Being in debt is okay as long as you’re putting that money towards something that has a higher return than the interest you’re losing on that debt.
For instance, if you take out a loan at 5% to pay for a house, it’s only acceptable if your house is earning money faster than 5%. If you’re losing money on the project AFTER the interest, then it’s not okay. Eventually, you will bankrupt yourself at that rate.
Personally, I had some money in investments that I’m now pulling out of the market to pay off my school loans. Those investments have a worse return than the interest on the loans, so even though I’ve been paying back those loans for 7 years, only now is it a bad idea to keep that debt. Say the interest on the loans is 4%. If that money is making 6% in the stock market, then I end up with a 2% gain, when all’s said and done. By keeping that debt, my net worth increases.
Economies like debt because, presumably, someone will take out a loan for a project that will generate much more money than it cost to create. Lots of people don’t have the capital to undertake those projects by themselves, so without the possibility of debts, nothing would get created. Debt and loans are an extremely important part of an economy.
In closing, you don’t need to stay out of debt if you’re going to use that money towards making MORE money. If you’re just going to be buying a new television, that’s not an investment (since it will never make money for you) and, therefore, a bad reason to go into debt.
PS. this is why increasing the national debt to continue to wage war in Iraq is insane—it’s not an investment and will never generate income for the country. Our grand childrens’ tax dollars are being burned for something that will never pay for itself.