"NPR reports that not so long ago, the prospect of a debt-free U.S. was seen as a real possibility with the potential to upset the global financial system. As recently as 2000, the U.S. was running a budget surplus, taking in more than it was spending every year — and economists were projecting that the entire national debt could be paid off by 2012. So the government commissioned a secret report outlining the possible harmful consequences of retiring the debt completely. For one thing, paying off the national debt would mean the end of Treasury bonds, a pillar of the global economy. Treasury securities are crucially important to the world financial system in a number of ways: banks buy them as low-risk assets, the Fed uses them for executing monetary policy, and mortgage interest rates vary based on Treasury rates. 'It was a huge issue ... for not just the U.S. economy, but the global economy,' says Diane Lim Rogers, an economist in the Clinton administration. In the end, Jason Seligman, the economist who wrote most of the report titled 'Life After Debt (PDF),' concluded it was a good idea to pay down the debt — but not to pay it off entirely. 'There's such a thing as too much debt,' says Seligman. 'But also such a thing, perhaps, as too little.'"
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