Some data:
Current National Debt:
5.6 trillion dollars (5.6 * 10^12)
Current Interest expense on debt:
360 billion dollars (3.6*10^11) - an average interest rate of 6.4%
Proposed Republican Giveback
800 billion dollars over 10 years = 80 billion dollars per year
Proposal: Amortize the debt over 25 years
In other words, the government should issue a notes- just like the mortgage note that people have on their homes - totaling an amount that would pay off the debt and replace it with fixed monthly or annual payments. Included could be default penalties - just as in a mortgage note(If your mortgage payment is late, by contract, the lender has the right to add a 5% penalty to the payment).
Advantages
CostIt would still be possible for various administrations to run a deficit. This is not a bad thing. Running a deficit is a useful fiscal tool in managing the economy. But each administration would be responsible for it's own deficit. Paying down the deficit in good times would be recommended.
- The sins of the past would be swept up and isolated from the sins of the present and the future
- the default penalty would be a strong incentive to pay the amount due
- the payment would not be that much more than we are now paying in interest at current interest rates (see below)
- the decisiveness and clarity of such a move would have a striking effect to lower interest rates overall, creating even greater savings
Sample proposal: 25 year note with monthly payments at an interest rate fixed for 5 years and determined by the market on an annual basis thereafter. Assume an interest rate of 6%. The annual payment would be the same as for a 25 year mortgage at 6% for the principal amount of 5.6 trillion dollars. Using a mortgage calculator gives:Monthly payment: 36.1 billion dollars
Annualized: 433 billion dollars
Current interest payments: 360 billion dollars
Extra Cost 73 billion dollars
This is less than the proposed Republican Giveback, and will give more back to the American people in the form of lower interest rates on mortgages and other debts, more economic stimulation - jobs, and more stability and security for future generations