>You can just do what the government does with treasury bonds; issue new bonds to pay off your old bonds
The problem is that there is a limit to how much treasuries you can sell to the market. For a long time US government was able to exploit internal and foreign markets to run deficits, but the "free lunch" has ended. No one wants to buy those treasuries at the proposed rates and volumes anymore. So what did the US government do? If we remove the extra steps, it effectively coerced the Fed to print money and give it to the government. If it's a one time thing, economy may handle it, but there is a strong temptation for politicians to keep doing so, which can only end in disaster.
"The problem is that there is a limit to how much treasuries you can sell to the market."
Why is there? Given that Federal spending puts the reserves in place with which Treasuries are purchased, how can there be a limit?
It's just an asset exchange.
"No one wants to buy those treasuries at the proposed rates and volumes anymore."
(i) What is the bid cover on the latest auctions
(ii) Why do you think that matters anyway? The Fed can just leave the bank reserves in place - as it is doing by QE.
Because there is no perpetuum mobile. By issuing treasuries a government loans economic power from markets in addition to what it gets from taxes. In a limit everyone will work for a government, so the system effectively degenerates to a centralized planned economy. Of course, in a capitalist society people will loose their trust in a government long before that.
In a well working system this additional power is used to accelerate economic growth, so interest rate is compensated by additional taxes, otherwise government has to allocate bigger ratio of collected taxes to service its debt or loan more and more. The first option is not popular with politicians for obvious reasons, while the second one can not continue indefinitely. More you try to loan from market, higher rate will be required (i.e. market will trust a government less), higher the rate, more difficult it will be to service the acquired debt (i.e. a government will have to be either really efficient with its spendings, or otherwise we return to the step 1).
Arguably market trust in the US government has already passed level of sustainability, so it has chosen to loan from the non-market source, which I believe in the end degrades trust put into the whole dollar-based economy. Granted, the level of trust is really high, so assuming the current QE is a one time thing, this should not be fatal, but if such harmful policy continues...
No, but there is an oil sump in an engine, and that stops it seizing up.
"By issuing treasuries a government loans economic power from markets"
OK. Let's test that. Let's say Scotland issues a new currency. Let's say the Scottish government believes it has to get money from markets to spend.
Where are 'the markets' going to get the Scottish currency from to buy the bonds?
Now do you see how you have the monetary operations backwards.
Bonds are a reserve drain. You can't do a reserve drain until you do a reserve add.
"More you try to loan from market, higher rate will be required"
There is no operational mechanism for that to happen. For rates to go up prices have to go down. If prices go down then the Fed simply QE's the Treasury out of circulation and forces the price back up.
The Fed has complete control of the yield curve all the way up the maturity. You get to play in the Treasury market on the whim of the Fed, and under no other conditions.
The problem is that there is a limit to how much treasuries you can sell to the market. For a long time US government was able to exploit internal and foreign markets to run deficits, but the "free lunch" has ended. No one wants to buy those treasuries at the proposed rates and volumes anymore. So what did the US government do? If we remove the extra steps, it effectively coerced the Fed to print money and give it to the government. If it's a one time thing, economy may handle it, but there is a strong temptation for politicians to keep doing so, which can only end in disaster.