A Fiscal Compromise to Get the Federal Debt Under Control

Addressing the Federal Debt Crisis

The U.S. federal debt has soared to $35 trillion, now exceeding 120 percent of GDP. This shift from approximately 30 percent in the 1970s illustrates the growing challenge of managing our national finances. Each year, deficits continue to rise, contributing to this significant debt burden. Currently, the projected shortfall for 2024 is around $2 trillion, a considerable jump from the $200 billion deficits of earlier decades.

Proposed Solutions for Debt Management

To aim for a sustainable fiscal future, one proposed solution is a constitutional amendment enforcing a balanced budget that caps spending at 20 percent of GDP. In exchange, a one-time wealth tax could cut federal debt in half, pushing it back to around 60 percent of GDP.

• Increased defense spending would return to 5 percent of GDP.
• Any yearly deficit funding above the 20 percent threshold would require a 75 percent vote in Congress.
• Tax expenditures would also be included in the spending limit.

Additionally, modest adjustments to Social Security payouts and minor increases in tax rates could help reach the target 20 percent GDP revenue.

Implementation of the Wealth Tax

Furthermore, the 10 percent wealth tax would impact financial and real assets. Asset holders may choose to remit their public securities or cash equivalent to the Treasury. This tax reflects a fair distribution of responsibilities, given the increase in asset values over the last three decades.

Challenges are anticipated from both conservative and progressive sectors regarding the wealth tax and spending limits. Short of a compromise, we risk spiraling deficits and debt that could threaten fiscal stability.