"It was private borrowing, not public borrowing, that created the mess."

From Paul Krugman's Leveraging, Deleveraging, and Fiscal Policy:

Spain and Ireland were running budget surpluses, not deficits, before the crisis. It was private borrowing, not public borrowing, that created the mess.

Yes, absolutely it was.

But, say some commenters, this was nonetheless malfeasance on the part of the authorities; they should have been running even bigger surpluses to offset the private credit bubble.

Does that work? No. If you look at a graph of private versus public debt, and think about how the trend fits with economic performance, this is where you end up:

When private debt is relatively low, it has room to expand. And when private debt expands, the economy grows well. But when private debt expands, it becomes relatively high. And when private debt is relatively high, it chokes off growth.

Graph #1: Total Nonfinancial Nonfederal debt relative to the Gross Federal Debt
The initial increase corresponds to the "golden age"
The post-1994 increase corresponds to the "macroeconomic miracle"

That being the case, the evidence says big government surpluses do not effectively offset big private deficits. Moreover, making the government surpluses bigger makes private debt relatively higher, and that only makes things worse.

Yes, it was private borrowing that created the mess.