What is a key purpose of government debt?

Government debt primarily serves to promote inter-period equity through capital improvements. This concept emphasizes that the costs of long-term projects, such as infrastructure development, should be evenly distributed across the periods that benefit from them. When governments issue debt, they borrow funds to invest in capital projects that have lasting benefits, which ensures that current and future taxpayers share the financial responsibility for those projects. This approach helps maintain a fair balance in fiscal obligations across generations, preventing an undue burden on current taxpayers who might not fully benefit from the immediate costs of the improvements.

In this context, using debt to fund capital improvements contrasts with merely covering day-to-day operating expenses or attempting to increase immediate tax revenues. The intent behind government debt is not to provide quick fixes or to relieve taxpayers of their obligations in the short term but rather to strategically invest in projects that will yield benefits for years to come. By utilizing debt in this manner, governments can enhance public services and infrastructure without placing an overwhelming financial burden on one particular group in a single fiscal period.