Eliminating the U.S. government’s debt is a Herculean task that could take decades. In addition to obvious steps, such as simply hiking taxes and slashing spending, the government could take a number of other approaches, some of them unorthodox and even controversial. Below are some things it could do.
Opening the Borders
This would be highly controversial considering the growing opposition to illegal and even legal immigration. However, immigrants start businesses at twice the rate of native-born U.S. citizens. So it has been argued that opening the borders to willing workers and would-be entrepreneurs from all over the world would accelerate the creation of businesses that pay the taxes that are desperately needed to reduce the national debt.
A faster-growing population from immigration would also create more demand for everything from housing to cars to dishwashers, creating a stronger economy that will help pay down the debt. Also, more individual taxpayers would help finance Social Security and other safety-net programs for decades to come.
- There are a number of methods to reduce the U.S. national debt that go beyond simply raising taxes and cutting discretionary spending.
- One of the most controversial would be to open the nation’s borders to immigration, kick-starting entrepreneurship and consumption.
- Raising the Social Security retirement age is frequently suggested.
- A national sales tax such as seen in Canada and Japan could also help.
Raising the Retirement Age—Again
Having Americans attain full Social Security retirement benefits in their 70s instead of their 60s could help reduce the national debt by increasing the amount that people pay into Social Security and reducing the time they rely on payments from the program.
The original Social Security retirement age was 65, but due to advances in health care and lifestyle, people are able to work and live much longer than when the program was founded. The retirement age has already risen to 67 for those born in 1960 or later. Some have argued it should be raised again to 70 or even higher.
Implement a National Sales Tax
Lots of other countries have found ways to reduce their debt, and some of their methods could help the U.S. Canada, for example, has a 5% national sales tax on most goods and services—a consumption levy that some economists prefer to higher taxes on income or investments since those discourage work and saving. Heavily indebted Japan is another country that turned to a sales tax. It recently raised its national sales tax to 10%—and the International Monetary Fund urged the Japanese government to double it to 20%.
Revamp the Tax Code
There has been a lot of talk over the years about fully revamping the U.S. tax code. In 2011, a group of six Democratic and Republican senators who were dubbed “the gang of six” looked at options during a standoff over the U.S. debt ceiling. They came close to reaching an agreement on a deficit-reduction plan that would have saved $3.7 trillion over 10 years. This included slashing discretionary spending as well as reforming the tax code to eliminate loopholes. But negotiations broke down.