The United States is on an irreversible path to insolvency.(Insoluble Insolvency). In lieu of fighting reality, resources should be dedicated to minimizing the adverse effects of the upcoming federal insolvency by identifying critical components of the economy which should be sheltered to the extent possible, for example, select governmental and public health institutions.
Insoluble Insolvency is a condition in which a sovereign government cannot reasonably be expected to restore long-term fiscal solvency through conventional economic, fiscal, or monetary measures within its existing political and institutional framework.
The important point is that this is not the same as bankruptcy and does not mean that the government suddenly runs out of money. A sovereign such as the United States can continue borrowing, taxing, refinancing debt, and creating money long after a private corporation would be insolvent.
The concept becomes important when those conventional remedies cease to provide a realistically achievable path back to fiscal sustainability. The test therefore should not simply be “Is the debt very large?” It should ask whether there exists a politically, economically, and institutionally feasible combination of spending reductions, revenue increases, economic growth, monetary measures, asset dispositions, or restructuring that can stabilize the government’s fiscal position over a reasonable period.
Recommendation
Federal and State governments should take the necessary steps to publicize and implement a program to address Insoluble Insolvency.
Proposed Action: National Recognition of Insoluble Insolvency
- The Recognition of Insoluble Insolvency as a Prevailing Economic Participant
- The Recognition of the Views of Established Third Parties
