“Never borrow a dollar without laying a tax . . . for paying the interest annually, and the principal within a given term . . . on such a pledge as this . . . a government may always command . . . all the lendable money of the citizens, while the necessity of an equivalent tax is a salutary warning to them & their constituents against oppressions.” Thomas Jefferson, in retirement from public life after two terms as president, wrote these words to Virginia representative John Wayles Eppes on June 24, 1813, offering a glimpse into his thoughts about the quality of public decisions in the new experiment in republican government, according to which each voter had an equal say in governing the affairs that concerned him. He wrote this at the tail end of a long-running dispute between himself and his fellow Founding Father, James Madison, over public debt. Their disagreement takes center stage in a beautiful new book, edited and translated into Italian by Alberto Giordano, called How Much Does Democracy Cost? Public Debt and Future Generations.
At the center of their quarrel was Jefferson’s belief about public debt: that present generations should not transmit obligations to future ones. This idea flowed directly from his axiom that “the earth belongs in usufruct to the living.”
We live in a time in which debt crises have affected many countries (perhaps Italy more than most) and pandemic spending has yielded an explosion of public debt. So the debate between Jefferson and Madison still has much to tell us about the political, economic, and moral issues lurking beneath the apparent coldness of political calculation.
Jefferson’s approach, scrupulously analyzed by Marco Bassani in his 2010 book Liberty, State, & Union: The Political Thought of Thomas Jefferson and taken up also by Giordano, fits into the Lockean matrix, according to which property rights belong among the “self-evident truths.” With particular reference to the issue of public bonds, Jefferson stated in a September 6, 1789 letter to Madison: “No generation can contract greater debts than may be paid during the course of its own existence.” Here is another statement of his principle that each generation has the right to make decisions for itself rather than being bound by those of past generations.
Madison believed that Jefferson’s position risked undermining the legitimacy of the political and economic system. Giordano characterizes Madison’s position as the obverse of the Jeffersonian approach. From this perspective, political decisions should be animated by the principle of “infra-generational equity,” according to which improvements made by the “dead” represent a “testamentary legacy” to the living, and that the right to collect such an inheritance depends on fulfilling the will of the dead accompanying such improvements. The task of the political decision-maker, therefore, is to ensure that the charges against the living do not exceed the improvements acquired by the dead.
One can see how all this is highly topical for our own times. The Nobel Prize-winning economist James M. Buchanan has said that the principle of balanced budgets once enjoyed the status of a true constitutional principle. Indeed, it was precisely in this context that the political slogan “no taxation without representation” was justified. Balanced budgets fulfill four fundamental functions: first, to limit recourse to deficits, a constant temptation to politicians because they are less costly in electoral terms; second, to avoid passing the costs of debt to future generations; third, to avoid compromising the integrity of the public debt; and fourth, to preserve the stability of the currency.
Giordano believes that it is possible to reconcile the Madisonian and Jeffersonian approaches by denouncing democratic choices marked by the stigmata of short-term thinking—namely, those made in the light of John Maynard Keynes’s famous quote: “In the long run we are all dead.” In this sense, the price of democracy is eternal vigilance against the arbitrariness of the policymaker: policies of irresponsible indebtedness, of scarce attention to education and scientific research, or of neglect for the environment, for example. Giordano proposes that we consider “the best of both worlds,” drawing on the work of these two giants of political thought, still vital in both safeguarding republican institutions and promoting future development.