Menus:

Home
About the Author
Book Preview
Front Book Cover
Back Book Cover
Book Contents
Book Supplements
Book Credits
Book Links
Book News
Book Orders
Join the Discussion
Contact Us
Quick Survey
Survey Results
FAQS
Rumors and Gossip
Visitor Statistics
International
USA Welcome
Mars Mission
Spacetime
A Little Knowledge
Final Frontier
Life Choices
Love Stories I
Love Stories II
Human Condition
The Good Life
More Money
Deficits and Debt
Hither the Future
H.A.B.C.
Raise! Too
Just for Fun
Parade of Life
Celebrate Life
GeoEarth
Open Earth
Progress
One World
Guns and Bombs I
Guns and Bombs II
War and Peace I
War and Peace II
Black Crime USA I
Black Crime USA II
4th Dimension
Olympics 2012
Good News
Call to Duty
Addiction/Recovery
Desolate Worlds
A Perfect World
Invisible Life
Joy
Sexual Rapture
Enjoy
Global Awareness
Democracy
Nations
History
History Live
Think
The Big Picture
Save the Children
A Different Way
Big Fun
Staying Alive
Cosmic Secrets 1
Cosmic Secrets 2
Cosmic Secrets 3
Cosmic Secrets 4
Cosmic Secrets 5
Cosmic Secrets 6
Places and Faces
Thriller
Derailers
California Living
Global Living
Info Superhighway
World Wide Web
Retro Web
Contempo Web
Semantic Web
XML Web
Mobile Web
Education Web
Information Web
Cloud Computing
Big Data
Health Is Wealth
Education for All
Food for All
Water for All
Prosperity for All
Nutrition for All
Justice for All
Hygiene for All
Tolerance/Respect 1
Tolerance/Respect 2
Tolerance/Respect 3
Ebola Watch 2014
Murder Watch 2015
Earth Watch
The Market System
Search Engine
PC-OS
Very Wise Humans
Memo to Humans
Work and Play
Rainbow
Web Weather Live
Annual B. Award
World War 3
Same Thing
The Human Story
12 C's
MENUS (FOOTER)


DEFICITS AND DEBT

In the unabridged version of the book The Age of Homo Sapiens Sapiens: Heaven or Hell, considerable time is devoted to a discussion of ways in which households could bolster economic security and prosperity in life. Based on the USA government's yearly budget deficits and its cumulative national debt, it appears as if the federal government ought to consider alternative ways to manage its day-to-day fiscal operations better.

One of the first principles of financial management is budgeting. How many of you actually budget? Probably not many. In the case of the USA government, it is not a matter of budgeting at all. It is a matter of balancing the budget. It is an inability to attain budget surpluses.

Admittedly, running the USA government is inherently different from running a private business. To be sure, the following types of unforeseen events can prove to be budget busters:

Economic and physical resources must be marshalled on a national scale to address these kinds of unforeseen events. It becomes a challenge to address these unforeseen events while at the same time trying to balance the budget. It takes a lot of money for the government to respond to these kinds of unforeseen events. Everybody knows that both natural and human-induced disasters will arise, but nobody knows exactly when or where on Earth they will arise.

THE WHAT: USA FISCAL WOES

What is the budget deficit? What is the national debt? The yearly federal budget contains both a spending component and a revenue component. If spending exceeds revenue, then there is a budget deficit. If revenue exceeds spending, then there is a budget surplus. When there are deficits, each yearly deficit accumulates and grows into the national debt.

The following table provides a simple illustration:

HYPOTHETICAL BUDGET
Budget Revenue Spending Balance (Deficit - / Surplus +) Cumulative Debt
Year 1 $75 ($100) ($25) ($25)
Year 2 $75 ($100) ($25) ($50)
Year 3 $75 ($100) ($25) ($75)
Year 4 $75 ($100) ($25) ($100)
Year 5 $75 ($100) ($25) ($125)
TOTAL $375 ($500) ($125)  

As the above table illustrates, a deficit occurs when the amount being spent exceeds the revenue on hand. In the above example, the government receives $75 in revenue each year, but it spends $100. As a result, the government runs a $25 deficit each year. In turn, each yearly deficit accumulates into the national debt. In the above example, the annual $25 deficits accumulated into a national debt of $125 over a period of 5 years. In other words, over the five-year period, the government received a total of $375 in revenue but spent $500. There was a shortage, net difference, or debt of $125.

How is that the government can spend more money than it receives? The government can spend more money than it receives through its power to borrow money (and also through its power to print money). In the above example, each year the government would borrow the additional $25 it needed to complete its spending decisions. The government would borrow the money by selling government securities to investors. In exchange for the privilege of borrowing, the government would pay interest to those who purchased its government securities. The interest that the government would pay to purchasers of its securities, too, would become a form of spending in the following year's budget.

The following link provides an historical view of yearly USA budget surpluses and deficits from 1789 (and projected) through 2017:

The following link provides an historical view of cumulative USA national debt and savings from 1940 (and projected) through 2017:

The following link provides an overview of the USA's national budget for the 2012 fiscal year:

Most students of finance agree that the USA cannot continue accumulating deficits and debt forever. At some point in time, a decision has to be made to tackle the deficit and debt problem, get it under control, and bring it into balance.

According to the website http://usdebtclock.org/, as of 2013, on average, each person in the USA would need to pay a total of approximately $185,000 to eliminate the national debt. Why delay the inevitable? The longer the USA waits to tackle its deficits and debt, then greater will be the financial burden on future generations to repay the debt. Ideally, you want to bequeath your children with an inheritance, not with a debt to repay.

THE HOW: SOLUTIONS

How can the USA balance its budget? How can the USA eliminate its national debt? There is a huge debate in the USA about how best to tackle the interrelated deficit and debt problems. Some (mainly Democrats) argue that more emphasis should be placed on increasing revenue to match spending. Some (mainly Republicans) argue that more emphasis should be placed on decreasing spending to match revenue. To use the simplistic budget illustration above, some (usually Democrats) argue that spending should remain unchanged at $100. Instead, revenue should be increased by $25 (from $75 to $100) to match the $100 in spending. Others (usually Republicans) argue that revenue should remain unchanged at $75. Instead, spending should be decreased by $25 (from $100 to $75) to match the $75 in revenue. There is a political stalemate in the USA over which of these approaches to adopt.

An alternate argument is to do a little bit of both, that is, the balanced approach. The balanced approach requires both an increase in revenue and a decrease in spending to reach a harmonic balance. Using the simplistic illustration above, the balanced approach would require increasing revenue by $12.50 and decreasing spending by $12.50 such that both revenue and spending are equal to $87.50. Under the balanced approach, citizens and businesses would be required to make sacrifices if the national debt is to be eliminated. Citizens and businesses would be expected to pay a little bit more (in taxes, for instance) to balance the budget while getting a little bit less in government goods and services (like, military defense, for instance).

A BALANCED APPROACH
Budget Revenue Spending Balance (Deficit - / Surplus +) Cumulative Debt
Year 6 $87.50 ($87.50) $0.00 $0.00
Year 7 $87.50 ($87.50) $0.00 $0.00
Year 8 $87.50 ($87.50) $0.00 $0.00
Year 9 $87.50 ($87.50) $0.00 $0.00
Year 10 $87.50 ($87.50) $0.00 $0.00
TOTAL $437.50 ($437.50) $0.00  

There is no shortage of proposals to eliminate the national debt. On the USA Welcome page of this website, I cited some of those proposals:

  1. Restoring America's Future
  2. The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform
  3. A Roadmap for America's Future | The Budget Committee Republicans
  4. Peter G. Peterson Foundation Solutions Initiative | pgpf.org
  5. Government Spending Reforms

There is, however, a shortage of political consensus and national will to tackle the national debt. Some argue that if the USA is smart enough to send humans to the Moon and if the USA is smart enough to send spacecrafts beyond the Solar System, then surely it must be smart enough to solve its national debt problem.

One approach to eliminate the national debt would be to let a debt-reduction model do the job. Such a debt-reduction model systematically and methodically would traverse through the budget. It would make targeted revenue increases and targeted spending cuts based on pre-determined constraints. The debt-reduction model would keep adjusting revenue and spending across multiple budget categories until it succeeded in eliminating the national debt.

Microsoft Excel offers one such systematic and methodical approach. It is called the Excel Solver. The Microsoft Excel Solver comes from the operations research/management science (OR/MS) field of study. The above balanced approach shows one way in which Microsoft Excel's Solver feature could be used to assist government decision makers in eliminating the national debt. Solver would proceed to select the balanced solution given the following assumptions:

The following table recaps how Solver proceeded to eliminate the debt. Revenue increased from $375 to $437.50 for a net increase of $62.50. Total spending was reduced from $500 to $437.50 for a net decrease of $62.50. The combined savings from increasing revenue and decreasing spending came to $125, which was precisely the amount needed to eliminate the $125 national debt.

EXAMINING SOLVER'S BALANCED SOLUTION, PART 1 OF 2
Budget Revenue Spending Debt
Period 1 - 5 $375.00 ($500.00) ($125.00)
Period 6 - 10 $437.50 ($437.50) $0.00
Period-over-Period Change $62.50 $62.50 $125.00
Debt     $0.00

The following table is presented as another way to view how Solver eliminated the debt. Using the initial five-year revenue trend of $75 per year and the initial five-year spending trend of $100 per year, Solver increased revenue by a net amount of $12.50 per year and decreased spending by a net amount of $12.50 per year for a net change or savings of $25 per year. The yearly $25 savings were used to reduce and eliminate the debt over a five-year period of time. Given the above assumptions and constraints, Solver decided that the most efficient solution was to reduce the debt by $25 per year until it reached $0 at the end of five years.

EXAMINING SOLVER'S BALANCED SOLUTION, PART 2 OF 2
    Revenue Trend Spending Trend   Starting Debt
    $75 ($100)   ($125)
Budget Debt at Beginning of Year Increase in Revenue Over $75 Yearly Trend Decrease in Spending over -$100 Yearly Trend Net Yearly Savings Debt at End of Year Due to Savings
Year 6 ($125) $12.50 $12.50 $25.00 ($100.00)
Year 7 ($100) $12.50 $12.50 $25.00 ($75.00)
Year 8 ($75) $12.50 $12.50 $25.00 ($50.00)
Year 9 ($50) $12.50 $12.50 $25.00 ($25.00)
Year 10 ($25) $12.50 $12.50 $25.00 $0.00
TOTAL $62.50 $62.50 $125.00  

Obviously, the above assumptions are for illustrative purposes only and are not meant to mirror how the deficit and debt, in reality, would be reduced each year. The point of the illustration is this: Microsoft Excel Solver is extremely capable of modeling complicated real-world optimization scenarios and finding solutions to those scenarios including unbalanced scenarios.

The following videos offer an introduction to the Microsoft Solver optimization technique:

Watch (How to Use the Solver Tool in Excel)




Watch (Use the Solver Add-in for Excel to Produce a Specific Formula Result)


The most challenging aspect of eliminating the national debt is devising an action plan or Solver-type debt-elimination solution that is acceptable to a majority of political leaders. After a Solver-type debt-elimination solution is found and accepted by a majority of political leaders, it simply would be a matter of putting the debt-elimination plan into action, monitoring it, measuring its progress, and evaluating the plan's overall performance. The evaluation process would determine if the national debt-elimination plan is performing as intended. If it is determined that the national debt is not decreasing as planned or if the national debt is continuing to rise, then the evaluation process should reveal what went wrong and what needs to be adjusted to correct the problem. Corrective actions would be taken to put the national debt-elimination plan on its proper course. It would be wonderful if the federal government would upload such a plan to its public website for all citizens to follow along as the debt is eliminated.

To make things interesting and exciting, the USA government might wish to consider soliciting debt-elimination solutions from the world public. The government could create a petition website for citizens all over the world to submit Solver solutions to eliminate the national debt. The government would establish a committee of experts to study the submissions. The top twenty-five submissions would be awarded monetary prizes. For example, the 1st place entry could be awarded $25 million, $24 million for the 2nd place entry, $23 million for the 3rd place entry, and so forth. The X PRIZE Foundation and the Knight Foundation already are doing something similar to find solutions to various global challenges:

Watch (Making the Impossible Possible)




Watch (Knight News Challenge OI Engine: How the Platform Works)

Knight News Challenge OI Engine: How the Platform Works from Knight Foundation on Vimeo.




Additional Links for Deficits and Debt:

  1. Excel 2013 - data analysis, charts, and graphs - Microsoft Store Online
  2. OpenSolver for Excel
  3. Excel Solver, Optimization Software, Monte Carlo Simulation, Data Mining - Frontline Systems
  4. LINDO Systems - Optimization Software: Integer Programming, Linear Programming, Nonlinear Programming, Stochastic Programming, Global Optimization
  5. Federal Budget 101 - National Priorities Project


FLATTR THIS SITE:






SEARCH THIS SITE:





Intellectual Property Disclosures: All videos and songs (as well as many of the images) referenced or spotlighted throughout this website are the legal and intellectual properties of others. All content and opinions on this website () are those of the author (Edward Bruessard) exclusively and do not necessarily reflect the opinions of the contributors, creators, owners, and distributors of these referenced videos, songs, and images. The author holds no legal interest or financial stake in any of these referenced videos, songs, and images. The contributors, creators, owners, and distributors of these referenced videos, songs, and images played no role at all regarding the appearance of said videos, songs, and images throughout this website; they had no clue that this website would be spotlighting their works.


Quick Information:

See the 'About the Author' page of this website

ORDER PRODUCTS HERE

get it now

A. Get the Electronic or Digital Version of the Book (Abridged 2nd Edition)

  1. E-junkie
  2. XinXii

Get the Digital Version of the Book Now (Abridged 2nd Edition):

    a. eBook (epub)
    Add to Cart

    b. eBook (mobi)
    Add to Cart

    c. Flipbook (exe) Windows
    Add to Cart

    d. Flipbook (app) MacOS
    Add to Cart

B. Get the Print Version of the Book (Abridged 2nd Edition)

1329_cover_front
Buy_now

C. Get the Excel Spreadsheet with Formulas

  1. Select Tables
    Add to Cart

D. Get the Offline pdf Version of This Website

  1. Offline Website Version
    Add to Cart

View Cart

CONTACT US

  1. Sendmail
  2. Email

TRENDING NOW

  1. Facebook
  2. Twitter
  3. YouTube
  4. 4 U 2 Comment

RELATED BRUESSARD WEBSITES