Take the case of housing. In some instances, it is better to rent. However, you forego certain advantages of ownership, such as the long term accumulation of equity, and the ability to fix costs as a hedge against inflation. Waiting to save the money to buy would merely keep you in rental properties, and defer or negate the advantages of ownership. Thus, people take out mortgages.
Similarly, few people can afford a car upfront. They would have to rent, in the absence of highly accessible public transportation. But again, they would lose their equity stake, and rental would cost more than borrowing in the long run. A car would not only be convenient, but may transport one to work, or allow one to live someone cheaper than the central city, while working downtown. Thus, one may accrue further financial advantages.
In the same way, the federal government may find it desirable to own rather than rent, especially if the investment is productive in its own right, without having to defer purchase until the money is saved.
Wanting to cut out dubious expenditure is a wholly separable issue from whether borrowing makes sense, in principle. For one thing, if we did get rid of pork, I would think it desirable to lower taxes severely. But in certain instances, that might once again necessitate borrowing. |
