The NPR story reminds me of Alan Greenspan's testimony before the Budget Committee of the House of Representatives on March 2, 2001. During that testimony, the Chairman of the Fed stunned Congress when he explained that the objective of zero debt might come at a cost. According to Greenspan,
...continuing to run surpluses beyond the point at which we reach zero or near-zero federal debt brings to center stage the critical longer-term fiscal policy issue of whether the federal government should accumulate large quantities of private (more technically, nonfederal) assets.
At zero debt, the continuing unified budget surpluses now projected under current law imply a major accumulation of private assets by the federal government. Such an accumulation would make the federal government a significant factor in our nation's capital markets...In other words, what Greenspan was trying to hint at is that an "accumulated surplus" (i.e., negative debt) would either result in a reduction in the money supply, which would be deflationary, or force the US government to acquire private financial assets, which would be tantamount to the nationalization of US industry. I remember like it was yesterday the look of disbelief on the faces of Committee members upon hearing Greenspan's testimony.
Of course, there are other problems with paying off public debt. As I've discussed in a previous column, in the case of Canadian provinces, years of public debt and deficit reduction have led to the increased financial vulnerability of the household sector in those provinces. Policymakers beware.
Federal Reserve Board, Current Fiscal Issues, "Testimony of Chairman Alan Greenspan Before the Committee on the Budget", US House of Representatives, March 2, 2001
h/t: Tom Hickey