Never Pay The National Debt

A blog about business and economics.
March 5 2013 10:50 AM

The Best Reason to Refinance Federal Debt

85563341
The U.S. Department of Treasury building in 2009

Photo by KAREN BLEIER/AFP/Getty Images

John Cochrane thinks the federal government should take advantage of today's low interest rates by refinancing as much of the national debt as possible into long-dated securities. Dylan Matthews speaks to some Treasury officials who explain why they don't do this, and everything they say is correct. Nevertheless, we should do what Cochrane says.

In fact, I think we should go even further than Cochrane wants and sell perpetual bonds, or "consols," that just pay interest forever and ever. Some of the advantages of this are the ones that Cochrane glosses over. But the more important reason to sell consols is to get people like John Cochrane to stop complaining about future interest rate risk. There is a powerful desire out there to worry about the national debt. The market price of the national debt is screaming as loudly as possible that people should stop worrying about the national debt. So instead, people have chosen to fixate on the possibility of a future market spike in the interest rate. A large-scale refinancing operation will either fail (in which case, no harm no foul) or else more likely it will succeed, in which case people will have to stop warning about this future spike.

Advertisement

We'd then have a nice objective look at the state of federal finances and could discuss rationally whether it makes sense to finance government operations out of taxes or out of borrowing.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

Meet the New Bosses

How the Republicans would run the Senate.

The Government Is Giving Millions of Dollars in Electric-Car Subsidies to the Wrong Drivers

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Photos of the Crowds That Took Over NYC for the People’s Climate March

Friends Was the Last Purely Pleasurable Sitcom

The Eye

This Whimsical Driverless Car Imagines Transportation in 2059

Medical Examiner

Did America Get Fat by Drinking Diet Soda?  

A high-profile study points the finger at artificial sweeteners.

I Wrote a Novel Envisioning a Nigerian Space Program. Then I Learned Nigeria Actually Has One.

A Futurama Writer on How the Vietnam War Shaped the Series

  News & Politics
Politics
Sept. 22 2014 11:13 AM Your Own Personal Rand Paul How the libertarian hero makes his foreign policy contradictions disappear.
  Business
Business Insider
Sept. 22 2014 9:39 AM Adrian Peterson Has a Terrible Contract, and Cutting Him Would Save the Vikings a Lot of Money
  Life
Atlas Obscura
Sept. 22 2014 11:15 AM Avenue of the Baobabs: Madagascar's Magical Upside-Down Trees
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Science
Sept. 22 2014 8:08 AM Slate Voice: “Why Is So Much Honey Clover Honey?” Mike Vuolo shares the story of your honey.
  Arts
Television
Sept. 21 2014 9:00 PM Attractive People Being Funny While Doing Amusing and Sometimes Romantic Things Don’t dismiss it. Friends was a truly great show.
  Technology
Future Tense
Sept. 22 2014 11:23 AM Robot Plants Are the Latest in a Long Line of Robot Thingies
  Health & Science
Bad Astronomy
Sept. 22 2014 11:23 AM Two Impacts, One Landslide… on Mercury
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.