Our Impending Debt Calamity: The “Billion Dollars A Day” Solution



By: Dr. Charles Ormsby – January, 2013

Dr. Charles, Chuck, Ormsby“I hear that train a’coming? It’s rollin’ ‘round the bend, and I ain’t seen the sunshine, since I don’t know when.” – Folsom Prison Blues, by Johnny Cash

I’m getting sick of our debt problem.

It is like sitting on a railroad track with a freight train bearing down on us. Unfortunately, we are chained to a bunch of people who are also sitting on the track but who refuse to move.

We know that, if the present situation persists, it won’t be long until we’re all dead.

We also know that there is a solution – Get off the tracks! – but for some reason our companions refuse to budge and we are being forced to share their fate.

Of course, there is a reason why our companions refuse to move. They are benefitting from the current situation in the short term and they prefer to have those benefits continue instead of recognizing the impending calamity.

The vast majority of knowledgeable people realize that continuing to build our national debt at the present rate will end in Armageddon. Apologists for the left or the various beneficiaries of our current policies make the self-serving argument that somehow we can continue the overspending and still avoid a painful ending.

It seems so unfair. Many of us recognize the magnitude of the problem and we are willing to do the sensible thing – even if it means foregoing some present benefits, but we are being forced to accept the same consequences as those who irresponsibly insist on trillion dollar annual deficits for a current advantage.

The battle over the deficit is being fought around the issue of raising the debt ceiling from $16.4 trillion to some higher level … or not. The Republican controlled House of Representatives is struggling with this issue knowing that if it doesn’t offer to raise the debt limit, the Obama administration will blame Republicans for threatening retirees with the loss of Social Security, the sick and disabled with loss of healthcare, our children with the loss of teachers, and all of us with the loss of police/fire protection, not to mention clean air and water.

This, of course, is pure demagoguery; but it is effective. Big government advocates are great at prioritizing cuts: Always cut the most important budget items first. This riles up the citizenry in favor of more spending and more taxes and blames conservatives for hating motherhood.

What are Republicans to do?

I say they should be accommodating and enact an ever increasing debt limit that is good for the remainder of the Obama administration. Short of another world war, there will be no reason to re-visit this issue every three months.

So, am I throwing in the towel?

Today we are overspending at an annual rate of over one thousand billion dollars per year or $1 trillion per year. If we raise the debt limit by $250B, it will last three months; $500B will last nominally six months. Actually, if we raise the limit $500B it might only last three months if Obama decides to spend twice as fast.

What we need is a limit on the rate of deficit spending – NOT on the total debt.

I’d be perfectly happy to completely uncap the total federal debt IF the rate of deficit spending was limited to $1B per year; i.e., let the debt limit rise approximately $3 million per day with no limit on the total. The economy will, over time, grow to the point that our total debt will become inconsequential. In effect this would solve the nation’s debt problem with no limit on the eventual total debt.

Of course, $3 million per day is not much different than not raising the debt limit at all. The extra debt allowed each day would be consumed in less than two minutes at the current rate of deficit spending.

We can debate the rate we should allow, but we must recognize that the current rate of deficit spending is just under $3B per day.

What if we bring it down to $1B per day? That would cut our deficit spending by nearly a factor of 3. MUCH better, I guarantee you, than what the Republicans will negotiate under the current circumstances.

So instead of jumping the debt limit by $250B or $500B all at once, we make the limit a ramp that goes up every day by only $1B. While still unacceptably high, it represents a major improvement.

The “$1B Per Day Debt Limit Increase” bill should be accompanied by a budget bill that is consistent with this rate of deficit creation and that protects an acceptable core of key services and benefits that would guarantee widespread acceptance.

These core services could include cutbacks but at least the statists could not claim that Social Security or Medicare or Education or Defense would be gutted.

The $1B Per Day Debt Limit Increase bill would also have the advantage of making it clear to everyone that we are still spending too much and that Republicans have not opted for the “cold turkey” approach by refusing to increase the debt limit at all.

What about the consequences of the additional deficit spending? While not good, it will allow an extended period (say 2 to 4 years) for the nation to adjust to the lower spending (a $650B/year reduction is not small!). After this adjustment is made and the economy has grown by an extra 10% or so, the adjustment to zero or minimal deficit spending will be much easier.

If the Democrats can’t handle the reduced deficit spending without threatening the core services that the public depends on, the Republicans can present their spending priorities within these limits during the 2014 and 2016 elections.

So that is the “Billion Dollars a Day Plan” that will get us off the tracks and out of the way of the on-coming freight train.

We should no longer fixate on the absolute deficit level. We should switch our primary focus to limiting the rate of deficit spending, and that prescription should be incorporated into any bill that raises the debt limit. The increase is day by day, NOT all at once.

If we do this, we can get a good night’s sleep. We may “hear that train a’comin,” but we’ll know that it is coming slowly enough to get out of its way when it comes “rollin’ ‘round the bend.”