out of my house into a smaller apartment, or Big Jimmy Breakabone (Break-a-bo-nay) comes by and pops me in the knee cap, but the actual debt I owe is as subjective as the value of the paper money I have in my wallet, my high yield mutual fund, or the gas in my lawnmower. (In reality I have only one of these things. Try to guess which!) Operating in debt is the way that our global economy works. China, or US Bondholders (who actually hold more of our debt than the Chinese ever will) cannot file some paperwork and force the population of America out of the country into a smaller one. It could be that humanity as a whole is exploiting the absurdity of such a system, flaunting the fact that despite the negative numbers on the balance sheets, life goes on much as before. Its easy to point to current events and say "Look at Greece! Look at what happens when a country racks up debt!". But countries have become destitute before, and they will become so again. This is not an argument against debt. After all, let's face it, Greece has been around since the Bronze Age. They've seen worse.

In addition, your example above takes for granted certain social values. It takes for granted the fact that anyone who has their basic necessities provided for will doubtless take advantage of this and live outside of their means. Its also sort of hints at the fact that of course dad couldn't afford to pay all those bills, and you were stupid to think that he could. Well, I believe these are very American assumptions. On the second point, in socialist democracies, government can, in many cases, afford to pay for these basic necessities like healthcare, maternity leave, etc, because income and sales taxes are very high, sometimes around 50-60%. In this country, we would equate taxes like that to the equivalent of the king of England bursting into your room on your wedding night to screw your new wife. We've been conditioned by our society to view contributing to the advancement of said society as a fundamental breech of our rights, and that nothing should be so abhorrent as parting with some of our money, no matter how beneficial the effects. I know you are in strong agreement with this, as you are a product of this society yourself. However, this is not a genetic imperative, it is a sociological one. As to the first point, this is not the case either. People in Spain and Germany aren't gorging themselves into obesity because the government pays their bills, that's us! We have a comparably small social safety net, and yet its we Americans who are living beyond our means, buying new cars and becoming the fattest fucks on the planet. Again, this is a product of our consumer based society. High taxes are seen as a violation of our rights because we have been told all our lives that buying equals freedom. It shouldn't take long to strip this down and discover the absurdity. I, for one, feel that a mandatory six weeks of vacation a year is more akin to freedom than two weeks and a new TV, but that's just me.

Anyway, back to the debt argument. I submit that the case against it is overblown and disproportionate to reality. Its easy for a presidential candidate to get a roomful of applause when he promises to "Git this country out of debt!", but such promises go far beyond the President's power in the first place, and in the second place, that applause would dry up quickly when the people providing it realize just what exactly our country's debt is providing them. So, I will use an argument you often use with me. Since debt is the status quo, as long as my creditors are happy with the terms of my borrowing and I can keep up the lifestyle to which I am accustomed in said debt without anyone else coming to harm, who are YOU to say that I ever need to pay it off? That anyone needs to pay it off? That the United States has to pay it off? This is simply the new perspective on an old concept, nothing more. And it is the world we live in.


However, while I feel these arguments are valid, I myself pay my debts on time.


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