"A balanced current budget so we only borrow for capital spending" is much beloved of left of centre types who want to sound "fiscally responsible" and sounds like common sense but it's basically just the firm version of the Swabian housewife. https://twitter.com/FT/status/1349123660498526209

If a firm is regularly borrowing then that borrowing better be generating additional future income or else the debts can't be paid back. So this rule makes sense at the level of an individual firm. The firm isn't able to levy a tax on the rest of the economy to finance its debt.

But this analogy doesn't necessarily work for public spending. Spending above tax revenues -- and perhaps quite a bit above tax revenues -- may well be sustainable in an r < g environment, whatever the mix of current and capital spending happens to be.

And a public capital project that boosts GDP may well be worth undertaking even if it doesn't generate sufficient tax revenues to pay for the original borrowing. So the analogy of "we borrow for this because it pays for itself" doesn't have to hold for the state's finances.

A more sensible rule would be to commit to having sustainable debt levels (in terms of interest costs as a share of GDP) and then let the current\\capital mix be decided by the substantive merits of various capital spending options available.

I'm not against borrowing for capital spending. The current environment represents a very good time to consider large and consequential infrastructure and green energy projects. But I don't agree with fetishing capital spending as the only thing you can borrow for.