Will the US ever be debt free?

Answer 1

NO -- Even if the federal government again reaches a financial state of having relatively low debt compared to the GDP, I am quite sure the U.S. Congress will spend so much more on programs that the level of federal debt will be driven-up again (this predisposition has been the track record since LBJ started the Great Society programs in the mid 1960s). What really matters is whether the federal government gets into a situation where it becomes so difficult to pay the costs of servicing its outstanding debt, that there are insufficient appropriations to fully fund existing programs / operations. Yes, even the federal government can only increase its debt just-so-much in a budget period -- note that public debt vehicles are marketable securities, so only so much new debt can be sold at a given yield over the life of the vehicle. Also note that up till now the Congress also has transferred liquidity from Social Security revenues to fund other programs, essentially making in-the-ledger (ie. no contract vehicle) loans from the Social Security funds. This will be dropping to 0 about now because the increasing proportion of retirees starting to draw Social Security benefits has reached the level of consuming all the Social Security revenues. In extreme times (eg. a depression), the federal government might not be able to float any new debt because the market of investors has been too diminished, and/or the investors don't believe the government can continue to service the outstanding debt at the reducing levels of GDP (which directly translates to reducing revenues). Of course the federal government literally can authorize an increase in money supply (either as currency or on accounts for disbursement of funds), but this quickly causes devaluation of the dollar versus foreign currency and eventually causes price inflation within the national economy.