Revisiting the Moral Deficit

Why can’t the liberal Left answer the Right when budget deficits are the issue?  Why are Democrats, Obama included, so eager to reduce spending on so-called entitlements?

Because they agree with Republicans on the morality of spending, the causes of economic growth, and the numbers that flow from this agreement—and only from this agreement.

This bipartisan consensus reads as follows.  “We’re spending too much on Medicare and related welfare state-sponsored services, so much that radical changes in these programs are urgently necessary.  The disparity between contributions made and benefits received is impossible to sustain either as a moral proposition or an economic projection.  Meanwhile, however, our choice of revenue sources has shrunk, because we’ve learned since the 1970s that we can’t penalize the ‘job creators’ [investors] in the private sector by raising taxes on their profits and incomes.  Thus we face budget shortfalls at the federal and state levels that can be met only by spending cuts.”

The Left and the Right diverge only when they discuss where those cuts have to be concentrated.  The liberals say don’t balance the budget on the backs of poor people, let’s slash the warmongering Pentagon instead, or maybe rescind Bush’s tax cuts (but only if our fund-raisers say it’s OK).  The conservatives say don’t balance the budget on the backs of rich people—if we do, they’ll stop investing and creating jobs, maybe even go on strike because the future looks too uncertain, no, let’s slash “welfare” instead.

In other words, both sides tell the same the story: the growing deficit is an obvious constraint on long-term economic growth because it crowds out private investment in the present and risks default, but it’s also a moral problem because the “entitlements” it provides have stifled personal initiative and disrupted the proper relation between effort and reward, that is, between work done and income received.  There’s no difference on the diagnosis; the debate is over how to treat the disease.


What appears as an argument about allocating material resources thus becomes, or rather just is, an argument about the disposition of moral properties.  And, as usual on such metaphysical (or theological) terrain, if you want to join the argument, you have to be able to suspend disbelief.  To put it more plainly, you must treat two great fictions as mere facts—you must believe that a “sovereign debt crisis” is impending in the US, so that comparisons to Greece are convincing, and you must believe that private investment drives economic growth, so that taxing corporate profits looks risky.

Before I explain how these fictions have become facts, and why we should treat them as funny stories or fairy tales, let me illustrate just how metaphysical the argument on the federal budget deficit has become.  The House Republicans issued Paul Ryan’s budget plan as their own on April 5, 2011, calling it “The Path to Prosperity.”  Here the so-called job creators in the private sector become deities to which any offering is insufficient.  And here the rationale for cutting or capping or dismantling “entitlements” like Medicare, Medicaid, and Supplemental Nutrition Assistance (food stamps) goes like this: “A government that buries the next generation under an avalanche of debt cannot claim the moral high ground in the world. . . . From a moral perspective, these programs are failing the very people they are intended to help. . . . The safety net should never become a hammock, lulling able-bodied citizens into complacency and dependency.”

Over the next few days, David Leonhardt and David Brooks of the New York Times and Jacob Weisberg of Slate published meditations on this quite radical budget proposal.  Leonhardt summarized new research on the costs and benefits of Medicare, noting that the payoff in medical care from contributions to Medicare over a working life was about 3 to 1, a good bet for seniors but a dubious economic proposition—perhaps a moral problem—for the rest of us in view of the demographics.  Brooks applauded Ryan and announced that this disparity between working-life contributions to and later benefits from Medicare is simply “immoral.”  Weisberg also celebrated the audacity of the Ryan budget, and voiced serious doubts about the sustainability of the welfare state as presently constituted (“Medicare is projected to eventually consume nearly all federal tax revenues”), implying that the discrepancy between inputs and outputs is something more than an economic issue.

At the same moment, Greece began to look like the end rather than the beginning of western civilization—the seat of profligate government spending, the home of effete bureaucrats and pampered retirees, the shape of a future overloaded with geriatric debt.  Reputable journalists tried out this theme in May, but now, over the last week, it’s become an extreme sport where columnists play by no rules, at, for example, where Guy Benson chastises David Brooks for letting the Democrats off the hook (!), and at the New York Post, where Michael Walsh warns that “what’s happening in the cradle of democracy could be coming here.”  But then even a sober, prize-winning columnist for the Financial Times, Gideon Rachman, announces on July 4th that “America and Europe are in the same sinking boat” because their public finances are “out of control” and their political systems are dysfunctional

Meanwhile, Jim Wallis, the pious liberal preacher, and Riard Land, the Southern Baptist Convention leader, square off in a video duel at the New York Times “Bloggingheads.”  Wallis begins by saying three different ways that a budget proposal from Congress or the President is a “moral document,” and congratulating himself for being a member of a new, ecumenical group called the “Circle of Protection,” which will insist that government spending on poor people didn’t cause the deficit, no, wars did.  Now there’s a strong stand for you, starve the armed services because they train, employ, and educate the very same people targeted, once upon a time, by the War on Poverty.

Land responds by saying that of course social spending is a cause of the deficit, that $700 million in “means-tested welfare services” have produced single-parent families, the “largest cause of poverty” and thus a continuing, expanding drain on taxpayers.  The wars were carried off the books, you can’t blame them for the deficit.  To close the budget gap, you make sure that fathers can’t walk away from their obligations by abolishing no-fault divorce!  That way, they stick around, they work hard, and nobody stays poor.  Now there’s a stronger stand, worthy of George Gilder, Charles Murray, Harvey Mansfield, and Matthew Crawford at their most hysterical.


It all sounds pathetic, and I suppose it is.  But the crudeness of the arguments—their appeal to basic emotions and inane assumptions—can alert us to certain truths we might otherwise miss.  It’s like analyzing a dream, or watching a low-budget slasher movie, where nothing is left unsaid or unseen.  When we’re done, we’ll want to sublimate the content of what we’ve experienced, but we know that while we’re at it, we’re translating an archaic language that contains knowledge we might use in our well-lighted, waking lives.

With that psycho-cinematic metaphor in mind, let’s listen to the political id that is the Post’s Michael Walsh.  He says what everybody else wants to but won’t.  He’s the extremity of our discourse—like Wes Craven, he amplifies our fears to the point where quantitative change becomes qualitative, and he does it gleefully.

“Welcome to the beginning of the end of the welfare state.”  That’s how he framed his argument on June 29th: the dissolution that is Greece “could be coming here.”  Here’s the real hook.  Walsh posits three differences between those Europeans and us Americans: they lack our “tradition of self-reliance,” they never developed a Protestant work ethic, and they think of entrepreneurial self-promotion as an embarrassment.  But these of course boil down to just one cultural difference that Walsh, to his credit, summarizes this way: “the disconnect between productive labor and earned reward has never been so great.”

That’s the moral problem these journalists and politicians, particularly but not only Brooks, are addressing when they worry about the budget deficit.  Somebody’s receiving income without working for it: their consumption of goods is not justified by their prior production of goods.  That’s the heart of the matter: the so-called sovereign debt crisis that supposedly looms over the full faith and credit of the United States is, by this accounting, a moral deficit that presents symptomatically as an economic problem.  Indeed, the numbers (the projections) just don’t add up—or down—unless you treat the revenue shortfalls at the federal, state, and local levels as measurable moral failures.

How to put this as plainly as possible?  There’s no debt crisis on the horizon unless you assume that getting something for nothing is intolerable, and that we can’t raise taxes on corporations or rich people because their investment will create jobs and drive economic growth.  Taxing the rich means the redistribution of income away from profits and dividends, toward wages and consumption—but first toward federal coffers, transfer payments, “entitlements”—and this is what all the fuss is really about.

But what if private investment is unimportant when it comes to growth?  What if consumer spending, transfer payments and so-called entitlements, not increased private investment out of higher corporate profits, have kept the economy afloat since the Great Depression?

What then?


Now Walsh is stating clearly what everybody else assumes, and that is the central importance of what I call the criterion of productivity, the regulative principle of modern bourgeois society, capitalism, and their hybrid successors: “From each according to his ability, to each according to his production of value through work.”  In other words, you have to buy the right not to die, and you do that by making a living, having a job, receiving an income—by going to work every goddamn day.

The ancient Christian sects and the modern socialist parties insisted on a disturbing alternative, the criterion of need: “From each according to his abilities, to each according to his needs.”  In these terms, charity wasn’t the generous function of naturally superior station—noblesse oblige, or “giving back” as the rich folks now say—no, it was a social imperative and a political obligation for every one of us, regardless of our standing.  That’s what it means to be your brother’s keeper.

The criterion of need has gone missing in this pathetic debate.  So the real moral deficit is here, on the Left.  We don’t want a “Circle of Protection” organized by compassionate clerics who feel sorry for those of us who can’t make ends meet.  To hell with alms for the poor.  We want to reinstate the criterion of need as it animated ancient Christianity and modern socialism because it’s the workable, practical, necessary alternative to the moral disgrace of the Republican budget proposals and, I hate to say it, of Obama’s capitulation to them.

Don’t get me wrong, I’m not interested in how to do the right thing.  I’ll leave that to Jim Wallis and his earnest comrades.  I’m interested only in how to do what is required to reduce the deficit and renew economic growth, which are one and the same project.  That project entails both a redistribution of national income away from profits—because cutting taxes on corporate revenues almost never leads to more investment, more jobs, more growth—and a new perspective on transfer payments and “entitlements.”

The redistribution of income is mandated by three historical facts.  First, net/new private investment out of corporate profits is unnecessary to drive growth, and hasn’t been since 1919.  Second, and consequently, corporate profits as such are restless sums of surplus capital in search of the highest return in speculative markets, ready to inflate any available bubble: they don’t promote growth, they cause crises.  Third, consumer demand rather than saving and investment has driven growth since the 1920s, so it must be made more effective by putting more income in the hands of consumers.

A new perspective on transfer payments and “entitlements” is overdetermined by the anachronism of the criterion of productivity.  Since 1959, the fastest growing component of household income has been transfer payments provided by the federal government, which have risen 10 percent annually; by 1999 they amounted to 20 percent of all “labor income,” that is, of wages, salaries, and compensation not derived from ownership of property.  By the turn of the new century, in other words, one in every eight dollars received by all households was unearned income, but for those without rents or dividends or capital gains to spend, the ratio was one in five.  If you apply the criterion of productivity to this situation, you get a big moral problem.

Meanwhile what Michael Walsh calls the “disconnect between productive labor and earned reward” became egregious, but not on the assembly line or the shop floor or the welfare office, and not in professional sports, where athletes learned to get paid properly for their half-lives.  No, that “disconnect” was most pronounced on Wall Street and in the companies that had changed hands in the salad days of Mergers & Acquisitions, when the “global savings glut”—that’s Ben Bernanke talking—was created by the Reagan Revolution.  That “disconnect” was most pronounced on the trading floors and in the boardrooms, where bonuses and stock options turned clever quant-jocks and plodding accountants into Masters of the Universe.  If you apply the criterion of productivity to this situation, you get an enormous moral problem.


But the perverse lesson to be learned from both Main Street and Wall Street is that there is no transparent relation between work and income, effort and reward, or, for that matter, crime and punishment (ask the so-called felons in your neighborhood correctional facility).  You can work your ass off and stay poor; you can do almost nothing and get rich.  Why, then, does the Left in general, and not just its liberal component, continue to abide, in every sense, by the criterion of productivity?

It may sound daft, in view of our benighted condition, to say that now is the time to apply the criterion of need—to say that it will clear the path to renewed economic growth and lead us toward a change in moral season.  But the ethical principle, to each according to his needs, already resides in and flows from our historical circumstances: “ought” and “is” have already converged.  On the one hand, we’ve learned to detach the receipt of income from productive labor: the welfare state and its attendant transfer payments have slowly and silently taught us this lesson, but then so too has the great mystery of Wall Street bonuses.

On the other hand, we’ve learned that we can produce more with less labor, both living (the current work force) and dead (past labor congealed in plant and equipment or represented as monetary claims).  The labor-saving innovations of the 19th century were matched and then exceeded by the capital-saving innovations of the 20th century, so that productivity soared even as net private investment and capital stock per worker kept declining after 1919, even as “automation” and electrical instrumentation and then cybernated information technology expelled workers from goods production.  The industrial work force hasn’t expanded since World War I; the capital stock per worker hasn’t either, unless you count defense spending or “residential investment” as contributions to the capital stock.

In short: the expansion of socially necessary labor ceased quite some time ago, and with it any meaningful correlation between the production of value through work and the receipt of income as wage, salary, or compensation.  The question that follows is, why would we want to reinforce the criterion of productivity?

Why would we want to repatriate all those manufacturing jobs long since exported to offshore platforms and developing countries?  Why do we want to go back to work by way of “full employment now”?

Why not say, instead, that the distribution of income is what concerns us, and that the “disconnect between productive labor and earned income” does not because it cannot, not anymore?  Why not say, we have reached a point in the development of the human species where socially necessary labor no longer contains, describes, or determines our possibilities, so that work can neither create the disciplined character we want from ourselves nor generate the incomes we need to support ourselves?

Why not say, the criterion of productivity has outlived its utility, and, as a result, insist that the criterion of need has now become an eminently practical program of both economic and moral progress?

Why not?



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5 responses to “Revisiting the Moral Deficit

  1. Paul

    “…net/new private investment out of corporate profits is unnecessary to drive growth, and hasn’t been since 1919.”

    Maybe I need to broaden my reading but I haven’t seen anyone else make this observation. You discuss this in “Against Thrift” and I wonder if this notion/metric has been challenged by anyone with a contradictory factual economic interpretation. Is this an indisputable fact, if so, it is a critical piece of information that should be in the common discourse of every economic discussion, after all it demolishes the foundation on which conservative economic investment theory rests.
    Sorry, I don’t mean to be questioning the veracity of the statement so much as I’m dumbfounded that it’s not discussed more.

    • I too was dumbfounded, until I read Dean Baker’s attack on me back in October 2011. The Left and the Right are equally complicit in maintaining the conspiracy of silence on investment. Nobody knows what to do with the simple fact that growth coincides with, and indeed require, declining net private investment.

  2. Gingerman

    I like your argument. But try making it to the white working class (also church-going) men and women — Reagan Democrats — who live in my south-side-of-Chicago neighborhood. It’s extraordinarily hard.

    The first thing they do is get resentful. They hear federal spending, and they picture members of minority groups living off of their (the white working class’) hard labor.

    So turning away from their brutal resentment, I describe the Wall Streeters as doing exactly that — living off the labor of others. My listeners may nod their heads in agreement and may even mutter something about putting the crooks among them behind bars, but only the crooks.

    They (my listeners) truly have a solid work ethic. You work hard. You earn your keep. But these folks also envy those with the lavish and truly easy lives — after all, these folks I’m talking to work damn hard and rarely get a break. Who wouldn’t want the easy life of the hedge fund manager, as compared to the plumber or electrician or …? And besides, they tell me, the rich folks legally own those assets from which they derive their income.

    So I tell them that, in fact, I AM ENTITLED to Social Security and Medicare. Entitlement is not a curse word. I’ve been paying for these programs (for others) for damn near 40 years — ever since I was old enough to hold a job that remitted payroll taxes.

    At this point, of course, I’ve caved into their assumptions … partly because I do buy into them at various levels. (I’m capable of working. I like the work that I do. I’m fortunate enough to have work, and work that I like. AND I don’t mind paying taxes … well, insofar as I’m not the only one paying my fair share. I’ve taught my kids to be self-sufficient insofar as they can be, allowing that there are many cases in which one can’t be self-sufficient, and not simply because one chooses not to be. And besides, self-sufficiency really is an illusion anyway. We ALL depend on MANY others to some degree.)

    So they argue “well, we can’t afford to keep this all going. It’s all a Ponzi scheme. There aren’t enough people working to pay for all the people who aren’t working.”

    I agree, and ask them if they’ve noticed that it requires far fewer people to produce the same building (say) than it took, oh, maybe even just 10 years ago … certainly as compared to 20 years ago. We now have cranes and all sorts of other devices and methods that make it possible to achieve a better result with less effort, with fewer jobs. In a way, the economy, as we have it rigged up, is one big Ponzi scheme.

    They respond: “yeah, that’s a problem, and in fact that’s exactly why the entitlements have to be curtailed. We have too few people paying for too many freeloaders.”

    And then my listeners suspect me of being a filthy socialist — well, either that or a bleeding heart liberal. A form of McCarthyism still lives among them. Or they question my credentials. What the hell do I know? The people on TV and in the papers are much better qualified than I am to opine on such matters.

    I have a similar discussion with other neighbors employed at small businesses where the proprietor essentially works side-by-side with them and has a more direct claim to ownership of the enterprise and its assets. These folks have even less patience for my argument that we should have discussions about who produces value at a given enterprise and who gets to control the value that’s produced.

    Well, it’s not an easy discussion. It’s the zeitgeist … bourgeois hegemony. How does that discussion go for you … say, with your students or your neighbors? How did it go for WAW when he was drinking beer and shooting pool with ordinary people in Eugene? You, at least, have a PhD next to your name.

    • I agree with everything you say! Still, the fact is that we can easily afford to be our brother’s keeper. When you acknowledge that, the moral issues get harder, not softer.

      • Gingerman

        An old fable brought up to date:
        A Tea Bagger (or is it Partier?), a union member and a CEO are sitting at a table with a dozen Twinkies on it. The CEO quickly takes eleven for himself. He then turns to the Tea Bagger and says “You better watch out for that union guy. He wants part of your Twinkie!”

        It applies to much of what’s behind the strained discussions I describe.

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