Almost everyday you hear that our national debt is somewhere around $20 trillion. Moreover, it must be stopped before it crushes us. In order to bring it under control, we need to slash “entitlement” programs such as Social Security and Medicare. Some have also suggested cuts in unemployment insurance payments, in food stamps, in aid to dependent children, to the disabled, and to the aged.

That assessment is 100 percent bunk!

First, America does not have a national debt. We have a public debt. And that debt is not $20 trillion. It is $13.7 trillion. The other $6.3 trillion is not a debt at all. It is the money the Treasury has diverted from the payroll tax (Social Security and Medicare payments), and used that money to fund other programs. This diversion (called intra governmental borrowing) is why both Social Security and Medicare show they cannot be sustained far into the future. There is an easy fix: Stop taking money away from the payroll tax! We owe that money to those who are paying into both programs today so that both programs will be solvent when they retire. Pardon my bluntness, but…Duh!

Our public debt is rising at about 3 percent per year. At that rate our public debt will stand at $60 trillion in 50 years (by 2067).

In contrast, our national wealth stands at $92 trillion today. It is increasing at 7.2 percent per year.[1]   At that rate our national wealth will stand at $2,975 trillion in 50 years. If we tapped that source (created by all of us), we could pay off the public debt almost any time we choose without putting a burden on anyone.

The rational solutions to fixing our public debt, as well as fixing our Social Security and Medicare projections are amazingly simple:

1. Stop taking money from the payroll taxes intended for funding Social Security and Medicare, and use that money to fund Social Security and Medicare. That will solve the projected shortfalls in both programs while assuring their solvency for all future retirees.
2. Our national wealth projection is 50 times our public debt projection ($2,975 trillion v. $60 trillion). All we need to do is to tap $1.2 trillion per year from our wealth projection over the next 50 years and our public debt will disappear.
3. Notice that we could eliminate the public debt much faster by tapping the future wealth total at a slightly higher rate.

If you think you need proof about any of the numbers in this short essay, ask your representative to have the Congressional Budget Office (CBO) to verify them. Or, you can do it yourself with any business calculator, and with this formula:

     FV = PV X 1.072 ^50  

Where FV = Future Value, and PV = Present Value

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[1]Wealth = the value of all stocks, bonds, and real estate minus debts. Its projection is based on the compound annual growth rate (CAGR) of 7.2 percent (1950 to present). Data source: Flow of Funds Report, Federal Reserve Board.