Well, OK -- but after having been nearly burned once, I can assure you that smart institutional investors aren't going to be too enthusiastic about investing in mortgage-backed securities -- or ANY dollar-denominated assets, for that matter.
And voila, you have it exactly...
eventually (e.g. Europe) people will not - and can not - continue to buy securities issued by goverments that need to borrow more (”roll over” the debt) just to pay the interest on the bonds they sell to people.
An annual SURPLUS is necessary, mathematically, in order to “pay down” the debt. That means, to “retire” debt without having to borrow to do it.
If on Jan 1 gubmint has $16 trillion outstanding,
then, during the year, the gubmint
a) issues $1 trillion in new bonds, and
b) redeems $2 trillion in old bonds
at year end, December 31, the outstanding debt would be $15 trillion.
This reduction in debt is limited to the size of annual surplus. Of course nowadays we have no surpluses in sight - just annual deficits.
Since investors know the annual deficit/surplus picture for the next ... forever years looks so dismal, and the debt is about 8 times as large as every dollar that comes in for 1 typical year, investors are indeed getting to the point of having no stomach for buying more government bonds.