THE NEW ARTHUR LAFFER?

Given that one of its authors, Edward Prescott, is a Nobel Prize-winning economist, you can't just dismiss this argument in favor of greater government debt out of hand. But this claim seems really goofy:

Some naively think that government debt is a burden on the young. This is not the case since the welfare of the young and the government debt are both large in the efficient saving-for-retirement system. Indeed, in the inferior tax-and-transfer system, government debt is zero. We go on to show that switching from a pay-as-you-go system to a saving system makes everyone better off and there are no costs of making the switch. All that needs to be done is to stop taxing labor income. In the transition period there would be transfers to old financed by a large deficit. Subsequently the stock of government debt would be at its needed level.

If people want to save more, there need to be assets for them to buy. Government debt is an asset, but it's not the only one. Isn't society better off in the long run if we save and invest, and create capital that generates future wealth, rather than having the government soak up everybody's savings through borrowing? Also, aren't real governments occasionally subject to bank-run type crises? Wouldn't a huge debt make that more likely?