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By Michael Pakaluk
Search the Catechism, the Compendium of Catholic Social Doctrine, indeed the entire Vatican website – search all you want – for teaching about what we call the "national debt." You will not find it. You can find teaching about the debt that poorer nations owe to wealthier nations, "foreign debt," but not about the debt that a government accumulates through financing deficits.
Some background: Each year the U.S. federal government spends roughly $2 trillion more than it takes in and issues bonds to finance this deficit. Each year's deficit, when not repaid, gets added to the "national debt." Last week this accumulated debt made headlines for topping $40 trillion. In four years or so, it will be $50 trillion. Current debt represents about seven times the government's annual revenue. The proportion is as if a husband and wife who together earned $50,000 per year had credit card debts of $350,000.
Imagine a couple like that who hardly ever paid attention to their massive debt. When they did, they couldn't agree on a plan to keep the debt from growing, because they were constantly fighting and had their own pet projects. That's our government.
People say, "But the government is not a household; it can increase revenue at will by taxation, or print money." Political society, however, is a household. Our nation is a household. The government is not. It is, rather, leadership over a household, possessing sovereign authority.
Sovereign authority, by the natural law, comes from God. It is a creature's participation in God's authority. Therefore, as it is the authority of a creature, the last thing it can be is unlimited; and since it's a participation in God's authority, the last thing it can be is arbitrary. The government is not a Leviathan. The government cannot make something out of nothing. It must exercise responsible stewardship over the household. The analogy does stand.
How great a Leviathan can it be, anyway, if each year it needs to go out to the markets and induce other countries (Japan, UK, China) and investors to lend it tens of trillions of dollars? With our constant quarreling and no debt stabilization plan, you'd think that eventually these lenders would require a higher return.
This could throw us into a vicious cycle, as the servicing of our debt costs more and more, leading to depressed economic activity. A legendary hedge fund investor, Stanley Druckenmiller, argued in the Wall Street Journal this week that that is exactly what we are seeing now ("Let the Bond Market Speak"). He calls it "generational theft" (i.e., future generations will pay). The usually sober Eurointelligence was blunter: "We believe it will end in default of some sort. . . .It squarely falls into the category of things that end one way or the other because they are not sustainable."
The Church thinks in centuries. It's not as though irresponsible governments running up debts they cannot repay are unseen in the history of the world. Often, these debts were assumed so that kings could wage wars of vanity and conquest. Typically, the debts were subsequently made irrelevant through the debasement of the currency, which becomes a form of theft.
As Samuel Gregg has pointed out ("Debt, Finance, and Catholics"), many early-modern Catholic theorists spoke sharply against such governments. Bishops, too, were savvy about the matter, from the need then for theologians to be adept at the casuistry of usury.
What explains the Church's silence today? Part of the reason is that our bishops and popes generally lack real-world experience in commerce and the necessary theoretical background in economics. Two exceptions were Leo XIII, who could rely on his friend, a real genius and an expert in both theology and economics, Fr. Matteo Liberatore, S.J., and Pope John Paul II, who saw first-hand the economic illogic of socialism. And who prudently relied on his own friend, and genius too, Michael Novak.
Otherwise, we have the spectacle of a Chur...
Search the Catechism, the Compendium of Catholic Social Doctrine, indeed the entire Vatican website – search all you want – for teaching about what we call the "national debt." You will not find it. You can find teaching about the debt that poorer nations owe to wealthier nations, "foreign debt," but not about the debt that a government accumulates through financing deficits.
Some background: Each year the U.S. federal government spends roughly $2 trillion more than it takes in and issues bonds to finance this deficit. Each year's deficit, when not repaid, gets added to the "national debt." Last week this accumulated debt made headlines for topping $40 trillion. In four years or so, it will be $50 trillion. Current debt represents about seven times the government's annual revenue. The proportion is as if a husband and wife who together earned $50,000 per year had credit card debts of $350,000.
Imagine a couple like that who hardly ever paid attention to their massive debt. When they did, they couldn't agree on a plan to keep the debt from growing, because they were constantly fighting and had their own pet projects. That's our government.
People say, "But the government is not a household; it can increase revenue at will by taxation, or print money." Political society, however, is a household. Our nation is a household. The government is not. It is, rather, leadership over a household, possessing sovereign authority.
Sovereign authority, by the natural law, comes from God. It is a creature's participation in God's authority. Therefore, as it is the authority of a creature, the last thing it can be is unlimited; and since it's a participation in God's authority, the last thing it can be is arbitrary. The government is not a Leviathan. The government cannot make something out of nothing. It must exercise responsible stewardship over the household. The analogy does stand.
How great a Leviathan can it be, anyway, if each year it needs to go out to the markets and induce other countries (Japan, UK, China) and investors to lend it tens of trillions of dollars? With our constant quarreling and no debt stabilization plan, you'd think that eventually these lenders would require a higher return.
This could throw us into a vicious cycle, as the servicing of our debt costs more and more, leading to depressed economic activity. A legendary hedge fund investor, Stanley Druckenmiller, argued in the Wall Street Journal this week that that is exactly what we are seeing now ("Let the Bond Market Speak"). He calls it "generational theft" (i.e., future generations will pay). The usually sober Eurointelligence was blunter: "We believe it will end in default of some sort. . . .It squarely falls into the category of things that end one way or the other because they are not sustainable."
The Church thinks in centuries. It's not as though irresponsible governments running up debts they cannot repay are unseen in the history of the world. Often, these debts were assumed so that kings could wage wars of vanity and conquest. Typically, the debts were subsequently made irrelevant through the debasement of the currency, which becomes a form of theft.
As Samuel Gregg has pointed out ("Debt, Finance, and Catholics"), many early-modern Catholic theorists spoke sharply against such governments. Bishops, too, were savvy about the matter, from the need then for theologians to be adept at the casuistry of usury.
What explains the Church's silence today? Part of the reason is that our bishops and popes generally lack real-world experience in commerce and the necessary theoretical background in economics. Two exceptions were Leo XIII, who could rely on his friend, a real genius and an expert in both theology and economics, Fr. Matteo Liberatore, S.J., and Pope John Paul II, who saw first-hand the economic illogic of socialism. And who prudently relied on his own friend, and genius too, Michael Novak.
Otherwise, we have the spectacle of a Chur...