What is Fiscal Profligacy?

The problem with this idea is that govenments don't just spread risk, they transfer it. This leads to transfer payments and moral hazard. The classic example are homes built in hazardous areas are "insured" by the govenment because there is no market for private insurance of these homes. People pay far less for this government "insurance" than they would for real insuance. Homes get built that otherwise wouldn't have. The need for government "insurance" grows. Those of us who don't own these hazard homes pay for those who do.

To put it another another way, the government is essentially the world's biggest CDPC, the super-senior protection seller of last resort. AIGFP had nothing on USG.

But seriously, I often hear the suggestion bandied about that if they want to help the economy, the government should just literally sell super-senior protection in size. It's the fact that in a sense it's already doing that in various, less transparent ways that gives me pause and makes me think the idea might not be entirely insane.