The current economic debt situation in the United States has reached a new level of non-sustainability with interest on debt this year in the trillions. It would be prudent for Congress and the President to explore creative solutions for addressing the national debt crisis. One unconventional approach could involve identifying valuable assets that could serve as collateral.
What is Collateral?
While some argue that Congress cannot collateralize its debt, there are alternative avenues to consider. For instance, Congress could allow leases or impose substantial taxes on government-owned properties, such as mountain ranges, deserts, mineral rights, oceans, rivers, lakes, and other natural resources.
While these areas may be designated as public parks, using them as collateral to reduce our debt as citizens and a nation is a legally viable and reasonable proposition. Innovative asset allocation and collateralization strategies are imperative for the United States at this juncture.
Another idea worth exploring is the implementation of a monthly and annual fee for immigrants or visa applicants seeking employment in the United States. With a significant influx of 10 million new immigrants, even a modest fee of $100 per month could generate substantial revenue of a billion dollars per month, helping offset a tiny fraction of the $500 billion spent annually on supporting illegal immigration.
From the United Arab Emirates to China to Mexico, everyone treats immigration as a profit center except the USA. Immigrants from Latin America pay an average of $7,000 per person to have a Coyote or human smuggler get them into the USA to receive benefits and jobs.
At this rate, the major airline industry profits would triple if the government simply let immigrants take 1st Class flights into New York or Chicago. Overall, if the USA had charged the $7,000 to each immigrant this year, our debt would be reduced by $35 billion this year.
While this may not be a lot of money to some, it is enough to fund food for the working poor in the entire USA. Supplemental Nutrition Assistance Program (SNAP): SNAP, formerly known as food stamps, provides nutrition assistance to eligible low-income individuals and families. It often falls within the $30-$40 billion range in annual expenditures. Further, the U.S. Customs and Border Protection (CBP) is responsible for border security and customs enforcement. Its budget is also in the range of $30-40 billion per year.
Education & Student Loans
Furthermore, a substantial portion of America's debt is tied to student loans, which currently stand at almost $2 trillion with 43.4 million borrowers. As this debt is now becoming a burden for a substantial portion of American workers, it might be time to establish a federal online university system that licenses its e-learning and educational resources to individual states.
This system could offer working adults the opportunity to attain a college diploma or degree at no cost. Considering that it took only about two decades for this $1.77 trillion new student debt to accumulate from public “non-tax-paying” non-profit education sector, it's essential to address this problem comprehensively. An online education course with one “rock star” professor teaching thousands of students simultaneously, could be part of the solution.
This innovation is also an option for high schools, as vast numbers of teachers and students have been assaulted physically and sexually. Therefore, the online delivery would eliminate trillions in costs over the next 30 years in staff, insurance, rent, security, and lawsuits.
The Super Rich Need Protection
Naturally, Congress could tax the super rich with a fair annual wealth security tax. Thus, the government would only tax shares over a value of, say, $40 million. In this way, the wealth of families would not be hampered.
For example, Congress could implement a 1% tax per year on the value of shares owned a company like Google or Microsoft. The tax could be payable on the value of shares owned by any person, company or foundation during life or at death over $40 million. Owners of shares could keep their voting rights, but shareholders would need to pay the wealth protection taxes during life each year or at death with the total accumulated amount. To be brutally honest, it is in the best interest of all of the “super rich” and all U.S. companies to have a strong dollar, strong credit rating, and an economy that is deemed sustainable.
Backing Up the USA Debt & the Dollar?
Even today, people will ask what backs up the dollar and debt of the USA, and many will simply say it is the “sweat and labor” of workers that produces taxes for the government. However, there are other ways to collateralize a nation's debt, including:
1) Foreign Exchange Reserves: A nation's holdings of foreign currencies.
2) Gold Reserves
3) Sovereign Debt Holdings: A nation can use its portfolio of government bonds and securities as collateral
4) Natural Resources: Countries with valuable natural resources like oil, gas, minerals, or agricultural land can grant rights or concessions to extract and sell these resources in exchange for financing.
5) Infrastructure Assets: Income-generating infrastructure assets, such as toll roads, airports, or public utilities.
6) Sovereign Wealth Fund Assets and Investments
7) Intellectual Property such as patents, trademarks, or copyrights
8) International Reserves, Special Drawing Rights (SDRs) from the International Monetary Fund (IMF)
9) Public Assets: Government buildings, land, or state-owned enterprises as collateral for loans or other financial arrangements
10) Bilateral or Multilateral Agreements: Countries may enter into agreements with other nations or international organizations that involve collateralizing specific assets or resources as part of the agreement terms
11) Intangible radio frequency rights for cell phones and communications
12) Sell or lease unneeded islands or offshore territories.
In sum, this list could be expanded as technology an events change.
Overall, they say that the USA debt is backed by: The "full faith and credit" of the U.S. government. This means that investors have confidence in the U.S. government's ability and willingness to meet its debt obligations. The U.S. has never defaulted on the principal or interest payments of its Treasury securities, which helps maintain this confidence.
USA Downgraded Again
This month, Moody's revised its outlook for the U.S. credit rating, shifting it from "stable" to "negative." This change was attributed to significant fiscal deficits and a decrease in debt affordability. The decision sparked criticism from the administration of President Joe Biden.
In August, Fitch downgraded the United States' Long-Term Ratings to AA+ from AAA. The first downgrade took place under Obama in 2011, when credit rating agency Standard & Poor's cut the US credit rating from AAA to AA+, following a rancorous debate in Congress over the size of the debt.
It is evident that traditional approaches have not yielded the desired results, and it's time to “go beyond mere change” and embrace innovation and success as we seek solutions to the nation's challenges. Thinking outside the box and pursuing creative strategies is the path forward to address the pressing issues facing the United States.
Commissioner George Mentz JD MBA CILS CWM® is an international lawyer, speaker, educator, tax-economist, and CEO of the GAFM Global Academy of Finance & Management ®. The GAFM is a ESQ accredited graduate body that trains and certifies professionals in 150+ nations under CHEA ACBSP and ISO 21001 standards. Mentz is also an award winning author and graduate law professor of wealth management for a top U.S. law school.
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