Best-kept secret about the national debt: Nobody will ever have to pay it back.
That's right, "Nobody will ever have to pay it back." How about that title? I keep trying to think of new ways convey the idea of debt rollover; maybe this way of saying it will work better than the other 99 ways I’ve tried over the last two years here.
Just to be clear, let me say it again, very explicitly:
Believe it or not, as long as we have a viable economy, nobody will ever have to pay back the national debt: not you, not me, not our kids, not our grandkids, not our great-grandkids, not any of their progeny. Period.
If you know any people who don’t believe that—for example, Blue Dog Democrats—ask them if they can find a flaw in either the Walter Wriston quote below, or the animated graphic below that. [Hint: There is no flaw in either one; this is how it has been working, and will continue to work, decade in and decade out.]
If we had a truth-in Government act comparable to the truth-in-advertising law, every note issued by the Treasury would be obliged to include a sentence stating: "This note will be redeemed with the proceeds from an identical note which will be sold to the public when this one comes due."
—Walter Wriston, former Chairman of Citicorp Bank
When the US Treasury does this with the federal debt, it's called “rolling it over.” It's perfectly sound financial practice, and it's done all the time.
Therefore, anyone who implies that any portion (let alone all) of the national debt will eventually have to be paid back—by us or by some future generation, via huge, crushing tax increases—needs to explain two things:
• why Walter Wriston’s statement above is inaccurate; and
• why debt rollover will become inviable, even though it’s worked perfectly well for generation after generation so far.
I'll be all ears when anyone comes forward with an explanation. But I won't hold my breath. [Hey Blue Dog Democrats, are you listening? How about explaining those two points in front of the C-SPAN cameras?]
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End note:
I’m taking this one step at a time. This article was about the debt principal. In the near future, I’ll address the interest on the debt—the favorite whipping boy of the fear-peddlers. Synopsis: The much-maligned interest on the debt is in reality buying something extremely valuable. Not only that, but it’s easily affordable, it’s worth every penny, it’s a transfer of wealth from the rich to the non-rich, and we should happily pay it (as well as collect it) with a big smile
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