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January 30, 2012 4:30 PM “Deleveraging” and Debt Scolds

By Ed Kilgore

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Matt Yglesias makes an extremely interesting point today—one made more briefly on January 20 by Paul Krugman—about the interaction of public- and private-sector debt in the United States. With relatively few non-economists noting it, the U.S. has been rapidly shedding private-sector debt—or “deleveraging”—during the Great Recession, to the point where total debt is actually declining.

Both Yglesias and Krugman bring this up to point out that all the alarums about public-sector debt are being raised in isolation from total debt trends, and the risk of “deleveraging” the economy too rapidly. Not being an economist, I’m interested in a somewhat different issue: the political power of the argument (beloved of such chronic debt scolds as Robert Samuelson) that Americans (especially middle-income Americans) are slothful, selfish louts who refuse to understand the country’s future depends on their willingness to give up luxuries like Medicare, Social Security, public education and collective-bargaining rights. It’s the closest most conservatives can get to a politics of common national purpose, even though it’s an argument that is intimately connected to policies encouraging wealthy “job creators” to chow down on the good things in life with all their might.

If we are not in fact a society on the brink of collapse because we are impossibly “overleveraged,” then the moral and poltical argument for “shared sacrifice” in which the sacrifice is mainly shared by those at the middle and bottom of the wealth distribution scales, then the whole game gets a lot more complicated for conservative politicians.

Ed Kilgore is a contributing writer to the Washington Monthly. He is is managing editor for The Democratic Strategist, a senior fellow at the Progressive Policy Institute, and a Special Correspondent for The New Republic.
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Comments

  • Mimikatz on January 30, 2012 5:15 PM:

    Complicated only if those conservative politicians value consistency and accuracy.

  • PEA on January 30, 2012 5:23 PM:

    Remember right after 9/11 when Bush asked us all to go out and SPEND? He wanted to be sure we didn't cut back our spending (demand) due to our general fear, thus hurting his/our economy.

    But now the GOP needs to portray the non-GOP part of the 99% as slothful (etc), so the GOP part will look down on them and vote for policies that shaft the 99% without realizing it will hurt them too. They are just playing into the "me first, who cares about you" attitude of their supporters. Not clear anyone can get through to them, but possibly it would help to spell out that when the GOP call for "broadening the tax base" they mean that ALL in the 99% (including GOP voters, not just the other --ie."minorities, bums and welfare cheats") will have to pay more while the 1% will pay less. But maybe their psychology is such that they will be glad to pay more if they believe that others they despise are also paying more??? I have a hard time trying to get into their mindset.

    Historically, back in the 50's it was enough to have just the dad employed. Then women went to work in droves, in part to maintain family purchasing power as unions and wages stagnated and inflation was incredibly high (13% mortgages anyone?). Then families were able to tap into the inflated values of their homes to cushion their stagnant income. Now that is gone. Not clear to me that people have been profligate so much as trying to compensate, without really realizing it. Meanwhile business and state govts have tended to reduce their workforce,expecting existing workers to do the same total amount of work as before their colleagues were downsized. So we are actually pretty productive. Of course we don't get the 6 wks paid vacations and extended maternity leaves that Europeans used to get until recently. If only the GOP voters knew more about the dreaded European lifestyle. But IF they ever went on a trip to Europe, undoubted they'd do so on a cruise so they wouldn't have to eat or sleep in the foreign country, talk to foreigners, find out what it's like to live there.

  • lou on January 30, 2012 5:58 PM:

    One other side of private debt is how it has been used financially by those at the top like Romney to skim billions, er trillions of dollars, out of the production economy for the private gain of a very few.

  • SYSPROG on January 30, 2012 9:09 PM:

    I watched a guy on TV today who wrote a book on the 'Moocher Society'. Of course, the right took it and ran telling us it all meant Medicare and Social Security were signs of our 'moocherism' but a guest brought up the Catholic Church (as an example). How dare you stand in line for handouts from the government (and pretty close to FIRST in line) and then whine when you are told to follow the rules. What about corporations and their tax breaks? I think that is MUCH more a sign of entitlement and if the 'debt scolds' really meant what they preach maybe we should get rid of all the loopholes and check back on the debt in say a year?