Monday, October 11, 2010

GOP Candidate's Brilliant Plan To Cut The National Debt

South Carolina's Jim Pratt, running against James Clyburn, is proposing such a plan.
By Adakin Valorem
October 10, 2010

Our national debt is at $13.5 trillion and growing. At current Treasury rates of around 2%, each billion dollars of debt costs around $20 million in annual interest payments. That means taxpayers are on the hook for $270 billion each year, with no reduction in principal.
With Treasury bonds paying only 2% interest, how do you suppose we are going to be able to attract buyers for all of our Treasury bonds? Obama’s answer is to “monetize” the debt — have the Federal Reserve buy Treasury bonds on the open market. But where does the Federal Reserve get its funds? They print it.

Simply printing money is only a short-term solution. Eventually, most of the foreign owners of our bonds are going to start noticing that the value of our inflated dollars are sinking faster than the 2% interest being paid. Pretty soon, the market is going to demand higher and higher interest rates in order to attract investors to our devaluating paper promises. And what do you think the cost to taxpayers will be when interest rates return to their historic rates of 4% to 6%? Suddenly that cost to taxpayers could easily become a trillion dollars each year.

Is there an alternative solution? Yes, and it’s exactly what a GOP candidate in South Carolina’s 6th Congressional District is proposing.

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