Calling All Investment Experts: Take the Deficit Solution Product Challenge
Admittedly, I don’t know much of anything about finance and how bonds and investments work. You see, I have this idea that I may work, but have no real idea if it would. At the very least, my silly idea may get a really smart person to come up with a better idea. I put this out there for the goodwill of the country.
In the old days, I would just write an email or letter to the Department of the Treasury, a lawmaker, or a big shot finance professor at such-and-such university and never hear back.
So, I thought I would offer a challenge to those of you with knowledge and experience about deficits, money, investments, etc.
Here is the challenge: Can you come up with an investment product where people could opt to pay money toward the national debt, but there would be perks?
Here is my general idea—keeping in mind that I don’t know much. The Treasury would have a product or authorize products by investors that would work something like a certificate of deposit or even a 401K or 403B. A person could invest $1,000 into this “Deficit Bond” or certificate of deposit and would be given a guaranteed rate of return for a number of years or permanently until the national debt is paid off. They could take the interest or agree to have the interest put back into the national debt. No, people could not take the money back. That $1,000 would be the Treasury’s. However, people would get a tax break from the investment and would not be taxed on the interest payments if they opted to take the interest up to a certain amount (more on that below).
Now, such would involve the Treasury or entities allowed by the Treasury (investment firms) to invest that money into the markets. This way, the money could grow, but there would have to be a mechanism in place that protects the Treasury from losing money beyond the $1,000. This would be like the FDIC protections for bank accounts. So, there would be this cap. Let’s say that this $1,000 went up to $6,000. Then the market crashes (or corrects). The loss could not go lower than $1,000. There would be insurance or a guarantee. To clarify, but complicate things, if people opted to receive interest payments, they would receive up to a certain amount — let’s say up to 10% — but if the interest percentage is higher, the additional interest payment would go to the Treasury. These details and options would be worked out. It’s just an example. But the interest would be guaranteed not to be lower than 3.5%. This may limit the Treasury or investors from investing in products that are too risky.
The Treasury would be the owner of the investment once the contract is finalized, so the Treasury could sell if that $1000 went up to $6,000.
I understand this could be a conflict of interest. It’s probably not a good idea to have the Treasury investing in the markets. In this case, those investing the money would authorize private investment firms to invest for the Treasury.
I think this is a great idea, but what do I know? If you are an investor and I am getting a laugh out of you, fine. The challenge is to come up with something better and perhaps less naïve.
I really think that something like this may work, using the free market system, including Bitcoin, to help pay back the national debt, but obviously, securities need to be in place to protect the national interest, etc.
What do you think? Have a better idea? Let’s hear it.
The opinions and analyses that Earl writes are his own and are not necessarily the positions or views of his employers, the agencies he supports, or that of his colleagues. Reach out with comments or questions.