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Solving America’s Debt Crisis by the Numbers

by John Brian Shannon | February 28, 2016

The biggest risk to America these days is high government debt and containing and reducing the national debt should be Priority #1 for the next U.S. administration.

It’s stunningly simple to solve this problem; What we need is bi-partisan backing of politicians to pass such legislation. And strong support from voters.

How to solve high government debt 101:

1. Decrease government spending
2. Increase government revenue


Decrease Government Spending

1a) We can reduce government spending by legislating a maximum deficit of 4%-of-GDP in any given year.

That way, we aren’t into a cycle of higher taxes in order to fund ever-increasing programme spending.

1b) Legislate that each federal government department cut their budget by 5% and freeze their spending at that level for the next five years.

We all know that every organization on the planet, including government, has at least 5% ‘fat’ built into their system. It won’t be half as traumatic as it sounds.

(Now, if some government departments can raise additional revenue to replace that 5% cut, that’s a good thing. Maybe NASA could allow their logo to be used and collect the royalties on a GAP clothing line, for example)

1c) Lower healthcare, agricultural and infrastructure maintenance costs by $500 billion per year by legislating the end to coal-fired power generation.

Harvard Medicine has calculated that burning coal in the U.S. costs taxpayers a minimum of $500 billion per year. — Harvard Medicine


Increase Government Revenue

2a) Raise government revenue via the use of a Goods and Services Tax of 7% (a federal tax on retail items) as Canada and other nations have done.

Yes, the federal government would share the tax 50/50 with the states, which nicely covers the collection cost of those taxes by the states and remitting the federal portion of the revenue to the feds.

Not only will the federal government raise significant revenue via this method, it would be a simple case of writing the legislation — while the individual states do all the collection work and remittances to the federal government.

Bonus: All 50 states will love the federal government as they collect significant additional revenue via the federal GST. States with an existing sales tax might choose to harmonize their tax with the federal tax to avoid duplication — or not. Their choice.

Another positive point; The GST tax rate can be adjusted on an annual basis depending upon the then-prevailing economic conditions.

Finally, in countries with an existing GST program, those who live under the poverty line receive a GST refund after they file their income taxes. So it is never a tax on the poor. The U.S. would be well advised to adopt similar policy.

2b) The United States — while keeping NAFTA, (TPP assuming it passes) and other trade agreements, should begin charging a 5% simple tariff on every imported and exported item, with no exceptions.

All countries need revenue to fund their operations — and a simple and small tariff can add billions of dollars of tax revenue per year.

Eliminate Annual Deficits / Operate in Annual Surplus Mode Indefinitely

Every year (with otherwise prudent economic policies) there will never be an excuse for the feds or the states to run deficits and instead, governments will always show a surplus.

THAT YEARLY SURPLUS is the amount that (by legislation) will paydown the federal debt.

In less than 25 years, the federal government would become 100% debt free

NOTE: 10% of each yearly surplus could (optionally) be used by the federal government for discretionary spending as authorized by the President.

Such as; Upgrading all federal buildings to 100% energy self-sufficiency (a microgrid) which is useful during blackouts, but mainly serves to save millions of dollars in annual electricity costs, compared to purchasing electricity from the grid. It is worthwhile to note here that many office towers cost more than $1 million dollars per month to heat and light.

During Hurricane Sandy for example, certain government buildings were completely immune to electricity interruptions due to their on-site microgrid (solar panels on the roof with natural gas-fired generators for nighttime power) and the upgrade itself is a jobs creator.

SUMMARY:

  1. No federal or state government debt within 25 years
  2. Additional revenue stream for the feds and the states
  3. Eventual elimination of all non-GST taxes — while not punishing the poor
  4. After the U.S. debt reaches zero dollars and zero cents, the complete elimination of income tax

It’s the fastest and easiest way to permanent prosperity for American states and for the U.S. federal government.


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President Ike Eisenhower

President Ike Eisenhower was the last Republican president to balance the federal budget. He refused to lower taxes. He paid down the national debt. He spent money to create jobs. Eisenhower’s Interstate Highway System (begun and completed on-time and on-budget during his first term) returned more than $6 in economic activity for each $1 it cost. He did not lower taxes, cut spending, kill jobs, or increase the national debt. President Eisenhower was America’s last fiscal conservative!



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