Saving Democracy Means Forgiving Debts
Let's talk about one Judeo-Christian tradition that the right wing won't.
Blow the trumpet and tap the tambourine: if we really want a strong American economy, and a vibrant democracy, it’s time to bring back at least one law from the Old Testament: the jubilee.
The word “jubilee” as it applies to debt goes back at least to the Old Testament. Simon Wilson at MoneyWeek describes what a jubilee is and where its name derives:
“It is literally a trumpet, blasting out the news that it’s time to forgive all debt to protect the long-term interests of the whole community and polity. In the Jewish and Christian traditions, a jubilee (the word comes from “yobel”, the Hebrew [word] for “trumpet”) was blown every 50 years to signal the Year of the Lord, in which all personal debts were cancelled.
According to the Mosaic Law […] in each jubilee year each household should recover its absent members; foreclosed land be returned to its former owners; indentured slaves set free and debts written off. For the details of Mosaic property rights and debt, see Leviticus 25.” [Emphasis added]
I have often we heard right-wing pundits crow about the United States’ “Judeo-Christian Heritage,” but I am unaware of any that have called for this particular set of Biblical property rights to be written into American law.
Which is a shame, because it’s not just an important “Judeo-Christian” tradition – it’s also good economics that pre-dates any “Judeo-Christian” traditions.
The now-deceased anthropologist David Graeber, author of Debt: The First 5,000 Years, traced the first recorded debt jubilee to Sumeria in ~2,400 B.C..
Simon Wilson summarizes Graeber’s research, and the natural conclusions.
“[T]he Sumerian king Enmetena declared a general debt cancellation in his kingdom. What’s more, his declaration marks the first time that the word “freedom” – here, the freedom of formerly indebted slaves – appears in any political document.
Indeed, the first word for freedom known in any language is the Sumerian “amargi” meaning “return to mother”, presumably because enslaved children in particular were allowed to return home. In other words, a debt jubilee is a recognition that economic life must be socially rooted if it is to be sustainable. If debts can’t be paid off, they won’t be – and it might be better for everyone if that can be addressed peacefully.” [Emphasis Added]
This is especially important in a democracy, where the peaceful transition of political power is a bedrock principle. It is even more important in our current system in which money is considered a form of political speech. In our system, the concentration of wealth is easily translated into a concentration of political influence.
What’s on flip side of the reality that wealth can easily be translated into political power? Indebtedness becomes a form of soft disenfranchisement, in that an indebted person has a net negative amount of wealth that can be used to influence politicians.1
It may not seem like a huge deal in the individual case – so what if some worker in debt can’t buy a politician?
But it’s a cycle with a positive feedback loop: the wealthy can purchase debt, and then use the profits from owning debt to buy/lobby politicians to keep laws on the books to perpetuate and deepen the debt owed by the debtor class, which in turn creates more profits for the wealthy and the corporations that issue credit or buy up debts.
All the while, every dollar that goes to servicing debt (and interest) is a dollar that is exiting our economy to pay for services and goods that have already been rendered. In the case of student debt, its for a non-tangible service that has no real quantifiable price.
Student debt is a particularly insidious way to keep people saddled with long term debt (under the promise of higher future wages). Over the last 40 years though, we have seen that taking out student loans doesn’t do anything to guarantee higher future wages.
What we end up with are people being kept just one step up from absolute desperation as portions of their wages are being used to pay interest on a debt taken out for an intangible ‘good’ (education).
This is a system best described as peonage, as Thom Hartmann highlights in The Hidden History of American Oligarchy. Hartmann quotes Supreme Court Justice David Brewer’s decision in Clyatt v. US. Brewer wrote:
“What is peonage? It may be defined as a status or condition of compulsory service, based upon the indebtedness of the peon to the master. The basal fact is indebtedness… This was the cord by which they seemed bound to their master’s service.”
This is still the case—if a person is working just to service debt, it does not matter who their employer is, they are subservient to the issuer of the debt, be it their credit card company, their cable company, their student loan lender (many times our own government) or a medical debt lender.
This is because debt at current levels keeps many Americans in a precarious position where missing a single payment could result in some form of incarceration. For the 2/3 of Americans who said they couldn’t afford an emergency $500 expense, the potential for financial disaster and a lifetime of debt is like a boulder teetering above, at any moment crushing another American under a lifetime of debt payments.
According to one ACLU report, titled “The Criminalization of Debt”, it’s not just that debt is crippling in terms of economic opportunity—thousands of Americans are arrested every year because of unpaid debts, even though debtors’ prisons were abolished nearly 200 years ago.
“An estimated 77 million Americans have a debt that has been turned over to a private collection agency. Thousands of these debtors are arrested and jailed each year because they owe money. Millions more are threatened with jail….
Debtors’ prisons were abolished by Congress in 1833 and are thought to be a relic of the Dickensian past. In reality, private debt collectors — empowered by the courts and prosecutors’ offices — are using the criminal justice system to punish debtors and terrorize them into paying, even when a debt is in dispute or when the debtor has no ability to pay.
The criminalization of private debt happens when judges, at the request of collection agencies, issue arrest warrants for people who failed to appear in court to deal with unpaid civil debt judgments. In many cases, the debtors were unaware they were sued or had not received notice to show up in court.
There are tens of thousands of these warrants issued annually, but the total number is unknown because states and local courts do not typically track these orders as a category of arrest warrants. In a review of court records, the ACLU examined more than 1,000 cases in which civil court judges issued arrest warrants for debtors, sometimes to collect amounts as small as $28.”
And even if Americans don’t go to jail because of their debt – the amount of debt held in America right now is undermining our attempts at economic revitalization.
Standing debt cripples the impact of direct payments to Americans, because many people feel pressure to pay down their debt. Instead of using that payment to buy a new good or service that would have a multiplier effect in the economy, they are instead stuck paying down interest on debt on services rendered in the past.
The level of consumer, student, and medical debt that is outstanding right now is undermining our democracy by concentrating wealth into the coffers of billionaires, bankers, predatory lenders, and buyers of debt in general.
If debt is unaddressed by a society for long enough, over time, debtors will always outnumber creditors, forming a de facto oligarchy where the majority of people spend their lives paying debt, and a minority of unelected people write the rules and use the authority of the government to enforce debt payment.
It further undermines our democracy by eroding trust in the institutions that are supposed to protect Americans from desperation, which are instead being used to threaten Americans with criminal penalties for failing to pay civil debts.
These unsustainable levels of debt undermine our economy, too. First through the concentration of wealth which leads to wealth inequality so great that it collapses societies, and second by sucking workers wages out of the economy to pay for interest on goods and services that have already been produced and rendered.
And it undermines our society as a whole, as the Hebrews and Sumerians knew: without an economic life grounded in some sort of social-mindedness, a kingdom will either collapse or be forced to use brutality in order to enforce an unjust system. If we are to preserve our democracy, our economic and political systems must recognize the same reality.
There are so many kinds of debt that it is messy business to discuss exactly how a debt jubilee would work. One of the easiest places to forgive nearly $1.5 trillion of debt in America would be to have the federal government forgive the 92% of student loans that are government-backed. This would effectively put $1.5 trillion back into the economy without cutting a single check, as was highlighted in a 2018 report from the Levy Institute called “The Macroeconomic Effects of Student Debt Cancellation.”
Instead of the payments that currently go to pay down the interest on that debt, let alone the principal, that money can be spent on goods and services in the economy, increasing aggregate demand, which leads to businesses hiring more in order to meet demand, which is a great way to stimulate an economy.
On the medical debt side, the United States government could simply buy the debt from private collectors (for less than the debt is worth, often) and forgive it. Then, if we implemented Medicare For All, we could free Americans from the crippling burden of medical debt forever, and put an end to the thousands and thousands of new GoFundMe entries asking for help to pay for medical expenses.
Any way it’s cut though, if we want a vibrant democracy and a healthy economy, it’s time to blow the trumpet for an American debt jubilee.
This soft disenfranchisement exists only in a relative sense, which is to say that the degree of disenfranchisement exists only in contrast to how much political franchise the wealthy can exert in the form of political contributions to buy elected politicians.