Raúl Carrillo-ren Monetary Sovereigns, Monetary Subjects: Modern Money & The Criminal Legal System1
Ukitutako gaiak eta zipriztinak:
(i) Sarrera
Today, I’m here on behalf of The Modern Money Network. MMN began as a group of rebellious students at Columbia Law who had some previous experience studying macroeconomics
(ii) Abokatuak eta finantzaketa federala
So you know the main points I’m going to make on this journey, there are really just two. The first point is conceptual 1): lawyers need to be thinking in terms of balance sheets. Criminal justice debt means someone’s has criminal justice assets. The second point is programmatic, 2): without sufficient federal financing, the only way courts are going to fulfill their function in the criminal legal system is by imposing fines and fees, and this will inevitably disproportionately hurt poor communities of color.
(iii) Subiranotasun monetarioa
… So according to the Modern Money view, the core of any given economy is a legal entity known as a “monetary sovereign.” What is that? Monetary sovereigns have the power, to not only issue their own currency, but collect taxes, fines, and fees, in their own currency, float their exchange rates, and denominate their debts in their own currency.
Most monetary sovereigns are political states, but not all political states are monetary sovereigns. For example, Greece, which uses the Euro, does not have monetary sovereignty. The European Central Bank ultimately controls money in Greece. Senegal, which uses the CFA Franc, does not have monetary sovereignty. The French Treasury (and ultimately the European Central Bank) controls money in Senegal.
(iv) Nor da subiranoa
Who is sovereign? The governments of the U.S., the UK, Japan, are truly sovereign, for example. The U.S. issues its own currency, the U.S. dollar. It also taxes and fines in U.S. dollars. The payments that are due to the holders of U.S. Treasuries are all paid in dollars. Since the U.S. government abandoned the gold standard in 1971 and committed to not pegging the value of the dollar to anything else, it has achieved full “monetary sovereignty.”
This means as long as we’re talking dollars, U.S. government payments can be met. During the debt ceiling debates, even the crustiest, vanilla-iest elites pointed this out: Greenspan, Bernanke, Krugman, Buffet. As far back as 1945, in a talk delivered to the American Bar Association, New York Fed Chair Beardsley Ruml stated flat out, we do not collect federal taxes in order to spend federal money.
The U.S. government can never run out of money in the same way that the NBA can never run out of points. In 1995, Paul Samuelson, a Nobel Prize winning economist, acknowledged that the “superstition” that the federal budget must be balanced is part of an “old fashioned religion,” meant to hush people who might otherwise demand the government create more money.
(v) Politikariak, gobernua eta familia ekonomia
Politicians may act like the U.S. government has the same constraints as a household or business, but the U.S. government can’t go broke. It can impose silly constraints on itself, like the debt ceiling, but people who actually know how monetary operations work know the U.S. government cannot run out of dollars. If you’re unlucky enough to take a Corporate Finance class at a law school, one of the first things they’ll tell you is to assume zero risk when accounting for U.S. Treasury bonds. This is because U.S. government can “inject” too much money into the system and destabilize prices, but the payments are always going to clear.
(vi) Arazo legalak
Many legal problems, especially ones we are discussing today, occur when your personal balance sheet is lopsided, when your liabilities outweigh your assets. Or in an immediate sense, you may not be liquid enough to satisfy an obligation enforced by the state. You may be stuck with medical debt; you may just be walking too noisily in the wrong part of town. To avoid problems, you need cash inflows to meet cash outflows. The economist Hyman Minsky called this problem a “survival constraint.”
(vii) Bankuak
Banks do not lend out of a pile of deposits or even necessarily key their lending to a pile of deposits. What they do is generate credit and because they have special legal privileges, their IOUs are very valuable. They lend and borrow whenever they see a profitable opportunity to do so, knowing the state will back them up if things go really poorly. They’re higher up on the food chain.
Just as banks create asset-liability pairs out of thin air, so do other creatures of the state. In our federal system, state and local government entities do not have full power to issue currency. Mississippi has police power, but it can’t issue Mississippi Marks and is in fact constitutionally prohibited from doing so. It has some legal sovereignty, but not monetary sovereignty.
(viii) Auzitegiak
Likewise, courts. Most people think about courts “moderating” the payments system by settling disputes. They indeed do this. If you are a monetary subject and you have a dispute with another monetary subject, you can go to court. There are obviously exceptions. If you have a contract for illegal drugs or sex, for example, you may not be able to seek redress, but for the most part a court will settle your beef with another subject.
(ix) Auzitegiak eta bankuak, desberdintasunak
Like banks, courts have certain privileges. Just as a bank can create a debt for you and an asset for someone else, so can a court. The court may hold that asset, that money might go to another government entity or a private corporation. Unlike banks, though, courts can even generate new obligations between you and the state itself. And they can often take advantage of their power to load up their own balance sheets, which they do all over the country.
Why? Part of this is because courts face their own survival constraints. No matter how they do that, whether it’s by preying on poor people or via some other method, they are faced with this balance sheet logic at the core of the system. As even Chief Justice Roberts admitted during the sequestration, courts face particular pressures “because virtually all of their core functions are constitutionally and statutorily required.” If they do not get money from the sovereign, they will get it from other monetary subjects.
(x) Finantza-krisia eta geroko egoera: diruaren bilketa
Other people will get much more into this, but since the financial crisis, we have seen how courts and other municipal bodies have turned to bleeding the poor. Poor folks are in the carceral system partially because cash-strapped entities cannot fund basic operations. Financial crisis begets austerity, which exacerbates the criminalization of poverty. The Ferguson Report made it crystal that the City relied upon cops as collectors. Even though it’s not even clear that some other municipalities are actually making any money this way, the driving logic remains. Courts, cops, and the clink try to get blood from stones, money from empty pockets.
(xi) Espetxeratzea
So, there’s financial domination intertwisted with carceral domination. So what? Why should we care about looking at things this way? Because it affects our strategy. As the saying goes, “if you don’t know where you’re going, you’ll end up somewhere else.”
In an article in the Boston Review last fall, Donna Murch, a Professor of History at Rutgers, said that we need:
“…a larger reexamination of the economic and extractive dimensions of mass incarceration… apart from establishing more equitable means testing of people brought before the courts.”
(xii) Nor da erruduna?
I strongly agree. I would obviously propose the Modern Money view as the method of reexamination. Ultimately, we need to argue the case that monetary subjects should not be footing the bill for either punishment or rehabilitation. Who should be footing the bill? The monetary sovereign.
(xiii) Subirano monetarioa
Looping back, unlike you or me, the monetary sovereign does not face a survival constraint. It can always pay. On the asset side of the federal government’s balance sheet is essentially a massive INFINITY sign. It not only has the Article I, Section 8 power to tax and spend for the general welfare, it has the operational capacity to spend or lend as much money as it wants. Although it has a price stability constraint it does not have a survival constraint. So why doesn’t it spend more money?
(xiv) Gerlak eta defizitak
It’s a mix of malice, miseducation, and misunderstanding. There is a myth that the sovereign cannot afford certain things. Even if you look at things through the Modern Money view, this is often ludicrous. When Cheney went to go to war, he said deficits don’t matter. Bannon also believes in deficit spending. Indeed, the Trump administration has proposed to almost triple federal outlays to state and local governments for policing and civil asset forfeiture. Yet when earnest liberal bureaucrats or even rebellious lawyers make demands on the state they get caught up with the question, “How are you going to pay for it?” as if the government were a household that must collect or borrow before it can spend.
(xv) Demokrazia gehiago
The answer for monetary subjects is to seize control of the monetary sovereign. It is, in essence, just more democracy. I am not pressing for it to pay for more prisons, more cops, more immigration detention centers, but it can spend enough money in a targeted fashion.
The move is to simultaneously push for decarceration, for demilitarization, etc. AND to push for federal funding of what we do want. We have to claim rights vis-a-vis the monetary sovereign, which partially means marching to the capitol and demanding our checks, like Dr. King said. The monetary sovereign should fully fund the machinery of due process, should spend the money to make sure everyone has employment, decent income, housing, education, healthcare, safe streets, safe water, safe air, etc. Back to the Freedom Budget and the kinds of programs proposed by BLM. Get some “Fiscal Feminism” in the mix. Make the monetary sovereign pay for things that actually make us safe.
Stopping austerity is not going to eliminate the drive to subordinate women and people of color generally. But the anti-austerity struggle can at least remove a great lie used to justify certain horrors.
(xv) Espetxeak garestiak ote?
To some people this seems like common sense. But a lot of people are going in a completely different direction: there’s a bipartisan effort to decarcerate as a cost-cutting mechanism to protect the federal budget. I see this as a trap, as does Dr. Murch. Not only does this buy into the framework that the rightwing turns around to use to gut social services, but it does something even more sinister. In the world of financial regulation, there is something called the Bootlegger-Baptist strategy. The Koch Brothers and Rand Paul are fiery preachers saying that the carceral system is bad because it’s expensive, it’s unthrifty, it’s imprudent etc. But they’re doing this to make room for privatization. They are making space for the “bootleggers” to come in and do the dirty work. They’re making room for CCA, J-Pay, Sentinel, and all the vultures on Wall Street. (This isn’t just a theoretical concern. Gary Johnson did this in my home state of New Mexico).
(xvi) Kontrol demokratikoa
Holding the monetary sovereign accountable is where it’s at. The struggle against the carceral system must also be a struggle against the cycle of austerity and crisis, which is a large part of why we’re in this mess. From 2010-2016, federal outlays of “state and local law enforcement assistance”, “juvenile justice programs”, “community oriented policing services” all dipped significantly. There all kinds of horrors going on with respect to financing the criminal legal system. But if we’re really to strike at the root, we also have to confront a funding structure that requires subjects to pay for the punishments imposed by the sovereign.
That’s the thesis. Just on a final note, my colleagues and I are trying to connect the dots between struggles and we’re here for anyone who wants to join in on that. Many people study law so as to avoid being tricked by lawyers. We think lawyers should study money so as not to be hoodwinked by financial elites. I hope that people at least consider our type of thinking as we move along and we’re here to join up with anyone who wants to team up.
