et al,
I'm not a genius, but it was
(simply) explained to me that this is one of several straight forward financial products being discussed that might reset some debt reconciliation.
One of these financial products was explained
(maybe incorrectly oversimplified) like this:
If the deficit is $1T Dollars, the US would have to sell an $8000-to-$10,000 bond to each of its 140,000,000 workers; within one calendar year. It would be a promissory note.
This would bring back the debt to the US, making the US Dollar the most stable and strong in the world. It would not be debt owned by any foreign entity.
My understanding is, that the EU is looking for some solution along these lines, investors to assume the debt.
Within the US, and many countries in the EU, there are a couple of complications:
- The problem with solutions like this is that the debt is gradually paid back by a series of tax reductions. It would work great in a nation with a relatively flat tax structure. But it would not work well in the US, as the more wealthy have greater holding and a wider range of deductions. Thus, they would get a much greater return on their $8K investment. So in order to make it fair, the entire tax code would need to be simplified, and the initial promissory pledge would have to be lower at the lowest income levels, and gradually higher, as the income rises. What initially sounds simple, rapidly becomes complicated.
- The second problem is a reduction in financial authority. Congress would have to reduce spending at the federal level and give-up some federal authorities back to the individual states. There could be no unfunded mandates and Congress would not be authorized to accumulate any additional debt. They would have to pass a balanced budget. Nor could Congress raid funding in escrow.
- No one trusts Congress to do the right thing and handle such an influx of funding to buy back the outstanding debt.
It is not likely that the Beltway is going to relinquish any power back to the states, and promise to go to the electorate "before" and further spending is authorized beyond the general revenue stream.
Most Respectfully,
R
)
