This has a similar but less direct crowding-in effect. If Uncle Sam pays off some of his accumulated debt, households that were holding that debt will end up with more money. If they use that money to buy goods and services, then private-sector output will expand. It may simply be that only the Fed's open market operations aren't backed by taxes, and regular debt reduction is indeed backed by taxation. You make an excellent point, however.
Every dollar paid to bondholders is a dollar taken from the private sector in taxes.
That's the bottom line, and I'm now inclined to agree. Thanks for helping me notice the keynesianism clouding my thoughts. Money that could have been spent in goods and services by the tax-payer is transfered, in the context of debt reduction, to the owner of bonds. The latter can spend only what the former had to withdraw from consumption. My traditional economic knowledge is mostly a mushy hodgepodge of positivist keynesianism and monetarism, so I could certainly be wrong.