Ideally there shouldn't even be any debt. Should be a hard rule that government can only spend money it actually has and every dollar should be backed by precious metals in a vault. Governments need to spend way less. Taxes should be low, and only kept for the bare necessities, like healthcare and infrastructure. End all the useless pet projects and programs.
I have to disagree.
1) So if a government is frozen in the amount it can spend (since it can't borrow), then some other country attacks it, then the first country should just give up? For example, the US could just march in and take Montreal or Vancouver since Canada cannot borrow money to defend itself? That is just as silly of a stance as anyone could ever make. Governments should have a long-term goal of no debt. But, they should always be able to borrow money short-term in emergencies.
2) The world population has gone up 4x since most of the world ended the gold standard. The amount of gold on Earth has not increased and will never increase. Having precious metal reserves keep up with population is physically impossible. There isn't enough precious metal. Why stick with this ideal when it is impossible? In the past, we have made it illegal for citizens to own precious metals. That would help, but not solve the issue. Plus, would you voluntarily turn over your metals to Canada so that it can meet your precious metal goal?
3) Now combine #1 and #2. In your dream, in order to do anything, a government would have to convince another government to ship it some gold. That puts all the power into countries with gold (in reserve or in the ground). You'd instantly make Australia the most powerful country, followed by Russia, South Africa, USA, Peru, and Indonesia. I'm not certain that is the world powers that I'd wish us to have.
4) I agree with bare necessity spending, but your list needs to be expanded to public goods/services that are not feasible to fund privately or not feasible to be redundant to have sufficient competition (defense, police, most roads, etc.) I'd personally detest a world where I have to pay for my private army, while paying for the 6 different toll roads (12 if you count round trip) that I'd take on my 1 mile trip to the grocery store, if I could even reach the grocery store with the dozens of different power companies criss-crossing the area with all their new power lines (and private water lines being installed under the roads non-stop).