Republican Senate Minority Leader Mitch McConnell (Image: Sipa USA/Graeme Sloan)

On January 8, 1835, President Andrew Jackson paid all outstanding US government debt. It was the first and only time that the federal government eliminated its debt obligations in full. And it triggered a major economic crisis -- the Panic of 1837, which was the deepest depression in US history to that time.

As a young man, Jackson had nearly been ruined by speculative investments. His experience taught him to distrust debt, which he regarded as a moral failing. When he reached the Oval Office, he was determined to rid America of this curse. Unfortunately, his grasp of economics did not match his military prowess. He did not understand that government debt is unlike personal debt for multiple reasons. In this he was hardly unique.

Government debt fulfils many functions for a nation. It finances investment in infrastructure, education and healthcare to help economies grow faster than they otherwise might. It underwrites national security. It affords a safe harbour for individuals and corporations to store their wealth. It backstops a national banking system. When interest rates are at historic lows, as they are now, government debt put to productive ends can generate returns more than ample to cover the costs. Debt also allows governments to share the burden of long-term investments across generations, ensuring that everyone who benefits from such expenditures contributes to them.