top of page

Who should pay the national debt if a national divorce from the U.S. government were to happen?

The concept of a "national divorce" is gaining traction in conversations across the country, prompting us to consider not just the emotional and cultural implications but also the financial realities since Texas brought the case of a possible secession. Texas Governor, Greg Abbott, has been recently making the case for Texas to become its own country, totally separated and independent of the Union.

The United States is a tapestry of fifty states, each boasting its own unique identity. Take California, for instance, a state so diverse that its regions could almost be considered separate states. This diversity adds layers of complexity to any discussion of a national split, particularly in terms of financial matters like the national debt.

When discussing the potential splitting-up of the country, a major question arises: What happens to the national debt? This is a concern that affects everyone, whether in Oregon or Florida. The argument here is that this debt should remain where it originated – with the federal government. Decisions made in Washington, D.C., are not always influenced by direct input from every state.

Let us consider this analogy: if your neighbor decides to renovate their house, it doesn't imply you should pay for it. In a similar vein, states didn't directly choose to take on the national debt – that was a decision made by the federal government. Therefore, why should states be left holding the bag? Just as individuals did not approve of the bailouts during the 2008 financial crisis, states did not agree to quantitative easing. Consequently, the federal government should be solely responsible for the national debt.

Breaking down the federal budget, we find significant allocations to Social Security, Medicare, and Medicaid, accounting for over fifty percent of federal spending. These programs operate on a pyramid scheme, reliant on new taxpayers contributing to the system so that older taxpayers can receive benefits. Neither you nor I consented to have our income taxed to fund this system. Furthermore, this model is not indefinitely sustainable; in fact, by 2034, Social Security is projected to struggle to meet its obligations.

History provides valuable insights here. When the American colonies declared independence from Britain, one of the contributing factors to the war was our rejection of the Crown’s demands for us to shoulder the debt accrued by Britain for the French-Indian War. Similarly, when Eastern European countries broke away from the USSR, they did not assume any portion of Soviet debt. These instances suggest that if a national split were to occur, states might not be liable for federal debts.

Even if there's a case for states assuming a share of the national debt, history offers viable solutions. For example, during the peaceful division of Czechoslovakia in 1993, Slovakia agreed to take on a portion of the national debt proportional to its population. This approach ensured a fair and equitable division based on each new nation's size and economic capacity.

Likewise, when Ukraine gained independence from the USSR, a similar arrangement was made. Ukraine took on part of the Soviet Union's debt, reflective of its population and economic status. These precedents indicate that even if states were to assume some responsibility for the debt in a hypothetical national separation, there are established methods to manage this fairly, preventing any single state from being disproportionately burdened.


Rated 0 out of 5 stars.
No ratings yet

Add a rating

Subscribe to The Lake Street Review!

Join our email list and get access to specials deals exclusive to our subscribers.

Thanks for submitting!

bottom of page