Pay Off the National Debt

cropped-bob-shapiro.jpg   By Bob Shapiro

Our leaders in Congress and the White House have been spending, and promising future spending, way beyond our country’s means for generations. Taken together, our overspending, plus off budget agency debt, and plus the current value of unfunded liabilities for entitlement programs is around $225 Trillion.

In previous posts, I’ve suggested ways to phase out the entitlement programs, and their unfunded liabilities. I also have called for a Balanced Budget Amendment, a Budget Dollar Limit Amendment, and

various Congressional rules to make spending more difficult.

Here is what the spending plan is for the roughly $3.6 Trillion total spending in FY2015:

FY2015 Proposed Spending

However well intentioned (or not) past spending has been, the fact is that we now have an official National Debt of around $18 Trillion. Every dollar of this debt has reduced the ability of the private, productive sector of our Economy to increase all Americans’ Standard of Living.

If we actually pay off this National Debt, it will be the equivalent of adding savings to our Economy, which can be a source of investment to help our Economy grow. So how do we do it? I see it as a three step process.

First: The National Debt is around $18 Trillion, and the FED owns about $3 Trillion of it. I have called for the FED to be abolished. The assets would be distributed to its owners (yes, the FED is a private organization). Looking back to the FED’s founding, it turns out that only the US government put in the money it was required to do.

The banks who were to be partners put in zero, instead borrowing from the FED to pay into the FED. So, the non-government partners didn’t pay in what the agreement called for. They really should own zero of the FED!

As we do away with the FED, we should recognize that full ownership belongs to the US government, and all the assets then should be returned to the Treasury. So, the $18 Trillion would be reduced by the FED’s $3 Trillion, still leaving $15 Trillion to pay off.

Second: To pay off the remaining $15 Trillion, our government would need to spend less than it takes in – we would need to run a Budget Surplus. Current federal tax revenues amount to around $3 Trillion a year. Raising taxes would slow the US Economy further, so that’s out.

Removing all transfer payments to the states, as already proposed, would almost balance the Budget. Recognizing that the National Debt can’t be paid off all at once, and it shouldn’t take forever, let’s pick a number arbitrarily – maybe 20 years to pay off the National Debt.

Amortizing the $15 Trillion over 20 years might mean running a Budget Surplus of $750 Billion a year, out of $3,000 Billion in revenues. As the debt is paid off, interest on that debt would decrease, leaving more money available for other spending.

Third: After 20 years, once the National Debt has been paid off, we still will be running a Budget Surplus of about $750 Billion. Since our Economy would have benefited immensely by the $15 Trillion of “savings” over the 20 years, government as a proportion of GDP would have shrunk, leaving a grater share for the rest of us.

I propose that we continue the benefit by building a National Surplus Fund. Those continuing $750 Billion surpluses each year would go into a blind trust to be invested in the US Economy. (A blind trust to prevent political corruption.)

The principal would continue to build, and only half the earnings each year would be available for government spending. Since we already would have a Dollar Spending Limit Amendment, the earnings on the National Surplus Fund necessarily would mean reduced taxation for all Americans.

It is conceivable that, by the time my grand-kids retire, there might already be a negative income tax in existence.

Action Item: Pay off the National Debt and build a National Surplus

  • Abolish the FED, returning its holdings of US Treasuries and other assets to the US Treasury
  • Pass a Dollar Limit on Federal Spending Amendment
  • Run an annual Budget Surplus of $750 Billion, so that the National debt could be paid off within 20 years
  • Continue running $750 Billion surpluses, going into a National Surplus (blind) Fund, with half of the earnings going to fund federal spending.

5 thoughts on “Pay Off the National Debt

  1. If not now, when and if not massive inflation and high taxes, then reduced spending and deflation. Either choice will be bad for our economy. Is one choice better than the other? Reduced spending means, someone is not going to get what they had been getting. Who is going to decide? Elections are won with promises of a chicken in every pot. Taking away the pot and the chicken will not get anyone elected.

    So, since the reality is going to be continued government over spending, what is the wise man suppose to do to protect them selves financially and personally? I am truly scared for my future and my children’s future.


    • Hi John,

      Yes, I wish I could be more positive, but I expect this will end badly. The only questions for me are how it will end and how badly. The track they’re taking right now – print, print, print – is the worst option for the country. Even if it doesn’t get as bad as Zimbabwe, it still could cause a lot of pain before the bubble bursts.

      To protect, I’m going with a mix of PM stocks and physical metal. They’re down the last couple of years, but I’m expecting large gains vs the paper dollar. At the least, I expect to maintain my savings’ value over the next few years. We’ll see.



  2. I almost never drop remarks, but I looked at through a few comments on Pay Off the National Debt | US Issues.
    I actually do have a couple of questions for you if you
    do not mind. Is it only me or do some of these responses come across like they are written by brain dead visitors?
    😛 And, if you are posting on other online social
    sites, I’d like to follow everything new you have to
    post. Could you post a list of every one of your social
    community sites like your Facebook page, twitter feed, or linkedin profile?


    • Hi Owen,

      Welcome to So far, I’m using only Facebook for social media, although and have re-blogged several of my posts. I seldom post directly on other sites – certainly not regularly.

      As for commenters, many of my readers have little background in the subjects which interest me. There also are quite are few visitors from other countries, so what you’re seeing may reflect just an imperfect familiarity with English.



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