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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.

https://mises.org/wire/should-local-municipalities-default-their-debts-seems-good-idea

Benjamin Seevers

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.

Ask yourself: how much control do you have over whether the Federal government defaults on their debt? If you are sane and honest, your answer should be “no control whatsoever.” Your congressman or senator has little to no control as well. The Federal debt is a monster that we have just about no control over. However, rejecting local debt can be relatively easy. All it takes is a majority on a local government board to pass an ordinance stating, “Government X will only pay zero dollars for every one dollar owed on bond Y.” It is that simple.

Additionally, local government debt default will restrict the spending activities of future administrations because the creditworthiness of the local government will be wrecked. Some might say this is a bad thing—“You are restricting our future”—but this is exactly what you should want. You kill two birds with one stone. You get out of present obligations and, to some extent, you prevent future board members from taking the town into more obligations. They are unable to pay for more of their pet projects.

One might say, “Local debt is only the tip of the iceberg. The national debt is the real problem.” Au contraire! Local and state governments owe just over a total of $3 trillion. This roughly comes out to $9,700 per person. They owe even more in other obligations—$5 trillion to be exact.

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