Should Local Municipalities Default On Their Debts? Seems Like a Good Idea.

April 27, 2023

by Benjamin Seevers Mises.org

Most Americans do not understand debt default. When it is explained, debt default comes off as immorally reneging on the financial obligations of the government. In contrast, libertarians have demonstrated that it is, in fact, moral and beneficial. However, when default is brought up, it is hardly ever discussed in terms of local governments. So, here is why your local government should leave their creditors in the dust.

Government issued debt is essentially immoral. Government debt issuance is an aggressive action and should be rejected as such. It involuntarily transfers money from the taxpayer to the government’s creditors. There is no positive obligation to pay back the creditors because the creditors are fully aware of where the payments come from—involuntary transfers from the taxpayer. The creditors are about as morally culpable as the government. Local government debt is only different in one way: it is easier to repudiate.