Funding the US government and avoiding the fiscal cliff

The US government could fund both its operations and avoid the fiscal cliff by introducing a self-liquidating and self-financing negative interest rate complementary currency.

The US Treasury could issue say one trillion dollars of pre-payment negative interest rate vouchers redeemable into US dollars after 52 weeks time. The vouchers would have no value unless a stamp valued at 2% of each voucher was attached each week. The sale of stamps by the US Post Office over 52 weeks would generate an income of $1.04 trillion dollars.

In this way the US Post Office would obtain the money to redeem every voucher issued by the Treasury to fund the government and still make a $40 Billion profit. The US government would not need to raise either taxes or its borrowing limits.

The US government could use the vouchers to not only fund its operations but also to reduce its debt. Businesses that accept credit card payments would prefer to be paid with the vouchers. This is because they would avoid paying a credit card commissions on every transaction. They would only need to pay the negative interest rate on vouchers that they did not use.

The President could possibly authorize the issue of negative interest rate vouchers without Congressional approval? If not, then this approach that also reduced government debt should be acceptable to all political parties.

Draft legislation to issue one trillion dollars of negative interest rate money was introduced into Congress on February 17, 1933. The legislation was reproduced as an Appendix in the 1933 book published by Professor Irving Fisher on Stamp Scrip as posted at: http://userpage.fu-berlin.de/~roehrigw/fisher/stamp-ap-1.html.

Ideally, instead of using paper vouchers and stamps, the government would use cell phone money. In this way government payments could be made directly to individuals without involving the banking system. Refer to my articles: How might cell phone money change the financial system? The Capco Institute Journal of Financial Transformation, 30:33-42, November 2010, http://papers.ssrn.com/abstract_id=1602323.

Most importantly, Cell phone money would allow the economy to keep working even if the banks did not!

For further information refer to my articles: Remaking the economy, posted at http://www.onlineopinion.com.au/view.asp?article=8660, How to cope with the next financial crisis, at http://www.abc.net.au/unleashed/2854160.html#comments and Options for Reforming the Financial System, in The IUP Journal of Governance and Public Policy, 6(3): 7-34, September 2011, available at: http://ssrn.com/abstract=1322210.