Saturday, July 30, 2011

Dueling Metaphors

As discussed earlier, much of our advanced, abstract thinking is grounded in the use of metaphors from basic physical experience. George Lakoff has presented two basic alternative moral frameworks, both drawn from the family: the strict father model, and the nurturant parent model. He sees conservative politics and religion as based on the strict father metaphor, and liberal politics and religion as based on the nurturant parent metaphor. Currently another family metaphor is in the news: the family budget. Must a nation, like a family, balance its budget? This dispute is fascinating in the ways it both matches and reverses the Lakoffian metaphorical expectations.

As expected, the "strict father" conservatives insist the nation, like a family, must balance its budget. The liberals are viewed as overly indulgent parents who allow their children to overspend. The interesting part is the second metaphor in the conflict: money. In a world of fiat currency, what is money? Is it a placeholder for a finite, non-renewable resource? Is it a nebulous, re-evaluable abstraction? Liberals insist the current U.S. debt situation is not a cause for concern. Unlike Greece, the U.S. has its own currency. Unlike other wrecked nations from the past, the U.S. debt is in its own currency, which is also the world reserve currency. Liberals insist the conservatives are being thick, not understanding the new economics of the unique U.S. situation.

Now this makes for an interesting reversal. Conservatives, who normally insist on American exceptionalism, say in this case the U.S. is not exceptional. More basically, the members of the conservative "faith based community" don't have faith in a deficit-spending fiat currency, while members of the liberal "reality based community" want everyone to have faith in the long-term stability of a fiat currency of a big deficit spender. The conservative metaphor, of the family with a balanced budget, is easy for everyone to understand. While the liberal idea of continuous deficit spending seems more like magical thinking.

Of course there are many other complexities and Machiavellian motivations behind the current impasse. And it will unfortunately probably be a fair while before the world revisits a core mistake that led to the current economic situation: the idea that bondholders can't be allowed to take a loss.


Gemfinder said...

This was great.

Gemfinder said...

A related role reversal concerns the morality of voluntary default on a financial contract.

Conservatives are more likely than liberals to consider strategic default immoral (e.g. choosing to default on a mortgage that one could, in truth, afford to keep paying).

Ironically, the strictest fiscal-morality faction of the House of Reps is now blocking exactly the measure that prevents nation-scale voluntary default on pre-existing financial contracts.

Seemingly, a policy more consistent with their own moral regime would be to raise the debt limit (keep promises already made) but also refuse to authorize new spending above tax receipts.

Eric Rollins said...

Two questions:

1) Do federal workers employment contracts have severance clauses?
2) What percentage of the federal budget is payroll?

If 1) is no, and 2) is less than the deficit, then technically they don't have to default on existing contracts (except where they are "contracted" to provide services).

Not saying this would be an acceptable way out.

Gemfinder said...

Checked just now. Enlightening.

2011 budget shortfall is $1.6t on a total budget of $3.8t. So the deficit is 43% of total spending, or 11% of GDP (!!).

Education, health, welfare, pensions and interest are 64% of the total budget. Stated another way, more than 100% of tax receipts are consumed by transfer payments codified in law, plus the bureaucracy to deliver those payments.

If you shut everything else down -- military, federal courts, all regulatory agencies -- you still come up slightly short.

But of course military suppliers have signed contracts with the govt. Judges have lifetime appointments. Lots of explicit and implicit commitments.

The above oversimplifies but is still revelatory. Seemingly the debt limit must trigger contractual defaults of one sort or another, unless raised.

Unclear how far away the first actual default might be.