Channels, Spring 2018

Channels • 2018 • Volume 2 • Number 2 Page 17 producing ideal social outcomes if one group, such as an impoverished majority, controls financial levers and uses them in a partisan struggle with other factions. 15 Early Responses to Buchanan Naturally, Buchanan’s arguments in Public Principles of Public Debt did not go unanswered. Keynesian reviews of this work, as well as independent articles moving forward, presented several critiques of his contentions. As one commentator on this debate has noted, these authors, while “generally respectful,” “pretty much rejected” Buchanan’s central claims in Public Principles of Public Debt. 16 One good example of such a review is the one given by Earl Rolph in the American Economic Review . Rolph argued that Buchanan’s work was polemical in nature and controversial in tone, separating it from good academic literature. 17 Further, he argues that Buchanan’s use of the term “new orthodoxy” for a group of economic thinkers that Rolph saw as diverse and varied, is improper and harmful. 18 No clear policy implications or principles emerge from the work on Rolph’s reading, and he reiterated the Keynesian argument regarding the impossibility of burden- shifting: The cost of construction is the value of resources used to produce them. Such costs are contemporaneous; present resources are being used to produce planes instead of other present things. In this sense of cost, there can be no postponement regardless of any accompanying financial devices. 19 Rolph thereby maintained the positions that Buchanan denoted as belonging to the new orthodoxy without conceding that such an orthodoxy existed. A further Keynesian rebuttal came with James Tobin’s review of Public Debt and Future Generations , an anthology edited by James Ferguson that includes three articles by Buchanan tracing his key arguments. Like Rolph, Tobin held the burden of debt in the present, noting this as Buchanan’s central point of attack and presenting the counterpoint as follows: “The debt can be no burden, because future payments of interest or principal from taxpayers to bondholders will be transfers involving no aggregate draft on resources.” 20 More importantly, Tobin found Buchanan’s basic assumptions unconvincing, namely that unnecessary taxation is coercive and harmful, while government use of market operations do not result in a burden. 21 Tobin argued that borrowers displaced by government debt issue are harmed in the present due to the lost access to a possibly more advantageous option, so that even though lenders maintain utility, not everyone does. Overall, Tobin did suggest that only Buchanan’s presuppositional 15 Ibid, 131. 16 R.E. Wagner, “James Buchanan’s public debt theory: a rational reconstruction,” Constitutional Political Economy , (2014) 25: 254. https://doi.org/10.1007/s10602-014-9161-3 17 Earl Rolph, “Public Principles of Public Debt,” in American Economic Review 49, no. 1, (1959), 183, 185. 18 Ibid, 184. 19 Ibid, 184. 20 James Tobin, “The Burden of the Public Debt: A Review Article,” Journal of Finance 20, no. 4 (Dec., 1965), 680. 21 Ibid, 680.