I was indulging in one of my favorite pastimes—watching people film police encounters—when one of the vidiographers mentioned a tired Libertarian canard:
"...when you turn 18, your share of the national debt is $45,000."
Not only is this incorrect (as a citizen, this debt is not yours and neither penalizes nor rewards you), and requiring the Federal Government to carry no debt is entirely missing the point.
Saying that is inaccurate, naive and ignorant. No PERSON has to pay back the debt. As a metaphor it isn't even relevant.
Debt free ever?
The only time the US has been debt-free was in 1835. President Andrew Jackson balanced the budget and the US held no debt. This is the only time in the history of this country that it has been done.
The outcome was negligible, as the early 1830s were prosperous anyway. Being debt-free, however, did not prevent a major recession two years later that lasted six years:
The Panic of 1837.
Since then, the US has always held debt and seen its share of bank failures, recessions, depressions and other economic calamities.
Debt-free doesn't work
The reason why the Federal Government should never have a balanced budget requirement is because many projects and grants are multi-year (
especially research grants), which are funded in a single appropriation. Other multi-year activities include land leasing.
If the government was required to balance out every year, then certain programs and research would be impossible to fund, as uncertainty would stifle investment. Take, for example, what happened to the alternative energy industry in the face of the production tax credit's expiration. In 2014, Congress voted to extend it for only one year with no guarantee it would be subsequently extended, thus causing slowdown:
But while there are more than 13,600 more MW of wind capacity currently under construction, that number is expected to drop off sharply as projects are brought online and fewer new projects are started due to the expiration of the wind production tax credit (PTC).
— "Uncertainty Over Tax Credits Causing Turmoil In Renewable Energy Sector"
Governments vs. Individuals
When I take out a loan to buy a car or get a mortgage on my house, I'm taking on debt that must eventually be repaid. If, for example, I lose my job, then my creditors can seize my assets to settle my debt.
Unlike individuals, Governments can reduce the impact of debt in a number of ways. One of the easiest is to adjust the money in circulation, i.e., print money. One of the reasons the EU—specifically Greece—is in trouble is member states aren't allowed to print money to get out of debt. If a government goes
too far and prints too much money, then its economy may
hyperinflate. This is what happened in Germany, post WWI, when the Allied Powers insisted Germany pay crippling reparations for starting the war. The government was forced to print more and more money in order to make the payments, making their currency more and more worthless.
Let me sum up
Governments are not like people and can use debt to achieve things individuals cannot. The trick is knowing which is good debt and promoting it, and which is bad debt and discouraging it.