Don't be alarmed by what I'm about to write. I'm simply thinking out loud, and writing down the thoughts as they come to me, without the bothersome chore of actually fact-checking any of what you're about to read. It's all very scattered, but most of it is based on the extensive reading I have done on this subject over the past five years, so it's not complete BS. Try to keep up!
Ok, so the United States has a national debt of something in the 17-18 trillion dollar neighborhood. Anyone who has purchased a Treasury bill is a creditor. That includes the Chinese government along with your crazy uncle Fred. A creditor is defined as a person or company, or government to whom money is owed. So we owe some 7 trillion to other countries, and a whopping 6 trillion to...ourselves, in the form of future obligations to Social Security and whatnot. So, we can't just stiff ourselves. But when it comes to what we owe other countries, that number cannot be viewed in isolation, it has to be compared to what those other countries owe...us, does it not? For example, we owe the Chinese roughly 1.5 trillion bucks...give or take a small fortune. However, the Chinese government owes US somewhere around 1.4 trillion. We owe Japan 1.3 trillion, they owe us 1.2 trillion. In fact, if you add it all up, what we owe other countries is pretty darned close to what they all owe us.
So, how's about we just call it even? Write off the whole mess as a giant misunderstanding and start all over. To sweeten the pot a little maybe we could throw New Jersey in to the Chinese to cover the short fall. While we're at it, we could write off those insane trillions that we owe to the freaking Federal Reserve in the form of loans they made to their own government back during the Great Recession of 2008. If you're hoping I can explain the Rube Goldberg contraption that is inter-governmental borrowing, you are hoping in vain. Hint: even Janet Yellen can't explain it.
Now, the deal with national debt is this, in and of itself it is neither good or bad, it just IS. As long as your economy is growing at a 5-7% annual clip, a 18 trillion dollar debt financed by low interest rates can be grown out of. However, our economy, post recession, has been growing at an annual rate of somewhere around 2%. In Economics, this is what is referred to as "being up Shit's creek." So, either we figure out a way to 1. ramp up economic growth, 2. dramatically cut spending to slow down the need for further debt, or 3. default.
I would prefer #1. Economic growth at 6% tends to lift everyone up, and has the added benefit of being fun. However, politics being what it is, neither party has the ability or the inclination to put in place a pro-growth program, since neither party can even agree on what growth is or even if it's a good thing! If there's anything that the American people should know by now is that #2 is never going to happen ever again. For politicians of both parties, economic growth isn't nearly as much fun as spending other people's money. So expecting Washington DC to cut spending is akin to expecting John Boenher to give up his tanning bed. That leaves the only reasonable alternative being # 3.
President Obama: I've called this press conference today to announce that as of midnight last night, the United States of America has decided to default on all of our foreign debt obligations. In return, I have authorized the Department of the Treasury to forgive all the outstanding debt of every country who owes us money. Thank You..........drops microphone.