our economy borrows against future real growth to finance itself, and that will never work in the long term - that real growth is physically constrained, but the debt is not.
just look at our national debt - our economy will never grow fast enough in real wealth terms to be able to pay back the debt that is accumulating much faster. debt is just a number on paper, without bound. growth has to contend with the real world.
It's not like the US Government is going to get old and lose it's income (like a person that retires would). Provided the economy grows (and tax receipts grow along with it) the government has an ever-increasing ability to service its debt.
Just look at the ratio of tax receipts to interest on the debt. The recent financial crisis has obviously made it dive a bit, but in general it's been quite steady or increasing over the last half century or so. In the corporate world, this figure is known as Times Interest Earned, and is a generally accepted measure of credit quality of a company.
Paying back the principal is less of a concern, because when it comes due, there is always a willing buyer of another t-bill to roll it over.
With some pretty charts: http://www.optimist123.com/optimist/2008/12/the-usas-debt-bu...
If money that is servicing debt were freed up, wouldn't it be logical that it could flow to other useful places?
Paying off debt and defaulting on debt are two different concepts.
Most companies are permanently in debt in some fashion.
You could ask the same thing of any borrower... "wouldn't all that money spent servicing your mortgage or bond issue be better used elsewhere?" ... to which they would reply: "but that mortgage bought me a house, that bond issue allowed us to expand overseas".
As for honorable, that is just misleading. The people loaning money to the government aren't victims, they are earning interest on a (virtually) risk-free investment. The national debt is not an expropriation of private capital... T-bills are offered for sale and buyers agree to their terms voluntarily.
Some governments actually do this. Canada, for example, can "pull out the key" of its CPP (Social Security equiv.) and everyone will get out at least what they put in. Not only that but Canada has been paying off its debt for the past 14 years. To prepare for the influx of medical patients Canada is building hospitals all across the country so that when patients actually start coming they can stop building hospitals and start fully running them, without having to find too much extra capital.
Where do you think a smart hacker will locate once the baby boomers start to age? In a country that saved and prepared that can keep taxes medium or a country that needs to ratchet them up to pay for their old people?
Or are you saying we should contract?
It's worth noting the parallels though, between the weird socialism he seems to be proposing and our current system. In our system, the fed creates money and lends it to the banks, at interest, so that they can lend that money to productive people. In his world, local governments would just give money directly to productive people. Frankly, I think that's bound to be less inefficient, even though it's more direct.
So maybe this is great from a community perspective - but it kind of sucks for something bigger... Like a Google or a Stem Cell breakthough.
Why is this off the table?
"Growth for the sake of growth is the philosophy of the cancer cell."