A friend sent me a link to Zachary Karabell’s article in Time Magazine, asking “What Would the Founding Fathers Say about the National Debt?”
Some critical comments to ensure you are not sucked in by his arguments:
1 – The conclusion of the article is that the Founding Fathers would have said don’t default. But this is a straw-man argument, because nobody is suggesting the US default on the existing debt obligations. Karabel states “But that is what is being contemplated” – except that this is NOT what is being contemplated. Even those who demand no rise of the debt ceiling under any condition, do not say we should default on our bonds. They cite that normal tax receipts are 10 times the amount required to pay interest and service our current debt – so there is no need to default. If this were the total purpose of the article, then it would not be of any merit, because the entire argument is a non-issue.
2 – If you read the quotes from the Founding Fathers, MOST of them are actually arguing for the US to pay off their outstanding debt as quickly as possible, not just service the debt and retain the balance. That is what George Washington meant when he said “No pecuniary consideration is more urgent than the regular redemption and discharge of the public debt.” So to use this quote to advocate for RAISING the debt limit is disingenuous. Thomas Jefferson was also adamant that the US pay off its debts – and get rid of debt altogether.
(Note: I acknowledge Alexander Hamilton, who as the nation’s first Treasury Secretary largely set up the US financial system, was an outspoken proponent of maintaining some level of national debt. His thinking was two-fold: First, the US had to build up a positive record among international creditors by accepting the obligations incurred by the States, and by creating a credit history showing we could make our payments. You could use the analogy of a young citizen taking a small loan to build up his credit history by showing he can be trusted to make monthly payments, so that the bank will trust him with a larger loan should he need it in the future. Second, Hamilton also understood (which most founders incorrectly rejected), that maintaining some national debt is a useful tool for helping to control the money supply. Neither of these reasons are at all valid for justifying the SIZE of the US Federal Debt – as every founder would agree that neither reason for the existence of debt would justify an amount of debt. It must be paid down to reduce the drag upon the Federal Budget and the total US Economy.)
3 – Which brings me to my final conclusion: Time Magazine and Zachary Karabell are liberals, and want to grow government. Therefore, they have twisted this argument to reach their preferred conclusion (implied but not clearly admitted), that they want to raise the Debt Ceiling so that the Government can continue to incur debt and grow unimpeded.
And this agenda is not at all supported by the Founding Fathers.