Wednesday, November 14, 2012

Can We Pay Down Gov't Debt When Times Are Good?

Dear Mr. President,

Suppose Congress wrote a law requiring government to pay off debt a little faster as the economy improves?

The law could set up an increment. The increment could vary, increasing as the economy improves,  decreasing when it sags. The increment could vary geometrically. 

When the GNP grows more than 1% a year, we could double the increment. When it grows more than 2% a year, double the increment again. The healthier the economy, the faster - geometrically - we could pay down our debts.
 
Small-government enthusiasts may appreciate that accelerating the debt pay-off in good times would tend to keep government small. It would keep government from automatically growing larger as the economy grows larger, only to become a burden when it slows.

At the same time, in a year when the GNP shrinks 1%, the pay-off increment would shrink by half, freeing tax money for pump priming.

If such a plan were in place, people might feel more easy about priming the pump when times are bad.
 
We borrowed to prime the pump, and doing this gave us 2% growth this year, while Europe floundered on the edges of recession. Foreign capital is finding its safest haven within our shores. This drives stocks up, and business owners like to see that. Persuading the business sector that in addition to priming the pump, we should set ourselves up here and now to pay off our loans more quickly as good times come may be the key to a compromise that could make America bloom.

The law is very simple. We do well - we pay debt faster.

Can we do this?

With tremendous regard for your vast potential,

Yours, etc.


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