Our debt to GDP ratio is now finally over 100% a level only seen when we had enormous spending in WWII.

This is a doomesday catastrophic scenario for America.  Taxes are up, but government is more up as departments keep growing and growing with no cutting in sight.

For now, the FED simply keeps interest rates low. But this is decimating pension plans. It’s also ruining the middle class who cannot save money without it getting eroded by inflation (which is 7-10% not 1% according to shadowstats.com).

To solve this will require a multi part plan.

  1. Make a standing order that each budget will reduce total spending by 5% from the prior year until we have a surplus.
  2. Change budgeting by congress to be done by PERCENTAGE and let the GAO calculate how much money there is to spend.  This has to be done after entitlement and welfare payments are made.
  3. Adopt new payout schemes for welfare and disability, if you have never earned much you shouldnt’ get much, say 40% of standard payout. If you’ve worked hard for 30 years and get disabled you should get 100% of payments. There should be no disability for children and no additional payments or preferences if you have children.
  4. Social Security should be set up and run as a real investment fund, but right now its a net zero or negative balance. This needs to be shored up with another additional 2% payin rate.  It also needs to be means tested.
  5. To pay off the debt, the USA should begin issuing 500 billion of debt free currency each year to “monetize” the debt directly.  The game we play issuing bonds, distributing them to investment houses, then buying them is a joke. It’s just a shell game to confuse the country.  This paydown schema should only happen if we have achieved the 5% cost reduction in spending.
  6. We have to shift from a warfare based economy to an innovation economy which means we need much more of the budget to shift from spending for university research to instead fund small startup companies and entrepreneurs. A program of grants of 200-500k should be set up for new companies where total assets of owners is less than 300k. In other words, striving new Americans trying to make it. Instead we spend 200 million to study why lesbians are fat, if turkeys run faster wearing tennis shoes, and if grapefruits can get angry. sigh.

The debt is no joke. As long as we want endless warfare and endless welfare we cannot survive as a nation. Both the single mother faction must be reduced (no payments or additional advantage for children. A single mother seeking welfare only gets as much as a single man with no children).  These are not easy concepts to grasp by most people. We also need to re-focus the military on nimble new technology, more emphasis on tools for urban fighting and taking out embedded forces, and less emphasis on trillion dollar aircraft carriers which are now obsolete.  They look good, but can be taken out in the first five minutes of fighting with modern weapons.

We currently have 20.5 Trillion in debt, which is over 105% of GDP which is 19.3 Trillion. The yearly overspending sits at 677 Billion dollars per year.  So let’s look at how our 5% spending reduction per year would work to change that. This would be a one time four year plan.

Year One: Spending reduced  from 4T to 3.8 T   Deficit remains at 477 billion

Year Two: Spending reduced to 3.6 T   Deficit remains at 277 Billion

Year Three: Spending reduced to 3.42 T  Deficit reduced to 97 Billion

Assuming increases in revenues and standard growth, the additional revenues SHOULD by the fourth year reset the debt to ZERO.

To accomplish this, a large percentage of the cuts need to come from the FBI, CIA, NSA, and Pentagon budgets but as much as 25% across the board. Because entitlements, medicare/caid, etc cannot be touched.  This is going to be a painful adjustment but these are hugely bloated inefficient and redundent agencies. It’s time to pair them back especially with the horrible spying on americans and other nefarious activities. The question is politically will they accept it?

One solution to this is to add the welfare reforms such as to reduce payouts to those who have never or minimally paid in by as much as 50%. Another area that could be reduced is to make the federal pension system less generous and self funding.  This would reduce the cuts to a more manageable 15% over 4 years. Very doable but not something people would be happy with.

That would leave us in good shape, with a slight surplus, government more correctly sized to our revenues. And then additional revenue sources can kick in such as:

1) A general 10% security fee on all imports. On 2.2 T in imports that would be 200 Billion in revenue

2) A small fee on all financial transactions would being in another 200B. We have 14 T in transactions PER DAY! This can be a very very minute fee and as a bonus it would make high frequency market manipulation harder to do.

 

These two programs would bring us into a solid surplus which we will need for emergencies and to fund social security among other programs.

Stage Two would be the gradual paydown of the existing 20T debt.  The government issuing 500B in directly issued currency from the US Treasury would reduce it to zero in forty years. While that is quite slow, investors and bond holders seeing there is now a trend for financial solvency would have a dramatic effect on the financial solidity of our nations finances.

One question one must ask is, if not this plan, then what is YOUR plan? To spend until everything dies and the dollar collapses under the weight of interest payments? And the fiscal worry of national collapse is a major security risk to the nation. If interest rates rise back to 6% which is closer to the historical norm, our debt payments would increase to over 50% of revenue, and begin a snowball effect where fixing it would be impossible. We must avoid that fate at all costs.