Hume argued governments abuse debt because its costs are hidden and intergenerational.

Evidence

Hume’s basic problem with public debt is that it has no limit, at least until the interest rates on the debt become crushing. Plus, debt is easy to levy since its costs are hidden and intergenerational, which makes states love debt. As Hume put it, “it is very tempting to a minister to employ such an expedient, as it enables him to make a great figure during his administration, without overburdening the people with taxes. … The practice will, therefore … almost infallibly be abused, in every government.” Accordingly, government will issue debt at a rate that shall exceed the rate of interest that it could earn elsewhere, therefore finding ready buyers at the cost of diverting funds from industry. As a consequence, capital will become concentrated in debt securities that “banish gold and silver from the commerce of the state … and by that means render all provisions and labour dearer than otherwise they would be.” — Mark Blyth, Austerity, 287

Categorization

• XREF: An early statement of the crowding-out and moral-hazard critique of public debt that runs through to modern austerity discourse; connects to Mattei’s account of fiscal consolidation justifications. — connects to: Hume predicted foreign-held debt would eventually undo political liberty. — Mark Blyth, Austerity: The History of a Dangerous…, 288; Hume and Smith’s debt skepticism was shaped by witnessed financial collapses — Mark Blyth, Austerity: The History of a Dangerous…, 306
• SEED: The 300-year-old argument that hidden, intergenerational costs make public debt structurally irresistible to ministers is a strong hook for an essay on why deficit panic recurs.

Broader Connections

• Hume and Smith’s debt skepticism was shaped by witnessed financial collapses #expands (0.75) — Mark Blyth, Austerity, 306