The options you give us to select from are extremely closed-minded. One can be opposed to a VAT without "not caring".

Saw a couple things in here that need to be cleared up.

1. Social Security and Medicare are included in the Debt, but not as you would think the way they are portrayed. Part of the debt is the IOUs that we owe the Social Security and Medicare trust funds. Yes we owe money to ourselves. $4.6 trillion of the $14.2 trillion debt is intragovernmental debt.  Social Security Trust fund is estimated to last another 25 years with nothing done. Medicare 12 years.  So in other words they are not the current problem.

2. Some agencies like the US Postal Service are not paid for out of the budget. They are self funded.  Social Security and Medicare technically are self funded as well, but we have allowed the surpluses they carry to be used to pay for other things. Thus we have #1 above.

A friends approach to elimating the debt.

http://www.facebook.com/#!/notes/aaron-erickson/how-i-would-solve-the-debt-problem-by-aaron-erickson/10150261700947933

So we have a debt problem. And we obviously need to solve it. Below I outline one solution from a mere armchair economist.

Why not solve this debt problem by having a one time levy on the assets of everyone. According to Wikipedia (http://en.wikipedia.org/wiki/Wealth_in_the_United_States), the current amount of net wealth in the US is $54.2 Trillion. We have a debt of $15 Trillion, give or take. You solve this by doing a one time, 28% tax on all wealth.

How would this work? Well, for liquid wealth (stocks, retirement portfolios, pensions, etc.) - it is easy, you pay the money now. For less liquid assets, say, homes, you can either pay it off, or you do some sort of equity sharing arrangement with a fund that holds the asset as collatteral against the debt. You stay in your home, but the government's creditors now have an equity position in it. Same kind of arrangement can be had for any other non-liquid asset, like farmland, a closely held business, or shares of a company that you do not want to devalue by selling all at once.

Would it be painful? Yes. But it resets the national debt at zero. If you do this, stop some of the wars that are costing us lots of money with little benefit, and clean up waste in our healthcare system, you could drastically reduce corporate income taxes and personal income taxes - while providing more services for the poor, the infirm, and the aged. You take the one time 27% hit to your wealth, but in return, you get to really hit the reset button and get rid of the drag on the economy.

There is only one problem. The rich would fight it tooth and nail. For some reason, the really wealthy in this country want flat taxes when it comes to income, since those are the ones where they pay more - but don't want them applied to everything else - especially property. Every year, my wife and I pay property taxes equal to 4% of the value of our house. Heck, we pay a wealth tax on an asset we don't even own - since given the housing crisis, we are underwater. But even if the loan were paid off tomorrow, if our house were our only asset, we would be paying an annual 4% wealth tax. Most middle class people who are homeowners pay something like this, a wealth tax of 1-5% per year on real property.

Do the people that have 90% of the wealth pay this much? Likely not. The more wealth you have, the less your main asset tends to be real estate. Other forms of wealth tend to be much less heavily taxed as wealth tax. You may pay income taxes (but at far lower rates than you or me, see hedge funds and carried interest) - but almost certainly no wealth taxes. The result is that the effective wealth tax rate goes down the more wealth you have. In the US, wealth isn't taxes progressivley, it is taxed regressivley.

That all said, we are going to do this anyway. We probably end up devaluing the dollar - effectivley defaulting - which levies aa de-facto wealth tax because a devaluation would basically mark down all assets held in dollars. The problem with this approach is it is even more regressive, since it is people on fixed incomes, people who work for wages, who end up paying the most. The pain is uneven, and if you go this route, you lose your credit rating - who would invest in the US again after something like this?

A one time wealth tax would be superior in that we could at least attempt to more evenly spread the pain in a fair way, while retaining our credit rating - and likely enhancing it! We would show the world that we pay our debts - even if it is short term painful. And we still have time to do it. This gets a lot harder when your debt is higher than your assets. Given our debt is still under 30% of our net assets, it seems as though doing this soon is our best hope to ever pay it off.

Damn that sounds like a horrible idea. Interesting point about the property taxes being a poorly-applied wealth tax though.

I already pay roughly 10% sales tax in Tennessee so I am oppossed to this idea. I would prefer a cut in the educational system.