What If We Paid Off The Debt? The Secret Government Report

Ahh, remember the good old times under Clinton when we were actually paying off the debt. What happened then? They mocked Al Gore for his plans to pay off the debt (remember all the "lockbox" stuff) and then we got a president that promised tax cuts and drastically increased federal spending, and added a couple of wars just for fun. Now there is absolutely no danger of paying off the debt.<p>By the way that report is absolutely wrong. Nothing terrible would happen if we paid off the debt. So there wouldn't be federal treasuries. BFD. Just set the risk free return to zero and you can use all of your old formulas. Yes several bank departments would not be able to make money for absolutely zero risk as they do now. Oh well, I suppose the banks would have to do what they are supposed to do, i.e., calculate risk properly.<p>But of course it is all academic now. Because it is unlikely to ever happen. Paying off the debt means doing something to help the future generations of Americans and it is doubtful any president would do such a thing, and if he did he would probably have to face a lot of angry voters who do not give a shit about the future generations as happened with Al Gore.

The basic premise of this article is suspect. The US would still issue enough T-Bills to provide stability even in a zero-debt scenario... it would simply buy other safe, long-term assets to hold.<p>If, for example, the US were borrowing money at 3% by issuing T-Bills, it would just buy a basket of high-grade foreign and corporate debt at 3.5% and earn a spread of 0.5% while continuing to provide adequate liquidity of T-Bills.

Australia paid off all of it's federal public debt in the mid-2000's. By 2007 the Federal government had no net debt. That is - the net position of the governement (savings-debt) was zero.<p>This didn't mean that there were no securities on issue - the need for an active market in government debt meant that there were still securities outstanding, but these were offset by liquid assets that could be sold to buy back the debt if necessary. I don't know what the surplus money was invested in, but one of the leftovers from that period is a 'Future Fund' which is a very large pool of investment funds held in trust for the future pension needs of the public service. That is - the money was separated out from the general revenue pit and put aside to pay out the retirement benefits of the people employed by the government itself. I do know that this fund is a diversified fund like any other, and invests in different styles and classes of securities.<p>Of course, a change in government since that period and a drop in revenues from the financial crisis means this is no longer the case. But for that brief period it was a very good place to be - income tax rates were going down every single year and the economy had an unbroken 13 year period of real growth in wages and productivity.<p>You don't need public debt to function properly. Australia is a perfect example of this. In fact, a lack of public debt is a good thing as it allows a government to either return taxes via lowering tax rates, or invest the surplus for the inevitable rainy day, or, to build productive infrastructure if that is what they choose to do.

This is such an interesting story, it's too bad politics are going to destroy our ability to talk about it on HN.

The money supply, ie. the amount of money in existence, fluctuates. Obviously, paper money is only a small fraction of the total amount of money "stored" in checking acccounts, etc. Money is created through debt. If nobody is in debt, the amount of money in circulation is much lower otherwise.<p>Does anyone know how much of the money supply is government debt?<p>I always get dizzy when I try to understand the monetary system. It seems insane. It really shouldn't work at all.<p>If you want to get a headache, too, try reading <a href="http://en.wikipedia.org/wiki/Money_supply" rel="nofollow">http://en.wikipedia.org/wiki/Money_supply</a>, <a href="http://en.wikipedia.org/wiki/Fractional_reserve_banking" rel="nofollow">http://en.wikipedia.org/wiki/Fractional_reserve_banking</a> or watching <i>Money as Debt</i>.

As a private citizen, it's my goal to have no debt, and savings in excess of my future debts.<p>Can someone explain why it's good to have a global economic system that is at great risk if the United States gets rid of it's debt?

An interesting read, but disquieting since it's mostly speculation and opinion without any real data or any models of debt and the dependencies of the economy on debt. And white papers of this sort appear to be the basis of policy decisions with far-reaching consequences.

This sort of makes no sense. The Province of Alberta (in Canada) balanced their budget, then paid off all debt in the early 2000s.<p>They still had the ability to issue debt (and did) because it was the belief that they were a good credit risk that was the reason behind the AAA rating.

I read the article thinking it was about the following idea, the principle is almost the same, just it's about govt debt not personal debt.<p>It would of course be too outrageous for most polticians but here's a thing:<p>When the UK govt bailed out the banks they spent 500billion. The outstanding mortgage debt of everyone in the country at the time was 368billion.<p>Whilst I know there are many people without mortgages (because they rent) the knock on effect of paying off all the oustanding mortgages instead of recapitalising banks would have done some amazing things: it would have given the whole economy an enormous payrise which would have had an immediate positive effect on high-street retail.<p>Also because people would not immediately spend all of their new found money it would have gone into savings: recapitalised the banks indirectly. They were always using everyone's savings anyway.<p>It would have resolved the thing that caused the crisis: that being risky mortgage debt on the banks books. No more mortgage debt, no more unstable banks.<p>Lastly and probably most importantly, it would have allowed govts to raise taxes to refill their coffers because absolutely nobody would notice, and probably nobody would even care.

"What do you do with the money that comes out of people's paychecks for Social Security? Now, a lot of that money gets invested in –- you guessed it — Treasury bonds. If there are no Treasury bonds, what do you invest it in? Stocks?"<p>So why couldn't we buy other sovereign debt --obviously stable/safe. It's not as though we're the only ones with debt or safe debt. I don't imagine Germany or Japan or France defaulting.

Linkbait title from NPR. It's clearly not a <i>secret</i> government report, since if it was then it couldn't have been obtained via a FOI request.<p>It is a genuine concern, though, what would happen if US Treasury Bonds ceased to exist. There's a good argument to be made for the US not completely paying off its debts.

The fallacy of the article is if we paid off the debt that we would never incur any debt in the future. Just not realistic to consider in any case.

This is the most ridiculous idea I have ever heard of. It was probably a project for fun within some circles, that would be all. Here's the reason. US empire like many of her predecessors taxed her subjects. However unlike any other empire in history US has been able to tax her subjects indirectly. When I say subject I do not mean US citizens living within the borders in Northern America, but I mean anyone who carries US dollar bill in his pocket, does trade with US dollar terms and especially buy US treasury bills. These subjects literally subsidize US economy doing just that. Even if US could be able to pay off its debt they would not have stopped issuing loans, why would one want to stop influx of easy money. By creating inflation of money (a.k.a. printing money) US will always be able to pay her debt with lesser value. Same amount but less value.

"What do you do with the money that comes out of people's paychecks for Social Security? Now, a lot of that money gets invested in –- you guessed it — Treasury bonds. If there are no Treasury bonds, what do you invest it in? Stocks?"<p>Perhaps this is a ridiculous question, I admit I haven't taken a lot of econ. But couldn't they just take the money that comes out of people's paychecks and, you know, keep it? I know that treasury bonds have a very slight overall interest rate, but that interest is paid by tax payers anyway, so if I'm not mistaken it's a net gain of zero.

Why pay off all the debt? What are we saving our credit for? Of course the burden can rise so high that it is prohibitive to growth, but in general credit exists to be used.

The report may have been secret, but the fact hasn't been anymore for quite a few years. Greenspan already mentioned it in his autobiography.

I think it is odd they would consider still selling bonds regardless of our debt load. Who never heard of a rainy day fund?

And if all of us stopped using credit cards, the credit industry would fail to catastrophic effect. Support your credit card company by going into massive debt. It's for the economy.

US Dollars = US Treasury Bonds.<p>they are freely interchangeable!<p>money IS debt!

Report From Iron Mountain is similar: <a href="https://secure.wikimedia.org/wikipedia/en/wiki/The_Report_from_Iron_Mountain" rel="nofollow">https://secure.wikimedia.org/wikipedia/en/wiki/The_Report_fr...</a><p>Anyway money is just a tool to keep the populus occupied. And since without problems or debt there would be no need for governments and banksters, they shall exist to create problems(government) and debt(money) and therefore assure they survival.

&#62; The Federal Reserve — our central bank — buys and sells Treasury bonds all the time, in an effort to keep the economy on track.<p>And how's that working out? This is all FUD, FUD, FUD..