You can think of it this way, the higher the debt, the more of your tax dollars go towards paying off that debt, which means less money goes into services you think you're paying for. The earners of this are institutions and the wealthy who lend the money to the government.

A government can print more money to pay off that debt (causes inflation), it can lower interest rates on that debt (also causes inflation), cut costs (causes deflation but politically unpopular), or it can raise taxes (also causes deflation but politically unpopular). In the first two cases, the value of your savings diminishes.

Government debt is not the same as household debt. The government, as the issuer of its own currency, has the power to create money. This ability sets it apart from households, businesses, and city or state governments that rely on income and borrowing to finance their spending.

Government debt is a byproduct of government spending. The primary purpose of government spending is to inject money into the economy, creating demand and stimulating economic activity. When the government spends more than it collects in taxes, it runs a deficit and issues debt as a way to accommodate the excess spending.

Taxes are thus a tool to manage inflation. By reducing the amount of money in circulation, taxes help prevent excessive demand that could lead to inflationary pressures.

(Modern Monetary Theory)

Many of the loans made to itself are wrapped up in pension funds, SSI, lots of future expenses to cover, etc...so just forgiving the loans wouldn't help much unless you want a bunch of angry old people rioting on the street.

Another way of thinking about it is the US deficit is high because savings needs are also high. It isn't just a "we need to spend more money", it is also a "we need to borrow more money" (due to lots of savings demand). The problem is that we aren't using those savings needs productively enough, so we are still going to get hit in the future.

China also has a similar problem, but one could argue that they are leveraging savings needs effectively through lots of infrastructure and other capital projects. BUT Japan went that route as well, and it didn't work out too well for them.

So then is the public debt in a large part just a complex accounting system the government uses to manage its business? At least in the case of the US where most of it is held by the US? Genuinely curious, every time I think about this it feels like turtles all the way down.

You think of US as a monolithic entity and that really isn't true. There are lots of agencies with lots of employees and future obligations; they all have their own budgets and "books"; congress doesn't like bailing out an agency due to them thinking they have the whole US budget to spend. Maybe if we bothered to just force all public employees into 401Ks, we could summarize it as mostly SSI and Medicare future needs (though we are increasingly hitting pay as you go).

I think this quirk is easier to wrap your head around if you think of the consequences of doing it. Modern economics have baffled me at times, but I’d fully expect our currency to be extremely devalued if they did that. Currency holders would end up paying for it as they couldn’t purchase as much.

«forgiving the loans it made to itself”. Wouldn’t something like that mean that some ex-gov employees won’t get their pensions?

Yes, but what makes it so weird is it's one pie.

Like, imagine you made up "hacker dollars", which you can make more of whenever you want. They're sticky notes with a number written on them.

Then you lent "hacker dollars" to yourself, at a 4% interest. So lender you creates new "hacker dollars" to pay the borrower you interest.

If you wanted, you could just say that you forgive the loan you made to yourself, and pay the "hacker dollars" directly.

If anything, it seems like a complex accounting system more than anything related to credit card debt or mortgages.