People often make a distinction between “good debt” and “bad debt,” in terms of both personal finances and public spending: Good debt, according to the theory, is borrowing that pays off over time, while bad debt doesn’t. So it’s OK to finance that new car that will bring you to a better-paying job, or vote for new federal borrowing that will stimulate economic growth, but try not to take out a loan to get a fancy haircut or pay for salary increases for bureaucrats.

In fact, this logic is flawed. As long as the world is uncertain, there is no such thing as good debt or bad debt. There is only good risk management and bad risk management. It’s a crucial concept to understand as the U.S. continues to add to its public debt, which has tripled in the last two decades to almost $36 trillion.

By way of explanation, let’s pretend it is 2010, and you are pre-approved for a $200,000 loan. Do you use it to buy a new and obscure asset that does not have a clear use case, or to pay for an education at one of the world’s most respected institutions of higher learning?

If you had bought that asset — Bitcoin — your $200,000 would now be worth more than $218 billion. If you had opted instead to get your undergraduate degree — from the Massachusetts Institute of Technology — then in a few years you can expect to have made about $1.5 million more than if you had not gone to college at all. The return on the MIT degree is about 14%; on the Bitcoin, it’s more than 1,000,000%.

So it follows that borrowing to buy Bitcoin was a spectacularly good idea, while taking out a loan to go to MIT was … less good. Right?

Not necessarily. What this analysis ignores is the concept of managed risk. Almost every MIT degree pays off in terms of higher wages for life, and you can get a low-interest, fixed-rate loan (or even the possibility of government forgiveness) to finance it. Bitcoin is mere speculation.

This logic also plays out in a political context. Democrats tend to favor debt to finance government spending on projects, such as highways or chip factories, that help sustain and grow the economy. Republicans generally support tax cuts because putting more money in the hands of the private sector boosts growth.

It is not enough to argue the government should take on debt to spend more or cut taxes. No matter what interest rates are, the true test of fiscal health comes down to risk management. Good risk management increases the odds that your bet pays off, or at the very least doesn’t leave you deeper in debt. That requires picking the right investments and managing the cost of your debt.

Good risk management starts with investing the borrowed money in something that will probably pay off. Some economists argue that any government spending is worth taking on debt for — even paying people to dig holes and then refill them — because it creates jobs.

This is not the case. The return on a government dollar of spending can vary between five cents and five dollars. Simply stimulating the economy in the short term does not always create value — not just because some projects are better than others, but because of opportunity costs.

And even if you pick a project that is projected to create value, say installing electric-vehicle charging stations, you need to ensure the execution on the project leads to a positive return. Many supporters of the Infrastructure Investment and Jobs Act, the CHIPS Act and the Inflation Reduction Act were dismayed that their value to taxpayers was undermined by excessive regulations and the need to appease different political groups, which drove up costs and time.

Another virtue of risk management is that it accounts for time frame. An investment project might appear to pay off for the first five years, but the benefits eventually wane, and the debt is still there. So go ahead, worry about the nation’s debt. But also pay attention to the nation’s risk management.