For a very long time, it has seemed perfectly natural that governments could and should borrow – to finance expensive wars or infrastructure projects, for example. Keynesian economists saw the occasional deficit as an important way of managing the economy. But once you give politicians the power to borrow, a huge moral hazard arises. It becomes just too tempting, and too easy, to borrow for the purposes of current consumption, rather than future benefit. More expensive schools, rising healthcare standards, more generous pensions, more police, social workers and officials, even bailing out the banks – all can be packaged as an ‘investment’ in the future. But in fact the principal beneficiaries are we today, who enjoy all these improvements. The losers are the next generation who find themselves bearing the cost.
Read the rest of the article at the ASI: Government should be banned from borrowing.