> rather than going into debt, would it be possible for the government to just... suspend the activation of financial covenants generally for a while?

That's completely unfair to one side of the transaction.

Here's an example:

Let's say that in 2010, I bought a million in bonds from various sources.

Let's say that in 2010, you sold me some bonds.

Let's say that your proposal goes through, and the government just declares that contracts will not be enforced.

That would completely punish ME at YOUR benefit.