I was reading Michael Pettis this morning, he wrote a post on When do we decide that Europe must restructure much of its debt? which you can find on mpettis.com . Michael Pettis, Steve Keen, and a few other economist who have not fallen into the neo keynesian trap of false assumptions, well worth the effort to read when they have something to say. Unlike Paul Krugman, they aren’t full of themselves and mistake political ideology as the yardstick for measuring the world. Yes, dear reader, Krugman is a horse’s rear end by any standard. Debt, that credit used as money and spent against future earnings is, as obligations go, is a moral one and hence must be repaid as faithfully to the penny as possible. To do less is to dishonor one’s name and the credit bureau will see to that for you. The issuance of credit is seen as a moral hazard is in almost every society borrowing is viewed as unseemly at best and a moral wrong against the family name. The fact that so many individuals in today’s modern societies enter into debt so freely and so often may be viewed as a relaxation of moral authority. That is a problem for philosophers to pummel with their thoughts.
On the other hand, government debt, that is goods and services contracted and paid through the use of bonds, notes, debentures, and other debt instruments, does not carry quite the moral charge. We may take a liberal or progressive stance that what is done in the name of the people is done with some sense of honor. Well, maybe not every enterprize. But when we speak of the welfare of society at large then we include a goodly number of individuals. Public welfare comes in a number of different shades of grey. The money we spend on public school systems or the building of local, state, and national roads certainly counts as government spending to promote the welfare of its people. On the other hand when government at any level conspires to involve itself at levels we should consider inappropriate then we should question that moral claim of doing good works for the many. I understand that if I ride my bicycle on public streets I may be stopped and given a ticket for not wearing a protective helmet. We never had helmets when I was a kid and certainly the Tour De France was rode with only the use of small billed caps. Worse yet is the fact that should your child be caught riding a bicycle without a helmet, you, the parent can be charged with child endangerment or worse, child abuse. Never the mind all the arguments for safety, which count more on a few isolated cases than mass injuries, these arguments allow the intrusion of government into areas of private behavior that had been off limits. It is a slippery slope and leads to a fascist government where one’s every move is monitored and examined for correctness.
Now Mr Pettis does not take the argument that far, just that government debt is a different animal where moral hazard is concerned. He sees the need at times for the government to restructure it debt so that it is repaid, if possible and if it works to the benefit of the populace. I would agree on that point. On the other hand, I am not in favor of government debt to be used as an all encompassing program to spend money on the public good when the likelihood of excess borrowing is in the balance. Hence, if the various governments must restructure their debts then there must be some restructuring of governments. The last employment figures I saw on the subject of government employment were that combining local, county, state, and federal employees their aggregate numbers would account for almost half of the employed population. That means that each of us who has employment in the private sector must pay the taxes that provide the wages of those who are employed by the various governments. True, these government employees pay taxes as well, but hey pay their taxes with the tax monies you and I in the private sector provide. In essence, their contribution to the government coffers is minor. That is like taking money our of your savings account and then paying back a small part as a tax and saying that you have contributed to savings again. Actually, all that you did was spend less, not save more.
If governments could only spend the money they took in as taxes, we will include all revenues as taxes, so as to avoid confusion, then then number of employees would be far fewer. Back when this country was founded, in terms of the constitutional convention, the idea for the federal government was for it to act more as a caretaker of the national interest. The individual states were assumed to be the real powers in these thirteen states. And even the states saw a need to limit its nose into the lives of its inhabitants. Now look at us. Hell, look at Europe, stuck with an unelected commission that passes laws and other regulations that cross national boundaries and threatens not only to usurp those sovereign powers but enlarge its size and role in a continental society. Hence, the need for the reset button that not only restructures government debts but also restructures government organizations and reduced the number of government employees by a great percentage, and it better be at least twenty five percent. Public employees used to be referred to as public servants, not members of public service unions as if they worked in private industry. Working as a city, county, state, or federal employee carries that sense of responsibility that one is working for the good of the people, not yourself or union. That the various governments require the services of individuals to carry on the work that government needs done is a given. If voters are to be registered, then we must have individuals working in that official capacity to record such information as would be necessary for the purposes of establishing that such individuals who they say they are and reside at such addresses as given. On the other hand there are a great many positions that can and should be eliminated. Does a city really need a visitors bureau? There are thousands and perhaps a hundred thousand such departments that can be eliminated at one. The problem is that such individuals who occupy those positions would be forced to find gainful employment doing real work. You see, the problem of government debt is that it leads bloated employment, unnecessary departs and other political fiefdoms, as well as a general waste of taxpayer money. Expansion of credit leads to the expansion of debt and government has no resistance to expansion of power through moral hazard. Oh one can revisit Laurence of Arabia and view that scene when the various arab factions are sitting around the tables discussion government and yet none of them has the faintest idea of how an electric power plant works or how to deliver water through the public water system, as simple as it was back then. Yes, governments have practical needs that must be met but there limits when expansion for the sake of “It’s a good idea” takes place. The problem with governments is that those who are in charge seem to believe that resources are endless and act accordingly. I think it time to hit all the reset buttons.