What if the US paid off the Debt?

[ERD50]

I've only read the summary, not the report or the audio yet, but I found it amazing that this was a real concern so recently. Maybe the details will provide more light, but it seems like the economists could only picture the future being like the recent past.

They were wrong.

What If We Paid Off The Debt? The Secret Government Report : Planet Money : NPR

It sounds ridiculous today. But not so long ago, the prospect of a debt-free U.S. was seen as a real possibility with the potential to upset the global financial system.

We recently obtained the report through a Freedom of Information Act Request. You can read the whole thing here. (It's a PDF.)

The report is called "Life After Debt". It was written in the year 2000, when the U.S. was running a budget surplus, taking in more than it was spending every year. Economists were projecting that the entire national debt could be paid off by 2012.

note: I put this in the 'FIRE/Political' forum, since it talks about the govt debt, but I'm not trying to make any political statement with it. It is more just a fascination with economic forecasts.

-ERD50

 

[haha]

It is more just a fascination with economic forecasts.

-ERD50

I think I remember some chatter about this possibility back then.

I believe that whenever one can cheaply fade a government prediction it is probably a good bet over time.

I don't know if they are mendacious, or just too pointyheaded to glance around at the real world.

Ha

 

[W2R]

When I was a little girl, probably in the late 1950's or so, my father would moan and groan about the national debt while reading the paper. I hated to see him so upset, so I sat on his lap, put my arms around his neck, looked in his eyes, and told him (with a child's sincerity) that when I grew up, I'd work and work and work and pay off the national debt and he'd never have to worry about it any more. I honestly intended to try.

I think where I made my big mistake was in taking my EE degree and veering off into oceanography....

 

[harley]

As I remember, the big issue with paying off the debt was the loss of Treasury Bonds. Most of the world's economy was based on buying bonds, and if we had no more debt we wouldn't be selling bonds to pay for that debt. Then what would all the loose money in the world buy? So they decided that it was best to keep a little debt to keep the wheels of the financial world greased. While I'm definitely in favor of paying down the debt, I can't say I disagree with keeping a little just to keep things flowing.

 

[haha]

As I remember, the big issue with paying off the debt was the loss of Treasury Bonds. Most of the world's economy was based on buying bonds, and if we had no more debt we wouldn't be selling bonds to pay for that debt. Then what would all the loose money in the world buy? So they decided that it was best to keep a little debt to keep the wheels of the financial world greased. While I'm definitely in favor of paying down the debt, I can't say I disagree with keeping a little just to keep things flowing.

I think there is no need to worry on that score. But you know that, you are just being incredibly subtle.

Ha

 

[donheff]

Didn't some of the talk about the negative implications of too little debt contribute to the call to cut taxes? I think that was one of many things cited on a bipartisan basis for giving the "surplus" back to the people. Since we turned the corner and went 180 degrees the other way it is definitely an academic discussion now.

 

[Independent]

I remember stories about "Should we really pay off all the debt?" around 2000. People with economic models found "surpluses as far as the eye can see". Alan Greenspan's famous testimony where he seems to have endorsed a tax cut (always hard to tell with AG speaking) was in this context. Some of the change was error in models, but most was things we can remember.

I saw a chart recently that compared the projections from 2000 to actual events and tried to estimate each of the steps that got us into this fix. I can't recall where I saw it, but the bulk of the change was the obvious stuff -

Tax cuts without corresponding spending cuts.
New wars without tax increases.
The economic collapse.

Then some miscellaneous (e.g. Medicare Part D was a new entitlement with no new taxes).

It all adds up.

 

[eytonxav]

I think where I made my big mistake was in taking my EE degree and veering off into oceanography....

I am not sure if it was a mistake or not, but I veered off my EE and went into a business role. I suppose that is a little more common than the path you took, although I suspect your choice was more enjoyable intellectually.

 

[W2R]

I am not sure if it was a mistake or not, but I veered off my EE and went into a business role. I suppose that is a little more common than the path you took, although I suspect your choice was more enjoyable intellectually.

I think about half of physical oceanographers have a background in engineering, about half in physics. There are not many physical oceanographers of any background, all in all, compared with the numbers in business.

 

[FinanceDude]

I think I remember some chatter about this possibility back then.

I believe that whenever one can cheaply fade a government prediction it is probably a good bet over time.

I don't know if they are mendacious, or just too pointyheaded to glance around at the real world.Ha

I think it was based upon unrealistic growth rates of GDP. A lot of people forget about all the hype about Y2K and the huge run in tech stocks because they were all going to help us avoid Armageddon on 12/31/1999. After the non-event, look at some of those stocks like SUn Micro and Microsoft, they have done little if anything since 2000. All of those tens of billions of dollars spent by big companies ain't gonna happen again.......

 

[Brett_Cameron]

Hey! The effort to avoid Y2K armageddon worked!

 

[donheff]

Hey! The effort to avoid Y2K armageddon worked!

+1

 

[Huston55]

I remember stories about "Should we really pay off all the debt?" around 2000. People with economic models found "surpluses as far as the eye can see". Alan Greenspan's famous testimony where he seems to have endorsed a tax cut (always hard to tell with AG speaking) was in this context. Some of the change was error in models, but most was things we can remember.

I saw a chart recently that compared the projections from 2000 to actual events and tried to estimate each of the steps that got us into this fix. I can't recall where I saw it, but the bulk of the change was the obvious stuff -

Tax cuts without corresponding spending cuts.
New wars without tax increases.
The economic collapse.

Then some miscellaneous (e.g. Medicare Part D was a new entitlement with no new taxes).

It all adds up.

I'd very much like to see the link or reference if you can find it.

 

[eytonxav]

Hey! The effort to avoid Y2K armageddon worked!

Especially for the consultants