Deficit and debt are like mph and miles, with the latter a measure of the accumulation and the former a measure of how quickly you’re getting there. For individuals with consumer debt, it might feel like the dead albatross hanging from the Ancient Mariner’s neck. One wouldn’t want to accumulate too much, or any at all; but the dead albatross simply hangs there and ripens while debt collects interest and must be regularly fed. This is the most common experience, and most believe it is better to be debt-free.
If, however, the debt was used to purchase an inflation hedge or income-producing venture whose rate of return is higher than the interest rate on the loan, the debt is the source of your return. It might be your livelihood, and feel pretty good. Similarly, if the government borrows money at a rate lower than the growth rate of its GDP, that is increasingly being argued as a smart investment, e.g. “Economists reconsider how much governments can borrow” (The Economist, Jan. 17): The profession is becoming less debt-averse.
Prior to the near financial collapse and resulting recession, debt was easy money. And then it wasn’t, and heavy debtors lost their homes.
