Alexander Hamilton, the architect of America’s First National Bank, proved that a national debt, if not excessive, is a great advantage to a modern nation. A sustained economic recovery requires a source of credit which can be neither zombie banks nor the federal budget.
We need trillions in long-term investments
According to its 2013 Report Card for America's Infrastructure, the American Society of Civil Engineers (ASCE) estimates that America needs to invest $3.6 trillion in infrastructure by 2020.
This sum – targeted to roads, rail, bridges, power, water, schools and similar projects – is roughly equal to the entire US Federal budget for a year. We can not simply pay these costs on-budget, which would add $600 Billion per year, costing the American taxpayer more than Medicare. A pay-as-you-go approach on the scale we require is not only politically unrealistic, it would place an excessive burden on the federal budget, thus creating a vulnerability to speculative attacks on the dollar.
Why we can't borrow the money from Wall Street
In 2011, the Poway Unified School District near San Diego, CA needed $105 million to make needed upgrades to its aging public schools. Unable by law to increase property taxes, and unable to afford the cost of a short-term loan, the district used a controversial loan called a capital appreciation bond.
With this bond, an example of the schemes becoming all too common to keep cash-strapped infrastructure functioning, the District will delay repayment for 20 years, and pay over the following 20 years at a total cost of nearly 1 billion dollars. In addition to the costs of construction, this means another $900 million in interest payments will be foisted upon local taxpayers.