- Leave Social Security and Medicare off the table. Whatever problems they have, making them pawns or players in this debate makes no sense. Their trust funds have a decade or two life in them, time for us to come to our senses, for example, and support Medicare with a single payer system.
- Cut defense spending to the level it was at the end of the Cold War. That would save you about $150 billion next year.
- Where personnel cuts are required, use natural attrition combined with retraining and reassignment of existing personnel to reduce the effect of these cuts.
- If it comes down to giving the ultra rich a tax cut or cutting Social Security or food stamps, give the top its undeserved break and fight that battle later.
- Recalculate all expenditures into operating and capital categories as any business would. Start printing interest free money to pay for capital expenditures. Wild as this seems, it works, in part because wise capital expenditures are not inflationary, as Bob Blain explained in the Review back in 1994:
Guernsey is an island state located among the British Channel Islands about 75 miles south of Great Britain. In 1816 its sea walls were crumbling, its roads were muddy and only 4 1/2 feet wide. Guernsey's debt was 19,000 pounds. The island's annual income was 3,000 pounds of which 2,400 had to be used to pay interest on its debt. Not surprisingly, people were leaving Guernsey and there was little employment.
Then the government created and loaned new, interest-free state notes worth 6,000 pounds. Some 4,000 pounds were used to start the repairs of the sea walls. In 1820, another 4,500 pounds was issued, again interest-free. In 1821, another 10,000; 1824, 5,000; 1826, 20,000. By 1837, 50,000 pounds had been issued interest free for the primary use of projects like sea walls, roads, the marketplace, churches, and colleges.
This sum more than doubled the island's money supply during this thirteen year period, but there was no inflation. In the year 1914, as the British restricted the expansion of their money supply due to World War I, the people of Guernsey commenced to issue another 142,000 pounds over the next four years and never looked back. By 1958, over 542,000 pounds had been issued, all without inflation.
December 21, 2012
Morning Line: Some modest proposals
Sam Smith - While I realize that logic has nothing to do with the current debate over the budget, in brighter times here are a few things that might help us get out of this mess: