Let's face it, "history" has to give GWB a "no-questions-asked-pass" on reforming Social Security, Medicare, and any other entitlement program unless it begins the assessment by recognizing that Bill Clinton squandered this country's best opportunity in half a century. When again will a President's two terms coincide with hurricaine force tail winds on the economic front; a holiday from history on the geopolitical front; the sweetest and longest honeymoon ever afforded markets and the private sector by its critics in academia, labor unions, and the media; and a political opposition that would have played ball on this issue. Against all this, it is hard to get too excited about whether we can now have guns, butter, or both.

And yet, I do hope there are some elements of Medicare reform in the current bill; that they can be expanded and deepened in a second GWB adminstatration; and that a "ruthless lame duck" President has the courage to do something about SS in that term.

Repudiating the debt would be a workable idea only if the government never borrowed any money ever again. Since it would certainly have to, our collective credit rating would drop, and it would become more expensive to borrow.

I've never understood the Perotist obsession with the deficit. As pointed out, much of that is held outside the US. To pay it off early means a transfer of wealth from Americans to ~furriners~. (At a premium, no less.) Then again, economic sanity has never been a feature of of that variety of populism.

Well, if you've exported most of your manufacturing jobs and shut down your farms, and you repudiate debt, then the Wal-Marts and the Safeways are going to be pretty empty, aren't they?

Besides, this seems to contradict your high regard for Coolidge. We hired the money, didn't we?

OJ
Were you smoking the same weed when you wrote this as when you wrote that Margaret Thatcher is sexy? If you remember, since 1972 the US dollar is backed by nothing more than the full faith and credit of the US government. Repudiate the debt, and the dollar immediately becomes worthless - and will remain worthless until we buy enough gold (without dollars, mind you) to re-issue it as a gold backed currency. That will be very difficult to do, as this will also cause the total collapse of the US economy. What do you think that all of the savings, pension plans and insurance portfolios are denominated in?

The Chinese are buying US debt to keep the dollar strong against their currency to keep the export gravy train . I'm sure that they have factored in a sizable loss on their dollar reserves, as their weak renmimbi policy will ensure that the dollar will continue to sink for some time. Long enough for them to totally industrialize their country. They are the ones benefitting from the trade imbalance, not us.

Harry:
Yes, but we are not they and I don't care about them. Moreover, the Europeans never paid their debt either did they?

Robert:

Nonsense. Great powers can do what they want, provided they're ruthless enough.

The Europeans may have defaulted on their WWI debt, but that was pretty much forgiven in the aftermath of WWII. It was an exceptional circumstance, and the US is not exactly in that position. Repudiating debt would destroy 200+ years of credit worthiness of the US.

While what OJ said about being ruthless enough is true, taking that kind of stance would create huge political upheaval in the US and destroy our moral credibility in the world and thus much of our soft power. It would fundamentally alter the nature of America's relationship with the world. The US does not have the temperament to govern sufficiently ruthless. Even if a President could do so, his successors could not and we'd have the worse of both worlds.

Paying off the debt is not essential, but keeping it manageable is. Small deficits are bearable. A debt of 10-25% is bearable. The huge deficits we now have are not if it is a long term trend, and they are.

You cannot have a policy of both guns and butter, or you return to the LBJ years. The sixties boomed, but we paid for it in the seventies. Debt is like alcohol, and too much gives your economy a hangover.

Chris:

What moral standing? They all hate us.

When is that mythical point that debt becomes unsupportable? Which nation fell because of it?

Why did the debt of the 80s lead to the 90s?

Where's Europe's repayment of the Marshall plan loans?

Etc.

All;

As humiliating as it is, I must agree with OJ's point here. If one looks at the actual history of nations that repudiated debt, the long term effects seem to be about nil. There was the Latin American debt crisis of the 70's, but by the 80's they were borrowing heavily again. I wouldn't expect the additional credit risk costs to persist much beyond a decade or two. I completely fail to see why the dollar would become worthless, as that has nothing whatsoever to do with debt. As long as you can still buy stuff in the USA with dollars, they'll have value.

Two words: unintended consequences.

AOG
That may be an acceptable outcome for a Latin American country, but have we really sunk so low that we wouldn't mind becoming a banana republic? Those countries had the benefit of having larger, stronger economies (namely us) to bail them out. We won't have that benefit.

We didn't get to be a great nation by welching on our debts, and we won't stay one by welching.

Robert:

where'd you hear that? Several states defaulted on debt.

Meanwhile, if we can bring China down without firing a shot...why not?