This post largely consists of an important aside before moving on to things of actual relevance. It deals with the idea of treating the government and its finances as a corporation.
The idea is actually quite a useful one. People who pay taxes can be treated as shareholders, while those who buy bonds or otherwise lend money to the government would be considered holders of debt. Revenue is generated, but the government would usually be considered a non-profit, as it never pays direct dividends to its shareholders, only indirect through provision of services.
From the field of finance, then, comes the idea of whether or not there is a large difference between a corporation financed mostly by debt and one financed mostly by shareholder equity.
The short answer is, there isn't. Being financed by debt provides a tax shelter and being financed by shareholder equity provides financial stability, but the two models are equally appealing, albeit to different sorts of corporations. You can certainly find more about this particular aspect of finance somewhere on the Internet.
More importantly this means that, holding all else constant, the only consequence that impacts the government directly as a result of being financed by debt is the possibility of financial instability.
There are many other indirect results, but I will get to those in a later post.
Moving along slowly when it comes to this topic, but I want to make sure I cover as much as possible. Apologies to anyone who doesn't find it interesting.
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