Public Debt, Inequality, and Power by Sandy Brian Hager

Author:Sandy Brian Hager
Language: eng
Format: epub
ISBN: 9780520960428
Publisher: University of California Press.

A SIMPLE RULE

Prasad develops what is arguably the most nuanced account to date of the political economy of foreign ownership of the public debt. The main strength of his analysis is that it overcomes the aggregate bias of the existing literature that was surveyed in chapter 2 and demonstrates the powerful domestic interests that bolster the creditworthiness of the US Treasury market as a safe haven for global investment.

Yet given my own emphasis on class in this book, it probably comes as no surprise that I am skeptical of Prasad’s anchoring of the power of domestic owners of the public debt in terms of age. So what exactly is the problem of identifying domestic owners as retirees and near retirees? And how does an alternative focus on class better explain the linkages between domestic and foreign ownership of the public debt? Is there a rigorous method for evaluating age and class as analytical categories?

I propose a simple quantitative rule that helps to provide a better assessment of the power of domestic owners across different categories. The rule can be summarized as follows: If a smaller group holds an ownership share greater than or equal to a larger group, then the smaller group should be privileged in an analysis of power. Put differently, this simple rule states that if two groups represent the same portion of the population, the one with the larger ownership share should form the focus of an analysis of power.

Before applying this simple rule to empirical data, I should stress that it offers merely a quantitative starting point for choosing different analytical categories. As with the selection of certain cutoff points within a specific category (e.g., the top 1 percent or top 10 percent of households), the selection of cutoff points across different categories (e.g., class or age) is still evaluated in terms of what it can reveal about the world. In this sense, the quantitative/qualitative framework that was developed in chapter 3 informs the analysis here.

Table 6 uses data from the Federal Reserve’s 2013 SCF to compare the pattern of public debt ownership for the age and class categories. Table 1 uses a broad measure of the public debt: it includes direct household holdings of the pubic debt, as well as household holdings of pension and mutual fund wealth, which are assumed to represent indirect ownership of the public debt.

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