Pay off the national debt in 8 years.

Great Debates
1

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 arethe numbers 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?

2

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

3

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.

4

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!"

5

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.

6

Raise taxes.

Get our troops out of Afghanistan and Iraq.

Close overseas tax loopholes.

Ought make for a good start

7

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 =( ]

8

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.

9

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.

10

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.

11

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.

12

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.

13

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.

14

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.

15
  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.
16

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.

17

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.

18

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.

19

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.

20

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.