Monday, November 26, 2007

The morality of public debt

The good ethicist feels that, in general, the taking on of communal debt for capital projects is essentially a good thing, since it's a prudent investment, but that the same bond floated to pay for expenses is essentially a bad thing, since it's imposing a burden on the future. This seems to hold true even if it's for a good cause, like care for the elderly, because these are essentially acts that should be charitable.

But this is different than having an entire older generation expect its pensions to be paid by the young, which seems to be the case for countries whose social security and pension systems are virtually completely unfunded. Judaism recognizes the obligation of children to support their aged parents, and even considers this the highest priority of charity giving, as the Scriptures teach us, "Don't hide from your own flesh". (Isaiah 58:7.) But ultimately this is still considered a form of charity (5), and our tradition urges us to strive assiduously to avoid dependence on charity and public support. (6)

This seems like a wise bit of thinking. There are probably some economic arguments you could make around deficit spending and keynesian multipliers or consumption smoothing, but I think the essential point holds - consumption smothing implies you'll be in surplus soon enough, and just because you plan do to good things with money doesn't mean you should borrow to get it.

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