How to reduce the national debt without raising taxes or cutting spending

Discussions about deficits and debt reduction inevitably center on whether and how to reduce government spending or increase tax rates. Proponents of increasing taxes argue over what level tax rates should be increased to and for which segments of the population. Proponents of decreased spending debate which federal programs should be trimmed or eliminated altogether. But this choice is a classic false dichotomy. If we grow the economy enough, we won’t have to rely on massive tax hikes or spending cuts.

Of course today, with the national debt and budget deficits reaching new highs and the nation’s economic health anemic at best, the old dichotomy is less tenable than ever. Increasing tax rates or cutting federal spending cannot be done effectively without disturbing a majority of Americans. Obama’s deficit commission stated that making reductions for sustainable levels of debt and deficits would necessitate large tax increases or major spending cuts, and quite probably necessitate some of each. Even if these were done, given the structural dislocations in the current economy, it isn’t likely the measures would do enough in time to turn the economy around. The fact is that both options share or possibly redistribute scarcity.

Sure, spending should not be profligate, and taxes should be fairly levied. The far more effective answer to reducing debt and alleviating a budget deficit, however, is to grow the economy and increase business revenue. Significant and sustainable increases in the revenues of business, however, are unlikely using the standard economic shell games of the day, such as off-shoring jobs, lay-offs, and selling subsidiaries. To achieve significant sustainable increases, businesses must increase and maintain their competitive advantages in domestic and foreign markets. Moreover, a true competitive advantage is a matter of producing goods and providing services that customers want to purchase because the products and services satisfy customers’ needs better than the competition. If a business is not excelling at satisfying customers’ needs, then any other perceived “competitive advantage” equates to nothing more than rearranging the deckchairs on the Titanic.

Under President Reagan I directed a program called the Socrates Project within the US intelligence community. Socrates enabled us years ago to foresee America’s present economic crisis, but it also identified the means to rebuild this country’s competitiveness and to turn things around. George Herbert Walker Bush scrapped the program, but it is time now to complete Ronald Reagan’s great legacy and to return America to economic preeminence.

The Socrates Project utilized all-source intelligence and, by examining competition worldwide, determined that the US and its organizations had begun losing competitive advantage in the marketplace after World War II as a result of switching from technology-based planning to economic-based planning as the foundation of most decision-making. Socrates also foresaw that if the US continued to rely upon economic-based planning with its inherent degradation of competitive advantage, the economic health of the US would go into catastrophic freefall and no amount of economic maneuvering would be able to stop it.

From the vantage point of Socrates, we also saw that China via an aggressive use of technology-based planning was, in effect, rapidly building itself into the next world superpower atop the wreckage of US manufacturing industries and a systemic failure to apply technology strategically to marketplace coordination and the output of real goods and services. China was outmaneuvering the US and its organizations in the acquisition and utilization of worldwide technology purposefully to decimate America’s ability to generate competitive advantage long-term, as well as to ensure its own maximum competitive advantage across the full range of markets and industries into the future.