Pay off the national debt in 8 years.

[Saint Cad]

You ran for President on one issue, paying off the national debt. You and your supporters won in such a landslide that you pretty much have a mandate to do whatever you want short of anything unconstitutional. Here are the numbers (http://www.usdebtclock.org/) you get to play with but ultimately you need to pay off about $14.25 trillion or about $1.8 trillion a year above the $1.3 trillion deficit.

My first move: balanced budget amendment. Politicians have proven that they are fiscally irresponsible and need to be contained. How can you pay off the debt if you still have deficit spending?
Net effect: prevention of more debt

My second move: tax reform. Notice that personal income tax is 4.5X that of corporate taxes. I think current rules allow for corporations to write off expenses in a way people are not. Let me give you an example: I am going back to school to gat a doctorate so I can teach in a university. I cannot write that off on my taxes as a work expense (and to be honest, how is a math teacher getting an EdD in math education anything but a professional expense?) but if a corporation (like a private school) paid for it, it is written off as a expense for them. Certainly things like COGS and payroll should be expensed out, but the rules are so convoluted that you can't tell me corporations are paying their fair share.
Net effect: If corporations pay the same as personal income tax, +$725 billion per year.

My third move: return to Federalism. Since the New Deal, the federal government has taken on more responsibility for stimulating the economy. Some are necessary and within Federal jurisdiction such as the Interstate System while some are necessary but outside of the Fed's constitutional domain such as community rebuilding. Some are completely unnessary pork. Hey, if your community of 12 needs a road to the main highway, build it with community, county or state funds and not $137million from the Feds. Basically, this would make the Federal government only pay for those things they are mandated to have an interest in by the Constitution in Article I, Section 8.

The sticking point is the "general welfare" clause. Tax and spend politicians use it to justify spending on everything. Take education. That is a state responsibility not Federal but I can see where the Feds have jurisdiction to ensure that a basic level of education is available to all Americans. As President, I would look at all of the Federal programs and use two criteria in deciding how much to spend:
1) Does it benefit Americans in general? If not, then it is out.
2) What is the minimum amount to spend to ensure that it does provide some benefit? "General welfare" may mean I buy you toilet paper but it doesn't mean I have to buy you 2ply quilted them wipe your ass for you.
Net effect: In 2010, discretionary spending was 19% of the budget or $660 billion. Cutting that in half would be $330 billion per year

Now that the deficit is taken care of time to take care of the debt. Some or maybe all of these will be temporary but it is no different than what average Americans have to do when in debt over their head.

Social welfare is almost $1.5 trillion. Social security is a goverment Ponzi scheme and someone should have been aware something was wrong with the numbers when the first recipients received much more than they paid in. Social security funds should be put back into the economy to help it grow and become a pay for itself program. Medicare and medicaid can be lessened by providing student loan forgiveness for doctors that provide pro bono medical work for the poor. Some cuts to benefits necessary until the program is self-sustaining.
Net effect: variable but it should be more savings as the program becomes more developed. Let's say and average of $375 billion per year

Defense & Homeland Security 10% cut for $75 billion per year

Discretionary: Another cut to what is absolutely minimum for general welfare. $165 billion savings

Tax increase: 10% across the board that is used to directly retire the debt. Since corporate tax is now at $925 billion along with personal tax after I raised them, net effect is +$185 billion.

Interest payments: As we pay down the debt, we do not need to make as much in interest payments.
Net effect: an average of $100billion per year.

OK: $900 billion to retire the debt per year. More taxes or less spending or is that good enough? Or do you have a different plan?

[Really Not All That Bright]

What happens to the millions of old people who lose their homes because their only income is Social Security retirement benefits?

[Voyager]

Social welfare is almost $1.5 trillion. Social security is a goverment Ponzi scheme and someone should have been aware something was wrong with the numbers when the first recipients received much more than they paid in. Social security funds should be put back into the economy to help it grow and become a pay for itself program. Medicare and medicaid can be lessened by providing student loan forgiveness for doctors that provide pro bono medical work for the poor. Some cuts to benefits necessary until the program is self-sustaining.
Net effect: variable but it should be more savings as the program becomes more developed. Let's say and average of $375 billion per year


Anyone who says Social Security is a Ponzi scheme pretty much disqualifies himself as a reasonable commentator on the issue. The fact that the first recipients received more than they paid in was a feature, not a bug. The point was to put money in the hands of the elderly during the Depression to keep them from starving. Social Security, until the recession hit, was a pay for itself program on a cash flow basis, and still is, and will be for quite a few years. Increase taxes slightly, cut benefits slightly, and it is again. And the money paid out goes right into the economy, of course.
As for medicine, the big problem with our medical system is not doctors' salaries. In any case, any doctor with a third grade economics education will soon compute whether getting loans forgiven is worth it. I believe there are similar programs to try to get doctors into underserved locations - that there is not a flood of these shows how well it would work. In any case, my GP told me yesterday that he was worried about paying for his kid to go to Northwestern, so not all doctors are swimming in money. And he's in a high class clinic.

[Gyrate]

For some reason I opened this expecting the OP to be "Local mom discovers secret of paying off the national debt in 8 years from your own home! Find out what the government doesn't want you to know!"

[RickG]

The premise is flawed. While deficits are a problem (in the long term), it's not necessary to pay off the debt. What matters is keeping the costs of debt service (interest payments) manageable in the long term. Plenty of businesses and individuals carry some small, revolving debt burden constantly. This revolving debt can be used to, for example, smooth out cash-flow over cyclic changes in income, or to create new capital. It's only a problem when interest payments start to overwhelm everything else.

To pay off the debt, which is something pretty close to 100% of GDP, in 8 years would require sucking 10-15% of GDP off the table to buy back Treasury notes, more than half of which are owned domestically. That would devastate the economy in the short term in a way that might not be recoverable.

Better to get spending in line with revenue. This will require both cuts in spending and increases in revenue.

[Evil Captor]

Raise taxes.

Get our troops out of Afghanistan and Iraq.

Close overseas tax loopholes.

Ought make for a good start

[aruvqan]

I personally would have preferred the bailout money to be applied to the national debt even though it would have been a drop in the bucket. For what it is worth, other than some sort of support to rebuilding a rail system I think any company stupid enough to fold should not be supported.

[And I wish we could get diesel manual cars in the US again =( I would love to have the kuga I drove last summer available here =( ]

[Saint Cad]

Anyone who says Social Security is a Ponzi scheme pretty much disqualifies himself as a reasonable commentator on the issue. The fact that the first recipients received more than they paid in was a feature, not a bug. The point was to put money in the hands of the elderly during the Depression to keep them from starving. Social Security, until the recession hit, was a pay for itself program on a cash flow basis, and still is, and will be for quite a few years. Increase taxes slightly, cut benefits slightly, and it is again. And the money paid out goes right into the economy, of course.


How is it not a Ponzi Scheme if the money is never reinvested but instead redistributed? And my point was that the numbers just don't work. Social Security is a bubble because it depends on a growing economy for solvency. We saw how well that has worked over the years.

[RitterSport]

[And I wish we could get diesel manual cars in the US again =( I would love to have the kuga I drove last summer available here =( ]

The Volkswagen Jetta is available in the US with a diesel engine and a manual transmission.

Back to the OP, I think you may have double counted some of the military spending -- it's part of discretionary spending, and it's the lion's share, I believe. So, when you cut discretionary spending, you were cutting military spending by a lot already, and more than you proposed later in your OP.

[RitterSport]

How is it not a Ponzi Scheme if the money is never reinvested but instead redistributed? And my point was that the numbers just don't work. Social Security is a bubble because it depends on a growing economy for solvency. We saw how well that has worked over the years.

The money is reinvested all the time. There has been a SS surplus for years now.

I think it really depends more on a growing population, not a growing economy, but I could be talked out of that. In any case, if you think that the US economy is going to stop growing, then there are many other problems we'll have to deal with.

[Buck Godot]

I personally would have preferred the bailout money to be applied to the national debt even though it would have been a drop in the bucket. For what it is worth, other than some sort of support to rebuilding a rail system I think any company stupid enough to fold should not be supported.


Yes I agree. Having the organizations that ruined the economy pay for their mistakes would be very satisfying. The problem was that at this point everything was tied so much together that if they failed they would pull down a lot of the economy with it, and then banks would start failing en mass, people would start making a run on them, and FDIC would have to bail them out, risking the solvency of the government, with the end result of an economy in depression-like tatters and the US government in even worse financial straights than it is now. A high price to pay for satisfaction. Given that most of the bail-out has been paid back with interest, I think we got a good deal for our money even if it does leave a bad taste.

[Ravenman]

How is it not a Ponzi Scheme if the money is never reinvested but instead redistributed? It is not a Ponzi scheme. It is essentially an income insurance program. It does not depend on a constantly growing customer base, because for generations, surpluses in the trust fund have been invested in the safest investments on earth. As surpluses end, those investments will be sold off. There is no fraud involved; anyone can learn exactly how the Social Security program works. The only people who are interested in calling it a Ponzi scheme are those who have a political ax to grind, and do not care to acknowledge the facts about why a benefit that is guaranteed by the Federal government is different from a criminal enterprise. But if you don't care about the factual difference because you'd rather just insult the most wildly successful government program in history (according to conservative columnist George Will), then I suppose it doesn't make any sense to try to explain the difference.

In any case, trying to pay off the national debt in 8 years is just a terrible idea.

It is fiscal bulimia nervosa: a psychological condition that would compel someone to try to remedy excess by taking extreme, short term measures that are far more harmful than the problem which is proposed to be addressed.

[BigT]

How is it not a Ponzi Scheme if the money is never reinvested but instead redistributed? And my point was that the numbers just don't work. Social Security is a bubble because it depends on a growing economy for solvency. We saw how well that has worked over the years.

A Ponzi scheme requires deception. All of the information about Social Security was known up front.

Plus, they are technically investing, since they buy bonds. All investments require the company they are investing in to turn a profit. It's just that the company in this case is the U.S. economy.

At least, that's my layman's understanding of the subject.

[Little Nemo]

The key to the national debt is that it represents money that's already been spent. Cutting spending now may reduce future debt but it won't eliminate past debt. The only way to eliminate the existing debt is to pay it off.

So let's keep it simple. We owe $14.25 trillion and we want to pay it off in eight years. That's $1.78 trillion a year. So increase government revenue by that amount.

Granted, that's a big amount but it's not impossible. Total federal revenue in 2011 is estimated at $2.17 trillion and there's still lots of untapped capital out there.

If you want a simple suggestion, just go back to the 1960's income tax rates. It's probably not the best idea but it would work, so that shows that the solution is possible.

[yorick73]

1. Divide monthly interest payment by 2
2. Pay this amount every two weeks instead of the entire amount once per month.
3. Watch debt melt away while saving BILLIONS over the years.

[Commissar]

Paying off the debt would be absurdly easy if the US was willing to make two simple and quite rational adjustments:

(1) “Defense” spending. This is clearly out of hand, yet few politicians are willing to take on this elephant in the room. Solution: withdraw all US troops to US territory and abandon all foreign bases. Make a commitment to non-interference in foreign affairs. Institute a hiring freeze for 5 years, and then keep it extremely limited, with the ultimate goal of bringing the number of troops down to 100,000 or less. Quit buying naval vessels, as they are all more or less obsolete. Focus on cheap defense-oriented missile technology. Consolidate domestic bases.

(2) Taxes. It’s time for the US to join the rest of the civilized world and realize that you cannot have a functioning capitalist nation without proper taxation. Raise income taxes, property taxes, etc. Introduce federal sales taxes and 50%+ estate taxes. Take oversight over incorporation away from the states and force corporations to pay significant annual fees for their charters.

Problem solved. Not only will you be able to pay off the national debt, you’ll also have enough to introduce nationalized health care and much more extensive social security spending.

[shiftless]

Why is it that the OP doesn't mention military spending I wonder?

If the goal of the OP is for the US to have the means to take over the rest of the world militarily, then I agree, the way to do that is: screw everybody who pays into SS, raise taxes, get rid of the non-military parts of the government. A nice military lead dictatorship might help us get to that lofty goal.

If the goal is to just balance the budget so the nation can prosper, that's easy: Cut military spending. That is where the fat is. A pearly white layer of pork fat so thick and rich you can spread it with a butter knife.

[Icarus]

Cut military spending. That is where the fat is. A pearly white layer of pork fat so thick and rich you can spread it with a butter knife.

OK, what do we do about all those people you just made unemployed? What about all those factories you just shut down? Now they are not paying income tax, and probably needing financial assistance.

[shiftless]

OK, what do we do about all those people you just made unemployed? What about all those factories you just shut down? Now they are not paying income tax, and probably needing financial assistance.

I've heard this one before. Creating jobs by paying people to be in the military doesn't magically make the budget balanced, otherwise we could just conscript everyone and live in Utopia. It is perfectly reasonable to question whether the work that these government employees do is necessary. The hard working people in our armed services would do just fine doing productive work right here in the good ol' USofA. Instead of blowing things up in Iraq they could build roads here at home, for example.

The question is, do we need a military as large (actually enormous) as what we have. I think we don't and I think the military doesn't just drain our budget, it drains our best, brightest and most industrious citizens to produce dubious value in other countries.

[foolsguinea]

Here's how I would do it. I'd find a few military personnel willing to follow me off a cliff, then I'd stage a coup, exterminate Congress, & set myself up as God-Emperor. Taxes would be raised to whatever point necessary to pay off the debt in--you said 8 years? OK, we'll go with that--and cover projects like my new public hospital system. The penalty for tax evasion would be death for the first few years, we might get it down to exile by the eighth.

Short of that? It's not going to happen. Once a nation-state has normalized constant deficit spending like the USA has, there's no will to stop, ever.

[foolsguinea]

Remember that money is power. If you're trying to make those who perform services to the state do it for less compensation in the name of the public good, rather than raise taxes, you're saying you want less power & less compensation for those who serve the public interest, & more for those who do not.

This is one reason I don't really support plans like, "Make them take of the poor pro bono instead of raising taxes for welfare." You can bloody well have the nation chip in for the public good.

[Wesley Clark]

If our health care were as efficient as what you find in europe you could easily pay off the debt. We spend about 18% of GDP on health care, so about 2.5 trillion of our 14 trillion economy. Other OECD nations spend 8-11%. If we had a system that cost 11% of GDP (high by OECD standards) and was 1.5 trillion instead, and invested that 1 trillion extra into paying off the debt then we'd be set and our standards of living wouldn't really decline (there would be lower revenue for health professionals though).

Long term health care is behind most of our debt problems. Short term the recession is the problem.

[Wesley Clark]

How is it not a Ponzi Scheme if the money is never reinvested but instead redistributed? And my point was that the numbers just don't work. Social Security is a bubble because it depends on a growing economy for solvency. We saw how well that has worked over the years.

It isn't really that insolvent. It is a 12.4% tax on the first 100k or so in income, and people pay it for about 40 years then collect for roughly 20 years in retirement.

So if you are paying 12.4% of your income for 40 years, then collecting 50% of your income for 20 years you need roughly 2 workers per retiree. Since there should theoretically be 2x more people age 20-65 than 65-85, it shouldn't be a problem.

My math is probably totally wrong. Either way, the tax rate has been raised when this issue came up in the past. They can do that again, I read raising the rate from 12.4% to about 15% would keep it solvent until the 22nd century. Raising the cap would likely do the same thing.

[Little Nemo]

Why is it that the OP doesn't mention military spending I wonder?He did. He called for a 10% reduction in defense spending.

[Smapti]

My third move: return to Federalism. Since the New Deal, the federal government has taken on more responsibility for stimulating the economy. Some are necessary and within Federal jurisdiction such as the Interstate System while some are necessary but outside of the Fed's constitutional domain such as community rebuilding. Some are completely unnessary pork. Hey, if your community of 12 needs a road to the main highway, build it with community, county or state funds and not $137million from the Feds. Basically, this would make the Federal government only pay for those things they are mandated to have an interest in by the Constitution in Article I, Section 8.


Of course, the courts have held time and time again that this kind of spending is in line with Article I Section 8, so everything following from this premise is flawed. Moreover, as the last few years have demonstrated, "let the states pay for it" doesn't eliminate the debt, it just shifts the burden from the federal government to the states that have to raise college tuitions and cut jobs to make up the difference.

[shiftless]

He did. He called for a 10% reduction in defense spending.

Right you are, my mistake. I just saw the "Homeland Security" part.

[spifflog]

Paying off the debt would be absurdly easy if the US was willing to make two simple and quite rational adjustments:

(1) “Defense” spending. This is clearly out of hand, yet few politicians are willing to take on this elephant in the room. . . .with the ultimate goal of bringing the number of troops down to 100,000 or less.


Just so I'm clear, you think it's a good idea to eliminate the U. S. Navy and trim the military by 95%?

[Der Trihs]

Cut military spending. That is where the fat is. A pearly white layer of pork fat so thick and rich you can spread it with a butter knife.

OK, what do we do about all those people you just made unemployed? What about all those factories you just shut down? Now they are not paying income tax, and probably needing financial assistance.If that's your argument, just put them all on some kind of welfare. After all, if they are only being employed by the military to prop up the economy, then they already are on welfare; just a very expensive and inefficient version of it that get people killed.

[Mosier]

If that's your argument, just put them all on some kind of welfare. After all, if they are only being employed by the military to prop up the economy, then they already are on welfare; just a very expensive and inefficient version of it that get people killed.

Excessive military spending is an expensive and inefficient version of welfare. I couldn't agree more. I hate making "+1" posts, but that statement deserved quoting.

[Little Nemo]

Just so I'm clear, you think it's a good idea to eliminate the U. S. Navy and trim the military by 95%?Yes, he really does.

[Ravenman]

I think he would view it as reducing capitalist imperialism by 95%.

But seriously, this whole idea of eliminiating the debt in 8 years is as absurd as asking what needs to be done to pay off your 30 year mortgage in 18 months. One might be able to do it if one got a much higher paying job, but that would also mean eliminating food from one's household budget.

Any budget that dramatically increases taxation and dramatically decreases spending is going to have HUGE effects on the economy, which would be far, far, FAR worse than the disease of having a large debt. The economic effects of huge cuts in Social Security, health care, education, roads, science and technology, and so on would not only produce an immediate recession, it would have ripple effects for decades.

Let's keep in mind that our debt now is somewhere in the ballpark of 90% of our GDP. In the roaring 90s, the debt was somewhere around 60% of GDP -- and it wasn't a problem. There is no reason to take such drastic measures to eliminate the debt all at once, when all we really need is a long term plan to bring the debt down to more reasonable levels.

Again, it's like a diet: you don't need to go on a crash diet of 500 calories a day if you weigh 300 pounds. Make a plan to lose one or two pounds a week that you can sustain for the long term, and shoot for weighing 190 pounds -- not foolishly trying to get to 105 in the next three months, and ending up in the ICU.

[Damuri Ajashi]

OK, what do we do about all those people you just made unemployed? What about all those factories you just shut down? Now they are not paying income tax, and probably needing financial assistance.

Any money spent on waste is a waste. As much as I despise the Grover Norquist crowd and their flawed and deceptive arguments, money really is better off left in the hands of taxpayers than spent on waste in a normal economy.

We don't have to get rid of the debt and it would hurt the financial markets to lose the only risk free investment in the world.

What we have to do is get it under control. We can do that by raising (and reforming) taxes, cutting defense and reforming medicare. That is literally all we have to do to get ourselves on track to a balanced budget and eventually with the passage of time the 14 trillion dollar debt will look paltry compared to the size of our economy.

[Blaster Master]

My biggest issue is that there's no direct tie between spending and revenue and attempting to pay off the debt without addressing this, while potentially possible, is putting the horse before the cart. So, I really think a balanced budget amendment is more or less a requirement.

Here's how I'd do it. Ideally, I'd eliminate the current tax code, going to something much simpler that can be relatively easily modeled (specific type of taxation isn't relevant, but both sales taxes and income taxes would work fine). Every bill that would cost money would then be required to determine the cost associated with it and how to adjust it up or down. So, for instance, it would say that this bill would add some amount of money, and there would be a formula used to convert it to adjust the tax rate. Thus, the spending will always roughly equal the revenue, and every time there's a deficit it's added to the next year's budget, and when there's a surplus it's subtracted from the next year's, and if it repeatedly comes up on one side or the other, that formula is adjusted.

After that is done, obviously, there's need to be a complete review of the costs of all existing programs, but once it's done, we'd have now completely eliminated any running deficit and we can directly see the impact of a bill and, we also would be unable increase spending without increasing taxes, or similarly, we would also be unable to cut taxes without cutting spending.

From there, eliminating the debt is trivial. We can see a set of plans like say 10, 20, 50 year pay-offs and see exactly how they will effect taxation and then the people can decide just how badly we want to pay it off.


That all said, I do agree with a lot of the proposed cuts, particularly defense spending, even as a defense contractor myself. I'm also in favor of cuts to Social Security, if not outright elimination, but in a way that doesn't affect people who are dependent on it. The problem is, that because it's paid by people who are currently in the system, someone is going to get hurt by it and it's irresponsible to keep shrugging that burden onto later generations; we should bite the bullet, give people who have paid into it benefits equal to what they've paid in, and everyone thereafter should be out of it, and the taxations for it end when the benefits end.

But, seriously, the biggest problem seems to be that whenever they make "budget cuts" they cut relatively small items, but leave the big ones untouched. We simply cannot get a balanced budget without cuts to major items.

[Little Nemo]

Any money spent on waste is a waste. As much as I despise the Grover Norquist crowd and their flawed and deceptive arguments, money really is better off left in the hands of taxpayers than spent on waste in a normal economy.The problem is that you can search the entire federal budget and you'll never see any item that authorizes funding for waste.

Nobody sets out to waste money or any other resource. It's just an inevitable by-product of trying to do anything. Try too hard to stop waste and you end up hurting productivity. (One telling anecdote is the WWI generals who forbid pilots to wear parachutes. The theory was that if they had the option of jumping out of a damaged plane, they might abandon a plane that could have made it back to the base.)

[Voyager]

How is it not a Ponzi Scheme if the money is never reinvested but instead redistributed? And my point was that the numbers just don't work. Social Security is a bubble because it depends on a growing economy for solvency. We saw how well that has worked over the years.

The surplus is reinvested, and the actuarial assumptions are well defined. As for growing economy, please check out a chart of the GNP over time. Except for a few recessionary hiccups, our economy has indeed grown for the past 200 years and more.
Not to mention that, unlike any actual Ponzi scheme, everything about Social Security is public and can be examined by anyone who wants to.
See the million other threads about how SS is not a Ponzi scheme for more details.

[Voyager]

I think it really depends more on a growing population, not a growing economy, but I could be talked out of that. In any case, if you think that the US economy is going to stop growing, then there are many other problems we'll have to deal with.

It's both, actually. If the population stopped growing, there would be fewer to pay in. If the economy stopped growing, those working would be making less and thus paying less, and there would be fewer people working, making the situation worse. The current deficit comes from the economy, not from population. I believe the forecasts use both as input variables.

[Voyager]

If that's your argument, just put them all on some kind of welfare. After all, if they are only being employed by the military to prop up the economy, then they already are on welfare; just a very expensive and inefficient version of it that get people killed.

You forgot the spending on things that blow up. Odd how people object to making window glass to break, but find that building $100K bombs to blow up is cool.

Actually, military spending enables things like free trade, and so some fairly high level is cost effective. But it could be a lot more efficient.

[Voyager]

The problem is that you can search the entire federal budget and you'll never see any item that authorizes funding for waste.

Nobody sets out to waste money or any other resource. It's just an inevitable by-product of trying to do anything. Try too hard to stop waste and you end up hurting productivity. (One telling anecdote is the WWI generals who forbid pilots to wear parachutes. The theory was that if they had the option of jumping out of a damaged plane, they might abandon a plane that could have made it back to the base.)
Some of the waste is a natural side effect of civilian oversight of the military, such as having parts of each system manufactured in as many congressional districts as possible. A friend of ours, who worked on helicopters, noted that the bloat of the system came from the contractors adding features to satisfy all kinds of overseers.