The Numbers Behind the U.S. Debt and Its Solution
The U.S. federal government finished fiscal 2017 with a budget deficit of $666 billion, an increase of $80 billion over the previous year. It was the biggest shortfall since 2013 and the sixth-highest deficit on record.
The U.S. deficit equaled 3.5% of gross domestic product, up slightly from the prior year. Spending rose by 3% for the fiscal year, while receipts climbed by 1%. The government’s fiscal year runs from October through September.
Our total debt now stands at $19 trillion, $6 trillion of which is intra-governmental debt (debt that results when an agency must borrow more from the Treasury than it is allocated). This portion of our debt will never be paid. While our total is not a burden to service at today’s interest rates, it nevertheless is trending up at a time when the economy is expanding.
There are many changes that could be taken to bring our deficit spending down. None is likely to happen given political gridlock in Congress. The tax reform currently being sought can only make the deficit worse. It is impossible to reduce taxes on the wealthy and expect the deficit to be reduced. Tax cuts to the wealthy go straight into personal wealth via stocks, bonds, and real estate.
A Fair Solution. Wealthy Americans currently hold $84 trillion of net worth (stocks, bonds, real estate minus personal debts). That total is growing at an average annual growth rate of 7.2 percent. At this rate wealth doubles every 10 years. The current projection is that by 2027 the wealthy will hold $168 trillion in wealth. A 1 percent surtax on just the growth in that $84 trillion of new wealth over 10 years would pay off the public debt. The wealthy would still see their new total wealth grow to approximately $155 trillion by 2027. [1]
Given that 98 percent of all wealth left at the death of a decedent flows as unearned wealth to inheritors, and 98 percent of all new wealth flows to the holders of current wealth, it follows that 96 percent of all wealth (98% times 98% = 96%) is the direct result of our inheritance laws. Not one cent of that total is earned.
Readers may invite legislators, logicians, econometricians, mathematicians or 3rd grade students everywhere to check my arithmetic as well as the soundness of this solution to our debt issue. Alternatively, ask your Congressional representative to submit it to the Congressional Budget Office for evaluation.
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[1] The 1 percent surtax could be adjusted slightly on an annual basis to accommodate errors in projections.
While you stuck to the facts, you touched a bit on the psychology with your comment about what happened to the Clintons and to the rich who are Democrats but do not support sound statistically based solutions.
It seems that seem to have a mystique about money. Having money certainly gives people power and a certain freedom of their own discretion. But people tend to think that people with money are better organized, smarter, more decisive, and can somehow make the country more successful because of their success. I would counter that wealthy people tend to get a bit paranoid about retaining their money and seek out supporting state legislators, congress persons, governors, and presidents with donations that are intended to be returned as favors for legislation in their benefit. Wealth begets more wealth. Wealth begets power. Power begets more power.
As the middle class loses wealth and many slide into the poorer levels each year, so many seem to still believe that they can be saved by the wealthy. Strange.
Ron
Love ya!
Jane