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Whats missing is grand plan

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When America's national debt reaches a certain point, it will become unpayable. We may have reached that point.

Our government is engaged in a slow-motion default on its debt. It's doing so by debasing our currency with a flood of printing-press money.

The 2009 budget reveals how profligate our government has become. Federal tax receipts were $2.2 trillion, yet we spent $4 trillion. The deficit was $1.8 trillion.

All such deficits add to the total national debt. In 1980, the debt was $1 trillion; in 2009, $11 trillion. Now it's $13 trillion. In eight years, it'll top $20 trillion.

If we display these numbers as bars on a graph, we form a series of steps so steep even lumberjack Paul Bunyan could not climb them.

The government creates money to pay for budget deficits in two ways. First, the Treasury Department sells T-bills and bonds to domestic and foreign investors. This is the public part of the national debt. It's only two-thirds of the total, but it's an obligation we cannot ignore.

Second, the Federal Reserve creates money out of thin air. This part of the debt is not owed to investors. We pay for it through inflation.

These differences between public debt and Fed debt offer hope and the hint of a three-step plan:

First, the Treasury Department must stop selling T-bills and bonds. If this happens by 2012, we can limit the public part of the national debt to $11 trillion.

Second, the Fed pays down the public part of the debt. This happens slowly, over 40 inflationary years. (Alternatively, we can mothball the Fed and accept a 40-year tax hike.)

Third, balance the federal budget. One way to do that is to freeze spending at the 2012 level -- about $4 trillion. By 2017, growing federal receipts will match spending. The budget will balance.

In practice, balancing the budget may be trickier than balancing ping pong balls. Rising outlays for Social Security, Medicare and Medicaid are like chicken froth rising in a boiling pot. It's a mess, and few in Congress dare to advocate the radical measures needed to clean it up.

To complicate the problem, Democrats and Republicans have bitterly opposing visions for America.

What's missing is a grand-scale, overarching reform plan. If the plan reflects American values and offers hope, Americans will support it. Absent such a plan, we can grin and bear the hard times that loom.

(Hanson is a resident of Grafton.)

Our government is engaged in a slow-motion default on its debt. It's doing so by debasing our currency with a flood of printing-press money.



Copyright 2010 Turtle Mountain Star, Rolla, North Dakota. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from SmallTownPapers, Inc.

© 2010 Turtle Mountain Star Rolla, North Dakota. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from DAS.

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