08/22/2025
Dealing with Government Debt and Deficits: A Paradigm Shift
Colorado is facing a $1.2 Billion shortfall in revenue, and Denver is expecting a $250 Million deficit for FY 2026.
Republicans are blaming the Democrats for “unsustainable funding” and overspending, while Democrats shift the blame to the “One Big Beautiful Bill” that the Republican controlled US Congress just passed.
While there is truth in the Democrats’ charge, the critical question to be answered remains, How will the State of Colorado pick up the slack from a 12% reduction in Medicaid, millions cut from SNAP program, and other shortfalls in revenue?
The typical way governments currently deal with deficits I call the terrible trio: (1) raise taxes, (2) cut spending, or (3) sell off public assets. We’ll briefly explore each of them, then introduce a well-
established 4 th way: Public Banks.
Taxation. There are income taxes, property taxes, and sales taxes. And yet, all these collected taxes, representing revenue for governments state, county, and city, never seem to be enough, as year after year our governments slip further into unpayable debt.
Large scale infrastructure projects are usually financed with bond issues. These too are a tax on the citizens as the government must payback principal and interest on the bonds typically at around 5% when the bonds are redeemed.
Another option used to deal with revenue shortfalls are to cut services.
The shortfalls instigated by the Federal Budget are affecting the poorest and neediest people in the state, those dependent upon SNAP and Medicaid, or those working in forestry and renewable energy production.
The last tool in the standard political toolbox for dealing with deficits are the fire sales of public assets.
This one troubles me greatlyl as governments takes an asset that belongs to the people – a park,public lands, a building, a school – and sells it off to the highest bidder. This in my view should be
illegal without a vote of the people.
A Paradigm Shift: The Public Bank Option
As the Federal government reneges on its fiduciary responsibilities to the states, it becomes imperative that State governments step up their game and think outside the terrible trio of options mentioned above.
And the most promising alternative to eliminating government deficits and debt are with State and local public banks modeled on the highly successful Bank of North Dakota, and the Sparkassen banks of Germany.
A State Public Bank would be owned by the state and its people, chartered to invest only within the state to serve the public interest. It would be the primary depository bank for State revenue, keeping taxes working for the State, not Wall Street. It will cost relatively little to capitalize, can grow very rapidly, and be profitable in the very first year. International banking expert, economist, and professor, Richard Werner (https://rwerner.substack.com ) has drafted reports for State Public Banks for Florida and Tennessee. He is now
starting his own bank in Switzerland using his novel model called “Sovereign Lending”. Since lending to a sovereign government is a very low risk endeavor, the BIS / Basel Capital Adequacy Ratios are near $0, allowing the bank to lend more than 10x its capital. A public bank lending to its government would create new money for investment in locally owned businesses (increasing revenue), financing infrastructure, and much, much more...without raising taxes, without cutting services, and without selling off precious parks and public lands.
Banks are the creators of the money supply whenever they issue a loan, as Professor Werner demonstrated in the first ever empirical study. State and local governments can utilize this power for the public good with the establishment of their own public bank.
Find out more about public banks on the Rocky Mountain Public Banking Institute website:
http://RMPBI.ORG
Michael David Melio,
Secretary, RMPBI,
Media Director, Public Banking Institute
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