Incentive Grants

From Zanecorpwiki

Today I heard a Planet Money podcast talking about the national debt and the little known fact that you can send money to the Feds for the explicit purpose of paying down the national debt. This is the easy half of a good idea--which makes it a bad idea.

The problem is the incentives are 180 degrees off. If the scheme were actually successful--meaning everyone sent in enough money to take a chunk out of the debt--it would encourage even more reckless spending. It's a bailout, a perfect example of moral hazard.

I personally would love to make the national debt one of my charities, but I'm not stupid enough to give an alcoholic a shot of bourbon to help with the DTs and call it charity.

What's needed is simple enough: contribute to a fund to pay down the debt. The government receives payments from the fund when certain criteria are met. 10% of the fund for every 1% in long term spending reduction compared to the 2000 budget and adjusted for current population. Or whatever. The point is no money for free.

One nice thing about this approach is that you don't need the government's cooperation at all. Just set it up. I believe this may be the killer app for the idea, but the idea itself is more general. Set up a fund where payments are released upon certain conditions. National debt, college endowments, all these things I'd like to give money to, but which I know it would be bad to actually give money to.

We already do it in some places. Welfare requires recipients to be looking for job, get treatment, etc.