Question:
Half the debt they're talking about is held by other FedGov agencies. Would it be possible for these agencies to "forgive" the debt held?
Yes. On this board we call it entitlement reform. My unsupported opinion is that this is why the US financial stability (cheap bonds) continues despite 100% GDP debt at the federal level and another 100-200% at the state and local level.
Eventually one of the following will happen:
1. These under funded pensions & entitlements will default
2. The treasury/bonds will default
3. The debt will be inflated away (play games with the cost of living increases)
4. The laws will change to remove the burden
5. Some combination of all the above
I don't think raising taxes is an option both literally and politically.
Literally due to diminishing economic activity from an already over burdened nation.
Politically due to fierce resistance to any more tax increase "compromise". People are wise to the game of promising a balance budget on the back of a tax increase, and then next year spending all the tax increase with no balance budget. Politicians are addicted to playing this game, and no tax increase will ever be used to balance a budget.