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Double Standards of Debt: Robert Kuttner On The Failures of Austerity
Economics | May 31, 2013

Double Standards of Debt: Robert Kuttner On The Failures of Austerity

In his new book Debtors' Prison, economics speaker Robert Kuttner argues that universal belt-tightening and austerity is not the answer to economic woes. In a recent keynote, Kuttner laid out the main points in his book in more detail. Despite the popularity of attacking government debt as a means of warding off economic instability—it's private debt we should be worried about. Student debts now total over a trillion dollars in the United States, while mortgage debts and speculative debts in the financial system are putting a kibosh on our attempts at economic recovery, Kuttner says. We are focusing on tackling the wrong debt, says Kuttner, which is locking us in the 'debtors' prison'. 

When researching for his book, Kuttner says he became very interested in what calls the "double standard of debt." He questioned why "corporations can get rid of all debts in a chapter 11 proceeding...getting a clean slate and a fresh start," but homeowners and students and small countries cannot. When bankruptcy laws were created hundreds of years ago, only the merchants were able to declare bankruptcy and receive a fresh start. Despite the fact that the government realized having a vast majority of your population in a prison of unpayable debts meant the "economy would implode," they still favored one class over another. Fast forward 300 years and the same conditions still exist today. However, these biased bankruptcy laws are now coupled with austerity measures which he says creates a "prolonged low-level depression" in the economy.

Rather than letting ordinary people go further into debt with banks and creditors, Kuttner says a more stable economic policy should favor government borrowing instead. That negates austerity, he explains, and creates more stable boom and bust cycles in the economy. What we really need is more government investment, not spending cutbacks. Since so many of us are crippled by private debt, we are unable to spend money and boost the economy. That's why the government should step in and make large-scale investments instead of penny pinching. In his books and his talks, Kuttner is an authoritative source on the economic and political policies affecting the nation. He is able to seamlessly translate complex concepts into easily digestible commentary, thanks his years of experience as a seasoned journalist. He addresses the issues that are affecting us today—and shows us how to turn policy on its head to create a brighter economic future.
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