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By Root 790 0

is then injected into the economy. It is for this reason that proponents of bond issuance argue that it is not in fact theft: In essence, although future generations will be burdened with a debt obligation on their heads, the money supply increased when the government spent the revenues from debt issuance. Thus, this argument goes, there will be more money flowing in the economy with which the future generations can pay those taxes; money which would not have been there but for the issuance. Moreover, we receive any benefit of money being spent now as opposed to later, for example, in the form of a cleaner environment brought about by government investment in green technologies.

This argument, however, runs into the same problems that we encountered in the section on taxation and the social contract. Because future generations obviously cannot consent to pay for government spending when the debt is issued, taxation cannot be in any sense voluntary. Furthermore, it is also unrealistic that future taxpayers will receive benefits commensurate with their tax burden. One group will always be benefitting at the expense of another. As we shall see in a moment, this is even more likely to occur with borrowing than with taxation.

Debt issuance is more problematic than taxation for several reasons. The first, and most obvious, is that future generations do not get to vote on those government expenditures, thus making it taxation without representation. Moreover, although proponents of debt issuance may paint a sunny picture of our children reaping the benefits of today’s prudent investments, they are ignoring the other half of the picture; they will be shackled to the cost of the previous generation’s political mistakes. I have yet to hear a cogent argument for why our children should have to pay for our military disasters. Children cannot inherit debt from their parents’ debt, so why should they inherit their parents’ government’s debt?

Second, it is much more likely that profligate spending will result from debt issuance than taxation. Because older folks do not have to pay for as much of the debt as the young (who have a whole taxpaying life ahead of them), it is less costly. This creates an incentive to favor wasteful spending, since the full burden falls on someone else’s shoulders. Thus, debt issuance is a surreptitious form of intergenerational factionalism. Nice try, Dad.

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Politicians also have an incentive to favor debt issuance, since it allows them to engage in wasteful spending without its typical political consequences; the people get what they think is the benefit of larger social programs, and no corresponding increase in taxes. The key problem with this is that it results in higher spending, and thus higher taxes, than the electorate would have otherwise opted for. A related trick politicians have up their sleeves is simply to cut taxes but not public spending, a tempting “have your cake and eat it, too,” policy given that both actions make them look good in the eyes of the public. Assuming, however, that the budget was balanced before those tax cuts, this reduction in government revenues must be met with an equal amount of debt issuance (you can’t spend more than you have). Thus the effective tax has not changed, just who pays it and when. Put simply, public debt, like credit cards, facilitates fiscal irresponsibility.

In response to all of these arguments, a proponent of debt issuance may argue that all of these criticisms are outweighed by the fact that government bonds can be a lifesaving tool in times of emergency. There are instances, such as during war or recession, when the government is simply not able to raise taxes to pay for all of its spending. History, however, teaches us that if government must issue debt to pay for its spending, then the odds are it is engaging in something it ought not to be, namely, offensive wars and bailouts of private industry. World War I, and the fifteen million deaths which it caused, would not have been possible if governments could not have issued debt or printed