The entire thing was formulated in terms of you, the taxpayer, not in terms of the national debt itself. The only question in consideration from a national fiscal policy perspective was whether the tax cuts would happen "now" or "later", not whether or not the possibility that no tax cuts would be made, still less that taxes might be raised and spending also cut to do something like paying down the national debt.
What a difference a decade makes ...
The question of the United States simply defaulting on the national debt was considered in 2011 by Brian Palmer.
So what would happen if the government did default on its debt? Well, there are two kinds of default. In the first scenario, the government simply wouldn't be able to cover its interest payments—in other words, what ordinary people mean when they use the word default. The results of this would be catastrophic. When creditors suspected that things might play out this way in Argentina in 2001, that nation's interest rates rose 5 percent [PDF] in a matter of months. A similar spike in Uncle Sam's average interest rate would increase the federal deficit by 30 percent in the first year, with a snowball effect going forward. The good news is that we're a long way from reaching that kind of crisis. Last year, the government paid $213 billion in interest on its publicly held debt. That accounts for just one-tenth of government revenue.
The second default scenario is more likely. In that case, the government would have enough money to pay interest to its creditors, but not enough to issue Social Security checks or pay soldiers' salaries. There's no analogue to this kind of default—if default is the right word—in the private sphere. Economists disagree on its significance. Secretary Geithner insists that it's "default by another name," since it would indicate the country's willingness to walk away from financial commitments. Others have argued that prioritizing debt-service payments, and walking away from entitlements or discretionary spending, would actually make us seem more reliable (and deserving of low interest rates), since it would establish just how seriously the U.S. takes its debt payments. At this point, it's not clear how, exactly, this would play out.
Neither seemed likely to happen then or now. The first type of default would, well, guys like Rod Dreher say we're Weimar America as it is. No point in belaboring that observation.
The second default scenario of paying the debt but gutting Social Security or military salaries sounds pretty bad, too. What could possibly be the risk of deciding to not pay soldiers' salaries or Social Security checks? Would American soldiers and the elderly be so philosophical as to not take action? But then since either type of default seems moot as an action taken by us the first default seems, ultimately, more likely than the second. It might take longer for the United States to reach such a point but it's not necessarily going to be a decision for the United States to make as if it controls that outcome. Wouldn't a moment of default arrive not merely because the borrower decides to default but because the lender takes an action to get paid back? I.e. there could be such a thing as a default default on debt, the kind of defaulting on a debt that could lead to ... say ... a default decision.
You can read how this thing can happen with stuff like student loans. Taking on a large amount of debt for an educational certification of dubious value on the job market has been considered a crisis for years, even by some other people who write for Slate.
I don’t question the importance of higher education. But the detrimental effects of crushing debt shouldn’t be the shared experience of millions of young people and their families. Currently, about 40 million Americans owe $1.2 trillion in student loan debt, and it continues to grow. According to the Institute for College Access and Success, students who borrow graduate with an average debt of $29,000 for a bachelor’s degree. In 2014, 69 percent of graduates had student loan debt, and from 2004 to 2014, the average college debt grew at more than double the rate of inflation. Even with smaller amounts of debt than mine, starting a life quickly becomes very hard. So how do people get to this point? We’ve debated student debt for decades, but our understanding of how it shapes a young person’s experience—from naïve teenager to indebted young adult—is still limited. Here’s what happened to me.
If the proposed solution is that the government pays for all education Americans need to consider that in those lands where the state pays for all your education they frequently take an interest in telling you what your professional career is going to be. That is the part that I suspect Americans will not tolerate. They may love the idea that Uncle Sam foots the bill for you to study whatever you want, but to be a cog in the national industry machine? That seems oppressive! What if a standardized career test says that you should be a horticulturalist when you want to go into something more literary? I ran into that in high school taking one of those standardized career tests.
Reading about a law under proposal that would require students to apply to at least one college ... I'm admittedly a pessimist about American higher education at a couple of levels. Requiring high school students to apply to a college when the higher education debt situation seems as bad as it is seems like it's suggesting that telling American high schoolers they HAVE to apply to a college to make sure enrollments don't drop at a state school sounds unscrupulous. j
If so many who get advanced degrees struggle to find jobs that can pay back that debt then wouldn't insisting that students apply do nothing to fix that? So what if a student applies? If they don't get accepted they're made to apply and that could glut admissions assessment. If they get accepted after they have applied that does not really mean they have to actually enroll, does it? You could apply and get accepted and then just decide not to go because there's not enough financial aid or you never had the money to begin with but a requirement for a student to apply takes no consideration of capacity to pay in advance, does it?
Overall it seems that the nature of the American national debt is such that the moment of default is probably not going to e the moment that we decide it's going to be but the moment the creditors decide they want their due. Precisely to whom this national debt is owed doesn't even seem to ever come up in a venue like Slate.