Australia paid off all of it's federal public debt in the mid-2000's. By 2007 the Federal government had no net debt. That is - the net position of the governement (savings-debt) was zero.
This didn't mean that there were no securities on issue - the need for an active market in government debt meant that there were still securities outstanding, but these were offset by liquid assets that could be sold to buy back the debt if necessary. I don't know what the surplus money was invested in, but one of the leftovers from that period is a 'Future Fund' which is a very large pool of investment funds held in trust for the future pension needs of the public service. That is - the money was separated out from the general revenue pit and put aside to pay out the retirement benefits of the people employed by the government itself. I do know that this fund is a diversified fund like any other, and invests in different styles and classes of securities.
Of course, a change in government since that period and a drop in revenues from the financial crisis means this is no longer the case. But for that brief period it was a very good place to be - income tax rates were going down every single year and the economy had an unbroken 13 year period of real growth in wages and productivity.
You don't need public debt to function properly. Australia is a perfect example of this. In fact, a lack of public debt is a good thing as it allows a government to either return taxes via lowering tax rates, or invest the surplus for the inevitable rainy day, or, to build productive infrastructure if that is what they choose to do.
I think that's great for Australia but isn't the central question what would happen without US public debt? Australian public debt isn't a pillar of the world economy.
If you'd read it properly, you'd notice that Australia kept a pool of debt-in-name-only turning over to serve local financial market needs. About 100 billion AUD IIRC, or ~10% of GDP at the time. The money raised through those particular bonds was never used. It just came in, sat around for a while, and went back out with a very small interest payment attached.
The US could have done the same and I understand that is what this "secret report" recommended.
Economies would adapt - they always have, they always will. Bubbles and tiger economies existed before the US was even a whiff of a dream. It's not like the US is $14T in debt in 2011 and in 2012 it'd be $0T in debt - repayment would take a long time, ample to examine effects and counter where needed.
This didn't mean that there were no securities on issue - the need for an active market in government debt meant that there were still securities outstanding, but these were offset by liquid assets that could be sold to buy back the debt if necessary. I don't know what the surplus money was invested in, but one of the leftovers from that period is a 'Future Fund' which is a very large pool of investment funds held in trust for the future pension needs of the public service. That is - the money was separated out from the general revenue pit and put aside to pay out the retirement benefits of the people employed by the government itself. I do know that this fund is a diversified fund like any other, and invests in different styles and classes of securities.
Of course, a change in government since that period and a drop in revenues from the financial crisis means this is no longer the case. But for that brief period it was a very good place to be - income tax rates were going down every single year and the economy had an unbroken 13 year period of real growth in wages and productivity.
You don't need public debt to function properly. Australia is a perfect example of this. In fact, a lack of public debt is a good thing as it allows a government to either return taxes via lowering tax rates, or invest the surplus for the inevitable rainy day, or, to build productive infrastructure if that is what they choose to do.