Saving Communities

Bringing prosperity through freedom, equality, local autonomy and respect for the commons.

The Ethics of Democracy

by Louis F. Post

Part 6, Democratic Government
Chapter 4, Public Debts

IF the statistics of all the public debts of this country were available, the amount would be appalling. In this great aggregate the national debt is as a drop in the bucket. In addition to that there are State debts, county debts, city debts, school district debts, and township debts, which make an unbearable aggregate. They are a growing first lien upon the industry and property of the country, and sooner or later, if they keep on growing, there will come a time when they must be repudiated. Now repudiation is associated with the idea of dishonesty, and this raises a question which demands calm consideration.

To identify repudiation absolutely with dishonesty, two wide chasms in thought must be bridged. It must be assumed, in the first place, that government has the moral right to bind future generations by contract; and, in the second, that all contracts are morally inviolable. If the government has not the right to bind future generations by contract, then future generations have the moral right, when they come upon the stage of action, to repudiate ancient government contracts which assume to bind them; and if all contracts are not morally inviolable, then, even though government might morally bind future generations by contract, it could not do so by all kinds of contracts, and illegitimate government contracts might be repudiated without dishonesty. It is incumbent, therefore, upon those who undertake to argue that the principle of repudiation is dishonest, to prove, first, that government can morally bind future generations by contract; and, second, that repudiation of contracts is necessarily dishonest. But so far from being able to prove both these propositions, they can prove neither.

Government cannot morally bind future generations. To concede its right to do so would contravene the root principle of self-government. This principle that it is the right of every people to govern themselves, has for a corollary the principle that it is the right of every generation to govern itself. In principle, it is as intolerable that dead and gone generations should govern living generations, as that one nation should govern another. In degree it is worse. Government by generations that have passed away is that most oppressive of all tyrannies - the tyranny of "the dead hand."

To no function of government is this observation so pertinent as to taxation. It is by means of taxation that peoples are most effectually enslaved. Whoever controls the purse strings of a nation governs the nation. To a keen appreciation of that truth by the pioneers of English freedom we are indebted for the familiar constitutional principle that revenue bills must originate in the popular branch of the legislature. It was early seen that if the people would govern themselves, they must tax themselves.

And it is the taxing function that is operated when one generation assumes to bind future generations by contract. The right of government to deal with funds in its own hands, funds and other property which belong to it, is not denied. Neither is it denied that government may make contracts to be fully executed, performed, completed and done with within such reasonable time in the future as to make it clear that they do not constitute evasive attempts to govern future generations. What is denied is that government has the right to give morally binding force to contracts requiring future generations to submit to taxation, either in character or amount, without their own consent. To assume to give force to such contracts is in its essence a legislative, not a contractual act; and it is a clear principle, not only of political philosophy but of jurisprudence, that any exercise of legislative functions is at all times, so far as relates to its future operations, subject to repudiation.

This alone is sufficient to dispose of the notion that repudiation is necessarily dishonest. But even if the point that government cannot contract away the rights of future generations were waived, and it were assumed that government has that right, the second point would still remain: contracts, though authoritatively made, are not necessarily inviolable.

While it is true that repudiation of public contracts may be dishonest, it is not true that it is necessarily so. Whether the repudiation of a contract be dishonest or not, depends not upon the fact of a contract, but upon its character. There are such things as unconscionable contracts; and repudiation of unconscionable contracts is not dishonest; it is rather their enforcement that is dishonest.

We here touch upon a principle which is aptly illustrated in the legal history of private contracts. At one time it was held by the courts that private contracts must be performed according to their terms. A leading case had to do with one of those practical jokes in geometrical progression with which we still astonish our children. To get his horse shod a farmer had contracted with a blacksmith to pay one barley corn for the first nail, two for the second, four for the third, and so on, each succeeding nail to be paid for with twice as much barley as the one before it. Notwithstanding the enormous amount of barley which the blacksmith claimed under his contract, the court decided, as anti-repudiationists now contend, that a contract is binding no matter how it affects the parties to it, and gave a ruinous judgment against the farmer accordingly. The principle of that decision was followed by the courts for a long time, but at length a more enlightened and honest view prevailed. It was seen that grossly oppressive contracts are unconscionable, and as matter of good morals, as well as sound policy, the courts stopped enforcing them. No one now would think of stigmatizing repudiation of such private contracts as dishonest. The principle applies as well to contracts by government. If they are unconscionable, honesty demands not that they be enforced, but that they be repudiated.

What would constitute an unconscionable public contract must depend, of course, as in the case of private contracts, upon the circumstances - not merely the circumstances in which the contract originates, but also the circumstances in which it operates. Though it be made in good faith, yet if it operate unconscionably it is a fit subject for repudiation.

Without undertaking to enumerate the kinds of public contracts that ought thus in honesty to be repudiated, two may be suggested by way of illustration. Public debts that extend over generation after generation, sucking taxes in the name of interest from people born long after the principal has been expended for purposes that do not concern them, clearly belong in the category of repudiable public contracts. The second example is franchise privileges. Franchises created by a dead and buried generation, by whose favor and upon whose authority the beneficiaries levy tribute upon people who had no voice in creating the franchises or in fixing their duration, may be repudiated without dishonesty. It is dishonest not to repudiate them.

Repudiation is a sacred right of the people. It is a right which must not be dishonestly exercised, to be sure; but likewise it is a right which must not be dishonestly neglected. Whoever couples this right with breach of public faith, as if the terms were interchangeable, gives aid and comfort to the worst class of enemies the people ever had. So does he who invokes it frivolously. The right of repudiation is a reserved right which the people should learn to respect; and one which, that it may command respect, should never be identified in speech with what is immoral, or be invoked for the redress of trivial or doubtful grievances. As the "queen's arm" of the old frontiersman hung upon its pegs above the hearth, never taken down for wanton attack but always ready and effective for defense, so should the reserved right of repudiation be cherished. It is the old "queen's arm" of a free people who are menaced on all sides by aggressive and merciless legalized monopolies. If it be not cherished, the freedom of posterity will be bargained away, and the nation's destinies will fall under the sway of a "dead hand."