If you drink too much at night, you'll get a hangover in the morning. The same is true of spending and debt.
The only problem with personal debt is when it becomes systemic. The fallacy of composition is that what's good for individual is not necessarily good if we all do it at the same time. Normally lowing your price to be more competitive is a useful strategy, but not when it becomes a race to 0. We saw this in the great depression with farmers publicly throwing out their product.
As for governments, the austerity meme is class politics in disguise, and tends to lead to nasty social blowback. Governments can change monetary policy and other law, giving them a lot more options.
I know this disagree with mainstream economics, and almost all niche economics theories. But it's happening again and again, so fuck the theories.
http://www.mybudget360.com/wp-content/uploads/2010/12/us-pub...
Japan (at the time, primarily a few zaibatsu) had serious financial problems when their export bubble popped in the 1920s. Unfortunately, they bought into myth that austerity lowers debts really badly, and decided it was a good idea to cut out 30% (!) of their GDP in two years. When that only made the situation worse, they doubled down and tried to cut another ~10%.
The zaibatsu and 37 banks went under in the inevitable bank-run, and quite a few financial leaders were assassinated when the military realized their budget was about the only thing left that could be cut.
Compared to that mess, the US has done a relatively good job of inflating away it's debts. Our gridlock blocked most of the austerity "fixes", so while we still have a mess of an economy, at least it isn't slashing a third of our GDP.
You've had your quote of unsustainable private debit, but not public.
Of course. That doesn't mean governments follow a simple zero-sum model. Government economics is it's own beast, with (hopefully) it's own solutions.
re: fsck the theories - you may find this[1] interesting, which is a summary of where we stand right now on many aspects of government economics by econ prof Mark Blyth that he gave at a recent q&a session. It might be one of the most succinct explanations of just how badly we're fscked.
The prevailing neo-liberal (and progressive, at least in the US) notion is that smart people "understand" keynesian counter-cyclical economics and only dopes or rubes ... or bad actors (as you suggest) would advocate for austerity.
However, it really needs to be repeated: austerity is only braindead if you insist on ever-increasing aggregate demand. If you are willing to accept stagnant or even decreasing aggregate demand (for whatever reason) then austerity is perfectly reasonable and perhaps a good choice.
I'm not saying I'm in that camp, but I really don't like this false dichotomy - that austerity is braindead and only morons would advocate for it ... and leaving unsaid the almost universal assumption that aggregate demand can never, ever, be allowed to drop.
EDIT: and I also don't like the condescending, custodial tone that this always takes ... "oh how quaint that you would conflate a national economy with a household economy, here let me mansplain it to you". In fact, there are boundary conditions where they behave exactly the same (see argentina). People aren't as dumb as you think they are.
I think the problem is that austerity advocates argue that that aggregate demand will increase in the face of austerity, when we know that doesn't happen. Austerity advocates then often bring up the theory that if debt is lower, then external actors will have more confidence in the country and interest rates will decline.
So while I agree with you that no one needs to be condescending, it is challenging to deal with the pro-austerity folks when they seem to be fact-challenged.
Debt is borrowing tomorrow's prosperity
There's three kinds of debt. One is corporate. A company took on debt to buy some equipment. That can be mis-investment, but it's usually pretty good.
Second, there's personal debt. That counts both mortgages (usually worthwhile, unless you buy more house than you need) and stuff like credit card debt, where you're still paying for Christmas five years later. So, some is worthwhile, some not so much.
Third, there's government debt. This can be used effectively to create infrastructure. The problem is, though, that it's allocated not by a careful cost/benefit analysis. Instead, it's allocated by politicians. This kind of debt therefore has the highest propensity to be sheer waste.
For example, let's say you discover a large deposit of gold on land you own. You could use debt to buy the mining equipment to mine the gold.
Another example is if terrorists demolished all the bridges between Manhattan and Brooklyn. The government doesn't need a cost/benefit analysis to decide to use debt to rebuild some bridges.
Many leveraged miners are going bankrupt for having not done cost/benefit analysis on something so obvious...