By James E. Hartley, Public Discourse. (Image: Adam Nir/Unsplash)
What are the ethical issues surrounding government debt? This is a good time to start taking that question seriously.
You don’t have to look hard to find alarm about high U.S. government deficits and debt. If the government budget isn’t brought under control, “it won’t take much to squeeze out private spending and drive the U.S. back into a recession,” or it will “precipitate an economic nightmare that will dwarf the Great Depression.” The problem: “we’re looking at a fiscal crisis that will drive interest rates sky-high.” The danger: “This is how empires decline. It begins with a debt explosion.”
Scary stuff. Until you see the dates. Those quotations are from 1984, 1992, 2003, and 2009. Yet, here we are two to four decades later and it is hard to find the disasters arising from the government’s debt. To be sure, there have been economic problems since the early 1980s, but not from high government debt levels. Government interest rates remained low throughout those years, and the empire is still throwing its weight around.
Constantly warning of a nonexistent imminent danger is the sort of thing that gets young boys eaten by wolves. If you learned to shrug off the alarmist screeds from the last forty years, is it time to start being concerned? The answer depends on what it is that concerns you. Much of the discussion surrounding the government debt has muddled together the quite different economic and ethical issues. Let’s sort those out.
The Economics of Government Debt
The federal government’s budget deficit is the amount by which spending exceeds revenue; in 2026 that is projected to be $2.1 trillion. The government’s budget debt is the total amount owed to creditors; in 2026 that is projected to be $32 trillion. Those are big numbers. If you personally owed someone $32 trillion, you (and your creditor) might be a bit concerned.