Our national debt is approaching $16 TRILLION dollars, and our deficit remains well over a trillion, meaning that the debt is still growing rapidly. It is now mathematically impossible to pay off the national debt by conventional (fiscal) means--even the Donald Trump Tax would raise "only" about a trillion or so based on our back-of-the-envelope calculations. So what should we do?
Obviously, if we find ourselves in a hole (especially one as deep as this),
the first thing we should do is stop digging. That means no more deficit
spending for the foreseeable future, period. But unfortunately, that's a lot
easier said than done. Taxes will have to go up and spending will have
to go down--dramatically. There is really no way around that.
However there is a relatively painless (albeit unconventional) method of
paying off the debt. Not just this year's deficit, but all of the cumulative
$16 trillion of the debt. It's called the Noble Solution (named after
its creator, Richard E. Noble) and does not involve any significant tax hikes or
spending cuts. So what is it? It's something we never would have advocated in
the past: printing (electronically creating) money out of thin air to pay it off
all at once. Alas, the genie is out of the bottle now, as the Feral Reserve has been creating money out
of thin air for decades (including a recent whopping $16 trillion secret bailout of the banks) so we might as well put this practice to productive
use. Call it QE4 if you'd like. Money is really nothing more than an accounting entry nowadays, so let's make the entry and be done with it.
But wouldn't that lead to hyperinflation? Not if it is properly done with
due diligence. Noble points
out that while creating money is undoubtedly inflationary, using it to pay
off the debt (which is in Treasury bonds and is thus already part of the money
supply) would be deflationary in that it would shrink the money supply by an
equal amount. Thus, the two effects would cancel each other out, as paper
(electronic data) would be exchanged for paper (data). Of course, we would have
to bypass the Feral Reserve to avoid creating more debt in the process. Or
better yet, abolish the Feral Reserve entirely and return the power of money
creation to its rightful owners, our elected representatives in Congress. America would then be free and clear for the first time in history since Thomas Jefferson.
Of course, while doing it once may not be harmful, doing it regularly can
be. To make sure we never have to do this again, we must make sure the debt
never, ever, reaches such stratospheric levels again, period. In addition to abolishing
the Fed, fiscal policy must be tightened after the Noble Solution is
implemented and the debt is paid off. We have already outlined in previous
posts what must be done as far as taxes and spending are concerned. We will
need to have a Balanced Budget
Amendment added to the Constitution as well, with deficit spending
permitted only in severe fiscal emergencies. Fortunately, the latest news
suggests that the deficit may already be shrinking as we speak as the economy improves (albeit very
slowly). After all, a significant portion of the fiscal gap is due to reduced revenues resulting from the Second Great Depression (because that's what it really is) as well as the several fiscal stimulus measures made necessary by the crisis. (Nearly all of the rest can be chalked up to the wars and the Bush-Obama tax cuts, as well as various loopholes and tax-shelters.)
But the bottom line is that the debt must be defeated, and soon. We simply cannot afford to continue kicking this can further down the road. Otherwise we may very well go the way of the Romans.