Just a Word About the National Debt and the Economy

I cannot count the number of times lately I’ve heard about how the government — whether state or federal — has to live within its means, just like we as individuals and families live within our means.

This sounds so fiscally responsible that it’s difficult to even want to argue.

Well-  almost.

Being the expert mis-matcher that I am — let me give it a try.

Everybody has been talking about the Keynesian Economics used by this Whitehouse (and the previous half-century-plus’s worth of Whitehouses.)  The problem with bringing Keynes into this, is that Keynes’  Graves* Level 5 economics  is the very definition of economics at this time in the US.  Keynes is both what got us into this near/possibly-soon-to-be economic depression, and what the fixers are trying to use to get us out.

And you know what Einstein said about trying to solve problems from the same level where they were created….  Doesn’t work.  Never worked.  Never will work.  Won’t work from inside the Whitehouse, inside the statehouse, or inside the outhouse.

So, if you can’t solve Keynesian–based problems with Keynesian thinking, how do you solve them?

I’m going to back up a step and point out a bit of linguistic sleight of hand, first.

What do we mean when we say “living within our means?”  There are a lot of people using this phrase without first explaining what they mean by it.

A few years ago, at a time when my government laboratory job’s insurance had been out of effect for 3 weeks, and when my then teenage son first became ill with what has become a chronic health problem, I put all his doctor bills, testing bills, hospital bills, and constantly changing medications on credit cards.  I depleted our savings and his college fund in a matter of days.  I stopped working any contract, temporary, or part-time jobs for several days, and then returned only sporadically for next few months because even though he was allowed to go back to school — the constant adjustments and re-adjustments of his medications left me unable, in good conscience, to leave him home alone.  Some of the drugs made him pass into unconsciousness.  Others made him lethargic and/or had the potential to cause further kidney damage or heart damage — to be a good mother, I had no choice but to stay with him on some days.  At the beginning, I was unwilling to leave just because of the fear of leaving him alone with this new and scary changes in his life.

As the drugs they were giving him started to work more consistently — I took more jobs and he was in school more and more of the time.  But by then, we were basically living on contributions from family and friends, and the limits on my credit cards.  I’d sold the small piece of land where I’d hoped to one day build a house.  I’d sold off my dark-room equipment.  I’d sold what little jewelry I owned and the few rare coins I’d picked up over the years of just paying attention to what fell into my hand.  I’d sold (to other collectors) many of the framed classic film posters I’d collected over the years and used to decorate the walls of my house.  I sold the one thing I’d inherited from my Grandfather — to my mother for about 10% of what it was worth — just to try to keep it in the family.

By whatever logic, I decided to pay all the doctor bills as they came in, not realizing that it left no money for more immediate needs like food, gas, mortgage, car insurance, medications — all those things that keep life going.  Even when I ended up declaring bankruptcy, I had no outstanding bills to the actual physicians involved.

During that time of my life, I was not, by any definition, living within my means.  If I’d lived within my means, I wouldn’t have been able to afford any of the drugs — and especially not during the weeks/months where they would prescribe a months’ regimen  at a time, only to change their minds 5 days later — leaving us with $150-bottles of pills that were still 3/4 full and no longer in the regimen.

I also wouldn’t have been able to put gas in my car.  Or make the payments on my car, for that matter — even though I was in the last year of paying for it.  I wouldn’t have been able to pay my utilities (in fact, I turned the heat off that year to keep the bills low.)  We bought no new clothes, no books — nothing new.  We canceled cable television.  We didn’t go to the movies.  We ate a lot of pasta and potatoes and soup.

But even then — we were not living on what I was making.

And using only and exactly the amount of money you are earning/bringing in is what many of the people talking about “living within our means” think we are talking about with discussions about budget, debt, and spending.

But the truth is — there is almost nobody in our Keynesian Economic Theory-version of Capitalism/Society who lives within their means by that definition.  Or — who would try to during times of economic emergency.  During a crisis, most of us all would do something in the range of what I did during an economic emergency — we would spend everything at our disposal.  We would cut back on non-necessities.  We would borrow from friends and family.  We would use up any and all sources of credit we could get our hands on.  We would sell of things we had that would raise temporary funds — just to keep the wheels of medicine and part-time jobs turning.

Let me back up even further, since most of this great Keynesian-Capitalism cave-in was triggered by dubious and criminal abuses in the real estate/mortgage business.

If we were to strictly adhere to the pre-supposed rules of only spending what we have in hand, there would be almost nobody in this country outside of the extreme upper class children of old money who could ever actually buy a house.   How many of Americans have the cash in hand when they buy a house?  Ever?  A few.  Some. But not many.

Does that mean that nobody who buys a home with a mortgage is living within their means?  How about all those Congressional folks who are banging on about living within our means?  How about all the folks at town hall meetings and voting for people who are advocating that the country live within its means?  Do they own their houses, cars, vacations, computers, jewelry/gifts, Christmas presents outright the moment they purchased them?  Do they operate on a cash-in/cash-only basis?

Probably a few do.  But I’d bet every tube of paint in my studio that it’s a really REALLY small percentage.  Hardly any, really.  Why?  Because that’s not the Keynesian model.  That’s not how we do business in this country.  That’s not how we think about our money.

When you or I go to a bank to borrow money to buy a house (or even a new car or boat or business investment — or whatever) they look at our credit rating, our work history, and our other real property.  They consider our history of being able to pay back what we borrow.

And back when my finances hit the wall — I had a really good history of paying back what I borrowed.  I’d had a good job for several years.  I’d managed to not overstep and spend more than I had honest expectations of paying for.

But I’d never even seen the kind of deep, radical mess that was coming.  I really had no idea how much a life threatening, long-term illness could cost.  I was a dumb, inexperienced single mom — literally without a clue.  I had no way to judge how long the crisis could last, or what the world could expect a single mother to do when her child is severely ill.  150 years ago — it would have been clear — my son would have died.  Period.  It would have taken a few weeks or months — but he would not have survived without the medical care he received in the last decade of the 20th Century.

So why is it, then, that when banks loan money to people who buy a house — we don’t accuse either the borrowers or the lenders of abusing the rule of Living Within Our Means?  Because we know that cash in hand is not nearly as important as it sounds.  We make bets about future earnings.  We judge people by their capacity to earn.  We look at other real property and view that as potential and collateral.

In fact, there are formulas for these bets.  Most banks will set you up (gladly) with a mortgage worth 1.5-2.5 times your annual household income.  Until recently — it was more like 2-5 times your annual income, but those formulas didn’t work out too well.  When the mortgage loan is for 200k, and the bank knows it’s going to get closer to 450k (or upwards of 700k when the interest rates were at their highest) then yes, they’ll take the gamble.

That’s basically all the credit card companies, banks, and now, the Chinese, are doing.  They’re gambling.  This is all about usury — that thing centuries worth of pre-capitalist/pre-Keynesians tried to avoid like the plague.  And the very thing that powers the engine of Capitalism that so many equate with modern democracy and freedom.

So when we hear people talking about “living within our means” — which version are they talking about?  The kind of living within our means that says we will only spend the cash we have in hand, or the kind of living within our means that says we will operate within the normal rules of Capitalism?  It’s the difference between Graves Level 4 economics, and Graves Level 5 economics.

So here are a couple of numbers to mull over in light of what we know about the L5 meaning of debt:

Current National Debt 2/27/1:  $14.19 trillion

2010 US GDP:  $14.41 trillion

____________

Back in the days when deficit spending was first begun by FDR in the attempt to keep people alive and bring the country out of the Great Depression, President Roosevelt spent a lot of time talking about how we as a nation would pay off this new, national debt.  Why? Because he and the majority of the country had existed for so long in Graves Level 4 Economy-land.  Even though the economic theory that made his many creative approaches to resolving the problems of the 1930’s possible was based on Keynes’ theories (first published in 1936), neither the country nor Roosevelt (we presume) had a good enough grip on the ideas driving these new approaches to national economy to do anything else BUT be on constant defense about paying that debt off.   It was a lack of understanding of how debt fit into the big picture that caused so much energy to be used addressing the subject of paying off the debt.

Here’s an important thing to remember about Graves Level Differences: it is so common as to be almost universal that every one of us tends to see anyone (Anyone!) who is not operating at the same Graves Level that we are as criminal, insane, sinful, stupid, useless, and/or weak.

Let me say it again: We see anyone who is not operating at the same Graves Level that we are as

criminal,

insane,

sinful,

stupid,

useless, and/or

weak.

Any time you hear those words coming out of your own (or anybody else’s) mouth to describe the behavior, beliefs, or ideas of someone else — bet your paycheck that what is going on has to do with the clash of 2 different Graves Levels.

When John Maynard Keynes was called in to explain the theory to FDR — it was such a reach into upper Graves L5 thinking, that the FDR Whitehouse basically shrugged its white-columned shoulders toward the public, and moved forward on blind and quite hopeful faith.  But still — with non-stop explanations about paying off the debt.

This is a little like having to re-address the “how are we ever going to pay off this mortgage” question every night before bed.  After a while, the question stops being an issue because insofar as L5 systems work for L5 problems — the mortgage/loan system works.  (It was only when the broken and unhealthy L3/L5 mask problems invaded home finance that the American system of Capitalism moved into foreclosure.)

L5 is a great stretch for L4, regardless of the circumstances.  But FDR had already seen how badly L4 economics was working on his — and the whole world’s — monstrous depression.

When what you’re doing isn’t working — the smart move (always) is to do something else.  To take an old pattern and just repeat it louder, longer, stronger, and with more urgency will still yield the same results, no matter how many times you repeat it.  (Yes, that’s the familiar definition of insanity.)

But FDR got it.  Whatever you’re doing — if it isn’t working — DO SOMETHING ELSE.  Find the best minds — the most innovative thinkers — and do something else.  And if that doesn’t work — you do something else.  And if that doesn’t work — well, you get the idea.

In our case — the problems weren’t created by broken 4 economics, but by broken 5.  And no amount of 5 economic theory is going to fix this.  And no amount of 4 economic wishful thinking or nostalgia is going to fix it.

There are Level 6 economic theories out there.  But it’s a tough sell.  It involves another of those leaps of faith to even hear them out.

Best guess estimates are that when FDR was battling the Great Depression and global meltdown, more than 65% of the US was running L4 as their normal mode of fiscal operation.  There were maybe 20-25% in L5 (though many of those were actually L3-wearing-L5-masks,) and the rest were distributed between L2, and L6.  But even that cluster of L5 had just recently moved from the L4 they’d grown up in.  They weren’t the pros we are accustomed to today.

Fast-forward to the 2000’s first decade and our unimaginable worst economic meltdown since the Great Depression.   It should be noted that the Great Depression didn’t actually begin with the Black Friday of 1929 — but escalated bit by bit and turn by burn over the next 2-3 years.  Which is about where we are now.

What’s important for this discussion is the Graves Level shift the country has gone through in the last 75-80 years.  Again, these are just estimates based on observation by myself and a few others who work with the Graves developmental model on a daily basis, but the L5s are now in the majority — though again, many are L3’s in L5-wolf’s clothing.  Even though this is the majority — the number of L4s is still significant, and loud.  They want the rules to be clear, absolute, immovable, and passed into law.

The escalating speed at which we as individuals move through the stair steps of the Graves Model is reflected in broad societal steps as well.  It’s the same acceleration we’ve all noticed in technology and innovation.  The knowledge and experiences available make growing-up-fast a way of life for technology, for individuals, and for the societies in which they exist.

So if we generously assume that 45-50% of the US economic pulse beats at L5, (or L3 masquerading as 5;) and another 35-40% is running L4, with only 10-15% running smoothly in L6, then that both explains the evenly matched tug of war between the 4s and 5s, and the general dismissal, mis-understanding, and alien-ness of L6 proposals and ideas.  As alien and unlikely as Keynes was in 1936.

So there are 2 things to remember here.  There is a sleight of hand where someone talking into a microphone says “live within our means” without explaining whether they mean L4 cash-in-hand or L5 Keynesian living.  Chances are, by being intentionally vague, they intend to mean whichever is appropriate or convenient for the audience they are speaking to.  By using a phrase with no single absolute and undisputed meaning — they are using our own cock-surety that we know how the economics of nations work — to make us all think they (of course) are speaking our minds.  And in fact, they may be — or they may not.  It is illusion and sleight of hand, after all.

What is the answer?  I don’t know.  I’m not an economist.  But I’m pretty sure it isn’t sleight of hand.  I’m also pretty sure that even if somebody tries to suggest it — we won’t hear it if we’re all yelling and screaming at each other.

Find the finest thinking men and women out there pioneering the edge of theory and reason.  Listen to the crazy suggestions as well as repeats of suggestions you might think of as tried and true.  If what we’re doing isn’t working — don’t look backwards for something that worked 100 years ago, or even 25 years ago.  Look for the next solution.  The next idea.  Think about what makes Graves Level 6 different from everything that came before it and follow THAT and see where it takes us.

___________

*See Spiral Dynamics, which discusses the Clare Graves theory of evolving human development, the Clare W. Graves Website (maintained by Cowan & Todorovic), or our own book/draft on the introduction to Grave’s theory explained with the help of the work of Carl Jung, at our Journal of Human Threshold Systems.

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