Column #440      February 2, 2024Debt Death Spiral

Our Federal Government is caught in a debt death spiral. Can it be solved? A debt death spiral occurs when interest on the debt drives more borrowing, which increases the interest expense, which causes more borrowing. The debt compounds even faster when it’s recognized by the masses and the bond market collapses. That’s when all hell breaks loose.

Our feebleminded representatives in Washington only know one solution which is to spend more money! But that’s the problem. What the government spends on Medicaid, Medicare, Social Security, Defense/War, and interest are increasing every year. Currently, every additional dime spent on anything beyond those five commitments must be borrowed. Consequently, as the situation looks now it’s hopeless.

But it’s not hopeless. There is absolutely a solution but it demands a change to an America First approach to governance. One can’t keep doing what they’ve always done and expect different results. For starters, rather than a bureaucrat or a politician running our country, it needs a businessman for a leader. Our government does not operate like a business. It takes money from people, borrows more, and spends it. The $6.2 trillion it currently spends per year is just too much temptation for crooked politicians and bureaucrats. Most of them want a “little” piece of the pie. Therefore, the whole setup is corrupt.

If the government was a business, it has three options for improving the bottom line. They are:
●    Bring in more money.
●    Cut expenses.
●    Improve services–reduce the government’s burden on the citizens.

For decades the Federal government’s only focus has been on bringing in more money by raising taxes and by borrowing/printing it. The legislators are afraid to cut government spending because they believe that will cause a recession and there will be less graft for themselves. Therefore they spend more, borrow more, and watch the M2 Money supply increase. (After a slight reduction from February 2022 to October 2023, M2 has been expanding again—which is inflationary.) Improving services is never considered. Nikki Haley’s approach is basically the same old approach except she proposes a national sales tax, the most regressive form of taxation.1

Those old approaches are just more of the same that has been going on ever since the income tax was made law under Woodrow Wilson. Taxing and borrowing, along with the many programs started under Roosevelt’s New Deal, and something like a “million” new regulations in 90 years are strangling the citizens and domestic businesses.

Here’s my package of proposals for paying down the debt. Keep in mind that it’s a package of changes that have to be implemented virtually together because one compliments the other.

Raising more revenue is critical which why I would immediately put on across-the-board tariffs on ALL imported goods. Tariffs are how our Founding Fathers originally funded their new government up until 1863—when excise taxes were added. For a good many years prior to 1863 tariffs averaged 60%! Currently annual imports are about $4 trillion. Since our government’s 2024 deficit is going to be about $2 trillion, I’d start with a 50% tariff. In all likelihood, imports would probably decrease to an unknown extent resulting in maybe only $1.5 trillion in new revenue. But that alone would nearly wipe out the annual deficit.2 3

Next I would cut taxes on lower income citizens and businesses since they will be paying more for the many imported goods they rely on. Then the objective would be to slowly eliminate the income tax within four years which would be offset by cutting government expenditures and regulations.

At the same time the income tax is being closed out, I would slash the number of regulations that slow, impede in anyway, or forbid businesses from operating in the USA and its territories. Unnecessary regulations are expensive burdens for businesses and individuals.

Those first few steps would set the stage for a major reduction in government employment over a four-year period achieved by either eliminating unconstitutional agencies and/or in reducing the number of Federal government employees. What’s needed is get the Federal government off the backs of the people by transferring what Federal agencies have been doing back to the individual states. For instance, the states will be more efficient handling education than a Federal agency.

When Musk took over X he reduced employment by 90% and the enterprise grew! Is government more efficient than big tech? Certainly not! In addition, to cutting the number of employees, all salaries and retirement programs of the remaining government positions must be analyzed and adjusted to be slightly lower than what they are in the private sector. Working for the Federal government should not be for privileged individuals.

There are 2.9 million government employees of which about 772,300 are in Defense-Military Programs, 411,600 are in the Department of Veterans Affairs, and 202,800 are in the Department of Homeland Security. Is it possible the payroll could be reduced 40% by totally eliminating unconstitutional agencies and superfluous employees?4 5

Since businesses would be unleashed in terms of regulations and taxes making them far more competitive when manufacturing goods in the USA, they could easily hire a million laid-off government workers. This would make our country a manufacturing and producing juggernaut of first rate. Exports would probably increase to the point where the balance of payments would be positive once again.

Then the most difficult spending issues will need to be addressed. Welfare, foreign aid,  Medicaid, Medicare, Social Security, military, and discretionary spending will have to be reined in. Foreign aid will have to be slashed to next to nothing. Welfare as a Federal program should be closed down and shifted to the individual states. Medicaid and Medicare will have to be reformed. Social Security needs to be privatized. The military must learn how to be more efficient. America’s military spending is higher than that of the ten next highest spending countries in total. There must be room to make cuts in the military—especially in terms of troop deployments and wars on foreign lands.6

Needless to say, as the deficit disappears and is replaced with a trillion-dollar annual surplus, the dollar will increase versus most other currencies. Interest rates may never return to zero, but they will remain reasonable and going forward provide income for personal savings accounts unlike that which we’ve seen in many decades. Therefore, as its debts are reduced, the Federal government’s interest expense will continue to be an issue for some time to come. But as the total debt approaches zero, the interest expense will drop at an exponential rate!

Who will be against running the Federal government as a business? All Federal bureaucrats, most of the legislators, the corporate elitists of international businesses, and the citizens who fear change. Who will be in favor? Most America First Patriots and leaders of domestic businesses.

So, there you have it. It’s as simple as pie. The debt death spiral can be stopped in its tracks and Americans can be wealthy again. Selling this change as an alternative to a hyperinflationary disaster or a crushing deflationary credit implosion will be the toughest job. The question will be: “Is America too woke?”

To your health.

Ted Slanker

Ted Slanker has been reporting on the fundamentals of nutritional research in publications, television and radio appearances, and at conferences since 1999. He condenses complex studies into the basics required for health and well-being. His eBook, The Real Diet of Man, is available online.

For additional reading:

1. FRED M2 Money Supply 1960 to Date

2. Tariff in United States History from Wikipedia

3. U.S. Federal Government Revenues: 1790 to the Present by Thomas L. Hungerford from Congressional

4. The US Has The Biggest Govt In The History Of The World... By A Very Wide Margin by Michael Snyder from The Economic Collapse blog

5. How Many People Work for the Federal Government? from USA Facts

6. Countries with the Highest Military Spending Worldwide in 2022 from Statista