It has occurred to me that the fungibility of public debt is not sufficiently recognized—and perhaps of private debt as well. In other words, when our government in the U.S. engages in deficit spending, the focus is generally on who, precisely, is the immediate beneficiary. As Richard Heinberg notes in The End of Growth, deficit spending has often been coincidental with higher military spending, in which case government deficits and the growing debt is seen as function of American militarization. Alternatively, or additionally, deficits like the one initiated by George W. Bush, alongside his tax cuts for the wealthy, may be seen merely as a largesse for the rich. Others, particularly political conservatives, are critical of what they see as a bloated welfare state and will always see social programs as some ill-conceived fiscal vacuum sucking-up any tax revenues and budget agreements not held closely in check. In any event, government deficits are often consider as being outside the economy, as if the borrowed money is being stuffed under the mattress in the Lincoln Bedroom.
I do think it is important to understand not only who directly benefits from deficit spending, and also the context and conditions under which Congress and the president decide to fund some amount of its total outlays with borrowed money. At no point will I judge such considerations to be unworthy of our attention. However, lost in this focus on the direct beneficiary of government spending (or failure to raise revenue) are some very important systemic considerations that, I will later suggest, help explain the way a post-peak economy has extended itself while offering a hypothesis about the way growing inequality is a likely, if not inevitable, outgrowth of a capitalist economy as it nears the end of easy or possible growth.
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