Obviously, if we find ourselves in a hole (especially one as deep as this), the first thing we should do is stop digging. That is known as the First Law of Holes. 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. And that would do more harm than good at the levels it would need to be done. There is really no way around that.
However, there actually is a painless (albeit unconventional) method of paying off the debt in one fell swoop. Not just this year's deficit, but ALL of the cumulative $20 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 just a few years ago: 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 that recent whopping $16 trillion secret bailout of the banks, which eventually rose to nearly $30 trillion) so we might as well put this practice to productive use. Money is really nothing more than an accounting entry nowadays, so let's make the entry and be done with it for good.
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, such as #MintTheCoin. Or better yet, abolish or nationalize the Feral Reserve entirely and return the power of money creation to its rightful owners, our elected representatives in Congress and the Department of the Treasury. 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 nationalizing the Feral Reserve to make it a public national bank that creates interest-free currency, 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 should also have a Balanced Budget Amendment added to the Constitution as well, albeit with a "safety valve" allowing deficit spending during legitimately declared wars of necessity, national emergencies, recessions, or any time the U3 unemployment rate exceeds 6% and/or the U6 rate exceeds 12%. Without that safety valve, such an amendment can easily do more harm than good. Alternatively, or in addition to the above, there is also the legendary Warren Buffett's clever idea: make a law that anytime the budget deficit exceeds 3% of GDP, all sitting members of Congress are ineligible for re-election, period. Problem solved.
Of course, the longer-term drivers of future debt obligations are the programs that make up so-called "entitlement" spending, mainly Social Security, Medicare, and Medicaid. But even here, there is less than meets the eye. For Social Security, that can be resolved by 1) scrapping the wage cap on FICA taxes (or raising it to an arbitrarily high level like $1 million or $10 million), 2) indexing initial benefits to prices or median wages instead of average wages, and 3) very gradually raising the full retirement age to 70 for those born after 1980 or so. In fact, if we did all those things plus a very slight 0.2% hike in the FICA tax, we could even expand Social Security (and perhaps briefly lower the retirement age a bit in the short term) while still keeping it solvent for the foreseeable future. For Medicare and Medicaid, the only real long-term solution to their burgeoning fiscal woes is a truly universal single-payer healthcare system that can bend the cost curve downward by taking the profit out of healthcare and especially tackling the price-gouging of Big Pharma. And other proposed solutions are mere window-dressing at best.
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.
However, there actually is a painless (albeit unconventional) method of paying off the debt in one fell swoop. Not just this year's deficit, but ALL of the cumulative $20 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 just a few years ago: 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 that recent whopping $16 trillion secret bailout of the banks, which eventually rose to nearly $30 trillion) so we might as well put this practice to productive use. Money is really nothing more than an accounting entry nowadays, so let's make the entry and be done with it for good.
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, such as #MintTheCoin. Or better yet, abolish or nationalize the Feral Reserve entirely and return the power of money creation to its rightful owners, our elected representatives in Congress and the Department of the Treasury. 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 nationalizing the Feral Reserve to make it a public national bank that creates interest-free currency, 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 should also have a Balanced Budget Amendment added to the Constitution as well, albeit with a "safety valve" allowing deficit spending during legitimately declared wars of necessity, national emergencies, recessions, or any time the U3 unemployment rate exceeds 6% and/or the U6 rate exceeds 12%. Without that safety valve, such an amendment can easily do more harm than good. Alternatively, or in addition to the above, there is also the legendary Warren Buffett's clever idea: make a law that anytime the budget deficit exceeds 3% of GDP, all sitting members of Congress are ineligible for re-election, period. Problem solved.
Of course, the longer-term drivers of future debt obligations are the programs that make up so-called "entitlement" spending, mainly Social Security, Medicare, and Medicaid. But even here, there is less than meets the eye. For Social Security, that can be resolved by 1) scrapping the wage cap on FICA taxes (or raising it to an arbitrarily high level like $1 million or $10 million), 2) indexing initial benefits to prices or median wages instead of average wages, and 3) very gradually raising the full retirement age to 70 for those born after 1980 or so. In fact, if we did all those things plus a very slight 0.2% hike in the FICA tax, we could even expand Social Security (and perhaps briefly lower the retirement age a bit in the short term) while still keeping it solvent for the foreseeable future. For Medicare and Medicaid, the only real long-term solution to their burgeoning fiscal woes is a truly universal single-payer healthcare system that can bend the cost curve downward by taking the profit out of healthcare and especially tackling the price-gouging of Big Pharma. And other proposed solutions are mere window-dressing at best.
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.
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