>You also leave off debt service, which is approaching the military budget in size.
There's a lot of FUD and wrong opinions approaching the national debt, and people don't think about it correctly.
Very briefly, I'll make one point to bring some of this to light: 40% of the national debt is owned by the government.
* 16% by social security (so this portion isn't debt service, it's SS funding)
* 13% by other government entities (likewise funding these agencies)
* 12% by the Federal Reserve (whose profits are remitted to the Treasury, this money is free)
Another 25% of the debt is owned by Americans in some form or another.
For comparison, the two largest foreign debt holders are China and Japan each with about 7%.
If default is the worst case scenario, defaulting on foreign banks seems preferable to defaulting on your retirees. The same is true for money printing, as retirees are harmed greatly by inflation.
If you owe debts to other countries you have to pay that money outside the system. So it takes a certain percentage of production (GDP) and pays the benefit of that production to people in other countries. Japan has a much bigger debt problem than the USA in percentage terms. Nearly all their debt is owed to those in Japan so when it is paid it merely redistributes wealth (rather than losing it to those overseas).
While inflation can allow you to payoff debt with less valuable $ and thus reduce the value of what is given to other countries (also to retirees and other holders of government debt but for the matter of losing wealth to other countries that isn't a factor). But markets adjust and unless you have now paid off all your debt and owe nothing you have to borrow again, and lenders will demand larger interest payments to make up for the risk of your debasing the currency to pay them back worthless dollars. So while this can maybe work in the short term if you fool the markets it most likely doesn't work in the long term for the USA.
I would say it is probably true defaulting on foreign banks would be preferable but it isn't that neat. The USA would default to everybody and it would be chaos (because of the central role of the USA - different than if some minor economic power defaults). The USA owes lots to foreigners and those in the USA and while spreading the costs of default overseas sounds better really it would be so catastrophic I doubt it matters. Debasing the currency through inflation is what would happen instead in the case of the USA. Which would have bad costs to the USA and to those holding USA government debt.
There's a lot of FUD and wrong opinions approaching the national debt, and people don't think about it correctly.
Very briefly, I'll make one point to bring some of this to light: 40% of the national debt is owned by the government.
* 16% by social security (so this portion isn't debt service, it's SS funding) * 13% by other government entities (likewise funding these agencies) * 12% by the Federal Reserve (whose profits are remitted to the Treasury, this money is free)
Another 25% of the debt is owned by Americans in some form or another.
For comparison, the two largest foreign debt holders are China and Japan each with about 7%.