Saturday, February 27, 2010

America the Bankrupt

It's time to tell the truth.  Our country is technically bankrupt.  If it were a business, it would be considered insolvent since our liabilities exceed our assets.

The facts are clear:
  • We had a record budget deficit of $1.2 trillion for 2009, and projected to be $1.5 trillion this year.
  • We have a national debt of $12.4 trillion and growing, which is now 85% of our GDP.
  • The interest on the debt alone is an average $400 billion per year, and will grow further with the debt. 
  • We have unfunded liabilities of $70 trillion and growing, primarily Social Security and Medicare.
  • The wars in Iraq and Afghanistan alone have cost nearly a trillion since 2001, and that only includes direct and short-term costs.
  • Many states have record deficits as well.
  • Much of our national debt is owed to China, Japan, the UK, and South Korea.
  • Our trade deficit is $40.2, and $20.5 billion with China alone.
  • We import over 2/3 of our oil, much of it from unfriendly regimes.
So yes, Virginia, we're bankrupt, and have been so for years.  Clearly something has to be done, but declaring bankruptcy is not an option.  We already did that in 1933, and we can't do it again.  Last time, it was done by confiscating everyone's gold, then subsequently getting off the gold standard.  This time, it would mean trillions of dollars of Treasury bonds would instantly become worthless junk bonds due to our credit rating going to naught.  And those who hold such bonds would lose much of their life savings, to say nothing of the countries that hold them.

We must pay off our national debt, balance the budget, and return to a favorable balance of trade.  And we need sound money to back it all up.  How do we do it?  The following must be done ASAP:
  • Levy a wealth tax on those with a net worth of $10 million or more, at 15% of net worth, for two years in a row.
  • Create a new 50% bracket for those who earn $1 million or more per year, and repeal the Bush tax cuts for those who make $200,000 per year or more.  And eliminate all loopholes as well.
  • Bring back the estate tax to pre-Bush levels.
  • Eliminate the Social Security wage cap entirely, making it a flat tax and not a regressive one, and limit benefits for wealthy retirees.
  • End the wars in Iraq and Afghanistan, and remove 100% of troops within a year.
  • Cut the "defense" budget by 50%, and remove our troops from most countries.  Maintain armed neutrality with respect to all foreign wars.
  • Put heavy tariffs on all imports, and tax the hell out of any and all companies who engage in outsourcing/offshoring.
  • Vote out all incumbents in the 2010 congressional elections who do not support all or most of the above.
In the longer term, there are further things we can and should do:
  • Replace the income and payroll taxes with a 25% value-added tax (VAT) on virtually everything, with a prebate equal to the tax on basic necessities. 
  • No income tax on those who make below $100,000 per year, but levy 25% on every dollar above $100,000 and 50% on every dollar above $1,000,000, simple and loophole-free.
  • With the payroll tax replaced by the VAT, have 7% of each paycheck deposited into a personal retirement account.  Keep Social Security as a means-tested fallback option.
  • Stop raiding the Social Security trust fund and using it as a slush fund.
  • Replace Medicare and Medicaid with single-payer healthcare for all Americans.
  • Bring back the gold standard, and abolish the Feral Reserve.  Let the market set interest rates, and let Congress control the money supply as per the Constitution.
  • Cut as much government waste as possible.
  • End the War on Drugs, at least for cannabis, and tax the hell out of any newly legalized substances.
  • Raise the excise taxes on alcohol, tobacco, and gasoline, and create new ones for other vices.
  • Create a tax on currency speculation.
  • Create a "carbon tax and dividend," taxing carbon at the source and giving everyone an equal share of the money collected.
  • Reduce overpopulation by limiting immigration to the previous year's emigration (about 200,000 people per year) and removing all barriers to birth control and other reproductive health services.
If these things are implemented in fairly short order, we may be able to avert disaster.  But if not, we may very well go the way of the Romans.  The choice is ours.

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