One problem with the argument that “we owe the skyrocketing debt to ourselves, so we can limit the impact”: each of those debts represents a promise to pay someone. If we can’t pay as agreed, the impact is severe. For example, if we don’t pay Grandma the $20K/year in Social Security because we can’t, and instead we only pay her $10K, that creates a problem. Alternatively, if we pay her $20K but we’ve driven monetary inflation (and skimped on the COLAs) so that it only buys $10K worth of goods, that still creates a problem. Piling on more promises now won’t change what Grandma’s going to get in real long-term value. The only thing that’s going to save Grandma is if someone else doesn’t get what they were promised… Now we have to repeat the same argument for everyone who was promised something — bottom line, we face a political vicious cycle for years to come.
Adding more to the debt without generating real GDP improvements will only aggravate the vicious cycle. And the data shows that the debt piled on since 2000 or so has done precious little to boost GDP, but represents an enormous number of promises relative to that GDP.
It is true that there are ways to break promises gently, rather than defaulting brutally, but the root problem is that our governments (at all levels) have, in aggregate, made far more promises than can realistically be kept. Politically it makes a big difference how you do it, but in practical terms the outcome is bad no matter what. There will be massive financial haircuts and broken expectations.
Furthermore, a political process, rather than a rational process, is going to decide who gets the worst cuts. This is not a recipe for peace and prosperity in a vicious-cycle political climate.
Even worse, the exaggerated promises are now so blatant that the government is losing credibility. As the promises lose credibility that creates all kinds of political and economic issues, because people here, and worldwide, will modify their behavior if they don’t think we can deliver.
Putting it all together, the problem is here and now, and aside from the immediate crises the risk of something catastrophically bad happening is rising exponentially. Papering the problem over with politically palatable platitudes isn’t a panacea.
There needs to be structural economic reform. The government needs to prioritize wants vs. needs, and we as a nation need to find better ways to direct labor to where it can generate genuine improvements in well-being.