The difference is that industry, and individuals, are constrained in the loans they take out by their earnings prospects. There is a natural limit on their ability to borrow money based on what lenders think is their ability to repay those loans.
The government has no such constraint, because of its ability to increase taxes at will. Lenders will lend money to governments (i.e. investors will purchase government bonds and notes) without regard for whether those loans are prudent under existing circumstances because they believe that governement will choose or be forced to raise taxes to whatever level is necessary to pay off those debts in future, because the government basically can't just choose someday to go bankrupt and start over.
There are thus effectively no market constraints on the government, which makes comparison of government borrowing and private borrowing meaningless at best and deceptive at worst.
The exception, and the better analogy, of course, is revenue bonds (as long as they are not also secured by general obligation). I have no objection to revenue bonds, because there investors are making a prudent evaluation of the expected success of the project and evaluating whether the bonds are a prudent investment.
But general obligation borrowings backed by the "full faith and credit" of the government and nothing else, no. |
