An important role of government is to provide public goods that cannot be provided via private markets. There are many ways to express this view theoretically, a famous one using modern theory is Mailath-Postlewaite.  (Here is a simple exposition.) They consider a public good that potentially benefits many individuals and can be provided at a fixed per-capita cost C.  (So this is a public good whose cost scales proportionally with the size of the population.)

Whatever institution is supposed to supply this public good faces the problem of determining whether the sum of all individual’s values exceeds the cost.  But how do you find out individual’s values?  Without government intervention the best you can do is ask them to put their money where their mouths are.  But this turns out to be hopelessly inefficient.  For example if everybody is expected to pay (at least) an equal share of the cost, then the good will produced only if every single individual has a willingness to pay of at least C.  The probability that happens shrinks to zero exponentially fast as the population grows.  And in fact you can’t do much better than have everyone pay an equal share.

Government can help because it has the power to tax.  We don’t have to rely on voluntary contributions to raise enough to cover the costs of the good. (In the language of mechanism design, the government can violate individual rationality.) But compulsory contributions don’t amount to a free lunch:  if you are forced to pay you have no incentive to truthfully express your true value for the public good.  So government provision of public goods helps with one problem but exacerbates another.  For example if the policy is to tax everyone then nobody gives reliable information about their value and the best government can do is to compare the cost with the expected total value.  This policy is better than nothing but it will often be inefficient since the actual values may be very different.

But government can use hybrid schemes too.  For example, we could pick a representative group in the population and have them make voluntary contributions to the public good, signaling their value.  Then, if enough of them have signaled a high willingness to pay, we produce the good and tax everyone else an equal share of the residual cost.  This way we get some information revelation but not so much that the Mailath Postlewaite conclusion kicks in.

Indeed it is possible to get very close to the ideal mechanism with an extreme version of this.  You set aside a single individual and then ask everyone else to announce their value for the public good.  If the total of these values exceeds the cost you produce the public good and then charge them their Vickrey-Clarke-Groves (VCG) tax.  It is well known that these taxes provide incentives for truthful revelation but that the sum of these taxes will fall short of the cost of providing the public good. Here’s where government steps in.  The singled-out agent will be forced to cover the budget shortfall.

Now obviously this is bad policy and is probably infeasible anyway since the poor guy may not be able to pay that much.  But the basic idea can be used in a perfectly acceptable way.  The idea was that by taxing an agent we lose the ability to make use of information about his value so we want to minimize the efficiency loss associated with that.  Ideally we would like to find an individual or group of individuals who are completely indifferent about the public good and tax them.  Since they are indifferent we don’t need their information so we lose nothing by loading all of the tax burden on them.

In fact there is always such a group and it is a very large group:  everybody who is not yet born.  Since they have no information about the value of a public good provided today they are the ideal budget balancers.  Today’s generation uses the efficient VCG mechanism to decide whether to produce the good and future generations are taxed to make up any budget imbalance.

There are obviously other considerations that come into play here and this is an extreme example contrived to make a point.  But let me be explicit about the point.  Balanced budget requirements force today’s generation to internalize all of the costs of their decisions.  It is ingrained in our senses that this is the efficient way to structure incentives.  For if we don’t internalize the externalities imposed on subsequent generations we will make inefficient decisions.  While that is certainly true on many dimensions, it is not a universal truth.  In particular public goods cannot be provided efficiently unless we offload some of the costs to the next generation.