This article provides a "why" and a "how" as to an honest way to address our Deficits and Debt, without playing shell games.

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Any increase in the Debt Ceiling should reflect "paying off" our PAST DEBTS.  

Consider this everyday illustration:

Take the example of a family who has run up $150,000 in credit card debt.   The credit card Company tells the family they are maxed out and no more credit will be extended (i.e. they have reached their "debt ceiling").    The credit card company tells the family you have to pay off a portion of the debt, which has come due - say $50,000, before they can add one NEW dime on credit.  

The family decides to tell the Credit card Company that their solution is that instead of adding their current $5000 a month in new credit card debt, they will bring it down to $3,000 a mo. in new credit - a $2,000 lessening of spending (i.e. spending cuts).    Of course, they have not addressed the problem.   They can't add the $3,000 a mo. (in fact, they can't add $1) in new debt, until they pay off the $50,000.

So, the family realizes they really have a "revenue" problem.   The family will have to decide to find increased revenues to pay off the $50,000.   So, for example, the husband will have to work two jobs, if he currently has one job.    The wife would have to get a job, if she is currently a stay at home housewife.   The grown son, who has returned home, and is living in his parents' finished basement, must be required to go get a job, and pay rent.    Then the family can start to pay off the minimum debt of $50,000, before they can add one new dime on their credit card.

WE HAVE A REVENUE PROBLEM AND A SPENDING PROBLEM WHEN WE REACH OUR DEBT LIMIT.

This is true for the family, the State (MN), and The Federal Government.   (Of course, the federal government is its own credit card company.   They can just decide to increase the debt limit.   However, the problem is the same, as that of the family:   Cutting spending will reduce future debt, only increasing revenues can pay off past debt.)

Please copy this Chart or download one of the versions below and put it up on your website or print out copies and pass them around! Email copies to your friends! Or best, get together with your friends and put a copy of this chart in an ad in your local newspaper! You don't have to attribute it to anyone, the important thing is to show every American how the Republicans are bankrupting America (while cutting every program they can get away with) and passing their debts to your children and grandchildren, and their children and grandchildren!

Source:  http://www.lafn.org/gvdc/Natl_Debt_Chart.html

The federal government (operating budget) has a debt of $14.5 Trillion.   

  When we open up the canard of the unified budget (peel the onion, so as to say), we will find that:

  The $14.3 Trillion (now $14.5 T) debt can be broken down as follows:

  The OPERATING BUDGET (revenues from Income, estate and excise taxes - all cut from Reagan - Obama) OWES:  

  - $2.6 T (Trillion) to Social Security (paid for by Regressive FICA TAXES.)

  - $4.2 T   to MEDICARE and 110 smaller other Trust funds (paid for by FICA and other   dedicated fees / taxes)

  - $3.2 T   borrowed from China, Japan, U.K. and S. Korea etc.

  -   4.1   T   owed in Treasury notes and bonds held by US public

  -   0.4 T    Interest on the debt

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14.5 T    TOTAL AMOUNT OWED BY THE OPERATING BUDGET   (these numbers fluctuate, so these are reasonable approximations).

Solution: Destroy the Unified Budget:   "Balance individual Budgets":   Many people believe erroneously that the trust funds are Ponzi schemes.   Nothing can be further from the truth.   The Trust funds are not the problem, rather the Unified Budget - handed down by Supreme   Court in Fleming v Nestor (1960) is the Ponzi scheme (i.e. FICA tax surpluses go into the Unified budget (magician's disappearing box), and then no one in government is serious about returning the IOUs).  

  If the trust funds are an illusion, then Congress is the Magician!!!

  There have been deliberate acts of Congress over the past 30-years that have led not only to our becoming a debtor nation, but also to the "Enron style" accounting within the Unified budget.

  (1) The Reagan Admin. and Congress tried the supply-side tax cuts experiment in the 1980s, essentially lowering marginal tax rates from 70% to 50% (1st. Reagan term) and 50% to 28% (2nd. Reagan term and Bush II (39.6 to 35%).   Even with the Bush I (31%) and Clinton (39.6%) tax increases, we still are still at some of the lowest marginal tax rates in a century.

  (2) The Reagan Admin. and Congress passed the Greenspan Commission recommendations in "whole cloth", leading to massive Social Security FICA Tax Increases (from 1% on an income on $3000 at inception to $12.4% on an income on an income cap of $25,900(1986) with a Income Cap Increase annually ... 12.4% on an income cap of $106,800 (2009-2011).   They also gradually increased the retirement age to get full benefits.   Medicare Tax rate of 1.45% was extended to ALL income (i.e. NO CAP).  

  (3) Yet, Congress did not close the Barn door, i.e. they left the Unified Budget in place, so the operating budget deficits were masked by Trust fund surpluses, and the operating budget has siphoned off $2.6 T and counting from Social Security, and over $4 T from Medicare Part A and 110 other smaller trust funds.

  These are deliberate acts of Congress, and they must be held responsible!

  So, I would suggest we have "Individual Balanced budgets" - reached with both tax rate hikes (& revenue increases) and spending cuts by "individual" budgets:  

Once we break up "Unified budget" into its component parts: "by revenue source and related spending", we see the only way to fix the debt is to:

(1) Reduce spending, which will lessen future deficits and debt in the operating budget.

(2) Raises Operating budget "tax rates" and close tax loopholes to increase "Tax Revenues" (income, estate and excise) to repay the IOUs to the trust funds (FICA taxes).  

Once, and only once, the trust funds IOUs are repaid, they (individual trust funds) will have under the "individual balanced budget Act" have to deal with any further shortfalls by: (i) raising FICA taxes to maintain current benefits; (ii) reduce benefits, (ii) raise retirement age, or a combination thereof.

(B)   We have two problems.

> The first, the past due debts of the "Operating budget"

> The second, the long term unfunded liabilities.

If we solve the past due debt (requires revenue increases), first, as we should, we repay the IOUs to the trust funds (operating budget owes the trust funds), and improve the outlook and longevity of the trust funds.

However, if, as the GOP, suggests we ignore paying down the past due debt (which can only be solved with revenue increases, and the GOP unequivocally states no revenue increases, EVER),   and instead focus on the second problem only, we undermine the Social Security and Medicare program (increase age, reduce benefits), and are still saddled with a $14.5 Trillion (T) debt and growing.   i.e. this solution is an "illusion".

Speaker Boehner, Paul Ryan, Eric Cantor and all of Pope Grover Norquist's subjects in the GOP engage in untruths, when they say that "We have a spending problem, not a revenue problem".  

Instead of paying off past debts (which would entail revenue increases), they have moved with full speed to carve-up the long term liabilities.

Yet, the trust funds have not added one red hot cent to the current debt.   In fact, if you do the correct thing, and use revenue increases to pay off the current debt, you will strengthen both Social Security and Medicare.  

However, if you have taken a vow to "never increase taxes", you essentially are using the magician's cape to distract the audience (citizens of the USA), and thereby changing the lady in the cage (past debt) into the tiger in the cage (long term unfunded liabilities).

WE HAVE BOTH A SPENDING PROBLEM AND A REVENUE PROBLEM.

(a)       Currently, tax revenues at 14.8% of GDP, is at the lowest rate in over 70 years, and spending at 24.1 % of GDP is at its highest.   Any fifth grader can do the math, so why can't our so-called leaders?

  If we were dealing in honest (non-Enron) accounting, we would require the operating budget to raise taxes (income, estate and excise taxes) to REPAY THE IOUS of over $7T (Social Security, Medicare and other trust funds, paid for by regressive tax cuts.)

Not to do so would result in the largest transfer of wealth from the working class (regressive FICA tax surplus) to the tuber affluent (progressive tax cuts, and estate tax shenanigans - 0% tax in 2010)

The neo-con Republicans are ideologues, who do not understand the debt/ deficit issue.   While, Democrats are both chicken, and do not know how to explain it.

Here is how to explain the deficit and debt issue (an illustration):

Case for Spending Cuts:   If we stop the two wars in Iraq & Afghanistan. as of this moment - we stop future deficits and debt increases.   However, we do not make a dent (not 1 cent) in past debt, which with the power of compounding grows exponentially, no matter who is in office.   {Point in case: Clinton reduced the operating budget surplus for 2 years (4 years surplus was with borrowing from the trust funds), yet the national debt still grew by $2.3T.}

  Case for Revenue Increases:   We still have to pay for 10-years of War - in Afghanistan and Iraq.   We can't unwind those or the "off budget" spending on those wars.   Paying the $1.3 T for the past wars will need Revenue increases.

  The worst error the American people made was voting in the GOP majority in the House in 2010.   They are ideologues, who put their pledge to "never increase taxes" to Grover Norquist over their pledge to "defend and protect the USA".   I have requested the Justice department to investigate, if this is a "treasonable offense".

  The current republican crop is neo-conservatives (both for wars, and for tax cuts).   They are not your grandfathers "true" conservatives.   (i.e. Eisenhower Administration)   The current GOP must be sent the way of the "Whip Party".

The greatest threat to the USA is the debt and deficit!  

God Save America from the entrenched interests, intransigent politicians, and unknowledgeable leaders.

God Bless America!

Authors Bio:
I am originally from Bombay India, born 1948. I came to the US in 1974. I have two grown sons. 

Post my divorce, I obtained an MBA from SUNY at Buffalo, in Financial Institutions & Markets. I own a Financial Planning Practice (as a franchisee with a large Broker Dealer). I have been in the business since 1997. 

In 2002, I was the Democratic Party candidate for Congress in NY26CD. (www.narimanforcongress.org). In 2004, I was one of 25 winners in C-span's 25th. Anniversary Contest. 

I have written extensively on Social security and Federal Budget issues - both as a columnist for www.yellowtimes.org (now defunct) - and sent in papers to White House and Commissions. I have a petition to Stop Congress from looting our Trust Funds written in March 2001, which has turned out to be prescient with the Bush tax cuts and ensuing deficits and exploding national debt. [A Law Suit against Congress to Save our Social Security and other ... 
A Law Suit against Congress to Save our Social Security and other Trust funds from being looted! Petition. 
www.petitiononline.com/nariman/petition.html - Cached - Similar] 

I am currently (well since 2003!) working on and off on my own book (more off than on, for the past three years of the stock market debacle!) 

My favorite poem is Rudyard Kipling's IF. 

I have sought from a young age to "be good" and "do good", which is also a primary tenet of the world's first Monotheistic Religion: "Manashi, Gavashni, Kunashni" --" "Good thoughts; Good Words; Good Deeds". If I had not been born a Zoroastrian, I would very likely have become a Nun in my youth. I now follow my own version of spirituality. I do not belong to any organized religion; though, as I am often want to say the "New Testament" makes my heart sing, and my soul soar! 

Political Ideology: I consider myself a democrat, because I do believe there is a definite role for government to protect the least amongst us, from the excesses of the powerful. I see the Republican Conservative elite (members of Congress and Fox News types) as cockeyed cynicists (opposite of the old song, "Cockeyed Optimist" from the movie & Play- South Pacific), who engage in Orwellian speak. They are deliberately cockeyed (or one-eyed) in that they read the Preamble to the Constitution, and see the words, they "choose" to cynically see: Federal Government is to be responsible primarily for the "National Defense", but obtusely miss the every next phrase in the same sentence "and General Welfare". They are ideologues first, republicans second, and US Citizens a distant third! 

As for myself, I am more of a progressive pragmatist - I don't necessarily follow a Party Line - in my policy ideas and ideals. (Me thinks I have just happenstanced on to my pseudonym!)