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The One Percent Solution

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July 27, 2011 – Comments (7)

Yes this is another debt ceiling blog, but with an interesting suggested solution.  The current numbers are there. We have 14 trillion dollars in  debt at the moment.  We always have an annual budget that at the present is about 1/2 trillion in the red.  Congress is fighting to somehow deal with this issue.  The problem as I see it, aside from the irresponsibility of holding increasing the debt ceiling as hostage, is cuts alone will simply never get rid of that debt.  You would literally need to make draconian changes that will just kill any chance for this economy to recover.  There simply needs to be somekind of income generation as well, and it is not going to happen through a miracle of job growth.  Not in this recovery. But, there really is an interesting plan set forth by Congressman Chaka Fattah, which is basicaly the penny transaction fee that would be directly earmarked against the debt.

Here is a repost regarding it:

"We hear a lot of talk from my Republican colleagues in the House about fighting the problem of our national debt. Unfortunately, we hear little about solutions. We cast vote after vote on paltry efforts to carve one and a half percent of spending out of a small corner of our budget -- and the majority is having fun settling old scores in the process.

That hasn't left the time or energy or imagination for going after the root problem -- the need for a fair and equitable revenue stream to knock out our national debt and grow the economy.

The Debt Free America Act, which I've introduced , provides the road map to our nation's future. It's a bold plan to eliminate the national debt within 10 years. That's right, 10 years! It will generate job growth and economic expansion. The plan has created discussion, and controversy, in the previous Congress. But it is time to be thinking -- and acting -- outside the box.

The path to a Debt Free America is simple and straightforward: Place a transaction tax of 1 percent - just a penny on the dollar -- on all retail and financial transactions, except for personal bank account transactions and those involving financial stocks. Create a dedicated revenue stream targeted to the national debt. The tax expires after 10 years.

President Obama has made it clear what's at stake, "Without action, the accumulated weight of that structural deficit, of ever-increasing debt, will hobble our economy, it will cloud our future, and it will saddle every child in America with an intolerable burden."

Secretary of State Hillary Clinton has raised the stakes to global terms: "Today, more than ever, our ability to exercise global leadership depends on building a strong foundation here at home. That's why rising debt and crumbling infrastructure pose very real long-term national security threats."

The interest payments alone on our national debt will reach $916 billion by 2020, according to the Congressional Budget Office. That is enough to crowd out domestic spending, federal investment in the private sector, and gobble up half of all tax revenues.

That is absurd!!

The answer? It's a broad-based, 1 percent tax on transactions that go through the Federal Reserve. The funds will generate sufficient revenue over the next decade to reduce the debt with minimal impact to the average taxpayer. Based on the latest data available from the Federal Reserve, the annual volume of transactions, excluding stock transactions, in the U.S. economy is valued at approximately $445 trillion.

The Debt Free America Act is equitable, providing a 1 percent personal income tax credit for families earning up to 250,000 a year (or individuals up to $125,000). Ultimately, it will provide even further relief from our confusing tax code which even the Internal Revenue Service recognizes needs an overhaul.

The Debt Free America Act provides the framework for fundamental reform of the federal system of taxation by eliminating -- once the debt is paid down -- the federal personal income tax and the Alternative Minimum Tax (AMT).

While so many voices in Congress are drowning each other out, the Debt Free America Act sends a clarion call, it is a clear, one-of-a-kind proposal. It is the only legislation before the Congress that would pay down the federal debt within a decade. Other proposals either take too long or don't go far enough to address the problem.

For example, the House Republicans "Roadmap for America's Future Act of 2010" would pay down the debt in 80 years according to Congressional Budget Office scoring. And the National Commission on Fiscal Responsibility and Reform, created from an executive order by President Obama, proposes to raise $1 trillion, in revenue by reducing or eliminating most tax expenditures, while imposing a 15 cent per gallon gasoline tax.

Here is a plan to take responsibility, and responsible action for our crushing national debt while offering the prospect of growth and greatness. We owe this to ourselves, our children, our grandchildren. We owe the next generations a Debt Free America."

Someone actually thinking outside the box.   

7 Comments – Post Your Own

#1) On July 27, 2011 at 7:42 AM, dbjella (< 20) wrote:

For one year lets prove we can freeze spending or cut 5%.

Unfortunately, we can't :(  Republicans and Democrats have to much to lose in cutting or freezing.  The debt goes on and on.  

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#2) On July 27, 2011 at 9:16 AM, awallejr (81.41) wrote:

Just to correct, I meant 1 and 1/2 trillion in the red.

Unfortunately a 5% freeze or cut really wouldn't make much difference.   I think most people do want spending to under manageble levels, but you have two camps diammetrically opposed in principle. The Republicans are anti any tax increase and the Democrats are anti "taxing" the average joe via cuts that effect them.  Republicans control one house the democrats the other. That is it.  That is deadlock.

But I am liking Congressman Fattah's suggestion.  I'm not sure how accurate his projections are, but it does seem worth exploring. 

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#3) On July 27, 2011 at 9:32 AM, PeteysTired (< 20) wrote:

I agree with dbjella.  Lets see any cuts let alone a freeze. We have never had them.  We can't even cut the military....good grief.

Next year we can try raising taxes.  We have proven that we can raise and lower taxes, but we have never made real cuts.  Unless a cut is defined as a reduction in proposed spending increases.

The senator guy from Utah cracked me up the other day when he said we would save a billion or whatever from ending our wars.  I am still LOL at that one.

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#4) On July 27, 2011 at 9:33 AM, lquadland10 (< 20) wrote:

question why not also apply to buy sell stock. That would pay it off even faster.

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#5) On July 27, 2011 at 6:39 PM, awallejr (81.41) wrote:

#4  I don't know.  I would suspect because of all the fractional trading that takes place now with computers that may make it unworkable.  I've actually mentioned this proposal to several peers and everyone of them (some are Democrat and some are Republican) said they would support it if it actually was earmarked for paying off the debt in such a short time.

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#6) On July 27, 2011 at 10:37 PM, Frankydontfailme (27.50) wrote:

Interesting idea.... 

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#7) On July 28, 2011 at 12:30 AM, awallejr (81.41) wrote:

Sadly Congress won't follow through with it. A workable plan.  Something that might work.  Something that I am willing to bet many from both sides wouldn't mind trying.  But nevertheless won't be taken seriously.

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