>The basic premise of this article is suspect. The US would still issue enough T-Bills to provide stability even in a zero-debt scenario... it would simply buy other safe, long-term assets to hold.
The US has no reason to issue T-Bills in a zero-debt scenario, through. The only reason that the US government has to sell bonds like T-Bills is to make up for the difference between income(taxes and fees) and costs. If the budget is completely balanced, there is no reason for the government to sell off bonds of any form, since they would need to pay them off with interest at a later date.
True, but if you had zero debt it might well be appropriate to issue some. for example, suppose you want to build a vast new infrastructure project; it may make more sense to borrow to do so if the cost of capital is lower than the opportunity cost of waiting for the money to accumulate.
You're right. State and city-level governments do bond sales for this exact reason.
However, I was assuming that the size(and budget) of the federal government is large enough that if it were completely balanced, and all debt was paid off, they would have enough surplus cash(or the ability to redirect funds) to invest in a large-scale project like that. Short of another world war, I don't think that there are really any projects that would absolutely require this kind of immediate investment by the public.
To lift a line from one of last year's best films: You mustn't be afraid to dream a bit bigger, darling.
You can always go bigger, and in such an incredibly desirable position as you describe, the potential economic feedback loop from going even further with investment in infrastructure and public services is too big to ignore.
Imagine an alternate universe in which there is still a Glass-Steagall act, the Bush tax cuts were never passed, the Afghanistan and Iraq wars were never started, the financial crisis was limited to a few isolated dominoes, and the US is on track to pay off its sovereign debt completely by 2016. We could build a competent, national network of high speed rail without borrowing anything. Or, we could borrow again and build a world-class rail network, invest heavily in education, transform the nation's healthcare system, revitalize NASA... There is always room for more investment.
Also, this is a really depressing fantasy to return from.
That's a fantasy which could never have come to pass in any universe. The only reason the budget was in surplus (technically) is the economy was so white hot revenue was coming in faster than Congress had anticipated. As soon as this was apparent, our legislators were falling all over themselves to spend money on their pet pork projects.
We would have ended up in the hole anyway, since the revenue burst was bubble induced and destined to go down. But even if that wasn't true they would never have allowed the surplus to continue.
Even then it was imaginary, because the growth in Social Security and Medicare spending was always going to outstrip revenue under the rosiest of scenarios.
The US has no reason to issue T-Bills in a zero-debt scenario, through. The only reason that the US government has to sell bonds like T-Bills is to make up for the difference between income(taxes and fees) and costs. If the budget is completely balanced, there is no reason for the government to sell off bonds of any form, since they would need to pay them off with interest at a later date.