Ramon Martinez develops and presents a thought provoking solution to eliminate the national debt separately from balancing the federal budget.

1. A Thought Provoking Solution to
the U.S. Debt and Deficit Crises
By
Ramon Martinez
Lieutenant Colonel, US Air Force (Retired)
Strategy, Management, Public Policy, & Insight Consultant
XTek Solutions, Inc.
August 2011
Background
The United States spends more money than it collects. The fact that we conflate
our debt and deficit with our federal budgetary process complicates and worsens
this predicament.
Our national debt limit and deficit crises are the result of a system of complex,
interrelated, current and emergent set of conditions. Our tinkering and
separately tweaking the elements of the U.S. economy and fiscal budget has
produced unintended consequences that unjustly tie the noose over our children
and grandchildren’s future. Offering a palliative to relieve the symptoms and
our anxiety is not the solution to our crises; these sedatives mask and amplify
our predicament. We will experience greater pain and suffering for generations
to come.
The solution goes beyond cutting federal spending, increasing the debt ceiling, or
raising additional revenue by way of more taxes. It will be impossible for our
government to function well and balance our budget given the current and
emerging conditions. Rather, the solution requires identifying, addressing, and
managing the underlying causes of our dysfunctional sovereign debt and deficit
crises.
This paper presents a thought provoking proposal to eliminate the national debt
separately from balancing the federal budget. It accomplishes this end-in-view
by (a) creating a national debt market to buy and sell national debt certificates
that should lead to reducing $1 trillion annually off the national debt over a 16-
year time frame; and (b) enacting a 5 percent national debt sales tax generating
$850 billion to pay the annual interest on the current national debt.
Solving the national debt predicament independently of the federal budget
empowers the U.S. to prepare, evaluate and implement a balanced budget that is
transparent, accountable and credible to help establish the conditions for the
creation of wealth, sustaining healthy growth, building a resilient economy and
nation, and meeting the needs of the people.
Ramon Martinez
Lieutenant Colonel, USAF (Retired)
xtek_solutions@msn.com

2. A Thought Provoking Solution to the U.S. Debt and Deficit Crises
The U.S. Economic Predicament
The United States confronts a colossal economic crisis that we can characterize as
a speeding runaway spacecraft traveling towards a black hole. Although the
U.S. debt is approaching $15 trillion (actually $14.5 trillion), the U.S. maintains an
additional $66 trillion in obligations and guarantees; this does not include debts
and unfunded liabilities owed by each of the 50 states. Moreover, the national
debt increases approximately $6 billion daily. These numbers are astronomical
and almost beyond comprehension.
Based upon the current interest rate, the U.S. pays $700 billion annually on the
current interest owed on the national debt. With the U.S. presently collecting
over $1.1 trillion in income taxes and an additional $1.1 trillion from other tax
revenue, the U.S. generates a total of $ 2.2 trillion annually.
Since one third of U.S. tax revenues goes toward paying the interest on the
national debt, this means the government should have only $1.5 trillion to spend
on its commitments. Without any fiscal changes, U.S. commitments for spending
in 2011 will be over $3.8 trillion; this strongly suggests that the U.S. is creating an
annual deficit of $1.65 trillion. Therefore, the national debt is really approaching
$16 trillion and we have in view another imminent crisis.
Some Additional Facts
The current population of the United States is over 310 million. There is an
estimated additional 50 million people with legal residence or undocumented in
the U.S.
The documented gross national product (GNP) of the United States is over $15
trillion. The U.S. has an underground economy of illegal and unreported income
from the production and sales of legal goods and services that is estimated to be
approximately $2 trillion. This massive underground economy creates the
adverse impact of taxable economic activities not being reported, collected, and
generating revenues for the U.S. federal budget.
The U.S. population to national debt ratio equates to every citizen, regardless of
age, owing $50,000 as their percentage of the national debt.
What We Must Stop and Start Doing
The government’s tried and true conventional methods, which include
maladaptive policies and offering perverse incentives, encourage the wrong
economic behaviors and can’t solve crises of these epic and pan-generational
proportions. The conditions have changed, and the more prudent,
transformational course of action is to redesign and restore our budget to align
with the current and emerging 21st century conditions and opportunities. This
translates into ending our learned helplessness and taking action now to create a
budget that works for all Americans.
2
Ramon Martinez
Lieutenant Colonel, USAF (Retired)
xtek_solutions@msn.com

3. A Thought Provoking Solution to the U.S. Debt and Deficit Crises
National Debt Certificate Program
The solution is to use private and public monies to eliminate our national debt.
We propose reducing $1 trillion off the national debt each year during a 16-year
period, which is doable, and totals $16 trillion. The U.S. can accomplish this by
buying and selling national debt certificates through a national debt market.
This should lead to the market creating wealth to reduce the national debt.
First, in order for the plan to work, Congress would have to immediately freeze
the national debt at $16 trillion.
Second, since the U.S. population-to-national debt ratio equates to $50,000 per
citizen, the U.S. would issue a National Debt Certificate (NDC) to every citizen
declaring that the bearer owes $50,000 to the federal government.
Third, the person or entity that pays the entire face value of the NDC would
receive special tax credits for a total of 7 years against their future income.
Fourth, instead of the face value being $50,000, the deductable income amount
would be $100,000 during the first year. The certificate value and deductible
income amount for years two through six would be the face value of $50,000.
The face value and deductible income amount would again be $100,000 in the
final 7th year.
Fifth, all certificates would be able to be bought and sold in a national debt
market.
Sixth, individuals would be able to purchase the NDC tax credits using their
Individual Retirement Accounts (IRA); and individuals would not be penalized
for using their IRA.
Seventh, the revenue generated from the NDCs would be strictly used to pay the
$16 trillion national debt.
Finally, since the GNP, including documented and undocumented incomes, is
$17 trillion, enacting a 5 percent national debt sales tax on all goods and services
should generate $850 billion annually to pay the annual interest on the national
debt. The federal government would be limited to using the generated revenue
only to pay the annual interest on the national debt, and the sales tax decreases
as the annual interest on the national debt decreases. The NDC Program is
predicated on maintaining on-going balanced budget.
Our Fate, Our Choice
The U.S. confronts a catastrophe of epic and trans-generational proportions. Our
leaders must make crucial decisions about our national debt and budget. Do
they continue with conventional methods of tinkering, tweaking, and offering
palliative medicines that treat the symptoms, worsen our conditions, and then
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Ramon Martinez
Lieutenant Colonel, USAF (Retired)
xtek_solutions@msn.com

4. A Thought Provoking Solution to the U.S. Debt and Deficit Crises
leave it up to fate? Or, do they take transformational action that chooses a better
future for our children, grandchildren, grandparents, and us by establishing the
conditions for the creation of wealth and the development of a resilient economy
or nation?
The conventional method will not work. However, transformational action
offers us the best opportunity to change our predicament into a successful
outcome.
We can and will succeed by managing the national debt separately from the
budget. Creating a national debt market to buy and sell national debt certificates
using private monies and providing tax credits while enacting a 5 percent
national debt sales tax should lead to eliminating our $16 trillion national debt,
paying the annual interest on the national debt, and stimulating the economy.
By taking the debt off the U.S. budget, our leaders can develop and present a
transparent, coherent and accountable balanced budget that satisfies the needs of
the people of this great nation. Implementing such a policy would lead to
stimulating the U.S. economy; undoubtedly strengthening U.S currency on the
open market; and restoring credibility to the U.S. economy domestically and
throughout the world.
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Ramon Martinez
Lieutenant Colonel, USAF (Retired)
xtek_solutions@msn.com