What is the next step to prop up the virus-battered United States economy, even as the $2 trillion stimulus package only begins to percolate out? Well, Republicans and Democrats have returned to talking about a massive infrastructure building program that would employ lots of people. That would be a post-COVID-19 intervention.
More immediately, some economists want more done to ease the debt owed by individuals, small businesses, cities, towns and states. Michael Hudson, a professor of economics at the University of Missouri at Kansas City and president of the Institute for the Study of Long-Term Economic Trends, is one of those economists.
“Right now, America’s economy is strapped,” said Hudson, author of “…and forgive them their debts.” “America could have another economic miracle by writing down the debts.”
The following is an edited transcript of Hudson’s conversation with the Marketplace Morning Report’s David Brancaccio.
David Brancaccio: Now you look at this as an economist and not as a biblical scholar, but what, in the Old Testament there are references to everybody getting released from their debt every 50 years?
Michael Hudson: Well, the Jubilee Year of Leviticus 25 was based on Babylonian practice for over 2,000 years. And, apparently, when the Jews were returned after the Babylonian captivity, they brought back the practice of debt cancellation, called “andurarum.” When any new ruler would take the throne, the first thing they would do would [be to] free the personal debts. And they wrote this Babylonian law into the center of the Mosaic Law when they edited the Bible. You would forgive the personal debts that had mounted up, basically, among the small holders on the land. You would liberate the “bond-servants” — people who had been obliged to work off their debts in labor — and you would return any land that was forfeited. And these three parts of the Jubilee Year were exactly what was done and what continued to be done throughout almost all of the Near Eastern kingdoms — Mesopotamia, their neighboring Near Eastern kingdoms, even Persia, according to Herodotus.
Brancaccio: Wow. I mean, you’re talking precedent there. Now, you think we need something like this now and that we need it quickly?
Hudson: A debt cancellation is needed when debts go beyond the ability to be paid, and all personal debts, all non-business debts, tend to mount up beyond what they can be paid. You have debt-strapped individuals right now who lost their jobs, or their stores have closed down, or they work in restaurants and they’re unable to earn the money to pay. Arrears are rising on student debts [and] on automobile loans, it’s obvious that the debts are growing so large that the only way of paying them is to foreclose on the property, or let them be homeless, or kick them out in the streets. And the reason that the Babylonians and the early Jews cancel the debts was not because they were idealists. They weren’t egalitarians. All the debts have to be canceled by the government. And the government cancels it because it doesn’t want to make the economy fall into austerity. It doesn’t want people to lose their livelihood and become unproductive members of society. The reason your cancel the debts is you want to preserve stability.