If (and this might be a big 'if') the U.S. uses the debt to make smart investments in education, technology and infrastructure, Stiglitz says "the long run national debt will be lower." According to his calculations, a simple 5%-6% return on these investments will easily pay for themselves and increase our competitive advantage in the future.
If the U.S. uses the debt to make smart investments - agreed. Unfortunately, encouraging savings and investment at the expense of current consumption would put an immediate drag on national income (GDP). This is an unacceptable outcome for political system that tends to win or lose elections based on the economy.
Also, encouraging investment is one thing. When investment is directed from the public, notoriously inefficient, rather than the private sector, a simple 5-6% is a very big assumption. Without the political will and the means to carry it out, the easier solution of devaluation as means of reducing the size of the debt burden will always be selected.
Source: finance.yahoo.com
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