Good Debt? Bad Debt? There’s No Such Thing
Borrowers, whether they’re the government or individuals, should focus less on potential returns and more on risk management.
Not the only number that matters.
Photographer: Derek White/Getty Images North AmericaThis is part of a series of Bloomberg Opinion columns exploring the risks related to the US’s rapidly expanding debt and budget deficit. Other contributions can be read here, here and here.
People often make a distinction between “good debt” and “bad debt,” in terms of both personal finances and public spending: Good debt, according to the theory, is borrowing that pays off over time, while bad debt doesn’t. So it’s OK to finance that new car that will bring you to a better-paying job, or vote for new federal borrowing that will stimulate economic growth, but try not to take out a loan to get a fancy haircut or pay for salary increases for bureaucrats.