As the U.S. Congress continues to ignore the need for real fiscal discipline, kicking the can down the road again with yet another continuing resolution (CR), it is worth revisiting what two of the greats of the Austrian School had to say regarding the question of the national debt. Drawing on the writings of both Ludwig von Mises and Murray Rothbard, one finds the case against the national debt rests on economic, moral, and political arguments.
Mises and Rothbard emphasize that government borrowing is a form of intervention that distorts the natural allocation of capital. In Human Action, Mises explains that government debt competes with private investment, diverting resources from productive uses to politically determined projects. This leads to capital misallocation and economic inefficiency, harming long-term economic growth.
Rothbard, in Man, Economy, and State and America’s Great Depression, expands on this by pointing out that government spending is inherently wasteful because it is driven by political incentives rather than market discipline. He argues that debt-financed spending exacerbates this problem by postponing the immediate economic pain of taxation while still consuming resources that could have gone to private enterprise.
For both Mises and Rothbard, government borrowing is a tool for expanding state power. Mises, in Bureaucracy and Omnipotent Government, warns that a growing state necessarily restricts individual freedoms. He contends that deficit spending allows governments to increase their reach without the immediate backlash of higher taxes, thus enabling interventions that would otherwise face stronger opposition.
Rothbard takes this argument further in Power and Market, arguing that the national debt is effectively a hidden tax on future generations. Since borrowing allows current politicians to spend money without immediate taxation, it encourages irresponsible fiscal policies and perpetual government expansion. As he puts it, “deficits are simply deferred taxation,” and since debt must be repaid with future taxation or inflation, it represents an unjust claim on future labor and wealth.
Another major problem Mises and Rothbard identify is that government debt often leads to inflation. Mises, in The Theory of Money and Credit, explains how central banks monetize debt by purchasing government bonds, increasing the money supply and reducing the purchasing power of money. This inflationary process acts as a stealth tax, transferring wealth from savers and wage earners to the state and its beneficiaries.
Rothbard elaborates on this in The Mystery of Banking and What Has Government Done to Our Money?, showing how central banking enables perpetual deficit spending. When governments rely on debt rather than taxation, they are incentivized to push inflationary policies to reduce the real burden of their obligations. The result is systematic monetary destruction, which harms the economy by distorting price signals and undermining trust in money.
A core libertarian critique of the national debt is its moral implications. Mises and Rothbard both argue that debt allows governments to consume wealth today while imposing the costs on future generations who had no say in the decision. Rothbard, in particular, denounces this as a form of intergenerational theft, writing in For a New Liberty that it is “one of the most immoral and tyrannical policies of government.”
Since future taxpayers will be forced to pay for today’s borrowing through higher taxes or inflation, the national debt effectively enslaves unborn citizens to obligations they did not consent to. This violates the fundamental libertarian principle of voluntary exchange and non-aggression.
Further, we don’t “owe it to ourselves,” as debt is not some abstract obligation held collectively by “society” but rather a set of enforceable claims held by specific individuals and institutions against others. In Human Action, Mises emphasizes that creditors (bondholders) and taxpayers are not the same people. The government owes its debt to specific creditors, often banks, pension funds, foreign governments, and wealthy investors, not to society as a whole. Meanwhile, the burden of repayment falls disproportionately on taxpayers, many of whom may never have consented to or benefited from the borrowing.
Rothbard, in America’s Great Depression and Power and Market, expands on this point, explaining that public debt effectively redistributes wealth. Bondholders receive interest and principal payments funded by taxation or inflation, meaning wealth is transferred from the general population (especially future taxpayers) to those holding government bonds. There is no sense in which “we owe it to ourselves” because the process creates winners (bondholders) and losers (taxpayers).
Both Mises and Rothbard advocate an end to deficit spending. Mises warns that the only way to restore sound economic principles is through fiscal discipline—governments must spend only what they collect in revenue. Rothbard, more radical in his approach, argues that the national debt should not be honored at all. In The Case Against the Fed, he suggests that governments should repudiate their debts rather than continue to extract wealth from productive citizens.
Rothbard’s reasoning is simple: much of the debt was accumulated through illegitimate means—war financing, crony capitalism, and fraudulent central banking. Since these debts were not entered into voluntarily by taxpayers, he argues that there is no moral obligation to repay them.
The national debt is not just an economic problem; it is a fundamental threat to liberty. Mises and Rothbard show that it distorts the market, fuels government expansion, leads to inflation, and immorally burdens future generations. The only solution is to abolish deficit spending, restore sound money, and prevent governments from using borrowing as a means of controlling the economy and society.
