Borrowing to consume: is it always bad?

Fareed Zakaria sees a silver lining in the dark economic clouds. I think he is being a tad optimistic that we will change our ways and not consume more than what we can afford--the we as in individuals, businesses, and governments at every level. In fact, we have pretty much exported this way of life to other countries too.
Furthermore, I don't think that debt itself is the real issue. A former chancellor of the OUS once remarked over coffee that we need to make sure that students have financial literacy because being (economically) successful in the modern world depends a lot on how well we juggle our debts and revenue streams. The crisis was triggered by extreme leveraging--by homeowners, and by financial institutions.
Anyway, here is an excerpt from Zakaria:

This crisis has—dramatically, vengefully—forced the United States to confront the bad habits it has developed over the past few decades. If we can kick those habits, today's pain will translate into gains in the long run.
Since the 1980s, Americans have consumed more than they produced—and they have made up the difference by borrowing.
Two decades of easy money and innovative financial products meant that virtually anyone could borrow any amount of money for any purpose. If we wanted a bigger house, a better TV or a faster car, and we didn't actually have the money to pay for it, no problem. We put it on a credit card, took out a massive mortgage and financed our fantasies. As the fantasies grew, so did household debt, from $680 billion in 1974 to $14 trillion today. The total has doubled in just the past seven years. The average household owns 13 credit cards, and 40 percent of them carry a balance, up from 6 percent in 1970.
But the average American's behavior was virtue itself compared with the government's. Every city, every county and every state has wanted to preserve its many and proliferating operations and yet not raise taxes. How to square this circle? By borrowing, using ever more elaborate financial instruments. Revenue bonds were backed up by the prospect of future income from taxes or lotteries. "A growing trend is to securitize future federal funding for highways, housing and other items," says Chris Edwards of the Cato Institute. The effect on the projects, he points out, is to make them more expensive, since they incur interest payments. Because they "insulate the taxpayer from the cost"—all that needs to be paid now is the interest—they also tend to produce cost overruns.
Local pols aren't the only problem. Under Alan Greenspan, the Federal Reserve obstinately refused to inflict any pain. Russian default? Cut interest rates. Worried about Y2K? Cut rates. NASDAQ crash? Cut rates. The economy slows after 9/11? Cut rates. Whatever the problem, the solution was to keep the money flowing and goose the economy. Eventually, by putting the housing market on steroids, the strategy created problems too large to untangle.