Many people are worried about the dual US deficits, national and international. Most of the suggestions for correction depend upon the US changing policies which benefit it at the expense of its trading partners. As a consequence they have not gone anywhere.

The US has vetoed changes in the way the WTO and IMF work. It has stymied the latest rounds of international trade as well as those on climate control. The world has started to push back anyway. There has been a quiet shift by our trading partners (especially China and Japan) away from holding dollars as a reserve currency and into others. The currency markets are anticipating US economic problems (recession, inflation) and the exchange rates are starting to take this into account.

The cost of the wars has not been financed by internal taxation, this always leads to problems later on.

I certainly don't know how to solve all these problems, but I'd like to suggest one small step that could be taken without much effort by simple changes in US legislation.

The stock markets have been pushed up by a variety of gimmicks over the past several decades. This has produced large paper gains in wealth in the US as well as skewing the wealth profile of the population. Many of the gimmicks have been at the expense of sound investment policies by the firms involved. Tying CEO compensation to stock performance has only added another incentive to bad planning. The use of stock options has meant that the officer's focus is on pushing the stock price up within a few years as the stock vests. They then exercise their options and leave with their bundle of dough. The firms try to compensate for this dilution of their stock by buying back stock on the open market. This does nothing to improve the viability of the firm. Money that could be spent on infrastructure development is diverted to fiscal manipulation, there is no economic benefit to the firm.

My proposal.

Banks are required to keep a certain amount of money in reserve. In practical terms this means in US Treasury bonds. Raising the reserve requirements is one way the government can slow the economy. The banks need to keep more in reserve in that case and thus can lend out less. This slows business activity. What if a similar requirement was put into place for non-banking firms? Each firm would be required to set aside a percentage of its worth in US Treasury bonds. The purchase of these bonds by the firms involved would increase the savings rate, cut the deficit and limit the amount of money available for speculation. It would also provide a cushion for the firms in the case of an emergency. There would need to be rules as to when the reserves could be tapped, for example when a company is losing money over a period of time.

Having domestic firms (and domestic subsidiaries of foreign firms) holding treasuries would cut the need for the US to sell treasuries abroad and thus help stabilize the dollar. It would also turn the net savings rate in the US positive again. It can be expected that the US banks that lend firms money would be opposed to this plan as it would limit their potential market, but the US banking industry is an easier nut to crack than the international finance system. A change to this plan requires only domestic legislation, not international treaties or the agreement of other sovereign states or international bodies.

It's like taking your cod liver oil, it may not taste good, but it's good for you just the same. A little fiscal responsibility wouldn't hurt. This idea could be expanded to other countries which have deficit problems, but as far as I am aware the situation in the US is much worse than in any other developed nation.