The illegitimacy of government debt

While we’re in a serious sovereign debt crisis, I’d like to play a little thought experiment.

Imagine that Ben takes out a loan in my name, to fund his own spending that I do not consent to. The nature of the spending isn’t relevant. After spending the money, he comes to me, demanding that I pay back the full amount of the loan. I’m slightly taken aback, as I never signed a contract, or agreed to pay a penny. Ben then threatens to break my legs if I don’t repay the loan in full to the bank.

Or perhaps imagine that Ben points a gun at my ten year old son and demands that he must start paying back Ben’s loan as soon as he starts to earn money – and if it doesn’t, he’ll hunt him down.

The only difference between this scenario and government debt is that this is legal when done by the government. If any private individual or company did this they would be acting illegally. The gall of it is that while if I am threatened by Ben, I can call the police, when I am threatened by the government, the police are there to ensure my compliance.

Inspired by Tom Woods and his awesome book Rollback.

Advertisements
This entry was posted in Uncategorized and tagged , , . Bookmark the permalink.

4 Responses to The illegitimacy of government debt

  1. You’re presuming that debt is a bad thing. Debt can inspire growth and is needed to fund new business & enterpreneurship.

    Which elements of government spending would you cut so the national books balanced each year? Thatcher may have said it but she was wrong: running the economy is not like running household finances. States have, at times unexpected, responsabilities to society from helping disasters to funding the NHS. They need flexibility.

    What you should argue against is uncontrolled, unchecked debt. Now that is a problem when it cannot be repaid. That is like the ‘hostage to fortune’ you mention in your post but controlled debt can cause growth for that 10 year old you mention to enjoy.

    • andyfrith2 says:

      There is a very large difference between government debt and private debt. If a business takes on debt in order to expand, that can indeed grow the economy, though not necessarily (if the business fails for example). However government debt is not concerned with profit and loss, but with political projects. The overwhelming majority of current govt debt is to pay for consumption (eg public sector wages, welfare, NHS). Paying for this using debt is not sustainable and does not boost the economy.

      Even if govt debt was beneficial to the economy, it still doesn’t answer the moral question I raised. Do the ends justify the means?

  2. nomasir says:

    Andy,

    I hit on the same topic a few posts back in “Just Weights and Measures … and Money” (http://bethsaidafigtree.wordpress.com/2011/07/11/just-weights-and-measures-and-money/) – from the standpoint of the Biblical directive against “changing the scales” for the purpose of plundering the poor.

    I think also there is a nice fundamental in here about contractual validity. One could make a very, very weak argument (which I do not support) that the democratic process allows the forming of a contract on behalf of all voters by will of the majority. However, in many cases the government has made massive promises of benefits on the back of those who could not vote when the promises were made. At some point, some generation will say “we never agreed to this, we won’t be paying any more.”

    • andyfrith2 says:

      The passing on of the debt to those too young to vote is by far the worst part. Why should the young have to pay for the overspending of their parent’s generation?

      In Britain, as I’m sure elsewhere, young taxpayers are paying for the generous pensions of those now retired, while our retirement age keeps going up. It always seems to surprise people that there is no pension pot held in trust by the state, but just a giant Ponzi scheme. Double standards anyone?

      I hope to do a post on sound money from a Biblical perspective soon. I’ve a long list of planned topics to cover!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s