Armchair quarterbacking aside, Americans are more concerned than ever with the state of our economy. Everyone seems to have an opinion, but few offer real solutions. My new book, “The United States of Bankruptcy” does, however, offer a plan that can save the economy right away.

First of all, I have mentioned Freddie and Fannie in the past, but don’t forget Ginnie.  The government committed $5 trillion off the balance sheet to prop up these abysmal failures that despite their guarantee have been reduced to worthless pink sheet stocks.  The government has already borrowed over $150 billion to turn around and give it to them and this will be over a trillion dollars, at least in the foreseeable future, and Ginnie is a huge problem on the horizon.  This policy is flat out wrong!

What should be done immediately is that a large portion of that same guarantee be redirected to afford all the citizens of this nation, rich and poor, the onetime option to consolidate and refinance ALL their debts.  This one move will significantly reduce toxic loans – the horrifying loan guarantees coming home to roost – and reduce the cost of the debt that Americans already have.  This would immediately increase disposable income in America by tens of billions and that means more spending, saving, and investing.

Why? The root cause of the housing, credit card, auto, student loan and other bad debts is Americans not being able to pay their bills.  You can keep cutting limbs off the tree and buying up all the bad debt, but that costs hundreds of billions at a minimum.  It is essential to help people afford the debt they owe and, thus, get to the root of the problem.  This doesn’t require minting or borrowing more money; they are already in debt and managing this is increasingly becoming worse or has already imploded and virtually destroying their lives.

If a massive refinancing program was put in place, then every single industry – banks, mortgage brokers, real estate, auto – you name it – would skyrocket.  The result would be a large-scale resurgence of entire industries and would CREATE hundreds of thousands of jobs, if not more.  It would take a Herculean workforce increase just to manage the program in the private sector alone and the economy-wide impact on employment would be utterly huge.  What is very important to understand is that more disposable cash would be in the pockets of every American who takes advantage of the program while rates are at an all-time low.

Today at least 50 to 70 million couldn’t take advantage of the great rates even if they wanted or needed it.  If every American, credit addicted or not, could refinance everything they owe and pay significantly less or even just pay it all off, it would mean much less bad debt, more money to spend on products, goods and services, and more money left to save and invest.  One caveat for those who take advantage of the program is a 2-year period where more credit cannot be obtained.  This allows them to rebuild their bad credit, reduce payments, manage and put their household or business affairs in order.  As it is now, the government has to clean up and bury the toxic waste from the rotting corpses of tens of millions of American debtors.

Second, if you are included in the 46 million Americans with a credit score of 600 or less, you are considered a big credit risk and credit unworthy in the eyes of the financial industry today.  The ranks are being joined by millions and there are millions more to come.  Even if you can get a loan or credit card, it will cost you dearly and that just means your financial situation will get worse.  Add to that financial reform and the banks are going to be even pickier about who gets credit and loans.  We all know for a fact that our economy is 70% consumption, and “credit addiction” has artificially supported this for decades.  Someone please tell me how we can sustain the economic recovery if tens of millions are not in a position to support it and, even worse, make it grow.

The government does not have to borrow or spend a dime to require the credit reporting agencies to alter the FICO score during the period of recovery.  Let me reiterate: this system has to be overhauled, reformed and transformed.  The above is true and 70 million have scores lower than 650 and those consumers are dropping and joining the lower credit score crowd by the millions; and the bar for them to get credit or refinance gets higher every day.  Your FICO score is like a tattoo: you wear it all the time and regardless of where it is on your body, it shows up every time you are stripped naked by employers and lenders investigating your life.  For those who are unemployed and/or broke, employers will screen you based on this and it now weighs heavily in their hiring decision.  Needless to say, that does not help unemployment and is severely hurting those trying to get a job.

Consumers, the credit addicted, and even those paying their bills suffer greatly at the hands of the credit bureaus.  Bankruptcy and foreclosure, for millions, was a last resort – a huge embarrassment.  Yet many crushed by the economy had no other choice.  The end result is they are discarded from the economy and many would agree they should be.  But remember that 70% of our nation is dependent on consumption.  Does anyone really believe that these tens of millions will be spending?  They are not going to be borrowing for certain, I assure you.  They need help!  They need a chance.  If foreclosures and bankruptcy stay on a credit report for 10 years, there is very little hope they will work themselves into a position to support the recovery and perhaps be able to rebuild their lives.

We create welfare system after system that hasn’t worked and won’t work but we haven’t even considered tossing these people a lifeline and massively reducing hopelessness, anxiety and depression.  Why don’t we use our massive computing power, algorithms, predictive and behavior analysis to monitor those whose credit score is low – those who have experienced bankruptcy or foreclosure – to measure their ongoing debt levels and correlate that to income tax?  Then thresholds of debt to income can be managed instead of creating some more useless bureaucracy to monitor consumer financial products and predatory lending practices.  Wouldn’t that reduce the chances of it happening again?  Wouldn’t this assure more credit stability in the future?

Now, combine these two programs.  Think about it.  How powerful would this be for the economy, consumer confidence, employment, spending, sales, manufacturing, you name it.  Solving the Main Street issues is the most important thing the government can do today, tomorrow and yesterday.  Unfortunately, the answer is and always has been to tax, borrow, and spend our way out of trouble.  The stimulus hasn’t worked, can’t and won’t work because of glaring mismanagement or incompetence, greed, backroom deals for politicians’ districts and appalling return on investment where hundreds of thousands of dollars have been allocated per job created.  THOSE DAYS ARE OVER!  Can anyone please get these ideas into the hands of anyone that can do something about it, because I often feel like I’m throwing rocks at the sun and banging my head against the wall in D.C.