Hager argues that "The concentration of the US public debt in the hands of the 1 percent has contributed to inequality and presents a fundamental threat to democracy." This is an interesting correlation, but I don't think it measures any kind of a decline in "democracy". I think that he has an extremely narrow concept of "democracy" (and he doesn't bother to define the term), and I find other problems with his mostly reassuring analysis. For example, he writes:
Foreign investors, especially China, fear that the Federal Government will “print money” to inflate away its growing debt burden. But the existence of a powerful group of domestic owners invested in the creditworthiness of the Federal Government should help to alleviate these fears. The wealthy households and large corporations that dominate domestic ownership of the public debt hold considerable sway within the political system and provide a powerful check against policies that might compromise the risk-free status of US Treasury securities.I've read in numerous articles that China is now significantly reducing its holdings in US dollars because of this "fear". And I've read elsewhere which suggests that the Federal Reserve buys up whatever shortfall exists in the market whenever the US Treasury issues securities for sale. Because of the international reserve status of the petrodollar, inflation worries that would normally affect the US are absorbed by most of the world.
A formidable “bond” of interests therefore unites foreign and domestic owners of the public debt.
Of much more interest to me is the section where he describes some findings by the German sociologist Wolfgang Streeck in his new book Buying Time: The Delayed Crisis of Democratic Capitalism.
In essence, what the transition from the tax state to a debt state means is that the Federal Government chooses to borrow from the bondholding class rather than taxing it. And in deciding to furnish wealthy households and large corporations with risk-free assets instead of levying taxes on their incomes, the debt state reinforces the existing pattern of inequality. This raises further questions about the long-term stability of current arrangements. The debt state is likely to persist into the foreseeable future, and the reason has to do in large part with the role played by foreign ownership of the public debt.Thus I encourage you to read a review of his Streeck's new book posted in Truthout in December.
