Covenant theology terms

While the reformed doctrines of the Covenant of Grace and Covenant of Works explain good theology, they often cause confusion because they don't line up well with the Bible's own use of the term covenant. It's a tension between systematic and biblical theology.

The Covenant of Works is God's requirement of perfect obedience, broken by Adam and fulfilled by Christ. The Covenant of Grace is God's plan to save his people by grace, first promised to Adam after the fall, then renewed throughout redemptive history until it was fulfilled by Christ. This framework helps us understand salvation by grace alone, through faith alone, and in Christ alone.

The Bible says much about covenants, but it uses different terms. The covenants in the Old Testament include those made with or at the time of Noah, Abraham, Isaac, Jacob, Moses, Joshua, and David. The prophets also speak of a coming New Covenant. There is obvious continuity between some covenants (from Abraham to Isaac to Jacob), but less obvious continuity for others (for instance Noah or David).

In the New Testament, the terminology is simple: Christ has instituted the New Covenant and we are living under that now. The New is contrasted with the Old Covenant. The New Covenant is the goal of redemption history, the culmination of all previous covenants, so understanding what this covenant is and how it differs from the old is important. In Galatians Paul explains how the New Covenant is both continuous with the Abrahamic covenant but radically different from the Mosaic covenant.

The Covenant of Grace doctrine correctly teaches the continuity between the Old and New Covenants, but in the desire to emphasize continuity, it often de-emphasizes the importance and priority and newness of the New Covenant. This is illustrated in Berkhof's Systematic Theology when he begins his one page treatment of the New Covenant: "Little need be said respecting the New Testament dispensation of the covenant." I guess the New Testament has a lot to say about it, even if Berkhof doesn't.

Also, it's a common mistake to confuse Covenant of Works for the Old Covenant. This could be corrected by better teaching, but I think the terminology is prone to the mistake. One reason is that there's extremely little Biblical support for the term "Covenant of Works" (Hosea 6:7 and what else?) I think some renaming of the doctrine, without the word covenant, would be helpful.

Of course, changes like this take time. There is tremendous value in the Westminster Confession of Faith and other reformed confessions that define the Covenant of Grace and Covenant of Works. These should not be changed quickly or lightly. But our systematic theology and confessions should always be open for revision and clarification because they are written in submission to the Bible.

Cliff jumping

Only a few days from the fiscal cliff, it's my turn to weigh in on what this all means. Of course no one knows. The experts don't. Our political representatives don't. So there's no harm in my throwing in an opinion.

First in my mind is that the national debt ($16.3 trillion) will never be paid; it will only be serviced (there were a few years under Clinton and Bush when the dot-com bubble created surpluses and debt was paid down, but that was the exception.)

If this is true, then the debt should be viewed as the required payment as a percent of the annual budget. Right now it is $360 billion per year from a $2,600 billion per year budget. That's 14%.

But this payment is variable. It is determined by the interest rate on Treasury bonds, and those are bought and sold on the open market. The free market determines the rate. Greece learned that this year. Right now our interest rate is around 2 or 3 percentage points. Greece's rate in 2012 fluctuated between 18 and 30. So, when private investors determine that the risk on US debt is too great, our rates will go up in the same way.

When this happens, the Fed will try to hold the rate down by purchasing bonds on the open market. It does this with new money, created out of thin air. Of course, they've already been doing that for the last couple years, in small amounts, with little observable effect. But these small moves are setting policy for the big dance.

What will a substantial and sustained influx of new money mean to the little guy? Inflation. It is the inevitable result of deficit spending. It's the hidden tax that sneaks up and takes money from your back pocket. The rich mitigate it by purchasing real assets that rise with inflation. The poor don't know what just hit them.

Do you remember Ross Perot's dire warnings about the national debt? I still remember the little guy and his alarming charts. Our annual deficit in 1992 was around $290 billion and our national debt was around $3.6 trillion. Those numbers aren't alarming now, courtesy of inflation. And that was modest inflation.

This is why I'm not overly concerned about the fiscal cliff. It was a compromise between conservatives and liberals, signed into law by President Obama, which actually cuts spending. Yes, it raises taxes too, but this is the nature of a compromise. It was supposed to be a poison-pill compromise, one that would be avoided by both sides. But, amazingly, what it actually does is reduce the deficit. Maybe there is no way for either side to actually cut the deficit and take credit for it. Instead, we have to cut by blaming the other side. Is this so bad?

So I think we should let things take their course. Over the cliff. There will be short-term pain. The media will show the poor on the street, then cut over to House Republicans making speeches. It won't be pretty. It won't be fair. But what is a greater long-term help to the poor: more social programs or less inflation? Republicans should refute the charge that they are dismantling the social safety net or weakening national defense. A safety net based on deficit spending is not safe. An army funded by deficit spending is self-defeating.