+ The Issue: Government Debt Is Out Of Control +
This is not a controversial statement. Everyone knows it. Everyone is talking about it. But nobody seems to be able to do anything about it.
We have annual deficits that exceed a trillion dollars and our national debt is over $15 trillion. When you add in unfunded liabilities, the number is in the $100 trillion range. And as our deficits and debt are scheduled to increase, there is no end in sight.
We are on the same path that Greece and Italy have already gone down. Unless we make drastic changes, we will end up with some combination of unbearable taxes, hyperinflation, austerity measures, et al.
This level of debt is absurd, it is unsustainable, and it is evil. It’s what is called “generational theft” because our debt won’t be paid back by the generation doing the borrowing. It’s one thing to steal from the current generation with direct taxation; at least we are around to try and defend ourselves. But it’s another thing altogether to spend the future earnings of the next generation. We are parasites waiting for our hosts to be born.
Looking at the unimaginable numbers of our federal balance sheet, one thing is clear; our government officials can’t be trusted to live within their means. If they can’t convince us to pay more in taxes for their pet projects, from entitlement programs to wars, they just borrow. They will spend every nickel they are allowed to, and then some.
Therefore, the authority to borrow must be taken away from our government. A balanced budget amendment would accomplish this, but attempts at passing such an amendment have come and gone. Why? There are two main reasons.
First, the public has had a poor understanding of government debt. This is fairly complicated stuff, and it gets especially confusing when numbers reach the current levels. It has also been a slow moving, multi-generational crisis, so one could go a lifetime without being confronted with the issue or having the time to figure it out.
Second, a balanced budget amendment lacks a truly inspiring goal. It would be a great achievement, but it would only be a step in the right direction. Once passed, could we then trust the government to start paying off the debt? As if. Would levels of spending decrease? Pshaw. Would taxes go down? It is to laugh.
The first reason is already being addressed. The political awakening over the last few years shows that individuals are beginning to understand this issue, and that they are taking it seriously. Our government failed to hold itself to the debt ceiling limit, and now the super committee has failed, but at least the debt is being discussed. And with the case studies of Greece and Italy, it is now too hard to ignore.
The time is ripe, but we need that inspiring goal. We need an idea so obvious that everyone can get behind. We need a Surplus Budget Amendment.
+ The Plan: A Surplus Budget Amendment +
Taxing is theft, but at least it’s somewhat honest theft. Borrowing is dishonest theft. Our politicians borrow because they can’t tax enough, but they borrow without any plans (or intentions, even) of paying it back. Instead, they count on future politicians, future generations, and a big helping of inflation to pay it off for them.
With this in mind, let’s look more deeply at the Surplus Budget Amendment (SBA), which was conceived to achieve four main goals. These are:
1. End Government Borrowing
The SBA will put an end to the practice of borrowing immediately. No longer will politicians be able to pass the buck and ignore our debt problem. All spending will be put under a magnifying glass and America will have to make difficult decisions on what they are willing to pay for.
But it’s not enough to maintain our level of debt. We can’t just plan on breaking even perpetually; we have to pay down the debt. So rather than simply balancing the budget, the SBA will set a ceiling on the percent of revenue the federal government can spend each year.
2. Pay Off the Debt
Here is some simplified, back-of-the-envelope math to explain. Revenue for the 2012 budget is estimated at $2.627 trillion. If the government were limited to only spending 75% of this revenue, or $1.970 trillion, and was required to keep 25%, there would be a $0.657 trillion surplus. Assuming revenues stayed constant, and using the $15 trillion number for our debt, it would take about 23 years to pay off the national debt.
At this point, government debt would be under control. We could transition from requiring a yearly surplus, to simply balancing the budget. With the problem solved, we could all live happily ever after, right? Well sit tight because the SBA has an even loftier goals.
3. Create a National Endowment
Most political discussions are about what we should do with tax payers’ money after it’s been taken from them. Instead we should be discussing whether our government has the right to take this money in the first place. The main issue isn’t our level of debt. The real issue is taxes qua taxes.
So rather than resting on our laurels, we’ll continue requiring a yearly surplus. Let’s look at some more back-of-the-envelope math. We’ll continue estimating a steady revenue of $2.627 trillion. There will still be a $0.657 trillion surplus each year, but instead of using it to pay off the debt, it will go into a national endowment fund, which will be an interest bearing account. If we assume a 5% interest rate, our magic number is 29 years, after which our national endowment will have reached about $41 trillion. Remember that our example has the government running on $1.97 trillion each year. 5% of the $41 trillion endowment is a little over $2 trillion. This brings us to the final goal of the Surplus Budget Amendment.
4. End Taxation
If you’ve been following our example you can see that after 52 years our government could be self-sustaining. Interest on the national endowment could fund all government operations and federal taxation could end. The 16th Amendment could be repealed, corporate taxes would end, and fittingly, the death tax would die.
And a tax revolution like this wouldn’t stop at the federal level. Many states and local governments would follow along, implementing similar plans. We could see the end of taxation altogether, leaving the only thing certain as death. An inspiring goal, no?
Of course our example is simple, and intentionally so. There are many excluded variables, some of which would hasten progress, and others that would slow it down. Yes, our current debt is already accruing it’s own interest that will need to be paid off. Yes, unfunded liabilities aren’t included. Yes, revenues and interest rates will fluctuate. Yes, the size and scope of government will fluctuate in the future. And yes, our government owns many assets that could be sold off. But the idea is functionally sound regardless of these variables.
And because the idea is so simple and easy to understand, politicians will be terribly confused by it. That’s why we need your help.
+ Your Help +
We need your help to spread the word about the Surplus Budget Amendment, so please:
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- Call, email, and write your senators and congressmen. Tell them that you demand their support for the Surplus Budget Amendment.
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