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There has never been a "surplus." The federal government has always spent every penny of general revenue and then some. With the Baby Boomers in the workforce, Social Security and Medicare have in various years taken in more money than they paid out. This surplus cash was not held in trust; it was given to the Treasury, which promptly spent it, recording the proceeds as income and issuing an IOU. Kids, if you're corporate fiduciaries, don't try this at home.

There are numerous problems with government debt, starting with the fact that it has to be paid back. Money generated by debt is not capital. It represents consumed capital which would otherwise have supported future production. As such, it is the first claim on every future dollar earned, meaning you have to work all that much harder to replenish your capital stock. The U.S. government is so deeply in debt that it is using debt to service debt, meaning that it has COMPLETELY depleted its capital stock. Our future production for many, many years into the future is already mortgaged to the hilt. In order to avoid financial disaster, the U.S. will need to declare its own bankruptcy and allow its creditors to seize its assets.

Also, what's wrong with debt?

You're a nice person for the most part, but I read this and was going to say something very mean to you.

Then I realized you're from Canada, so you're allowed to say stupid things.