Why can’t a government forgive it’s own internal debt?
In: 2
Debt forgiveness would mean the government tells those who owe it money that they don’t have to pay it back. So you’d be talking only about situations where one part of the government owed money to another part (like the Social Security Administration holding T-bills). Sure, the SSA could tell Treasury “forget it, we’ll rip up the T-bills and you don’t have to pay them out” but then where would the SSA get funds to pay SS benefits?
Do you mean “Why can’t the government tell American citizens and organizations that are owed money by the government that they’re not going to get paid?” This is a default and would be catastrophic both for those owed money and for the ability of the US to borrow in the future. Just a bad idea, and politically it seems Treasury would be prioritizing non-US citizens and organizations who would presumably still get paid.
Latest Answers