Why Governments Must Be Forbidden from Borrowing
The Unquestioned Assumption That Destroys Nations
Modern governments possess a power that would have horrified the architects of democracy: the authority to spend money they do not have, issue obligations against citizens not yet born, and leave the bill for generations that had no voice in the decision.
This power has become so ordinary that we scarcely notice it. Yet it represents one of the most profound transfers of political authority in human history—a transfer from the living to the unborn, from taxpayers to bondholders, from democratic accountability to financial abstraction. We have accepted, without serious debate, that governments should be able to mortgage the future of their people as casually as a teenager runs up a credit card bill.
Government debt is not an unavoidable feature of modern life. It is a choice. And it is a choice that has corrupted democratic governance, enabled catastrophic wars, facilitated the looting of public treasuries by wealthy elites, and mortgaged our children’s futures for our present convenience.
There is another possibility: abolish the government’s power to borrow, entirely and permanently.
This is not a radical proposal. It is a return to the most fundamental principle of responsible stewardship: that those who make decisions should bear their consequences, and that no generation should have the power to mortgage the future without the consent of those who will inherit it.
PART ONE: THE CORRUPTION OF DEMOCRACY
The Separation of Decision from Consequence
When a government borrows, it performs a political miracle: it delivers benefits to today’s voters while deferring the cost to tomorrow’s taxpayers.
This is not governance. It is intergenerational theft dressed in financial jargon.
A pension increase, a new railway, an expanded bureaucracy—every spending proposal becomes politically easier when the bill can be sent into the future. Politicians promise what they cannot deliver, confident that bond markets will provide the illusion of affordability. They can stand before cameras and announce grand new programs, knowing that the painful reckoning will come long after the next election, perhaps long after they have left office entirely.
The result is a systematic corruption of democratic accountability. Citizens cannot properly judge their government’s performance when the true cost of its decisions is deliberately obscured. They receive the benefit. Their children pay the price. The democratic feedback loop—where citizens reward good policy and punish bad policy—is broken because the consequences are separated from the decisions by decades.
Historical Example: The United States post-2008
Following the financial crisis, the US government borrowed trillions to stimulate the economy. The benefits—bank bailouts, auto industry rescues, unemployment extensions—were immediate and visible. The costs? A national debt that grew from roughly $10 trillion in 2008 to over $34 trillion by 2024. Today’s young Americans will spend their working lives paying for decisions made before many of them could vote. They had no say in the matter, yet they bear the burden.
Modern Example: Japan’s Debt Crisis
Japan’s government debt exceeds 260% of GDP—the highest in the developed world, according to IMF data. Three decades of deficit spending have produced stagnant growth, an aging population burdened with unpayable obligations, and a political class that has become institutionally incapable of fiscal restraint. The Japanese people are paying today for promises made in the 1980s and 1990s, when their grandparents were the beneficiaries. The young Japanese worker understands that they are working not for their own future, but to service debts incurred before they were born.
Taxes Would Become More Honest
Government borrowing does not eliminate taxation. It postpones some taxation while adding interest.
When a government issues a bond, it receives purchasing power today in exchange for a promise that future taxpayers will provide resources to repay both principal and interest. This is not a free lunch. It is a meal paid for by your children’s children.
A borrowing ban would make taxation brutally honest.
If citizens want a larger government, they must pay for it. If they do not want higher taxes, politicians must explain which services will be reduced. This creates a far healthier democratic conversation than the modern practice of promising benefits today while hiding the bill for tomorrow. Every spending proposal would have to answer an immediate question: where does the money come from?
The political illusion of “free” government spending becomes much harder to maintain. Debt allows the cost of today’s political decisions to be separated from today’s voters. Abolishing borrowing reconnects decision, payment, and responsibility. That is a profound improvement in democratic accountability.
Historical Example: The Roman Empire
Rome’s decline was accelerated by its fiscal irresponsibility. Emperors debased currency, imposed crushing taxes, and borrowed from future revenues to fund military adventures and public spectacles. The citizens who received the bread and circuses did not pay the cost—the provinces did, through ever-increasing taxation and confiscation. The empire’s collapse was, in significant part, a fiscal collapse. Rome had spent its future and found that the future would not be bailed out.
Modern Example: Greece’s Debt Crisis
Greece’s government borrowed massively to fund generous pensions, public sector employment, and Olympic infrastructure. When the debt became unsustainable, the Greek people faced brutal austerity—receiving a €110 billion bailout in 2010 in exchange for spending cuts that contributed to a roughly 25% decline in GDP. The average Greek today works longer hours for lower wages to service debts incurred before they entered the workforce. Democracy in Greece was effectively suspended as foreign creditors dictated policy—all because previous governments had borrowed without restraint.
PART TWO: THE FINANCIAL DRAIN
The Debt-Interest Machine: How Borrowing Consumes National Wealth
Interest paid on government debt is revenue that cannot be spent on schools, hospitals, infrastructure, or tax reductions.
The United States currently spends more on interest payments than on the entire Department of Defense, more than on all children’s programs combined, more than on transportation, education, and housing assistance put together. In fiscal year 2023, the US paid $659 billion in interest—more than the entire federal budget for veterans’ benefits, science, space exploration, energy, and environmental protection combined.
This is not a cost of government. It is a cost of past government, a financial hangover from decisions made decades ago. It is money that flows from taxpayers to bondholders, many of them foreign, extracting wealth from the economy that could otherwise be invested in the nation’s future.
A debt-free state would eliminate this permanent drain. Once existing sovereign debt is retired, the state no longer needs to devote a permanent portion of its revenue to servicing yesterday’s borrowing. That money becomes available for today’s priorities.
Historical Example: Britain in the 19th Century
Following the Napoleonic Wars, Britain’s national debt reached 260% of GDP—comparable to Japan’s today. Yet Britain spent the next century reducing that burden through disciplined fiscal policy, running surpluses whenever possible. By 1914, the debt had been reduced to roughly 24% of GDP. The discipline of that century—a century of unprecedented British power and prosperity—was made possible by a commitment to fiscal responsibility that today’s governments have abandoned. Britain did not borrow its way to greatness; it saved its way there.
Modern Example: Italy’s Economic Stagnation
Italy’s debt burden exceeds €2.8 trillion, and by November 2024 had surpassed €3 trillion, with annual interest payments consuming nearly 8% of government revenue. This money does not create jobs, build schools, or fund research. It flows to bondholders, many of them foreign, extracting wealth from the Italian economy that could otherwise be invested in Italy’s future. The country’s economic stagnation is not a mystery—it is a direct consequence of decades of borrowing that left no room for productive investment. Italy is trapped in a cycle of debt service that prevents it from building the future its young people deserve.
The State Would Become Financially Boring—And That Would Be a Virtue
A healthy government should not need to behave like a leveraged corporation.
It should collect revenue, provide services, maintain reserves, invest in infrastructure, and keep its finances comprehensible. Citizens should be able to look at the national accounts and understand the basic proposition: this is what the country earns, this is what it spends, this is what it has saved.
The enormous financial machinery surrounding sovereign debt would become unnecessary. There would be fewer bonds to issue, fewer refinancing operations, fewer interest-rate shocks transmitted through government finances, and no perpetual requirement to roll over maturing government obligations. The state would become less financially sophisticated—and more financially robust.
PART THREE: THE CORRUPTION MACHINE
How Debt Enables Regulatory Capture and Elite Enrichment
There is a darker dimension to sovereign borrowing that extends beyond intergenerational theft and financial drain. Government debt is the primary vehicle through which the wealthy and well-connected extract wealth from the public treasury while insulating themselves from risk.
When a government borrows to bail out a failing industry, prop up a collapsing bank, or fund massive infrastructure contracts, it is not merely spending—it is transferring risk from private balance sheets to the public ledger. The profits of these enterprises remain private. The losses become public. This is the oldest trick in the crony capitalist playbook, and sovereign debt makes it possible.
Without the ability to borrow, a government could not afford to rescue failing corporations. It would have to raise taxes immediately or cut other services to do so—an act so politically visible and painful that it would rarely occur. The “too big to fail” doctrine would collapse overnight. Banks and corporations would know that their recklessness would not be underwritten by future taxpayers.
Modern Example: The 2008 Financial Bailouts
When the US financial system collapsed in 2008, the government borrowed $700 billion for the Troubled Asset Relief Program (TARP) and trillions more through the Federal Reserve’s emergency lending facilities. The banks that had caused the crisis—through reckless mortgage lending and fraudulent financial products—were rescued. Their executives paid themselves billions in bonuses within months of receiving taxpayer funds. The ordinary American, meanwhile, faced foreclosures, unemployment, and a soaring national debt that would take decades to repay. The profits were privatized; the losses were socialized through sovereign borrowing.
Modern Example: The COVID-19 Pandemic PPP Loans
The Paycheck Protection Program in the United States was financed entirely by borrowed money. While intended to help small businesses, billions of dollars flowed to large, well-connected companies with ties to politicians and regulators. The Los Angeles Lakers received a $4.6 million loan, which they later returned after public backlash. Ruth’s Chris Steakhouse received $20 million. Shake Shack similarly received and returned a loan. Multiple publicly traded companies and even some hedge funds received funds that were ultimately forgiven—meaning the government borrowed money to give to wealthy entities that never needed it. Small businesses that actually needed help were often left waiting. This was not incompetence; it was regulatory capture operating through the mechanism of sovereign debt.
How Wall Street Feasts on Government Borrowing
The financial industry has become addicted to sovereign debt—not as an investment, but as a source of fees, influence, and regulatory capture.
When a government issues bonds, it must hire investment banks to underwrite, market, and trade those securities. These banks earn billions in fees for services that could be performed by a simple government savings account. They then use those profits to lobby for policies that increase government borrowing—lower reserve requirements, deregulation, and fiscal stimulus programs that require massive debt issuance.
The cycle is self-reinforcing. The more a government borrows, the more power and profit flow to the financial sector. The more power the financial sector acquires, the more it shapes policy to ensure continued borrowing. The financial industry has a vested interest in government debt, and it spends vast sums to ensure that the public never seriously considers abolishing it.
Historical Example: The South Sea Bubble (1720)
The British government converted a portion of its national debt into shares of the South Sea Company, a private enterprise with monopolistic trading rights. The company paid £7.5 million for the conversion privilege and distributed an estimated £1.3 million in bribes to members of Parliament and court officials. The company’s stock soared, insiders sold their shares at the peak, and the bubble collapsed, ruining thousands of investors. The government then had to assume the company’s obligations, effectively transferring wealth from ordinary citizens to the corrupt elite who had engineered the scheme. It was sovereign debt that made this looting possible. The pattern is centuries old, and it has not changed.
Historical Example: The S&L Crisis (1980s–1990s)
The US Savings and Loan crisis was fueled by deregulation and reckless lending—and ultimately financed by government borrowing. The total cost of the bailout was approximately $160 billion, with $124–132 billion borne directly by taxpayers. The directors and executives who had looted the institutions faced little personal accountability. Once again, the public treasury was raided to protect private wealth, and sovereign debt provided the cover. The lesson was clear: if you are wealthy and well-connected, the government will borrow to save you. If you are ordinary, you will pay the bill.
Quantitative Easing: The Ultimate Transfer to the Wealthy
When central banks engage in quantitative easing—creating money to buy government bonds—they artificially inflate the prices of financial assets. Stocks, bonds, and real estate soar in value. The wealthy, who own the vast majority of these assets, see their net worth explode. The average worker, who owns few assets, sees only the inflation that erodes their wages and the higher taxes that service the debt.
Quantitative easing is not monetary policy. It is wealth redistribution from the poor and middle class to the financial elite—conducted entirely through the mechanism of sovereign debt.
Modern Example: Post-2008 Asset Inflation
Between 2009 and 2021, the US Federal Reserve’s balance sheet grew from under $1 trillion to approximately $8.4–8.6 trillion, primarily through purchasing government bonds. The S&P 500 rose by over 400% during this period, with the bull market delivering cumulative gains that exceeded that threshold. By the fourth quarter of 2021, the top 1% of Americans held a record 32.3% of the nation’s wealth, while the bottom 50% held only 2.6%. The total wealth of the top 1% reached $45.9 trillion. The wealth gap in America widened to levels not seen since the Gilded Age—not because of productivity, but because government borrowing and money printing transferred wealth upward. The Federal Reserve’s policies were not neutral; they were a deliberate transfer of wealth from the many to the few.
The Taming of the Capture
A government that cannot borrow cannot funnel unlimited resources to favored industries. It cannot bail out failed banks. It cannot underwrite massive public-private partnerships where the private sector takes the profits and the public takes the risk. It cannot print money to inflate asset prices for the wealthy.
Every subsidy, every bailout, every sweetheart contract must be financed by immediate taxation or by cutting other programs. This makes crony capitalism vastly more difficult to sustain. The voters can see exactly who is being enriched and at what cost. The wealthy elite do not support sovereign debt because they love their country. They support it because debt is the most effective mechanism ever devised for transferring wealth from the many to the few without provoking revolt. The cost is hidden in future taxes and inflation. The benefit is immediate and visible to those with political connections.
PART FOUR: THE WAR MACHINE
How Debt Enables Conflict
There is perhaps no more compelling argument against government borrowing than its role in enabling catastrophic war.
Throughout history, borrowing has made it possible for governments to fight wars that their citizens would never have supported if the cost had been immediate and visible. Debt separates the financial sacrifice of war from the political decision to wage it, allowing leaders to commit nations to conflict without requiring the consent of those who will bear the ultimate burden.
Historical Example: World War I
The Great War was financed through unprecedented borrowing by all major powers. Germany, Britain, France, and Russia all issued massive quantities of war bonds, effectively mortgaging their futures to fund mutual destruction. The war cost approximately $186 billion in current dollars—and almost all of it was borrowed. If the governments of Europe had been forced to finance the war through immediate taxation, the conflict would have ended within months, perhaps within weeks. The slaughter of millions continued for four years because governments could separate the cost from the decision. Young men died on the Western Front so that bondholders could be repaid decades later.
Historical Example: The Vietnam War
The United States financed the Vietnam War almost entirely through borrowing and monetary expansion rather than taxation. President Lyndon Johnson deliberately avoided a war tax, fearing it would undermine public support for the conflict. This decision meant that Americans did not experience the true financial cost of the war, making it politically easier to continue a conflict that ultimately claimed 58,000 American lives and over 2 million Vietnamese. The war was not ended by military defeat but by political exhaustion—and that exhaustion might have come much sooner if citizens had been forced to pay the cost directly. Johnson’s deception was not merely political; it was financial, enabled entirely by the government’s ability to borrow.
Historical Example: The Iraq and Afghanistan Wars
The United States financed its post-9/11 wars through borrowing rather than taxation. The total cost of these conflicts exceeds $6 trillion when including long-term obligations, interest costs, and veteran care—all ultimately financed through borrowing. Direct operational spending through 2014 was estimated by the Congressional Research Service at roughly $1.6 trillion, but the long-term costs raise the total substantially. If American citizens had been forced to pay a “war tax” each year, the political support for these conflicts would have been very different. Instead, the wars continued for two decades because the financial burden was hidden in the national debt.
Modern Example: The War in Ukraine
Russia’s invasion of Ukraine has been financed in part through massive sovereign borrowing, allowing the Russian government to sustain a war that has devastated its economy. Both Ukraine and Russia are accumulating enormous debt burdens that their citizens will be paying for decades. The war continues, in part, because neither side’s population is directly experiencing the full financial cost of the conflict. Ukrainian soldiers are dying, Russian soldiers are dying, and both nations’ futures are being mortgaged—all because governments can borrow.
The Principle of Visible Sacrifice
A government contemplating war would have to finance it from existing reserves, current taxation, and whatever resources it can legitimately redirect from other activities. This would not make war impossible—a nation could still fight if its population considered the conflict sufficiently important. But it would make the financial sacrifice visible.
The political question would no longer be merely “Can we win?” but also “Can we afford this without impoverishing ourselves?” That is a powerful restraint on unnecessary military adventures. It imposes a democratic check on war that borrowing removes.
This is not pacifism. It is prudence. And it would impose a powerful restraint on unnecessary military adventures. The democratic debate about war would be richer and more honest when citizens understood its cost.
PART FIVE: THE PREPAREDNESS IMPERATIVE
A Responsible State Saves for Emergencies
A borrowing prohibition would not mean helplessness in an emergency. It would mean that preparedness must come before the crisis.
A responsible state would maintain substantial reserves for floods, earthquakes, pandemics, wars, financial crises, and other extraordinary events. Instead of saying “We can deal with it because we can borrow,” the government would have to say “We prepared for this because we knew emergencies were possible.”
This changes incentives dramatically. A government that repeatedly exhausts its reserves faces an obvious political consequence: it has failed to prepare adequately. Citizens can see the cost of that failure directly—not in abstract budget projections, but in the depletion of funds that were supposed to protect them.
The state would effectively become its own insurer. It would accumulate savings during good times to draw upon during bad times—just as any responsible household or business does.
Historical Example: Singapore’s Fiscal Discipline
Singapore maintains one of the world’s most conservative fiscal policies, with substantial reserves accumulated through decades of disciplined saving. During the 2008 financial crisis, Singapore drew S$4.9 billion from reserves for a jobs credit scheme and bank lending program, and set aside up to S$150 billion to guarantee bank deposits from October 2008 to December 2010. A S$20.5 billion resilience package was delivered for FY2009. The country emerged from the crisis stronger, having learned the lesson that preparation is superior to desperation.
Historical Example: Norway’s Oil Fund
Norway has accumulated the world’s largest sovereign wealth fund, valued at $1.5 trillion in early 2024 and reaching $1.75 trillion by the end of that year, by saving rather than spending its oil revenues. The fund serves as a fiscal buffer for future generations and for emergencies. When the COVID-19 pandemic struck, Norway could draw on its reserves rather than borrow. The Norwegian people understood that their government had been preparing for exactly such an event. They are not burdened by debt; they are protected by savings.
Modern Example: COVID-19 and Western Debt
During the COVID-19 pandemic, most Western governments borrowed massively to fund economic support. The United States borrowed over $5 trillion, with federal debt surpassing $30 trillion by early 2022. The UK, France, Germany, and others all added to their debt burdens. Meanwhile, countries like Singapore and Norway—which had maintained substantial reserves—were able to respond without creating future obligations. The difference was not in the severity of the crisis but in the preparation. The Western approach was a failure of governance; the Singapore approach was a success of governance.
PART SIX: INTERGENERATIONAL JUSTICE
The End of the Debt-Generational Cycle
One of the strongest arguments against sovereign debt is democratic and ethical.
People who had no say in a government’s decision can nevertheless be required to finance its consequences. A child born twenty years after a spending program was approved may spend their adult life paying taxes partly to service the debt created by that program.
This is not merely unfair. It is a violation of the most basic principle of consent. It is taxation without representation, applied to those who were not even born when the decision was made. It is the ultimate expression of political power without accountability.
A debt-free state changes this relationship. Future citizens inherit the infrastructure, institutions, and productive economy created by previous generations—but they do not automatically inherit their government’s financial promises. Each generation becomes responsible for financing its own government.
That creates a stronger principle of intergenerational fairness. Each generation makes its own choices and bears its own costs. No generation can impose its will on those who come after.
Historical Example: The American Founding
The American Founders were deeply suspicious of public debt. Thomas Jefferson wrote that “the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.” Alexander Hamilton, though a supporter of federal assumption of state debts, understood that debt must be temporary and retired as quickly as possible. The early republic maintained a commitment to fiscal responsibility that served the nation well. The Founders understood that debt was not merely an economic matter but a moral one.
Modern Example: Pension Obligations and the Young
Across the developed world, young people face a grim future of paying for commitments made to previous generations. In the United States, unfunded state and local pension liabilities, when measured using risk-free Treasury rates to discount future obligations, exceed $5 trillion. Official government figures using higher assumed investment returns are lower—around $1.6 trillion—but economists increasingly agree that the risk-free measure better reflects the true liability. In Europe, generous public pensions promised decades ago are now crushing the working-age population. The young are paying for the old’s political comfort—a transfer of wealth from those who had no voice to those who had all the power. This is not intergenerational solidarity; it is intergenerational theft.
PART SEVEN: THE EFFICIENCY DIVIDEND
How Borrowing Conceals Waste
A government that cannot borrow cannot indefinitely conceal waste behind additional financing.
If a ministry spends too much, something else has to give. If a public program produces little benefit, its continued existence becomes harder to justify. If bureaucracy expands without producing corresponding value, taxpayers eventually confront the cost directly.
This would not magically eliminate waste. Governments would still make mistakes. But it would create a much stronger constraint against persistent waste. A government can survive inefficiency for a surprisingly long time when it can continuously borrow. It has considerably less room to do so when every additional expenditure must be financed by an identifiable reduction elsewhere or by taxation.
Prioritization becomes mandatory. A state has finite resources. Every dollar spent on one objective cannot be spent on another. Debt can temporarily obscure this scarcity. A balanced, cash-funded state cannot. The result would be a government that is smaller not necessarily because citizens demand fewer services, but because every service must compete openly for scarce resources.
Historical Example: The Fiscal Reform Movement
Throughout the 19th century, Britain’s fiscal reformers argued that sound money and balanced budgets were essential to good governance. Their success in reducing the national debt created the fiscal space for Britain’s Victorian prosperity. The discipline of that era—when government could not simply borrow its way out of problems—forced efficiency that benefited the entire nation.
Modern Example: Municipal Bankruptcy
When cities and states cannot borrow, they are forced to confront reality. The bankruptcy of Detroit demonstrated what happens when decades of borrowing are finally exhausted: services are cut, pensions are reduced, and citizens face the true cost of their government’s past choices. The city has emerged with a more disciplined fiscal structure—but only after the painful process of reckoning. The lesson is clear: borrowing only postpones the reckoning; it never prevents it.
PART EIGHT: THE COUNTERARGUMENTS
But What About Emergencies?
The strongest objection is obvious: what happens when something enormous happens and the government has not saved enough?
The answer is uncomfortable but straightforward: the country bears the cost itself. Taxes may have to rise. Spending may have to fall. Private resources may have to be redirected. Some projects may have to be postponed. Citizens may have to make sacrifices.
But this is not a unique problem created by banning debt. The underlying economic cost of the disaster exists regardless of how it is financed. Borrowing does not make a war, pandemic, or natural disaster free. It merely changes when and by whom the cost is paid.
A borrowing ban therefore does not abolish sacrifice. It forces society to confront sacrifice rather than disguising it as a financial obligation. The sacrifice is real either way; borrowing simply hides it.
Historical Example: The Great Depression
The Great Depression was met by massive borrowing by governments around the world. Yet the debt incurred did not make the Depression easier—it merely shifted the burden to future generations. The economic recovery was driven by productivity and innovation, not by government borrowing. And the debt burden of the 1930s cast a long shadow over the post-war years.
Modern Example: Puerto Rico’s Debt Crisis
Puerto Rico’s government borrowed to fund services and cover deficits for decades. When the borrowing reached its limit, the island faced a humanitarian crisis. The debt had not prevented the crisis—it had merely delayed and worsened it. The people of Puerto Rico are paying today for borrowing that did not create lasting prosperity. Borrowing did not save Puerto Rico; it destroyed it.
But Wouldn’t This Make Government Too Weak?
Some critics argue that government would be unable to respond to crises or pursue ambitious projects without borrowing.
The response is twofold. First, as demonstrated, a responsible government saves for crises. Second, ambition is not the highest value in governance. Prudence, accountability, and honesty are higher values. A government that can only do what society is genuinely willing to pay for is a government that is genuinely accountable to its citizens.
A state that must live within its means may be slower, poorer in emergencies, and more constrained in its ambitions. Yet it would also be more honest about costs, more disciplined in its priorities, more accountable to taxpayers, and less capable of transferring today’s political choices onto generations that had no opportunity to object. The goal is not to create a state that can do everything. It is to create a state that can only do what society is genuinely willing to pay for.
PART NINE: A DIFFERENT PHILOSOPHY OF GOVERNMENT
Two Conceptions of the State
Ultimately, abolishing sovereign borrowing is not merely an accounting reform. It represents a different conception of the state.
The modern financial state says: If today’s resources are insufficient, borrow against tomorrow.
The debt-free state says: Prepare today for tomorrow, and do not spend what you do not have.
The first philosophy maximizes the government’s financial flexibility. The second maximizes its financial discipline.
The first allows governments to respond quickly by transferring costs across time. The second forces governments to anticipate problems and maintain reserves before they occur.
Neither philosophy eliminates scarcity. The difference is whether scarcity is confronted openly or postponed through promises. The debt-free state is honest about the fundamental fact of economics: resources are finite, and choices have consequences.
The Principle of Consent
A government should have extraordinary powers only when society can tolerate the consequences of those powers. The ability to create enormous financial obligations is one such power—perhaps the most dangerous power a modern state possesses.
Once governments can borrow almost without limit, politicians can make decisions whose costs extend far beyond their own terms of office. They can spend without immediately taxing. They can fight wars without immediately paying the full bill. They can expand programs without immediately demonstrating that citizens are willing to finance them. They can bail out their wealthy friends without voters realizing the cost.
A total prohibition on sovereign borrowing would remove that power. It would force governments to save for emergencies, fund wars from resources they actually possess, justify spending to the taxpayers who finance it, eliminate debt-interest payments over time, and prevent today’s politicians from automatically presenting tomorrow’s citizens with yesterday’s bills.
It would make government less flexible. But perhaps that is exactly the point. A government should not be infinitely flexible with other people’s money.
PART TEN: THE PATH FORWARD
How to Transition to a Debt-Free State
The transformation would not happen overnight. Existing obligations must be honored. But after a transition period, the financial burden of past borrowing would disappear.
Step One: Recognize the principle. The government should not borrow. This requires a fundamental shift in how we think about public finance, from assuming that debt is normal to recognizing that it is a corruption of democratic governance.
Step Two: Establish a plan to retire existing debt. This means running primary surpluses—tax revenues exceeding expenditures excluding interest—until the debt is eliminated. This requires political courage and public understanding.
Step Three: Build reserves. A responsible government maintains substantial savings for emergencies, wars, and other contingencies. This requires discipline during good times so that reserves are available during bad times.
Step Four: Amend the constitution. A borrowing prohibition must be legally entrenched so that future governments cannot overturn it. This requires a supermajority consensus that reflects the importance of the principle.
Step Five: Create a culture of fiscal responsibility. This means educating citizens about the true cost of government programs and making the trade-offs transparent. Democracy depends on an informed citizenry, and fiscal responsibility depends on democratic accountability.
Historical Precedents for Success
Historical Example: Canada’s Debt Reduction
In the 1990s, Canada faced a debt crisis that threatened its economic future. The government implemented a program of spending cuts and tax increases that eliminated the deficit by 1997 and reduced the debt-to-GDP ratio from roughly 66% to below 50%. The result was a stronger economy, lower interest rates, and greater fiscal flexibility. Canada demonstrated that debt reduction is possible with political will. The Canadian people accepted sacrifice because they understood that the alternative was worse.
Modern Example: Germany’s Debt Brake
Germany’s constitutional “debt brake,” adopted in 2009, limits the federal government’s structural deficit to 0.35% of GDP. While not a complete prohibition, it represents a commitment to fiscal discipline that has served Germany well. The country emerged from the 2008 financial crisis and the COVID-19 pandemic with a stronger fiscal position than most of its peers. Germany demonstrates that fiscal rules can work when they are constitutionally entrenched and politically supported. (Note: the debt brake was amended in March 2025, but its core principle remains a powerful example of fiscal constraint.)
Historical Example: Hong Kong’s Fiscal Conservatism
Hong Kong has maintained a policy of fiscal conservatism that has served it well for decades. The government runs surpluses in good years and draws on reserves in bad years. Its net debt-to-GDP ratio is negative, with fiscal reserves exceeding debt. As of March 2024, fiscal reserves stood at HK$734.6 billion, approximately 24.6% of GDP. This has provided Hong Kong with exceptional financial stability and the ability to respond to crises without creating future obligations.
CONCLUSION: THE RETURN OF ACCOUNTABILITY
The modern financial state has made borrowing ordinary, debt inevitable, and intergenerational theft routine. It has corrupted democratic accountability, enabled catastrophic wars, facilitated the looting of public treasuries by wealthy elites, and mortgaged the futures of our children for our present convenience.
It is time to restore the principle that governments must pay their bills, that wars must be financed honestly, that every generation should be responsible for its own governance, and that no one should be able to enrich themselves through regulatory capture and government borrowing at the expense of the unborn.
Cancelling the financial state is not about austerity. It is about accountability. It is about democracy. It is about justice between generations. It is about preventing the corruption that occurs when governments can spend money they do not have and impose costs on people who had no voice in the decision.
A state that must live within its means may be slower, poorer in emergencies, and more constrained in its ambitions. Yet it would also be more honest about costs, more disciplined in its priorities, more accountable to taxpayers, and less capable of transferring today’s political choices onto generations that had no opportunity to object.
The goal is not to create a state that can do everything. It is to create a state that can only do what society is genuinely willing to pay for. It is to create a state that cannot be captured by wealthy elites who use government borrowing to enrich themselves at public expense. It is to create a state that cannot wage endless wars because the cost is hidden from citizens. It is to create a state that is genuinely accountable to the people it serves.
This is what it would mean to cancel the financial state.
It is not a radical idea. It is the oldest idea in democratic governance: that those who make decisions should bear their consequences, and that no generation should have the power to mortgage the future without the consent of those who will inherit it. It is the idea that government should be of the people, by the people, and for the people—not of the bondholders, by the politicians, and for the wealthy elite.
The time has come to restore that idea. The time has come to end the power of governments to borrow. The time has come to cancel the financial state.
“The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”
— Thomas Jefferson
“Public debt is a burden on the people, and a means of enriching the few at the expense of the many.”
— Andrew Jackson
“A government which robs Peter to pay Paul can always depend on the support of Paul.”
— George Bernard Shaw