War and debt

[Archean]

Throughout modern history, war has been the major cause of a rising national debt. Most governments operate in fiscal balance during peacetime, financing their spending and investment by levying taxes and charging user fees. War emergencies push this balance into deficit – sometimes for defensive wars, sometimes for aggression.

In Europe, parliamentary checks on government spending were designed to prevent ambitious rulers from waging war. This was Adam Smith’s great argument against public debts, and his urging that wars be financed on a pay-as-you-go basis. He wrote that if people felt the economic impact of war immediately – rather than postponing it by borrowing – they would be less likely to support military adventurism.

 

[captaincranky]

Adam Smith never had to deal with social entitlements and a massive trade deficit when he offered his treatise either. Well, that and the society wide delusion that an economy can be, "service based", and still survive. Oh well, crank up the presses at the mint, and hail a passing slow boat to China on which to offload their output. Things will get better, we just need to spend more.

BTW Archean, this isn't exactly news. European monarchs have been bankrupting their domains for centuries. Take the crusades for example; now that was a golden apogee of the glory of British tax dollars at work. (The pun on "golden" was indeed intentional. I offer no apologies for it).

 

[Archean]

I know, but at least the Europeans (mostly) stopped propagating war as a solution to everything bad in the world during the last century, passing the torch to the Americans after WWII. Hence the endless expansion of the military industrial complex at staggering scale.

Well, that and the society wide delusion that an economy can be, "service based", and still survive.

You nailed the actual issue here pretty nicely there.