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National Debt
Issue
The national debt in America is over $30 trillion and continues to grow with future generations being expected to deal with the problem.
It is not only irresponsible for officials to spend that much without accountability, it is also unrealistic to expect the future to pay for it. The U.N. General Assembly should classify the passing of debt obligations to a future generation as a violation of human rights since people of the future don't have any say on whether they agree to pay for it.
The U.S. Debt Clock shows that the amount of debt expected to be paid by every taxpayer in America is nearly $265,000, though that amount increases every day. Not everyone has that much in savings to pay the government. Especially when considering that with a 50-year repayment period, taxpayers would have to pay $5,300 every year in addition to their taxes. This would result in a 50-year economic contraction for America.
As if that wasn't bad enough, the banking system doesn't have any safety measures in place to prevent a catastrophe if the $34 trillion is redeemed all at once (as if under a panic).
To prevent this, it should be required that bond redemption is dependent on fiscal policy to establish an annual surplus the prior year in order to fund redemption for the following year. That way, the banking system would be protected against default if a large number of bonds are redeemed all at once. Also, annual surpluses over the years would have prevented the national debt from growing to its current size.
Currently, there are no such safeguards in place protecting our banking system, which is surprising and indicates bad design.
Solution
The first issue that needs to be addressed is the prevention of the further accumulation of debt, or the problem will never be resolved. The simplest manner of achieving this is for the government to no longer offer bonds so that the national debt remains frozen at present levels.
Once the nation stops accumulating debt then several options need to be considered in order to resolve the problem. The most obvious would be to have taxpayers bear the full brunt of repaying the debt themselves. As mentioned above, the $265,000 taxpayer obligation if paid in 50 years would result in an annual payment of $5,300. Which is steep and unrealistic not to mention that it would result in an extended period of economic depression for the country.
Another option would be to split the debt between three parties to ease the burden for each: (1) businesses who benefited the most from excessive government spending should pay their portion, (2) taxpayers who have also benefited over the years should pay their portion, and (3) bondholders, who by purchasing bonds, should take responsibility for causing the debt to reach such excessive levels (since by buying bonds, bondholders are just as responsible as government officials for the massive national debt).
Splitting the national debt three ways results in $11.3 trillion per party. Businesses and taxpayers would pay their share with future taxes over a period of years. Bondholders will take a corresponding loss in their investments such as only being able to claim a portion of their original principal, or not collect interest as their portion of responsibility. Overall, the advantage of splitting the debt three ways is that taxpayers would only be responsible for 1/3rd of the total amount, which comes out to a more affordable and realistic $1,766 per year (than $5,300).
Another option that may be explored is that approximately 30% of debt is foreign-owned (government) who may be able to wait longer than 50 years to be reimbursed. That means that a sizeable portion of the repayment effort could be delayed in order to ease the burden. Combined with the above approach of splitting the debt three ways, the amount is further reduced to just $1,236 per year for taxpayers.
Another option is to have businesses pay the entire amount with taxpayers and bondholders having zero liability. The justification for this is that since businesses have benefited the most from government spending over the years, they should be the principal party to repay the debt.
According to the U.S. Census Bureau, there are approximately 20,000 large-sized companies (500+ employees), which could be assigned the responsibility of repaying $25 trillion of the debt over a 50-year period (approx. $25 million per year). Medium-sized companies (100-499 employees) that number 93,000 could be assigned $8 trillion of debt (approx. $1.7 million per year). Smaller-sized companies (<100 employees) that number over 6 million could be responsible for the remaining $1 trillion (approx. $3,300 per year). Or, some other allocation of repayment may be determined for each group.
So, there may be a number of ways to ease the burden of repaying the national debt. However, if there is no public interest to repay the debt, the final option to consider is to declare the national debt as a violation of human rights. In that, the past attempted to bestow a financial burden upon future generations without their consent. If so, then such debt obligations become null and void in value and would not have to be repaid at all.
In this case, bondholders would assume a total loss on their investment with no party being held responsible for repayment. Bondholders may complain about this option, but investing in government bonds is not a 100% guarantee to get their money back, so there is risk associated with such an investment (due diligence).
This is especially true when considering the immorality of their expectations and of past officials making future generations pay for such obligations without their consent, which is a clear violation of human rights. So, a bondholder's "unspoken arrangement" for future generations to repay such obligations may be legally terminated at any time, and for any reason, based upon this justification. If repayment is decided by the nation then it will be a courtesy, not an obligation.
If I were President and was given the task of handling the massive debt problem, these would be the options that I would present to the nation:
Option A: (individual taxpayers pay 100%)
$5,300/yr for 50 years
Option B: (businesses/excise/customs duties pay 100%)
$500 billion/yr for 68 years
Option C: (combined approach with 3-way split and delayed foreign-owned as noted above)
$1,236 [individuals] + $159 billion [businesses] for 50+ years
Option D: (no reimbursement, 0% liability due to violating human rights)
100% loss for bondholders
[$2 trillion payment will be necessary to clear bank deposits from gov't. bonds]
Option E: (debt resolved entirely through spending cuts, taxes remain at present levels)
$4 trillion annual surplus for 8.5 years
$400 billion-sized gov't. until debt-free then taxes drop to 5% skeleton rate
Even though Option E may be the fastest to become debt-free, doing so will require individuals to pay a great deal more than some of the other options. The reason is that revenue from corporate, excise, and customs duties if raised will be around $500 billion. In 8.5 yrs, that is only $4.25 trillion in which individuals would have to pay the rest ($30 trillion).
On the other hand, if voters decide upon Option B (businesses), individuals would pay $0 despite it taking
68 years to become debt-free. Some will say that waiting nearly 70 years before they may redeem their bonds will take too long, however this may not be the case if the repayment effort is prioritized properly.
For example, without including additional spending cuts or other measures, a sample breakdown may be as follows (with the first decade or so being people-oriented):
Years 1-4 : pay off depository institutions ($1.81 trillion) to access our bank accounts
Years 5 : pay off U.S. saving bonds ($160 billion) + insurance annuities ($368 billion)
Years 6-7 : pay off pension funds ($1.15 trillion)
Years 8-13 : pay off mutual funds ($2.84 trillion)
Years 14-16 : pay off state and local gov’t. ($1.55 trillion)
Years 17-41 : pay off federal and gov’t. accounts ($12.26 trillion)
Years 42-56 : pay off foreign ($7.43 trillion)
Years 57-68 : pay off other ($6.43 trillion)
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