Channels, Spring 2018

Channels • 2018 • Volume 2 • Number 2 Page 21 economic environment concerning inflation. 39 Buchanan distanced himself from the idea that politicians should infer something about “the desirability of budget deficits” from an economic discussion of the burden of public debt. Nevertheless, he stated clearly that “the economist should not retreat ever further into technical and terminological obscurity” when simple analysis is possible. 40 In his response to James Tobin, an article titled “The Icons of Public Debt” in the Journal of Finance , Buchanan is more focused on defending the presuppositions of utility maximizing individuals and the beneficial nature of free action that Tobin attacked. He begins with a counterattack, arguing that he is not the only one with fundamental assumptions, but rather that, “My notions about debt burden seem to counter images that are more than intellectual constructions, more than scientific paradigms.” 41 According to Buchanan, Tobin’s unwillingness to accept Buchanan’s founding assumptions is not a reasoned rejection but one of emotion. Further, he attempts to show that his own arguments are based on fundamental facts and not assumptions about the coerciveness or compulsion felt as a result of government action. “The fact that taxes are payments is, in itself, sufficient. In this sense, taxes are no different from prices paid in market transactions. The payment of prices for ordinary goods and services is also, per se , a burden. This we all accept without the sophistication of economic theory.” 42 Further, Buchanan attempted to defend the broader context of his theoretical framework, arguing against Tobin that full employment conditions are not the only situation to which public finance analysis can or should be applied. 43 Also, Buchanan insists on establishing the separate decisions of individuals to vote for debt finance and to purchase government bonds. The former choice is made by individuals in a group, while the latter is “strictly individualistic.” 44 This prevents debt issue from being understood only in the Keynesian framework of aggregation which asserts that we owe it [public debt] to ourselves. All in all, Buchanan conceded very little to his critics, setting up a conflict of assumptions, frameworks, methods, and conclusions, what Buchanan called a “murky battleground.” 45 The result of the initial major clash between Buchanan and his opponents in the Keynesian orthodoxy did not lead to a single winner dominating the resulting literature alone. Nevertheless, in the ensuing years, Buchanan’s contributions began to penetrate the field of public finance to a greater extent. One example of this comes in an article by Roger Spencer and William Yohe in 1970. They argued that crowding out of private investment is a key problem for public debt issue. Closer to full employment, crowding out becomes very 39 Ibid, 360. 40 Ibid, 360. 41 James Buchanan, The Collected Works of James Buchanan, Vol. 14, Debt and Taxes, “The Icons of Public Debt,” (Liberty Fund Inc., Indianapolis: IN, 1999), 361. 42 Ibid, 362. 43 Ibid, 363. 44 Ibid, 363. 45 Ibid, 361.