Zero Federal Debt & Deficit – (Is it really this simple?)

What is the answer to addressing our National debt, the deficit, unfunded US liabilities and the spending, that for all intent and purpose is a primary contributor to our economic woes? Year after year of digesting my daily dose of domestic and international economic news and opinions pieces I begin to wonder. Who is defining our issues and just how are they going about finding a solution to our spiraling debt obligations?

I’ve recently come to the conclusion that the quest for an answer could be best described as trying to determine the gender of a terrapin by simply gathering around the water’s edge and observing the specimen from above. A terrapin is a turtle that lives predominately in water. For those of you about to be frightened off by terms that challenge your vernacular please don’t be alarmed. I intend to guide you gently and safely through this discourse in a clear and concise manner. Within the following pages I will offer a provocative but practical solution to the great unknown – Our long term economic condition. But first, a little bit more about the turtles.

Our Politicians, Pundits, Scholars and Economists assemble, unabashedly engaged, yet mystified by the absence of defined truth around this question? Confounded through the ages, of all we can possibly muster to deduce, what gender is this turtle? Theories, impressions and opinions run their respective cycles and after a while they can’t help but begin to point out how unflattering one another’s reflection appears in these brackish waters. Before you know it there is more emphasis directed at each other’s flaws and in all their pre-occupation, they’ve lost sight of the initial question entirely. In the heat of this ongoing exchange, perhaps the answer will present itself? In the course of their observations could they be so fortunate as to witness an actual mating event?!?  With such good fortune at hand, an epiphany is thrust upon us. A nearly indisputable conclusion could not only be drawn as to the gender of each, but in addition, an educated guess as to which of the two is ‘the taxpayer’. (I apologize sincerely for that digression but I just couldn’t help myself.)

So to tie the analogy back to our issues with accelerating debt, what is the answer? Is there an answer?  It’s hard to say amongst the murky waters at which we currently gaze, especially from our perspective and point of examination. As it stands, no one has yet possessed the audacity and courage to simply kneel down, extend thine arms gently to the water and grasp the specimen to… well, just turn it over for a look see.

I intend to do just that, so enough about the turtles. Let us forge ahead.

There is a commonly spoken soundbyte ‘Government has a spending addiction’ that in reality, fails to outline the real issue. I’m guilty of using this term as are many others. In an attempt to bring clarity and true meaning to this terminology, excessive spending can and should be more accurately defined as: ‘Government has an addiction to wealth and power, which can be facilitated only through spending’. Simply put, spending begets wealth and power. This is the hand we have been dealt and are dealing with (or not dealing with), depending on one’s perspective.

For elected officials and representatives, this model is something along the lines of a reward system. One could dangle or distribute spending initiatives to curry favor with an industry, garner support, campaign contributions and votes… This current reward system is not only detrimental to our Nation’s solvency, but is at first glance, seemingly unstoppable and is in a large part unsustainable at its current pace, one would think…

The following is a first draft proposal to redirect initiatives and motivate elected officials ‘to do’, while producing a beneficial outcome for the elected, the budget and the electorate.

Proposal:

Engage in a wholesale restructuring of the current Federal, State and Local reward system. The effort is to be directed in a manner that’s intended to fast track the elimination of our current deficits, long term debt, as well as all unsecured liabilities while maintaining or improving the standard of Governmental programs and services currently provided to the electorate.

Logic will be predicated on the following premise and assumptions.

Premise:

  • Some elements within an issue can be changed
  • Some elements within an issue cannot can be changed
  • Of the things that can be changed, the positive effect of change will outweigh or diminish the effect of that which cannot be changed, provided that the changes are significant.

Assumptions:

  • That which cannot be changed – The primary objective of all Federal, State and Local elected officials is that of 1) Establishing wealth and power and 2) To secure and maintain that establishment for as long as possible.
  • That which can be changed – If the current reward system were to undergo a metamorphosis, those who can adapt to a new reward system will do so. Those who cannot adapt will be replaced by those who are both eager and capable of adapting to the new model.

Issues:

  • US Budget Annual Deficit = $1.3 Trillion and climbing
  • US National Debt = $15 Trillion and climbing
  • US Total Unfunded Liabilities = $116.4 Trillion (and climbing)

Now the $64,000 question, no scratch that. The $132.7 Trillion dollar question is; can the positive effect of an altered reward system outweigh the ‘spending effect’, which is inexorably entangled with our elected official’s insatiable appetite for wealth and power? Not only do I think this is possible, I’ll go out on a limb and say that a new reward system would not only feed the political beast, but become the impetus for a nifty little bread crumb trail to fiscal solvency.  All while providing the body electorate with economic growth, improved services and a transparent balance sheet that will allow them to: 1) perpetuate the efforts of successful elected officials and 2) replace those who are unable to affect positive change in achieving our directive to move toward improved services and sound fiscal policy.

Reward Plan: Who is affected?  – 100 US Senators 435 US Congressional Representatives (can also be applied to State and Local governments on a micro scale)

How are they affected?

  • New Salary = $0.00
  • New Pension = $0.00
  • Health benefits and travel expenses are unchanged (although incentives to reduce these expenses may result in individual reward)
  • For every dollar removed from the annual Federal budget by majority vote, 5% is to be distributed among those representatives that voted ‘Yes’ for a cost reduction bill.
  • 5% distributions are only eligible for currently funded programs, services and U.S. Treasury obligations (National debt).
  • All non emergency Bills presented to governing bodies for vote are to be submitted in two sections (but voted as one):
    • Section 1: Clear definition of scope/  budgetary impact:
      • Specifically, what program will be transformed?
      • Manner of transformation (efficiency, reduction in staff, program transformation to private sector, program merger or program elimination)
      • Reduction in spending (total dollar amount cannot exceed amount the Fed cuts periodic checks to maintain its current operations)
  • Section 2: ‘Business Plan’ – Executive Summary, Description, Market Analysis, Operations Plan, Timeline, Financial Plan, Return On Investment and Milestones
  • All Bills are to be reviewed prior to vote by an oversight committee within The GAO and an additional non-partisan watchdog group for fairness, accuracy in projected costs, dollar savings, project scope, and to validate whether the project outcome is in line with maintaining or improving current service levels.

If you’re still with me at this point, let’s take a sample initiative and walk it through the proposed reward system. I have intentionally chosen a sensitive example: ‘Medicare/ Medicaid’ as it’s not only a high profile service whose continuation is of great interest to a significant portion of the electorate, it is also a leading expenditure within the Federal budget.

The Federal Government uses taxpayer dollars and debt to write a lot of checks (required to keep the Medicare/ Medicaid wheels turning). They write checks to pay and pension their employees. They write checks for maintaining office space, supplies, contractors, fraud investigation, policy formation, reimbursement formulas/ tables, health care conglomerates, hospitals and public/ private practice providers. I could go on and on but you get the point. All of these checks amount to approximately $824 Billion every year.

Their largest expenditure within Medicare/ Medicaid by far, is the writing of checks. Now let’s indulge ourselves and consider a proposal which is at face value, obscenely provocative. Let’s go ahead and take the biggest bite out of Medicare/Medicaid that we possibly can.

PROPOSAL: DISSOLUTION OF MEDICARE/ MEDICAID ACCOUNTS PAYABLE DEPARTMENTS

AKA – NO MORE CHECKS

  1. Scope Summary – Analysis indicates they we can save the Federal Government and its taxpayers approximately $200 Billion annually by shifting all Medicare/ Medicaid reimbursement obligations to the closet possible point in the exchange of funds. Allow care providers and all persons/ entities associated with the Medical industry to barter services in exchange for a direct reduction in tax liability. Please note: a segment of the A/P shall remain intact to reconcile operations expenses for ongoing BAU RE: the remaining required components within Medicare/ Medicaid (that which is not being dissolved). Reimbursements shall be issued to providers in the form of tax credits. Tax credits will be limited to amounts preset within the current reimbursement scale for provider actions that perform services and care to Medicare/ Medicaid participants as well as those uninsured or cannot otherwise qualify for Medicare/ Medicaid programs.
  2. Business Plan Summary – Maintenance and ongoing revision initiatives to the Average cost reimbursement scale will remain with Medicare/ Medicare staff (no change). Fraud division remains intact and unchanged. Dissolution of major components of Accounts payable staff, office space, supplies staff (change). A/P staff (as needed) will remain with re-directed roles in accounting division to ensure that tax-credit requests from service providers are accurate in amount and volume. Requests will be validated and tallied for a paperless year-end statement for Health Care professionals corporate and personal IRS tax returns).

Let’s say the GAO and oversight committee vets the proposition and finds that a $200 Billion annual savings is accurate and the current service levels are maintained (even improved in this case).

The Bill goes to a Vote:

  • Specified Cost Savings – $200 Billion Annually
  • Legislative monetary distribution ($200 Billion * 5%) = $10 Billion
  • Total projected budget savings = $190 Billion first year (ongoing $200 Billion annually)

The Vote is unanimous to proceed. Congress and Senate approve, President signs the bill into law, and here we go.

Immediate effect:

  • $190 Billion has been removed from our current annual budget deficit. (An additional $200 + Billion in savings year over year)
  • Taxable income distributed to Yes votes Legislature ($10B / 535 reps) = $186,915 per rep. (The rank-and-file members of the House and Senate, with their very first cost reduction initiative, have just surpassed their current 2011 salary of $174,000). Sounds fantastic but guess what? There is still 5% of the $1.1 Trillion in deficit and $15 Trillion in debt for our purposed representatives to go after!!! From our representative’s perspective: As a group, they have an additional $805 Billion in salary potential up for grabs!!!

Now let’s take a look at the potential outcome of this transformative effort (initial cost savings aside).

  • Medicare/ Medicaid has been transformed to a model that retains its primary funding inputs (FICA and premiums from non-qualifying participants) but no longer has to pay out funds to the provider communities (tax credits now fund the payouts). Unfunded liabilities shrink as a result (and if there’s sound fiscal reason to reduce FICA and premium levels, putting those savings back in the consumer’s pocket, you can bet there’s another proposal brewing. (What legislator wouldn’t want their piece of the 5% for that?).
  • Medicare/ Medicaid participants enjoy the same quality of service currently afforded to them. (Providers receiving tax credits continue to happily provide care and services.)
  • The ‘uninsured’ also enjoy the same or new quality of service currently afforded to them (at no additional costs to taxpayers). Provider tax credits promote non-paying patient acceptance…
  •  Tax credits to providers/ care givers promote the incentive to work harder, taking on more patients to essentially whittle their taxable income obligation to zero.
  • Keep in mind that the tax credit concept is extended to everyone within the provider circuit. From the Surgeon to the front desk admin. From the phlebotomist to the home care nurse to the bed pan scrubber. If for example, a provider provides 30% of their workday effort to Medicare/ Medicaid/ Uninsured patients, they receive a 100% tax credit for 30% of their taxable income. That equates to more money in the pockets of those in the profession at every level… As a result we could anticipate few more koi ponds, dedicated home theater rooms, new cars, and vacation homes, dotting our landscape. (All good things for the economy)…
  • With the tax credits, Hospitals and Long term care conglomerates and corporations will post immense profits. Once a profitable model reaches a capacity point, the only way to increase profit would be to expand the Care Network, Facility space and equipment, extending their service capacity and suite of offered care. So in the interest of increasing profit and maintaining as close to a zero tax obligation as possible, the side effect is an industry wide expansion of scale, with improved care and services for everyone, at no additional cost to taxpayers.
  • One might be concerned regarding facilities and clinics that have been historically funded exclusively by Medicare/Medicaid (which would have no private sector income/ tax obligation to which a tax credit would be beneficial). These entities would be incorporated into the larger body of hospital care networks. A 100% Medicare/Medicaid funded clinic would be an excellent (tax advantage) commodity for a larger hospital as all improvements to the facility itself, as well as its entire client base become a tax credit for the larger network. The improved facilities as well as its qualified employees are rolled into the larger network, suited to sufficiently line up with the Network’s standards in quality of care, equipment/ supply outfitting and cleanliness. So both the employees and patients of the local mom and pop Medicare house of horrors clinic, provide and receive service from the new quality standard set by the larger care network.
  • You would be 100% correct to postulate that all these tax credits will amount to a reduction in tax revenue. However, the reduction in revenue is in line with the reduction in spending so with respect to tax-base vs. budget, the reduction in tax revenue is an initial wash. Additional upward tax revenue effects will follow with the expansion and increased profitability of the reinvigorated Health care industry. Job opportunities will undoubtedly grow along with the industry resulting in a secondary trend in Federal revenue increases.
  • The Expanded Care Network and more patients translate hiring more doctors and peripheral caregivers, more supplies, equipment, more jobs and profit within the manufacturing and supply chain, and a net increase in employees and/ or employee hours
  • Larger Care Networks and expansion leads to the need for innovation to handle expanding entities. This will require more skilled labor to maintain, improve and streamline service capacity to address the complexities associated with industry growth..

Now, considering the bounty of available health care and services that have blossomed from this initiative we must ask ourselves, do we really need to fund an additional $1Trillion toward a National Health Care Policy?

Not a bad start, huh… Our elected officials can continue to craft transformative efforts in streamlining, merging or aligning efforts between departments, partially or fully privatizing departments and programs to reduce costs in over 1,300 distinct Federal Agencies and their subcategories as well as nearly 2,000 different Federal subsidy programs (any of which can be redundant, obsolete or ripe for partnering or merging with another for a net cost reduction with respect to our budget gaps. And let us not forget, a net income increase for our elected officials).

All endeavors will be based on sound fiscal responsibility, maintaining or improving current service levels and executed by majority rule. Considering the income potential for the legislative body (and current election terms), one could imagine or expect the volume of initiatives to be in the hundreds, resulting in 30 to 50 major budget reduction bills passed per annum.

Of course there will be instances where particular elected individuals may find that some initiatives run contrary to their personal convictions, moral or religious beliefs or that of the constituency which they represent. It is of course their option and/ or obligation to stand firm on principle and vote no on a project (which would of course cut them out of the income distribution on a majority vote), but they can in turn campaign on the principles for which they stood.

Legislator’s Skill building and expansion of personal empire:

As stated previously, the new reward model presents the current body of elected officials with a revenue potential of $815 Billion. A veritable smash and grab and a patently obscene figure considering what our legislative body does for us today. That being said, we must take into consideration that within this model, legislators are newly purposed to march our Nation down a path of deliberate and intelligent transformation of how our Federal government currently does business. The objective: Our legislative body will become the means to an end for our escalating Federal expenditures and obligations.

Also, as previously stated, in order to maintain their elected status, legislators must be exceptional at performing their duties and fulfilling their new directive, otherwise they will not be able to survive. I doubt that there’s a single entity within the Legislative body that possesses the level of expertise in every facet of plan building and execution necessary to excel, but to their credit, a great many of them will be able to adapt. They will do so in the form of team building. Perhaps an initial operating budget is in order (which would of course be paid in full from the proceeds of their 5% distributions). Think of all the highly skilled private sector individuals (jobs) that would be created by Legislators recruiting talent to build policy that makes both humanitarian and fiscal sense. These jobs will be tied directly to the continued success and re-election of Legislators, so we can expect that the quality of work will possess the standards of excellence, quite deserving of the electorate.

This initial acquisition of expertise will form the core of our legislator’s individual empires. Of the cost cutting initiatives where privatization of former Federal programs makes the most sense, legislators will possess the personal wealth (from ongoing 5% distributions) and influence to organize private sector businesses tasked with maintaining the permanent transition of Federal to privately managed services. Since the Legislator’s bottom line and future extension of wealth and power are at stake personally, you can be assured that the private endeavors will be run efficiently and shielded from the excess weight and bloat associated with our Federal institutions today.

While some to many will transcend the challenges they will face and ultimately prevail, we can also expect a heated fervor of resistance from the elected officials that know deep within their hearts and psyche that they simply lack the capacity to succeed in this new environment. This group will go to great lengths to obviate and obstruct attempts to adopt the new model, grappling with their last breath to retain the status quo that they are so adept (inept) in playing and will push back with the hopes perpetuating their currently inert roles.

Those aforementioned individuals will no doubt be replaced and swiftly. With the near boundless revenue potential one stands to gain, competition for elected status will be fierce to say the least. We can expect that only the best of the best will stand out amongst the competition and prevail. The net effect will only further up the ante for perceived and realized excellence in cost reduction initiatives. The ball is indeed rolling.

The Legislator’s Scorecard:

Opportunity for re-election will come and go, so how do we intend to apply a measuring stick to a representative’s performance?

  • The representative’s voting record – What he or she facilitated by majority siding with regard to spending reduction initiatives.
  • Number and scale of proposals submitted by the representative – All bills today maintain records of sponsors/ co-sponsors so this item should be as easy to evaluate performance.
  • Number and scale of privatization efforts. What is the representative’s prerogative with regard to the businesses he or she starts? How many people are employed as a result? How well are they compensated with respect to national averages? What is the projected growth of these businesses? Do the types of businesses align with humanitarian, moral and religious ideals of their constituency? As a result of the Legislator’s business initiatives, what is his/ her net worth? (How well are they investing their rewards, with respect to economic growth?)
  • What extra-curricular endeavors has the legislator invested in? Let’s say shifting initiatives from the Federal realm to the private sector is muss less complex than we could have imagined. A legislator or group of legislators have all the bases covered on maintaining and improving shifted services and still have hundreds of millions if not billions of dollars at their disposal. Would they invest in Green or Conventional energy solutions? Medical or Military R&D? Abortion clinics or adoption centers? Would they donate their proceeds to accelerating the pay down of National debt or inspire humanitarian effort and nation building in impoverished countries? These decisions can certainly solidify re-election efforts if their choices align with their constituency.

Each of these elements could be outlined in a simple profile and can be used as a CV to allow the entire electorate to evaluate re-election of a candidate. An irrefutable, transparent record of what the legislator has done for his/ her country, in combination with the classic campaign model of speak to what each intends to do if given the opportunity to continue serving.

So there it is. By effectively ‘switching the target’ our elected officials will have lost their motivation to spend a path to wealth and power. Instead, they’ll chase the tail of solvency to attain a stature of humanitarian and financial recognition, achievement and service that is worthy of a great and deserved Nation.

I sincerely believe that the principles outlined herein offer practical solutions to the over spending predicament and the expanding need for service provision   that has confounded our people for decades. I’d like to float the concept around and see if it can gain some momentum down by the Potomac. Given the alarming rate at which our country is becoming more and more dependent on Federal programs with each passing day, the question must be asked. What’s it going to be?

‘M-My way’? or the ‘B-Bye way”?

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3 Responses to “Zero Federal Debt & Deficit – (Is it really this simple?)”

  1. How do we fix the economy - Democrats, Republicans, Libertarians, Conservatives, Liberals, Third Parties, Left-Wing, Right-Wing, Congress, President - Page 4 - City-Data Forum Says:

    […] do it like this… (long) Link to entire piece I wrote on Thanksgiving week 2011. [SIZE=3]Proposal:[/SIZE] [SIZE=3]Engage in a wholesale restructuring of the current Federal, State […]

  2. Tea Party, how would you reform Medicare and Social Security? - Democrats, Republicans, Libertarians, Conservatives, Liberals, Third Parties, Left-Wing, Right-Wing, Congress, President - City-Data Forum Says:

    […] Well I'm not the Tea Party and I haven't address SS yet but I have crafted a simple concept that would reform both Medicare and Medicaid (hint: dissolution of their accounts payable department). Keep in mind the link outlines a means to achive zero federal debt and deficit but I but used Medicare/ Medicaid as a sample initiative. The best part is that we could not only provide relief for tax payers and the medical industry, but actually improve services for all humans within our borders that cannot or will not pay for medical treatment. Enjoy Zero Federal Debt & Deficit – (Is it really this simple?) | kideuphrates […]

  3. If Republicans are so opposed to overhauling health care... - Democrats, Republicans, Libertarians, Conservatives, Liberals, Third Parties, Left-Wing, Right-Wing, Congress, President - Page 11 - City-Data Forum Says:

    […] how about this? Oversimplified short version, long version is here Provision the entire medical industry and all of it's employees with the option to barter services […]

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