Introducing Coupon Stripping
A payments tax balances the budget, and that would allow us to finally pay off the national debt.
Under Coupon Stripping the Fed would generate reserves to buy back Treasury bonds, then cancel the bonds.
We cannot pay off the debt in one lump sum, as that would entail liquidating too much debt in the capital markets at once. It would take about ten years to repay the debt with Coupon Stripping.
When we issue Treasury bonds, it is the same as printing money. We have created two forms of money: currency and Treasury bonds.
The difference between currency and Treasury bonds is that bonds earn interest, which is what makes them so problematic.
Deficit spending and the issuance of Treasury bonds are why a loaf of bread costs $4 today instead of ten cents as it did in the 1940s.
We ended up paying the taxes that we were seeking to avoid by borrowing. We have been paying them through the inflated cost of goods over time. By continuing to charge interest on the bonds, we are only furthering their inflationary effect.
Today our debt exceeds the GDP and is projected to go even higher.
If interest rates increase, the national debt could greatly exceed 200% of the GDP in the next few decades.
The problem is compounded as spending is increasing relative to GDP, whereas the ratio of revenue to GDP is constant.
The problem begs two questions: 1) Is there a better tax base relative to GDP? 2) What can we do to curb spending?
As shown on our tax page, payments in the monetary economy greatly exceed the GDP and are rising faster than our income. Taxing payments would not only eliminate the deficit, but it would even produce a surplus!
The tiny red dot represents our GDP, while the blue sphere shows the payments in our economy.
This graph shows rising healthcare costs and interest are the two main components of increased spending in the future.
The cost of interest is growing because our deficit is growing.
A payments tax solves this problem, eliminating the deficit and enabling us to pay off the national debt, which would significantly reduce the cost of interest.
An aging population creates the problem of rising healthcare costs.
Visit our healthcare page for information on how a payments tax can lead to solutions for bringing the cost of healthcare under control.