This 1992 Murray Rothbard essay on the national
debt is well worth reading in its entirety, but in light of the
Raise the apocalypse ceiling! chatter of the last few
weeks and all the unchallenged assumptions blandly regurgitated I
thought it might be useful to point people to a truly radical
rethinking of public vs. private debt — Rothbard’s prescription
will not likely become the default position of any elected official
anytime soon, yet he raises serious, prickly questions about how
public debt effects the relationship between man and state that our
federal overseers eventually ought to be made to wrestle with:
Most people, unfortunately, apply the same analysis to public
debt as they do to private. If sanctity of contracts should rule in
the world of private debt, shouldn’t they be equally as sacrosanct
in public debt? Shouldn’t public debt be governed by the same
principles as private? The answer is no, even though such an answer
may shock the sensibilities of most people. The reason is that the
two forms of debt-transaction are totally different. If I borrow
money from a mortgage bank, I have made a contract to transfer my
money to a creditor at a future date; in a deep sense, he is the
true owner of the money at that point, and if I don’t pay I am
robbing him of his just property. But when government borrows
money, it does not pledge its own money; its own resources are not
liable. Government commits not its own life, fortune, and sacred
honor to repay the debt, but ours.
This is a horse, and a transaction, of a very different
color. For unlike the rest of us, government sells no
productive good or service and therefore earns nothing. It can only
get money by looting our resources through taxes, or through the
hidden tax of legalized counterfeiting known as “inflation.”
There are some exceptions, of course, such as when the
government sells stamps to collectors or carries our mail with
gross inefficiency, but the overwhelming bulk of government
revenues is acquired through taxation or its monetary equivalent.
Actually, in the days of monarchy, and especially in the medieval
period before the rise of the modern state, kings got the bulk of
their income from their private estates—such as forests and
agricultural lands. Their debt, in other words, was more private
than public, and as a result, their debt amounted to next to
nothing compared to the public debt that began with a flourish in
the late 17th century.
The public debt transaction, then, is very different from
private debt. Instead of a low-time preference creditor exchanging
money for an IOU from a high-time preference debtor, the government
now receives money from creditors, both parties realizing that the
money will be paid back not out of the pockets or the hides of the
politicians and bureaucrats, but out of the looted wallets and
purses of the hapless taxpayers, the subjects of the state. The
government gets the money by tax-coercion; and the public
creditors, far from being innocents, know full well that their
proceeds will come out of that selfsame coercion. In short, public
creditors are willing to hand over money to the government now in
order to receive a share of tax loot in the future. This is the
opposite of a free market, or a genuinely voluntary transaction.
Both parties are immorally contracting to participate in the
violation of the property rights of citizens in the
future.
