The metaphor of the body politic is often a very good one, for both terms of the metaphor share some similarities: both bodies and governments are very complex entities with many interconnected, interdependent parts; failure or damage to one part of a body or a government can ripple throughout the whole and affect distant parts; both bodies and governments can be actors; both individuals and governments take actions such as growing, fighting, deciding, consuming, sickening, dying, and so on. The metaphor of the political body has endured for thousands of years as an apt and useful framework for conceiving politics because both of its terms are characterized by complex interdependency.
Yet it is essential to keep in mind that organic political metaphors are only metaphors, and that there are significant differences between individuals and states too. Bodies politic are immortal while bodies individual are not; bodies politic are of a scale millions or billions times larger than any single individual; bodies politic can draw upon the collective effort, intelligence, property, and moneys of millions or billions of people; the internal organization of a government is much different from organic anatomy and, unlike an of an actual body, is changeable; bureaucratic parts can be moved around whereas organic parts cannot. Yet we are supposed to believe that the finances of a government are just like the wallet of an individual? We are supposed to believe that the finances for a massive organization, with of all of society as its members and with a massive bureaucracy with multiple agencies and legislatures, is subject precisely to the same financial constraints as Joe Sixpack? Isn’t that absurd on its face? It’s like saying that the military has the same limitations, with its jets, missiles, divisions, tanks, and ships, as an individual has with the limited power to throw a spear with their biological arm.
I’m not saying that government isn’t subject to some financial laws of nature, nor am I saying that government should be free from all financial rules. What I am saying is that, because of government’s different structure, size, and characteristics, the financial rules it follows are necessarily somewhat different from the rules that you and I must follow as individual, private citizens. But the metaphor of personal finance for government budgeting misleads us into thinking otherwise. To keep thinking that the government “credit card” has run out, or that the government has a “pocketbook” or “checkbook,” or that government debt works like personal loans, or that the solution to the national deficit is just like personal debt — cut back on expenses — is actually rather silly, given the differences involved.
Here are some of the differences between personal and governmental finance:
• People are mortal, governments are not, so governments can loan themselves money across time and generations. If productivity growth is maintained, a debt taken out now can be invested in education or infrastructure and then paid back decades later when it is a much smaller part of the economy, and has produced much more economic value than the original investment. Additionally, with modest inflation, the debt’s nominal value remains the same but becomes smaller in real terms as the economy grows. In other words, when government debt is taken out and invested wisely, paying it back in the future when the economy is bigger is a good bargain for the public. Because governments can do this across generations, large debts in one generation can appear miniscule to a later generation. The $75 million in national debt incurred during the Revolutionary War, while huge in 1791, is the equivalent of what the federal government spends in about eleven minutes today and could be paid back easily.
• Governments can issue sovereign debt, while individuals cannot. Normally, when individuals find themselves too indebted, they have to either get new loans to pay their old loans, raise their incomes, or cut back on expenses — usually the latter is the only real option for most people. But governments can roll their debt over in ways that individuals cannot. Unlike individuals, governments can issue bonds, and as long as they pay the interest on those bonds to reimburse investors, they can continue to issue more bonds. As long as investors are willing to invest in those government bonds at reasonable interest rates it can be a good deal for governments to take on debt. Of course, eventually a point of inflection is reached when a government takes on too much debt and the interest payments become too high, making the tax burden of paying that interest excessive. Or, if a government threatens to default, investors may demand higher interest rates. The United States is nowhere near either of these possibilities; investors are currently settling for very low interest rates on government bonds, indicating that they are willing to roll over US debt indefinitely. A US bond is a very safe investment, and everyone knows it — as long as austerity airheads don’t force a default for political reasons, as they tried to do last summer. Governments create money, while individual people do not. Or, more accurately for the United States, the government sets the rules by which the Federal Reserve creates money through inter-bank loans. If needed in an emergency, the government can print money backed by the full faith and credit of the United States. This is not as negative a thing as neoliberals make it out to be — since we have never defaulted our full faith and credit are ironclad, again unless the austerity airheads force a default — although printing money, if done indefinitely, does lead to inflation over the long term.
• Governments can, if need be, cancel debts. Argentina and Iceland did so in recent years with minimal ill effects — within a couple years their economies started healthy growth and they regained their ability to borrow again rapidly, probably faster and with less economic damage than meted out by neoliberal IMF austerity packages. Sovereign default is less damaging to a state’s finances than bankruptcy is to an individual’s finances — states can often cut deals with investors for debt relief in a way that individuals cannot, and the recovery period is usually shorter. Austerity mavens want you to think debt cancellation or renegotiation is a bad thing for everyone, when in reality it is only a bad thing for wealthy lenders. But, as John Ralston Saul observed, historically debt cancellation has preceded periods of flourishing democratic creativity, such as the golden age in Athens that followed Solon’s reforms – which gave birth to Western civilization.
In short, public budgets are not the same as your wallet, and you should stop thinking that they are. That is a bad, misleading metaphor. Not only is the personal wallet metaphor inaccurate, it makes it seem like the solution to financial or economic problems is always to cut back on spending. That’s what you have to do when your own wallet is empty, so that’s the solution the metaphor naturally seems to lead to. But that’s not how reality works with regard to public debt! They are not the same. America’s debt in particular, as has been pointed out endlessly, is a product of insanely high health costs (attributable to our privatized, profit-seeking-unto-death health care system), the Bush tax cuts for the wealthy, the wars and huge military budget, and the temporary costs of Obama’s inadequate stimulus, which are coming to an end. Rather than austerity cuts against the poor and middle class, which is a form of class warfare, we should create a public health insurance system, raise taxes on the wealthy, and cut the defense budget radically.
In the mean time, don’t be fooled by claims that the only solution to our deficits is to cut government. That is exactly the wrong medicine during a recession! We need much more public investment; indeed we need a program much larger than Franklin Roosevelt’s New Deal, and one shifting us to an environmentally sustainable economy, for many reasons: to end the Great Recession, to repair our broken infrastructure, to build needed public schools and hospitals, to switch our energy systems to renewables, to create more public spaces, to restore blighted urban and rural areas, to build communities, to make college affordable again, to green the economy and create a new way of life that is in harmony with nature. The austerity agenda, metaphorically disguised as being good for the public “wallet,” is actually aimed and maintaining exploitation for the narrow self-interest of the rich. Rather than budget cuts, we should be expanding government’s domestic economic role, for the good of the public and the world.