“A more likely outcome [than the US defaulting on its debt], it seems to us, is that the US will make good on Treasury debt but repudiate soft obligations like Social Security and Medicare. That way the US would continue to be able to borrow in the future. And all it would require would be a Congressional vote lowering the outlays for these programs.”
This is reelection suicide. I agree that it’s the best option, I’m just not sure convincing more than 50% of Congress that the good of the country should come before their reelection concerns. There’s also a guarantee of an “I’ll let everyone else vote for this” game. Doing something gradual that wouldn’t be a financial shock to voters within one or two election cycles should have been done 10+ years ago.
Also, Social Security isn’t really a problem. If the cap on FICA contributions was removed, that would get rid of almost the entire long-run deficit in the program. It’s healthcare inflation that’s the real issue. See any David Walker or Pete Peterson quote for more.
