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How to Reduce the U.S. National Debt Without Raising Taxes or Cutting Spending

Interest-Rates / US Debt Dec 16, 2010 - 05:01 AM GMT

By: Submissions


Best Financial Markets Analysis ArticleMichael Sekora writes: Discussions about deficits and debt reduction inevitably center on whether and how to reduce government spending or increase tax rates. Proponents of increasing taxes argue over what level tax rates should be increased to and for which segments of the population. Proponents of decreased spending debate which federal programs should be trimmed or eliminated altogether. But this choice is a classic false dichotomy. If we grow the economy enough, we won’t have to rely on massive tax hikes or spending cuts.

Of course today, with the national debt and budget deficits reaching new highs and the nation’s economic health anemic at best, the old dichotomy is less tenable than ever. Increasing tax rates or cutting federal spending cannot be done effectively without disturbing a majority of Americans. Obama’s deficit commission stated that making reductions for sustainable levels of debt and deficits would necessitate large tax increases or major spending cuts, and quite probably necessitate some of each. Even if these were done, given the structural dislocations in the current economy, it isn’t likely the measures would do enough in time to turn the economy around. The fact is that both options share or possibly redistribute scarcity.

Sure, spending should not be profligate, and taxes should be fairly levied. The far more effective answer to reducing debt and alleviating a budget deficit, however, is to grow the economy and increase business revenue. Significant and sustainable increases in the revenues of business, however, are unlikely using the standard economic shell games of the day, such as off-shoring jobs, lay-offs, and selling subsidiaries. To achieve significant sustainable increases, businesses must increase and maintain their competitive advantages in domestic and foreign markets. Moreover, a true competitive advantage is a matter of producing goods and providing services that customers want to purchase because the products and services satisfy customers’ needs better than the competition. If a business is not excelling at satisfying customers’ needs, then any other perceived “competitive advantage” equates to nothing more than rearranging the deckchairs on the Titanic.

Under President Reagan I directed a program called the Socrates Project within the US intelligence community. Socrates enabled us years ago to foresee America’s present economic crisis, but it also identified the means to rebuild this country’s competitiveness and to turn things around. George Herbert Walker Bush scrapped the program, but it is time now to complete Ronald Reagan’s great legacy and to return America to economic preeminence.

The Socrates Project utilized all-source intelligence and, by examining competition worldwide, determined that the US and its organizations had begun losing competitive advantage in the marketplace after World War II as a result of switching from technology-based planning to economic-based planning as the foundation of most decision-making. Socrates also foresaw that if the US continued to rely upon economic-based planning with its inherent degradation of competitive advantage, the economic health of the US would go into catastrophic freefall and no amount of economic maneuvering would be able to stop it.

From the vantage point of Socrates, we also saw that China via an aggressive use of technology-based planning was, in effect, rapidly building itself into the next world superpower atop the wreckage of US manufacturing industries and a systemic failure to apply technology strategically to marketplace coordination and the output of real goods and services. China was outmaneuvering the US and its organizations in the acquisition and utilization of worldwide technology purposefully to decimate America’s ability to generate competitive advantage long-term, as well as to ensure its own maximum competitive advantage across the full range of markets and industries into the future.

To rebuild America’s competitiveness, the Socrates Project developed a highly advanced form of technology-based planning called automated innovation. In automated innovation, the process for acquiring and utilizing technology for a competitive advantage, including research and development, is automated so that it can be executed with unprecedented speed, efficiency and agility. Automated innovation would enable the US and its major public and private organizations to consistently outmaneuver China in the exploitation of technology, in order to acquire and maintain maximum competitive advantage and thereby greatly increase corporate revenues.

After the first President Bush abolished the Socrates Project for political reasons, the basis of the initiative was moved to the private sector, where it has been considerably refined since that time.

Debates today on how to best reduce the US national debt and federal budget deficit must include a third leg and not only the tired rhetorical tug-of-war between the need and desire to increase taxes or cut spending. What needs to happen is that businesses must increase their revenue from their private businesses and do so in a significant and sustained way, in order to grow the economic pie and thus exponentially bring in more tax revenues towards retiring the debt and living in our means year to year. The political debate must include more than the usual arguments. Corporations and businesses have to refrain from mere economic shell games claiming profit while they hollow out their insides and lay off American workers.

Businesses will naturally do this if and when tax and trade policies are less regressive, and when public-private partnerships produce the tools they need to have a real technology-based competitive edge. The US Government and various state governments should look into tech-based planning models, in order to fully appreciate and address their sagging economies and debt burdens, which are unique to this timeframe and not cyclic but systemic in their nature. To fully address the economic health of the US, the US Government should move resolutely towards a reexamination of President Reagan’s Socrates Project and so usher in the automated innovation revolution in this country and a return to sustained economic prosperity and a revitalized American Dream.

Michael Sekora is the former director of the US government’s Socrates Project.

    © 2010 Copyright  Michael Sekora - All Rights Reserved

    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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