When I have excess money I wouldn’t think of taking a loan which is much smaller than my savings. Why does a sovereign state issue sovereign bonds to borrow tens of billions dollars when it has in reserve over half a trillion dolars?
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I have both a mortgage and emergency savings. Sure I could use my emergency savings to pay down my mortgage, but there’s a lot of value in having liquidity available and I can’t easily increase my mortgage balance if I have a surprise expense one month.
States are similar, they have both long term things (like building infrastructure that will produce returns and hopefully generate more taxes over decades) as well as short term swings in revenues and costs (many states collect income taxes once a year for example).
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