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How to Solve the Deficit and Debt Problems in One Easy Lesson
In 1980, our total national debt, accumulated by ALL "tax and spend"
Democrats and ALL "borrow and squander" Republicans in 200 years,
stood at something like $ 0.7 Trillion. Today, only a dozen years
later, total debt stands at more than $ 4 Trillion and it is
increasing at the rate of another $ Trillion every three years or so.
Even if President Clinton achieves what he is trying to do, the debt
will climb to $ 5 to 6 Trillion before the deficit is eliminated. And
there is another Trillion, hidden in our shift from biggest creditor
to biggest debtor. And there may be yet another Trillion, if the
rumored commercial bank and insurance scandals materialize. What a
nightmare!
There is no way to give an analogy to our situation in the realm of
personal finance, but let's try anyway. Suppose that your salary is $
60,000 and you live in a $ 200,000 house, on which you owe $ 10,500.
One fine day, you find that your pay has been cut to $ 50,000. So, to
cheer yourself up, you double what you have been spending on your
favorite hobby, to $ 1,000 per month, and you start making monthly
trips to the bank to increase your mortgage by $ 1,000 --- to keep the
bill collectors at bay. After some years, your salary is only
$ 48,000, but you now owe $ 60,000 and you are still going to the bank
every month to borrow another $ 1,000. You haven't been able to
maintain your house properly, so it is now worth only $ 120,000. Your
banker is getting nervous and thinking of foreclosing. What are your
options? Wouldn't it be absurd to speak of ``solving" this problem by
trying to stop borrowing $1,000 more every month, within 4 or 5 years?
Realistically, your only options are to declare bankruptcy or sell the
house.
What happened to all the Trillions, that Reagan and Bush borrowed and
squandered? This money still exists in the form of T-Notes. Guys like
you and me now owe it and those who have the T-Notes now own it. Thus,
the practical result of Reagan-Bush economic policy was to effect the
by-far greatest transfer of wealth in history. This is what Reagan set
out to do, according to his first Budget Director Robert Stockman, but
he also hoped that the resulting debt would end social programs
forever. Nice fellow. Great Good Fortune was supposed to "trickle
down" to you and me, but it didn't.
The experiment failed, so why don't we just undo it? The deficit is
just the amount by which taxes were reduced in 1981 and 1986, so that
can be fixed by just restoring 1980 tax schedule. The debt can also be
fixed, by just transferring the $ 3 or 4 Trillion, from those who
received it back to those from whom it was taken (stolen??). All we
have to do is cancel the T-Notes.
"You can't do that," everybody will scream, "T-Notes are a contractual
obligation that cannot be abrogated". Well, our Social Security
Pensions are also a contractual obligation that cannot be abrogated.
But that hasn't stopped politicians from calling them "entitlements"
and "putting them on the table". And these same politicians speak of
"fairly shared sacrifice". Cancelling the T-Notes IS fairly shared
sacrifice: T-Notes also figure in the pension funds of ordinary
people.