Obviously, if we find ourselves in a hole (especially one as deep as this), the very 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 $21 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. 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. Any other proposed solutions are mere window-dressing at best.
Of course, Rodger Mitchell has an even better, more fundamental idea that makes it so the government would never need to borrow a single penny ever again, and it doesn't require raising taxes OR cutting spending. Not only that, but it would guarantee that Social Security and Medicare, and any other program, would remain fully funded indefinitely as well without the use of FICA taxes (or any other tax for that matter). The solution, in his exact words:
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. The greatest tragedy of which being the fact that it was all 100% contrived and therefore 100% avoidable all along.
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 $21 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. 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. Any other proposed solutions are mere window-dressing at best.
Of course, Rodger Mitchell has an even better, more fundamental idea that makes it so the government would never need to borrow a single penny ever again, and it doesn't require raising taxes OR cutting spending. Not only that, but it would guarantee that Social Security and Medicare, and any other program, would remain fully funded indefinitely as well without the use of FICA taxes (or any other tax for that matter). The solution, in his exact words:
The best way is to eliminate the federal budget deficit and debt: Ending government borrowing. The government has the unlimited ability to create and spend money without borrowing. The process will be:
1) Congress will create an account called "Money."
2) Congress will determine how much money this account contains. The process will be similar to the way Congress now determines the debt ceiling.
3) Federal agencies will write checks against this account according to budgets decided by Congress. If any federal agency needed additional funds, Congress would decide whether or not to allow this spending, in the same way that Congress votes for additional spending by the military et al.
This would eliminate concerns about "our grandchildren paying for the federal debt." There would be no federal debt.And as long as such money were created without any interest or related fees (as per Ellen Brown) such a solution would actually work. Modern Monetary Theory indeed supports such an idea. But before we can do that, of course, we must first have an independent Treasury and/or a public national bank in place of the privately-owned FERAL Reserve. (And since he mentioned the debt ceiling, that is another thing we should really get rid of as well in the meantime, since it does far more harm than good.)
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. The greatest tragedy of which being the fact that it was all 100% contrived and therefore 100% avoidable all along.
Rodger Mitchell's idea is best. This is how all governments should work like. The worst thing to do is to ignore the deficit.
ReplyDelete