Tuesday, October 15, 2013

Debt Default As A Goal: An NYT Columnist Notices

Bruce Bartlett, one time Ron Paul staffer, turned Keynesian, has written in NYT a brief disjointed history of economists, and others, who have been in favor of USG debt default. Peter  Klein takes the position that Bartlett purposely mixed debt default scholars, with others, to muddy the scholarly take on default. I find it fascinating, however, that Bartlett chooses not to ignore Murray Rothbard, Lew Rockwell, Gary North and Klein---and feels that instead, he must muddy the picture. That's a sign of fear of the growing advancement of non-establishment, anti-government, economics.

Here's an important snippet:
The late Nobel Prize-winning economist James Buchanan supported debt default, as has the Harvard historian Niall Ferguson.
I have previously noted that defeated Southerners were very hostile to being taxed to repay the Union debt after the Civil War, while the Confederate debt was repudiated and not permitted to be repaid by the states. This is the reason that Section 4 of the 14th Amendment, guaranteeing the validity of the national debt, was included in that amendment.
The Columbia University historian Eric Foner, an expert on the Civil War,recently recounted the debate over the postwar debt and demands by Southerners for repudiating the Union debt, which are echoed by many default advocates today. In those days, it was Democrats who supported default while Republicans opposed it; today it is the reverse.
There are still many in the South, where the Republican Party is now based, whose hostility to the national debt traces back to those days.
In his 1987 essay, “The Ethics of Debt Default,” Buchanan made an argument often repeated by libertarians and Tea Party members: if the Treasury were to default, no one would ever lend it money again, thus imposing a balanced budget; the government could only spend as much as tax revenue permitted.
Buchanan also argued that much debt-financed federal spending is immoral and that it was immoral to tax people to pay for it. “On balance, the moral arguments against default on the debt do not seem so strong as seems to be assumed in the observed neglect of the question,” he wrote.
(Buchanan’s essay in not available online, but a recent article by the New Zealand economist James E. Alvey in The Journal of Markets and Morality discusses his thoughts on this topic.)
During the 1988 race for the Republican presidential nomination, the televangelist Pat Robertson, whose father was chairman of the Senate Banking Committee in the 1960s, advocated canceling the national debtbased on the biblical idea of “jubilee.”
In 1992, the libertarian economist Murray Rothbard wrote an essay supporting debt repudiation, saying, “Why should we, struggling American citizens of today, be bound by debts created by a past ruling elite who contracted these debts at our expense?”
Just last year, the Rothbard essay was reprinted on the Web site of the Ludwig von Mises Institute, where Tea Party ideas often originate. A companion Web site run by Llewellyn H. Rockwell Jr., the president of the Mises Institute, often publishes articles advocating debt default by the economist Gary North and others. Just last week, it reprinted a 2011 essay by the University of Missouri economist Peter G. Klein saying that a Treasury default is no big deal.
The entire article is here.


  1. My daughter, who is a high school senior, just spent the night at a liberal arts college in Claremont. She attended an intermediate macroeconomics class as part of her stay there. She said the professor brought up Austrian concepts at least three times, mentioned Ron Paul and Rand Paul by name, and thought that going to a gold standard may not be a half-bad idea.

    So much for my impression that colleges are the last bulwarks of Keynesian economics.

  2. Had I known that Robertson supported debt repudiation, I would have supported him in the primary.

    I still voted correctly in the 1988 general election, though ;)

  3. When mentioning the "serious critics" in Bartlett's article, why does Klein fail to list Gary North??

    "Bartlett lumps together serious critics such as Rothbard, Ron Paul, James Buchanan, and Niall Ferguson"

    Niall Ferguson gets a mention but not Gary North? Klein and North were given the same amount of coverage in the article.

  4. I think the Federal Reserve bootlickers are drinking way too much. Bartlett needs to commit heimself to dry out!