As we watch the out-of-control debt rise in the United States, it is worth thinking about whether it is wise, or even moral, for a government to borrow money. I will argue that, in most cases, it is immoral.
- Borrowing money makes Citizens Vulnerable. When you buy something from savings, you have true ownership and control. There is no lender that can call in the loan or force you into bankruptcy. When a government borrows money, its citizens become vulnerable to a fiscal collapse. However, the primary role of a government is to protect its citizens. Borrowing money is a violation of this sacred trust.
- Government borrowing is an oppressive abuse of power. In the private sphere, a borrower is an individual person who can be held accountable to his own contracts. However, in the public sphere, the borrower is usually not the person to pay back the loan. Such borrowing is a form of oppression of others and their future.
- Government borrowing creates economic injustice. The lending of money to government comes from passive investors, who earn wealth from taxpayers. This is a system that shifts wealth from the working class to the elite.
- Government borrowing signifies lack of fiscal discipline. Democrats who say they are on the side of the worker tend to advocate more government borrowing, an act that takes money from workers and gives it to the wealthy. Because this is a contradiction in what they say and what they do, it is a symptom of poor fiscal leadership. While, government borrowing in some circumstances need not necessarily signify the lack of fiscal discipline, it is generally the case.
- Government borrowing for redistribution destroys an economy. Redistribution of wealth is not wealth creation, but it is sometimes good to provide a social safety net that requires redistribution of wealth. However, if this is done with borrowed money on a long-term loan, the compound interest can be more than the principle. This comes at the expense of future economic growth.
- Governments that both print and borrow money violate a conflict of interest. The U.S. Federal reserve, being part of the U.S. government, should not attach any interest to the taxpayer for money introduced into the economy through government borrowing. When an individual state borrows money, but cannot print the money, it is forced to repay or lose its credit rating. The Federal government, by both borrowing and printing has no structural check and balance to guarantee long-term financial solvency.
- Borrowing money sets a bad example. A good government should encourage sound financial practices of its citizens. Therefore it should set a higher standard of fiscal responsibility than it demands of its citizens. The United States, and many of the individual states are poor examples of fiscal responsibility. No good parent can look its children in the eyes and say, “I am going to borrow money and expect that you will pay it back after I am gone.” Such a parent would be viewed as evil. Why is it not considered evil when the government does this?