A curious plan afoot at the State Capitol creates a rare opportunity — a chance to urge politicians not to underestimate government's abilities. One ability, anyhow.

Government is quite good at borrowing money. That isn't a wisecrack. Because it can impose taxes to secure funds to pay its debts — and because investors often get tax breaks on its bonds — government generally can get loans at lower interest rates and on more favorable terms than private businesses or consumers can. This talent is most impressive among large governments like the state of Minnesota (and of course the USA) which have taxing power over big economies.

But legislative leaders, perhaps disoriented by the challenge of disposing of a $1.2 billion surplus, say they are considering using cash instead of borrowed dollars for a share of the building projects they want to fund in this year's session ­— maybe $100 million or so. They've been struck by this brainstorm even though there's also considerable enthusiasm for tax cuts at the Capitol in this election year — and of course the cash in question could be added to the dollars sent back to taxpayers if the state borrowed to finance all its building projects through what's called the bonding bill, which is the usual method. (Cash has, however, been used before.)

Another option, as Gov. Mark Dayton proposed last week, would add available cash to the state's "rainy day" reserve fund, where it could help hold taxes down whenever budget troubles return.

In the spendy world of government, this decision doesn't involve all that much money. But it does involve something that matters — a tendency among politicians to have vivid, Disney-worthy imaginations when it comes to envisioning the multifaceted, short- and long-term, direct and ancillary benefits of their actions, yet no more imagination than a boiled egg concerning the indirect and downstream costs of those actions.

But isn't it always prudent to avoid borrowing money if you can? Of course not. If you can borrow at, say, 3 percent, to pay off debt at, say, 8 percent, you probably should do it. Many millions of mortgage refinancings have proved that average Americans grasp this idea.

And this is rather similar to the situation we face in the state's cash-vs.-bonding decision.

Government has been usefully likened to a purchasing agent you might hire to obtain certain goods on your behalf. If your agent could borrow inexpensively for a particular subset of the purchases you assigned him — while you, for instance, worked to pay down or avoid high-interest credit card debt — that would be terrific. (Unless he inexplicably insisted that you should give him cash for those purchases instead, leaving your credit card debt higher. In that case you would get yourself another agent.)

Every dollar government taxes and spends is one less dollar that could otherwise allow some taxpayer — some consumer or some business — to pay off, or avoid, a dollar of private debt. Their borrowing will be larger as a result. And they'll typically do that borrowing at higher cost than the state's costs of borrowing … often a lot higher.

In other cases, that tax dollar will be a dollar less for savers or businesses to invest. The loss of the return they would have earned on those investments is also a cost, as real as any other (although its size is uncertain because investment returns are uncertain).

This latter kind of cost, the cost of foregone gains — what economists would call an "opportunity cost" — seems especially invisible to many champions of government. In debates over whether public agencies or private firms can provide a service more efficiently, for example, it is often noted that government has an advantage because it "doesn't have to earn a profit."

Well, yes, government doesn't have to earn a profit, for the same reason it doesn't have to pay any of its own bills. It gets all of its resources from taxpayers.

But when government scoops up tax dollars, it also scoops up all the profits (or investment gains) that might ever have come from those dollars. Government's real advantage is that it doesn't have to count the "profits" that are very much part of its spending — because they're somebody else's (foregone) profits.

Now, of course, the most important consideration about government spending is not how it is financed but whether it is reasonable and represents real value for the dollar. And, of course, too much borrowing can encourage reckless spending. That's why the state constitutionally limits the things it can borrow for (mainly longer-term investments). Different issues are raised by deficit spending in Washington, which is used to fund everyday operations.

But once the construction spending plans are made, it only makes sense to keep all the costs in mind and give taxpayers the benefit of the state's ability to borrow well.

D.J. Tice is at Doug.Tice@startribune.com.