Guest Blogger: Part IV: The Debt Ceiling: The Antoine Marshall Proposal

Guest Blogger Antoine Marshall breaks down the Debt Ceiling and puts forward his original proposal (in a 7 part blog series)-- let's hope Congress takes notice.  Antoine Marshall is a rising 3rd year law student at Wake Forest University. http://www.linkedin.com/pub/antoine-marshall/1a/267/148

The Marshall Plan:
(Disclaimer: This plan is constructed under the premise that I had full authority. I understand that it would be politically unfeasible to pass in our current legislature)

-            Order the Federal Reserve to buy and hold $750 billion - $1 trillion in debt

The Federal Reserve Board routinely buys and sells U.S. debt as part of its monetary policy operations. In the current downturn it has made the unusual decision to buy up hundreds of billions of dollars of long-term government bonds and more than $1 trillion of mortgage backed securities in order to help keep long-term interest rates low and thereby provide support to the economy.

This option would have the Fed sell back at most $250 billion to the public (it intends to sell it all back), keeping the flow of interest on this debt going back into the Treasury. This way the debt issued to support the economy in the downturn does not become a burden on the government in the future.

In ordinary times, the decision by the Fed to buy large amounts of government debt could lead to inflation. This is unlikely to be a serious problem in the current context of near double-digit unemployment. When the unemployment rate begins to return to more normal levels, the Fed could use other tools, such as raising reserve requirements or raising the federal funds rate, to ensure that inflation does not get out of control.
Savings by 2020: $1.125-$1.5 Trillion

-          Tie Retirement Age of Social Security and Medicare eligibility into Life Expectancy rates.
One of the drawbacks to most retirement programs are that we are living longer than when the Government first passed social security and Medicare programs. Current Social Security law states that the normal retirement age is 62, and that age will begin rising two months a year in 2016.

Under this proposal we make the retirement age 14% of the life expectancy rate. The average life expectancy in the US is currently 77 years, so we raise the normal retirement rate to 66.

Savings by 2020: $78 Billion

-          Reduce Troops in Iraq and Afghanistan to 60,000 by 2015.
This proposal is to slowly decrease the troop levels over in Afghanistan and Iraq. Troop levels in both countries added up to be about 235,000 in 2010. This proposal calls for decreasing troop levels slowly to 195,000 in 2012, 80,000 in 2014 and 60,000 in 2015.

Savings by 2020: $690 Billion

_        Raise Medicare Premium to 35%
Currently Medicare beneficiaries pay for 25 percent of the cost of the Supplemental Medicare Insurance coverage (Part B) that primarily goes for paying doctors fees. (This cost is covered by Medicaid for low and moderate income seniors.)

This proposal would raise the share of the cost required of middle income seniors to 35 percent of the total This would mean, that a single person over age 65 with an income of $25,000 a year would pay an additional $2,600 per year. A couple with an income of $40,000 would pay an addition $5,200 for their Medicare.
Savings by 2020: $423 Billion

-          Progressive Price Indexation of Social Security 
Currently, initial Social Security benefits are determined in a way that allows them to grow with economy-wide wage growth. This proposal changes the benefits structure so that workers whose average wage was above the 30th percentile (about $22,300) would have their benefits adjusted only with prices.
Savings by 2020: $177 Billion

-          Efficiency improvements offered by Secretary of Defense Gates
Secretary Gates has already addressed cuts that could be made in the defense budget through the increasing the efficiency of military depots, commissaries, and exchanges. This proposal says we follow those proposals verbatim
Savings by 2020: $133 Billion

-          Reduce spending on ship building
During the years of the Reagan Administration’s military buildup the Navy paid about $1.2 billion. Now that cost is about $2.7 billion. This option would force the cost of ship building to increase only with the rate of inflation.

Savings by 2020: $52 Billion

Stay Tuned for Part V

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