A new proposal from USA Positive Expectations suggests a novel approach to reduce the federal deficit by leveraging the Federal Reserve's monetary policy to fund early childhood education. The plan, which the organization says could be implemented without raising taxes, envisions a transformation driven by the private sector over several decades.
The concept centers on creating 'receipts money' through a mechanism called 'FED NEXT.' Under this plan, the Federal Reserve would purchase assets tied to the present value of early education outcomes for children entering first grade. These assets would then be gifted to the U.S. Treasury, reducing the national debt. The organization argues that this would not cause inflation because the cash used to purchase the assets would be used to pay down debt without increasing the money supply in circulation.
At full scale, the plan could involve 4.5 million children starting first grade annually, with an estimated cost of $75,000 per child, totaling $340 billion per year. The Federal Reserve's purchase of these assets could reduce the federal debt by an estimated $3.4 trillion annually. A county-level pilot program with 10,000 children would represent a $750 million annual purchase, contributing $7.5 billion to debt reduction over time.
The proposal also suggests that local taxes could be reduced by shifting school funding from grades PreK-12 to grades 1-10, directly addressing property tax affordability. The organization emphasizes the importance of early childhood development, citing the irreversible nature of neural network formation and the potential for 'Brain Gold'—a term for the cognitive abilities developed through quality early education.
The plan draws on the ideas of economist George Gilder, who has long advocated for the private sector's role in economic growth. Gilder's work highlights the importance of human intellect and information as the ultimate resources, and the proposal extends this to include early childhood development as a form of capital.
The organization is calling on private sector members to support an 'email march' to the Federal Reserve, encouraging consideration of these ideas. They point to the Fed's mandate and its openness to addressing long-term economic challenges. While the proposal is speculative and faces significant hurdles, the organization believes it is worth testing.
For more details, visit USA Positive Expectations.
