U.S. Debt Cut by USA Plan

At “Debt and the USA Plan” we established that the total US debt was present $130 trillion: $ 20 trillion of “funded debt” and $110 trillion of “unfunded debt”. As the USA plan redirects all payroll taxes to the taxpayer’ USA Accounts, we must add back to the unfunded debt the reduction in that amount by the present value of payroll tax receipts used to reduce the debt to $110 trillion.

Before the actuaries take a finite look at the figures, let’s look at the overall picture. First, under the Plan, we will only need to add to the $110 trillion the benefits payable to taxpayers presently 45 to 65 years old. Those between 25 and 45 will have accumulated sufficient wealth in their USA accounts that the income of that wealth will pay them more than Social Security would. The Plan, therefore, eliminates that liability.

Rather than using the present value of the next 20 years of Payroll taxes, let’s use SSA’s actual projected amount of $39 trillion just to be conservative. In addition, let’s add $21 trillion more just for good measure knowing what Medicare, Congress, and circumstances may require.

That means that at the minute before the enactment of the Plan the Country’s financial statement would read as follows:

(trillions)

Assets                                                                                               $135
Liabilities
Funded Debt                                                  $20                                                                                                                       Unfunded Debt                                                         110
Benefits 45 to 65                                                          39
Other                                                                                  21     190
Negative net worth                                                                 ($   55)

As you can see, the USA Plan at one minute before enactment presents a sorry picture. One minute after, however, a different picture emerges.

(trillions)
Assets                                                                                        $135
Liabilities
Funded Debt         $14                                                                                                                                                             Unfunded Debt                                                               6
Benefits 45 to 65                                                          39
Other                                                                                  21       80
Positive net worth                                                                   $   55

As illustrated, by adopting the USA Plan, the Federal debt is cut by $110 trillion. Funded debt is reduced to $14 trillion because almost $6 trillion is what Treasury owes to another department of the government. Unfunded debt is reduced to some $6 trillion in governmental operations. The balance in unfunded debt is reduced to the amount owed 45-65-year-old recipients $39 trillion and the $41 trillion cushion.

There are many factors considered by actuaries. Among them mortality rates, inflation, interest rates, etc. When the Commission begins its USA program on January 1, 2018, we anticipate that many groups and organizations will make their own calculations. Irrespective of any flaws in our calculation, the fact remains that this is a feasible way to cut the nation’s debt. Nobody else is even trying. In fact, cutting benefits, raising the retirement age, and cutting inflation adjustments have been the only solutions the politicians have advanced.

Now, this is a simple explanation of a very complex set of financial events. We believe the total elimination of the debt will occur several years before the 40th anniversary of the Plan. We predict that our enormous growth and the attendant increase in income taxes will be a big factor in the early retirement of the debt.

To the extent we must print money to pay the Social Security and Medicare benefits in year one and several years later, the devaluation of US dollar by such printing will be offset by an unusually big increase in the value of the dollar occasioned by the $110 trillion reductions in America’s debt.

We hope this satisfies your understanding of the overall process of eliminating all US-funded and unfunded debt. As to when and under what conditions the funds in the USA account can be accessed by its owner will be covered in “Accessing Funds from Your USA”.

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