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Six Easy Steps to Reducing $1 Trillion of National Debt

William L. Kovacs

February 2022

Six Easy Steps to Reducing $1 Trillion of National Debt

Americans are obsessed with weight loss but generally, they are getting heavier each year. The same is true for an obese federal budget. Congress pontificates about reducing our massive national debt of $30 trillion but each year it gets bigger. Books don’t help one lose weight, only by reducing food intake can weight be lost. The same is true for budgets. Bloviating against the national debt on cable TV will not reduce debt. Only by cutting programs and reducing laws can the nation reduce the national debt.

In 2021 our federal government spent $ 6.82 trillion in a $ 22.4 trillion economy. Simply, 30% of all economic activity in the U.S. is federal spending.  Another $3.3 trillion was spent by state and local governments. Forty-five percent of our entire economy is government spending. The Government Accountability Office (“GAO”) informed Congress the growth of the national debt is unsustainable and a risk to our future. It’s now time to stop spending and start reducing the nation’s debt to ensure a sustainable nation for our children.

Allapattah Six easy steps to taking $ 1 trillion annually off the federal spending scale

  1. longly Do not fund laws that have not been authorized. The easiest set of budget cuts would be to refrain from funding laws that Congress has not authorized. “In FY 2021 appropriations, the Congressional Budget Office identified 1,068 authorizations of appropriations, stemming from 274 laws, tolling $432 billion, that expired before the beginning of the fiscal year 2022.” Since House Rules prohibit such appropriations, it should be an easy savings of almost one-half trillion dollars.
  2. buy modafinil in spain Review and vote on every expenditure of the Judgment Fund. The Judgment Fund is the mother of all slush funds. It is a permanent, indefinite, and unlimited congressional appropriation continuously available to pay money judgments entered against the United States and settlements of cases in or likely to be in litigation with the United States. As an indefinite appropriation, it is so secret that Congress no longer even debates what the amounts are for. The amounts are appropriated, no matter what the amount. The Department of the Treasury just pays the claims upon the receipt of paperwork. This is the fund that President Obama used to deliver $1.7 billion in cash, to Iran as a bribe to sign the Iran nuclear deal. Why should our government officials have billions in a secret fund to cover up illegal activity? Having Congress approve each judgment and settlement as it did before 1956, the U.S. could save taxpayers tens of billions of dollars by rejecting settlements the executive branch makes with its friends.
  3. Enact a fair, simple, tax code that focuses on raising money not legislating behavior. Another easy way to reduce the deficit is to get rid of the 8-million-word tax code and replace it with the 1913- four-page Form 1040. Few deductions and low rates, but everyone pays something, including the wealthiest. The benefit of this simple approach is it captures a greater amount of tax owed by closing the Tax Gap.  The IRS defines the tax gap as the difference between true taxes owed for a given tax year and the amount that is paid. The gap is caused by the under-reporting of income, non-filing, and tax evasion. While the exact amount is unknown, the IRS estimates it to range from $574 to $700 billion, annually. A complex tax code invites under-reporting and manipulation, whereas failing to pay taxes in a simple system, could easily place one in a position of defending a fraud or tax evasion charge.
  4. Follow and implement GAO’s Generally Accepted Accounting Principles (“GAAP”). Congress mandates GAO to perform a GAAP analysis of federal spending and assets and provide recommendations to ensure the financial reporting by the agency is transparent and consistent. Every member of Congress should read these reports on how our money is managed and should implement its findings. One specific GAO recommendation is for the federal government to address the government-wide improper payments, estimated to be $175 billion.
  5. Congress should make a kitchen-table list of what programs are most important to our Republic. The amount of information available to Congress for making smart debt reduction decisions is overwhelming. It is time Congress puts these materials to use. A simple way to approach this task would be for each congressional committee to rank sequentially each program within its jurisdiction, with the most important programs having the lowest number. The budget committee would still allocate a budget for appropriations and the highest-priority programs will be funded first. The appropriation committees would work down the list until the revenue raised by taxes are expended. At that point, Congress would have to cease spending money on programs for which there is no longer any funding, e.g., studies of shrimp on a treadmill, or admit to the taxpayers, it wants to borrow money to fund programs of little value. This kitchen-table process of spending only up to revenues received could save another $1plus-trillion annually, even if Congress expended a few hundred billion on some lower value programs.
  6. Government must operate only for the public purpose. The issue of Congress giving away our money to private entities has been debated since the founding of the Republic. Opponents of giveaways argue taxpayer money can only be spent on matters enumerated in the Constitution. The government asserts it can spend taxpayer money on anything that promotes the general welfare. Continuing this debate is irrelevant since the courts have made it clear legislatures determine what is general welfare. Such a broad interpretation of governments’ ability to tax and spend has resulted in a massive increase in the national debt and a huge expansion of government.

To reduce spending, Congress must appropriate our money for matters that truly benefit the nation while preventing the direct redistribution of wealth to strictly private enterprises that wield influence in government?

The business-as-usual giveaway model is illustrated by the 2020 fiscal year appropriations which resurrected from the grave, billions of dollars in expired tax extenders and spread the benefits to distilleries, race-horses, and Nascar owners, short-line railroad, biodiesel blenders, and other favored industries. The tax credits were even made retroactive. The purchasers of the first 200,000 electric vehicles received up to a $7,500 tax break. Investors in Opportunity Zones received tax deferment on capital gains from for their investment in high-end apartments with yoga lawns and pools surrounded by cabanas and daybeds. Opportunity Zones were to benefit poor areas. The $350 billion dollars a year prescription drug industry benefitted from $64 billion in federal research funding. Flood insurance subsidies continued for beachfront property, notwithstanding that the program has $25 billion in losses, it is potentially liable for $1.24 trillion in claims while only collecting $3.5 billion in annual premiums.

While there is almost no limit to governments’ power to give away taxpayers’ money, there are historical precedents for limiting such gifts. In the mid-1800s, many municipalities and states used public funds to purchase stock in railroads being built across the continent. Many government entities were swindled out of large amounts of money. To prevent future losses, forty-six states enacted constitutional limitations preventing gifts to private entities. These restrictions were called “gift clauses” or “anti-donation” clauses or simply “government gift-prohibitions.

The government gift-prohibition policies barred state and local governments from giving or loaning public funds to private corporations or associations for private undertakings. Initially, these provisions stopped government speculation with taxpayer money. With a $30 trillion national debt, Congress should enact the wise policies of the mid-1800s by prohibiting gifts, grants, loans, or the extension of the public’s credit to any private corporation, association, or private undertaking.

Such an action would serve to establish Congress as a fiduciary of the taxpayers’ money.

A few modest proposals for reducing the national debt. Is anyone in Congress willing to take up reducing the national debt challenge?

 

William L. Kovacs has served as senior vice-president for the U.S. Chamber of Commerce, chief-counsel to a congressional committee, a partner in law D.C. law firms, and his book Reform the Kakistocracy is the winner of the 2021 Independent Press Award for Political/Social Change. His second book, The Left’s Little Red Book on Forming a New Green Republic, quotes from the Left on how to control society by eliminating capitalism, people, and truth.

 

 

 

 

 

 

 

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Wake Up America, One US Until National Debt Tears Us Apart

William L. Kovacs

May 2021

Wake Up America, One US Until National Debt Tears Us Apart

There is no polite way to say this – “Wake Up America,” a federal default on the national debt will directly hurt anyone who has or expects some form of retirement income. Don’t expect government to look out for you. Government will do what is best for it, citizens be damned. Citizens are mere commodities that send money, in the form of taxes, to the government for its discretionary use.

To remain in power the government will do whatever it takes to retain power, including incurring more debt, printing as much money as needed, notwithstanding its value, devaluing its currency, or even defaulting on its debt. If debt reaches astronomical proportions and the federal government is forced to take action, it will take the easiest path which is to default on the debt owed to the general public, which is most likely, you the reader.

Part I of this series uses a chart to illustrate that the National Debt is bipartisan, both parties engage in massive spending without any known way to pay for it. Part II discusses the underlying assumption of the Progressives Modern Monetary Theory, i.e., massive debt is irrelevant if it is in the currency of the sovereign. The sovereign merely needs to print money from “thin air” to pay it off. This Part III identifies who will be directly impacted by a default.

Identifying who is impacted by a federal default is a critical piece of information that should be given directly to citizens.  Unless our government addresses the issue, the national debt will continue to increase. The Congressional Budget Office estimates the debt will be double the nation’s GDP by 2051, or $ 42 trillion or more.

Interest payments in 2020 were $ 325 billion. They are estimated to rise to $928 billion by 2029. If the Fed raises rates only 1%, that will increase add another $19 trillion over ten years to the national debt.

Our elected representatives are doing nothing to address the national debt, not even bloviating about it. Even the Modern Monetary Theorists recognize that inflation is the one event that could upend their theory that debt does not matter to a country with its own currency. Inflation is starting to rise at a fierce pace. Interest rates hit 20% in the late 1970s under President Carter. A twenty percent interest rate on bonds today would require the federal government to pay $6 trillion a year in interest, an amount larger than the budget of the U.S. The U.S. would be crushed by debts it could not pay. It would have to default or render the dollar worthless against world currencies.

So, who gets hurt if the federal government defaults on its debt obligations?

As of March 31, 2021, the U.S. National Debt exceeded $28 trillion. $ 21trillion of the debt is owned by the public or 78% of the debt. $7 trillion of the debt is owed to foreign countries.

Put aside the $ 7 trillion in foreign debt, it will be renegotiated. The real concern is what happens to citizens whose retirement rests on the government’s promise to make payments on its financial obligations. Unfortunately, federal agencies collected trillions of excess dollars from federal programs like social security and loaned that money to the federal government to spend. The citizens paying these social security taxes only received promises from the federal government to repay the borrowed funds at some future time. That money or a large portion of it will be lost in a default?

There is nothing citizens can do about it if the federal government defaults. Yes, nothing! Government can change pension laws at will to relieve itself of a debt problem. Only the government is sovereign. Moreover, the doctrine of sovereign immunity protects the government from its citizens. Government wins, you lose. An easy proposition to understand.

The magnitude of what the federal government owes citizens is staggering:

$10.81 trillion is owed to the Federal Reserve and government agencies that gave cash from certain programs like Social Security to the federal government to spend.

$3.5 trillion is owed to mutual funds.

$1,.09 is owed to state and local government pension plans.

$ 784 billion is owed to private pension plans.

$253 billion is owed by insurance companies.

$147 is owed to owners of U.S. Savings Bonds.

$2.28 trillion is owed to a variety of individuals, government-sponsored enterprises, banks, and other investors.

Most of the beneficiaries of these debt instruments are Social Security recipients, pensioners, mutual funds investors, bondholders, and insurance companies. All these payments are long-term payments to individuals who depend on those payments for survival.

Would Social Security recipients, mutual fund investors, pensioners think the same about “free” federal money if they knew their retirement savings were being put at risk by their government?

The federal government is in a predicament that it cannot get out of without actually making fiscally sound decisions that address the long-term sustainability of the country. As the federal government creates new multi-billion- and trillion-dollar programs, it moves closer to a default. If the Federal Reserve can keep interest payments around zero, debt is manageable since there is little interest due. Every 1% increase in interest rates raises the debt over a few years by trillions.

. The federal government is pitting Americans against Americans as to who gets a piece of the pie and when the pie is divided. Does the federal government give away the entire pie now and let those who invested in the nation live without pensions? Does the federal government opt to forgive student loans, authorize child care and universal basic income for all? Should the federal government support illegal immigrants with food, shelter, clothing, health care, education and basic income by putting social security recipients at risk?  How high can taxes go before people abandon the country? How much can we cut from the military before the U.S. can no longer defend the USA?

Tough questions that must be answered.

The federal government is now an entity separate from its people. It lives in a world that does not exist for ordinary people who must survive without the ability to tax others. If the national debt is not addressed soon, “we the people” will live in involuntary servitude to the federal government.