Alexandra Ocasio-Cortez recently said that because we have such bounty, we ought to meet all needs. I find this interesting because bounty means that there is a growing pie that more people can share rather than just redistributing the fixed pie of our economy. She is referring to more government spending as coming from our bounty. What bounty? What kind of bounty? Let’s get some perspective on what bounty means.
The Bounty of God: When the Pilgrims and various groups came to America, they delighted in the bounty of the land. It was actually possible for a poor man from Europe to have a substantial farm in the American colonies. The soil was fertile; the man worked hard; he pulled out the tree stumps; he planted his crops, and the ground produced its bounty. Jonathan Edwards was impressed, especially after the stinginess of Europe’s farms, and he pronounced that God had given us a bountiful land. Some, and especially the Spaniards and Portuguese, had the attitude of just taking gold and silver. The French had an attitude of just owning the land, but the colonialists here insisted on mingling land and hard work.
The Bounty of Man: AOC was not talking about the land, but about the impressive wealth of the corporations. Before 1980, most wealth was created by profits from manufacturing or retail businesses and services, plus oil and minerals. Then the financial sector’s profits exploded, not just from banking, but from stock trading and investment banking. This almost doubled the profits of the old make-it-and-sell-it economy.
Then a third massive stream of profits came to America through globalization. By manufacturing, sales, and even financial activities abroad, profits soared again. Then the tech wave added a new dimension to the make-it-and-sell-it economy. Profits have grown to 10% of GDP since 1980, and the economy (GDP) has tripled.
When AOC notices that corporate profits are immense and that America is prosperous, she is correct. It is not wrong to call that bounty. So far so good.
The Bounty of the Government: There is more; there always is. AOC is also referring to the unique ability the U.S. has had in the past decade to expand the money supply without (amazingly) inflation and with (expectedly) very low interest rates. If borrowing money is nearly free and if you can (almost unimaginably) print money without inflation, what on earth would keep you from spending all you can? This is not just redistribution, but what is called ‘printing money,’ currently at a rate of $120 billion per month. AOC and the Biden administration are not alone in this though the Covid economy has far exceeded the borrowing excesses of Trump, Obama, and Bush.
Like many others recently, AOC is relying on Modern Monetary Theory, which claims we could just print money until inflation flares up, and then we should back off a little as needed. We do not (yet) have much inflation, and the past 20 years have been low-inflation decades. This is the value of a strong dollar that is also the global reserve currency. When inflation returns, the artificial bounty of printing money will evaporate.
Bounty and Redistribution. Finally, redistribution: the topic favored by those who believe that income inequality is always an evil sign rather than a mixed sign. Mixed? Yes, income inequality in a market society indicates that someone is creating value somewhere, and others get to benefit from it. That is the upside. The downside is that people lose jobs due to fierce overseas competition, corporate oligarchies, or even social bias.
So, who creates that bounty? The land and people. Your work and your savings are loaned to entrepreneurs or the savings of businesses that innovate and expand. Does the government create bounty? Only if you count printed money or ‘taxing Peter to pay Paul’ (economist-talk). The government sustains bounty with the courts, education, regulation, infrastructure, and national defense. Good.
The administration has proposed using our bounty to meet the needs not of the bottom 15% but the ‘bottom’ 70% of Americans. A combination of redistribution (higher taxes) and Modern Monetary Theory (printing money) will fund new entitlements. Does not American bounty permit us to provide free childcare, preschool, and the first two years of college, not just to the poor but to all? Maybe, for now. It may damage our work ethic and create dependency, but it makes political sense to many.
Yet we provide entitlements only for Americans who are already rich by global standards, where a person enters the top half of all income earners at $4,800/year. How do we explain that use of bounty?