top of page
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.
Not only is it irresponsible for officials to spend that much without accountability, but 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 or not.
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 their portion to the government. Especially when considering a 50-year repayment period of where every taxpayer would have to pay $5,300 each 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 in order to prevent a catastrophe if all $34 trillion are redeemed at once. Ideally, bond redemption should be dependent upon the government’s fiscal policy to establish an annual surplus in order to limit redemption for the following year. That way, the banking system is protected against default if a multitude of bonds are redeemed all at once. Also, annual surpluses over the years would have prevented the national debt to grow 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.
Another option would be to split the debt between three parties to ease the burden: (1) businesses who benefited the most from excessive government spending should pay their portion, (2) taxpayers who likewise have benefited over the years should pay their portion, and (3) bond holders who by purchasing bonds should take the same degree of responsibility as legislators for causing the debt to reach such excessive levels for the nation.
Splitting the national debt three ways results in $11.3 trillion per party. Businesses and taxpayers may pay their respective share with future taxes over a period of 50 years. Bond holders will take a corresponding loss in their investments such as only being able to claim a portion of their original principal amount, or perhaps, not be paid 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 even further. By cutting the debt by 30% for the initial 50-year period, the repayment effort would be reduced to $3,710 annually for taxpayers. Combined with the above approach of splitting the debt three ways, that amount is further reduced to just $1,236 per year for taxpayers.
Another option to consider is to have businesses pay the entire amount with taxpayers and bondholders having zero liability. The justification for this is that businesses may have benefited the most from government spending over the years, so they should be the principle party responsible for repaying 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 the 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.
However, if there is no public interest in being responsible for repaying the debt at all, the final option to consider is to declare that the national debt problem 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 wouldn't have to be repaid at all.
In this case, bond holders would assume a total loss on their investment with no party being held responsible for repayment. Bond holders may complain about this option, but investing in government bonds is not a 100% guarantee to get the 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 to 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 to handle the massive debt problem, these would be the options that I would present to become debt-free:
Option A: (individual taxpayers pay 100%)
$5,300/yr for 50 years
Option B: (businesses/excise/custom duties pay 100%)
$500 billion 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 bond holders
[$2 trillion payment will be necessary to clear bank deposits from gov't. bonds]
Option E: (debt resolved 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 become popular because it is the fastest to be 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 custom duties if raised will be around $500 billion. In 8.5 yrs, that is only $4.25 trillion out of the $34 trillion total, in which individuals would have to pay the rest.
On the other hand, if voters decide upon Option B (businesses), individuals would pay $0 despite it taking
68 years to become debt-free. Without including additional spending cuts or other measures to reduce the timeframe, a sample breakdown may be as follows:
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 annuties ($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)
bottom of page