For anyone who has been paying any attention, the U.S. government is in over its head in debt. The national debt is almost $14 trillion and the unfunded liabilities (mostly Medicare and Social Security) are estimated at as much as $100 trillion or more. This will never be paid. The "benefits" for Medicare and Social Security will be cut. It is just a question of when, how much, and by what method they will be cut.
Now what about the national debt? To pay back $14 trillion isn't totally impossible. It would take considerable restraint and discipline by the government, so I guess it really is impossible from that aspect. It is an interesting question for libertarians on what to do with the national debt. Some libertarians believe that the debt should be paid back because the government entered into a contract with others. There are many holders of U.S. bonds including foreign governments, foreign citizens, U.S. citizens, U.S. corporations, and the Federal Reserve.
It seems that the libertarian thing to do is to honor contracts and that usually is the case. There is a major problem here though. These contracts are not legitimate from a libertarian standpoint. The U.S. government has sold bonds to others with a promise to repay the buyer with the interest agreed upon. But the problem is that the government does not create any wealth of its own. The only wealth the government has is by confiscating it from others, whether through taxation or inflation.
If person A loans person B some money and person B agrees to pay back person A by stealing money from person C, then this isn't a legitimate contract. If person B is broke, then person A should take the fall, not person C. Person C did not enter into the contract. Just because his name was on the contract doesn't mean he should have his money stolen from him for person B to make good on his contract.
The same holds true for the government. Since the government has to confiscate (tax) Americans to pay for the bonds, then the contracts are not legitimate. The bondholders should take the fall. The only other option is to treat it like any corporate bankruptcy. You liquidate the assets and pay off the creditors. In this case, the federal government should sell off its properties to make good on at least some of its promises. Although we can't know the amount, there is property worth at least hundreds of billions of dollars, but probably more like trillions of dollars. There are forests, national parks, oil fields, government buildings, government monuments, and many more things to auction off. These should be sold to the highest bidder and the funds can be used to pay off bondholders (at least a portion) and those currently dependent on Social Security and Medicare. This is similar to what Harry Browne suggested when he ran for president.
The government does not want to default, but it will be forced to eventually. It will default through inflation first. It will be painful. At some point, it may default outright. From a libertarian standpoint, this would actually be a good thing as compared to the alternative of hyperinflation.