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PREFACE academic circles. A sovereign’s ability to pay is a function of its abilityto generate revenues, which depends, among other things, onthe economy’s capacity to grow and on the government’s politicalcapacity to collect taxes. The line between ability and willingness topay can be notoriously fuzzy. Deborah Lucas examined the structuralsources and magnitudes of U.S. fiscal imbalances and the policychanges needed to avoid them. While conceivable, default remainsunlikely; however, risks from rising healthcare costs, slow productivitygrowth, a spike in interest rates, and contingent liabilities can tipthe outcome. James Hines observed that while the United Statesimposes a smaller tax burden than other large wealthy economies,its greatest unused tax capacity is in expenditure taxation that wouldalter the current distributional bargain. James Kwak put the U.S.fiscal challenge in historical and political perspectives, analyzing thestructural and policy steps needed to address the debt problem, andthe political capacity of the U.S. government to take these steps.James Millstein suggested that asset sales—such as sales of mineralrights—merit serious consideration as part of a package of debt reductionmeasures. His contribution drew on the history of sovereignasset sales, adapting it to the current needs of the United States.xxvThe conference culminated in a panel discussion of a “thought experiment”laid out in Charles Mooney’s contribution: what if theUnited States decided that it was in its interest to restructure U.S.Treasury debt? How might it go about it? What legal and policy optionswould the U.S. government have, what are the pros, cons, andlikely consequences of taking any of these steps? His paper considersconstitutional, statutory, market and transactional challenges to defaultand restructuring, and presents three options for a hypotheticaloperation. At the conference, he laid out the strategy for across-theboardand selective exchanges of outstanding U.S. Treasuries for newobligations, including the possible issuance of “Prosperity Shares,”non-debt securities giving creditors a stake in future growth. DonaldBernstein and Steven Schwarcz offered comments on the paper.Bernstein was skeptical of recourse to the bankruptcy powers, andpointed to the many hard policy challenges, including loss distributionand policy reform, that would remain unsolved even withrecourse to bankruptcy. Schwarcz noted further possibilities for re-
xxviPREFACEstructuring, and obstacles to selective default. In addition, his contributionexplored the problem of government financing through specialpurpose entities, and urged oversight to improve accountability.Throughout the day, conference participants from different academicdisciplines and backgrounds engaged in lively discussion. We did notstrive for a policy consensus, nor did we achieve one. Our purposein the volume, as it was in the conference, is to start a conversationlong overdue. We hope it will continue. If the conference convincedus of one thing, it is that the stakes in the future of U.S. governmentdebt are too high to confine serious analysis and informed debate tolegislative back-rooms and disciplinary silos.
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Page 7 and 8: viContents8 Thoughts on Debt Sustai
Page 9 and 10: viiiContents
Page 12 and 13: The Contributors Anna GelpernAme
Page 14 and 15: The Contributors Howell E. Jacks
Page 16 and 17: The Contributors School, as well
Page 18 and 19: The Contributors Zoltan PozsarIn
Page 20 and 21: The Contributors Richard SyllaNe
Page 22 and 23: xxiAcknowledgmentsWe would like
Page 24 and 25: xxiiiPREFACEThe Law School and t
Page 28 and 29: Richard Sylla 11U.S. Government Deb
Page 30 and 31: Richard Syllasigned from office in
Page 32 and 33: Richard Syllalike the United States
Page 34 and 35: Richard SyllaAfter 1815, a generall
Page 36 and 37: Richard Syllapurchase to back their
Page 38 and 39: Richard Syllational debt and reduce
Page 40 and 41: William W. Bratton 132A World Witho
Page 42 and 43: William W. Brattonwould go from a c
Page 44 and 45: William W. Brattonthe system, than
Page 46 and 47: ConclusionWilliam W. Bratton19At th
Page 48 and 49: Richard J. Herring 213Default and t
Page 50 and 51: Richard J. Herringpay is seldom in
Page 52 and 53: Richard J. HerringFigure 2: Archety
Page 54 and 55: Richard J. Herring27Figure 4: The R
Page 56 and 57: Richard J. Herring29Figure 6: Deman
Page 58 and 59: Richard J. HerringGovernment bonds
Page 60 and 61: Richard J. HerringDuring August 201
Page 62 and 63: Zoltan Pozsar 354A Macro View of Sh
Page 64 and 65: Zoltan Pozsartions, forming an inte
Page 66 and 67: Zoltan Pozsarfunding for safe, shor
Page 68 and 69: Zoltan Pozsarfor the reduction in t
Page 70 and 71: Zoltan PozsarWhile increased rollov
Page 72 and 73: Michael W. McConnell 455Origins of
Page 74 and 75: Michael W. McConnellAlthough the Co
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Michael W. McConnellvene? Who would
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Michael W. McConnell(Social Securit
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ConclusionMichael W. McConnell53Whe
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Howell E. Jackson 556The 2011 Debt
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Howell E. Jacksonloss in liquidity.
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Howell E. Jacksonand provides resou
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Howell E. JacksonWhile assertions o
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Howell E. Jacksonof those payments.
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Howell E. Jacksonwhich payments to
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Concluding ThoughtsHowell E. Jackso
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Richard Squire 697A Market for End-
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Richard SquireSo far, there is litt
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Richard Squirethat the reference en
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Richard SquireIn fact, the gross no
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Richard Squireto only 22.6%. Thus i
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Richard Squirewill default. An econ
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Richard Squireannounced that in liq
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Richard SquireCDS on USA and Correl
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Richard Squiremean, however, that t
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Peter R. Fisher 878Thoughts on Debt
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Peter R. Fishernot really an insura
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Peter R. FisherU.K. prospered great
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Peter R. FisherSources of income be
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Peter R. Fisherlead to greater comp
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Peter R. FisherCentral bank mytholo
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Peter R. Fisherboth sides of their
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Deborah Lucas 1019The Federal Debt:
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Deborah LucasProjected Size of Defi
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Deborah Lucasrevenues. In fact, man
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Deborah Lucasly from the global des
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Deborah Lucas109Figure 2: Primary S
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Deborah Lucas111Figure 4: Medicare
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James R. Hines Jr 11310The Tax Reve
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James R. Hines Jrrevenue rely on ex
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James R. Hines JrStates is the lone
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James R. Hines Jr119Table 3: Social
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James R. Hines Jrtapped federal tax
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James R. Hines Jrer economic costs
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James R. Hines Jrtries, and consequ
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James R. Hines Jrtries from 1999 to
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James Kwak 12911Can the United Stat
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James Kwakone hundred years. 6 At t
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James Kwakthe Royal Navy had over o
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James Kwak135Figure 1: National Deb
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James Kwaka real growth rate of 2.2
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James Kwakkeep the national debt at
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James KwakRepublicans have seized o
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James Kwakreduction package. 45 Fur
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James KwakThe bottom line is that f
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James Kwakprovisions, including hea
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James KwakDespite these political c
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Jim Millstein 15112Burning the Furn
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Jim Millsteinits spending and tax c
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Jim MillsteinWhile safe-haven flows
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Jim Millsteinon reserve balances wi
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Jim Millsteinfull list of options i
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Jim Millsteinfundamental disagreeme
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Jim MillsteinHowever, other things
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Jim Millsteinwould likely command a
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Jim MillsteinThere will inevitably
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Charles W. Mooney, Jr 16913United S
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Charles W. Mooney, JrSecond, would
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Charles W. Mooney, Jrticipants, did
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Charles W. Mooney, JrThe extent and
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Charles W. Mooney, Jr“Treasury Di
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Charles W. Mooney, Jrin subpart B i
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Charles W. Mooney, Jrcount holders
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Charles W. Mooney, Jrdefault. If an
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Charles W. Mooney, Jrcould be achie
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Charles W. Mooney, Jrconsider adopt
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Charles W. Mooney, Jror gold coin.
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Charles W. Mooney, Jrpre-1933 legis
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Charles W. Mooney, Jrbegin by notin
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Charles W. Mooney, Jrformity requir
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Charles W. Mooney, Jrnation based o
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Charles W. Mooney, Jrthe Treasury d
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Charles W. Mooney, JrUnder any cohe
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Charles W. Mooney, Jrcontext of ban
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Charles W. Mooney, Jrcans in Congre
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Charles W. Mooney, JrThe government
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Charles W. Mooney, JrIf Wade’s sp
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Charles W. Mooney, Jring in Perry,
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Charles W. Mooney, JrThere would be
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Charles W. Mooney, JrBut that concl
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Charles W. Mooney, JrCourt of Feder
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Charles W. Mooney, Jrtem. 135 This
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Charles W. Mooney, Jr. b. The Race
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Charles W. Mooney, JrBut, of course
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Charles W. Mooney, Jrhave adopted r
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Charles W. Mooney, Jrtions Conventi
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Charles W. Mooney, Jrthe other hand
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Charles W. Mooney, JrIf the U.S. co
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Charles W. Mooney, Jrpursue massive
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Charles W. Mooney, Jrof multination
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Donald S. Bernstein 23714A Comment
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Donald S. Bernsteinis what most ban
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Donald S. BernsteinAmendment, simpl
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Donald S. Bernsteinfallout of alloc
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Steven L. Schwarcz 24515Direct and
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Steven L. Schwarczin Perry held tha
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Steven L. Schwarczwould apply to fe
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Steven L. Schwarczunder Section 13(
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Steven L. SchwarczD. Assessing the
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255AppendixThe 2011 Debt Limit Impa
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Jeremy Kreisberg & Kelley O’Mara
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