Taz writes:
Are we going to one day just all agree to simply forget the national debt is there at all?
I don't think that the people who rely on social security and medicare, which "owns" half the national debt, are simply going to forget that it is there. Nor are the insurance companies and retirement funds (or the Chinese for that matter) that have major holdings in US treasury bonds (the physical form of our national debt) likely to forget. Unfortunately, governments have a very easy way to effectively retire a substantial fraction of their debt, by adopting economic policies that lead to hyper-inflation. Small underdeveloped countries will sometimes do this by just printing piles of money to pay off their debt and fund exorbitant programs.
This always leads to such hyper-inflation that the economy is essentially destroyed and the country effectively returns to a barter system, so I can't imagine the US ever being so fiscally irresponsible. But there are less drastic policies, including some that are now being considered to lift the US out of its financial troubles, that are supposed to "prime the pump" or inject fluidity (cash) into the financial markets, but run the risk of high inflation.
This approach of retiring the debt through inflation has its limits in that the government has to constantly refinance its debt (the Ponzi scheme aspect I alluded to) and lenders will demand interest rates commensurate with anticipated inflation. So the inflation gambit has to be done fast and furious, say 10% to 15% inflation for a few years. It's the people on fixed and low income - primarily the elderly - who effectively pay off the debt and get totally screwed over, but perhaps that's the penalty for not paying attention in civics class and tolerating a Reaganomics driven series of administrations that drive the debt from $1 Trillion to $10 Trillion in so short a time. (Buzsaw, are you listening?)
'Borrow 'til we're broke' Reaganomics has now run its course.