Comments Elsewhere

Dan,

It’s not clear to me what level the question is supposed to be asked on. If it’s a question about moral ideals — what really ought to be done — then I think the obvious answer is complete and permanent repudiation — government debts …cannot be repaid except through government revenues, and government revenues are always extracted by force from unwilling third parties (viz., us). Those of us from whom they are extracted never consented to the debt at all, and have a perfect right to refuse to pay one damned dime. Of course, if those who did contract the debt (viz., governors at various levels) want to pay out of their own pockets, or to pass the plate and ask for donations, they should be free to do so. But I personally don’t give much of a damn whether or not U.S. or Chinese banks or petrocrat “sovereign wealth funds” ever get “their” money back. I’d be just as happy if they all starved.

If it’s supposed to be asked on a level that’s constrained in some sense by practical political possibilities, then I think the answer is still repudiation, but for a different reason. Not only are none of the possible “solutions” to the structural problem (massive spending cuts and/or tax increases to gain tax-surpluses, selling government “property” out to big buyers, etc.) even minimally just; they aren’t minimally likely, either. Nobody in government is going to do the things that they would practically need to do in order to reduce deficits or pay down government debts because they make decisions on a political, not a fiscal, basis, and face structural incentives that make permanent, sky-high-and-growing government debts not only unavoidable, but actually quite attractive. The structural constraints are such that they are almost surely never going to stop running up debts until their capacity to continue running them up breaks down completely and irreparably (either due to diminishing returns from tax increases, or due to diminishing returns from inflation, or from a complete crack-up bust of the financial system); at which point they will partially or entirely repudiate anyway. (The hope is that they will repudiate entirely because they will collapse and not get up again. But whether they do or not, I have no expectation that any politician would or could ever do anything to pay off the government’s debts, ever.)