Solutions Not Compromises

As the debt talks rage on in Washington the same obstacle of ideology keeps obstructing progress. The Republicans do not understand why the Democrats could ever want to increase taxes at a time when the economy is so weak. On the opposite side of the spectrum, the Democrats cannot understand how the Republicans could ever want to cut spending on programs like Supplemental Nutrition Assistance when 44.6 million people in the U.S. are depending on it. The economy is in shambles, with estimates of the unemployment rate ranging from 9.2% - 9.8% of the workforce, and so far nobody has even discussed solutions to this problem. Instead our elected officials are only talking about ideological compromises. Both parties are limited because they align themselves so strictly with their constituents' ideals. What the people of this country need to learn is that the two parties' plans are more similar than they think, and neither are very well thought out. The Republicans want to spend less, and the Democrats want to tax more; both of these actions reduce the money supply in a drastic way, and would have devastating. The proposals on the table ask for compromises like, "we will spend less if you tax more." However, the debt problem, like all other problems, requires a solution.

The consequences of the Republican philosphy of spending less to increase revenue is not a solution to this problem. Programs like SNAP (formerly food stamps) would need to be drastically reformed. If SNAP benefits are cut, then unemployment will certainly rise. The flow of money from the Federal Government, to the state, to the beneficiary, to the grocier, then on to the distributor, and finally the manufacturer pays a lot of wages. Each company along the way would have decreased revenue, and would eventually have to cut back on the number of employees. These employees would then have no income, and a significant portion of them would need SNAP benefits to put food on the table. However, the cutbacks in social programs by the Republicans would most likely cap the amount of money spent on SNAP, thus limitting the number of people who can receive benefits. This new person who applied may not be able to get them. No cut-backs on spending should be made because this chain of events would certainly occur.

On the other side of the aisle, the Democrats propose increases in tax revenue to reduce the rate at which the debt increase. This plan would have similar consequences as the Republican's; remember both cuts in spending and increased taxes reduce the money supply. The tax revenue generated would not come from Corporate taxes. Corporations employ people in the United States, but if the taxes in the US increase, these companies are likely to outsource their workforce, cut employee wages, or both. The wealthy in this country would not be a very good source to generate tax income, because they have an uncanny ability to hide their money from the government. Taxing the poor would obviously not generate very much revenue either. This leaves the majority of an increased tax burden on the middle class, who also happen to be the majority of the consumers. Taking cash directly out of the hands of the middle class means that products do not get purchased, companies restructure their workforce to stay in the black, and the lower class and unemployed get more people in their ranks. No tax increases should be made because this chain of events would certainly occur.

So what can we do if the two 'solutions' on the table wont work at all? Can we just keep borrowing like there is no tomorrow? Of course not. Eventually the interest on the national debt would be as much or more than the country spends on everything else. Furthermore, a country with a very high debt will eventually find itself unable to borrow from anyone because investors will be asking the question, "Will they ever be able to pay me back?" This would severely decrease the money supply in the country, and we already know what kind of effects this will have on our way of life.

The Republican and Democratic plans to balance the budget would both result in a severe depression, and simply increasing the debt ceiling will come back to haunt us one day. The only true solution to the debt problem the country faces must be one that has four characteristics. It must reduce the debt, not affect the money supply, restore the value of the dollar and reduce unemployment. (Why must the plan restore the value of the dollar and reduce unemployment? Because the amount of money spent by the government on social programs like TANF and SNAP depends on the value of our currency and the unemployment rate.) The first step is to reduce the debt. That is easy. Simply have the Treasury create money, called United States Notes, and pay off all the debt. The second step is to adjust the amount of currency in circulation so that the money supply is not affected. A tax system is already in place, and taxes take money out of the economy. So the amount of money created by the Treasury to pay domestic bond holders must be the same amount as what will be taken out in taxes each year. The third step is to restore the value of the dollar by only creating enough United States Notes as necessary to keep trade smooth in a growing population. The last step is to reduce unemployment by taking the money which would be payed to the unemployed and putting them to work on everything from infrastructure to new schools.

If the debt was paid off, taxes could be reduced since the country would save about $300 Billion a year by not paying interest. If the money supply was unaffected the economy would not suffer from this transition. If the value of the dollar was restored the Federal Government would not have to help the needy, thus taxes could decrease further, and the same can be said about unemployment. This is a solution, not a compromise.