I'm not optimistic about the prospects for making meaningful reforms to the political system. The main draw of Bitcoin to me is the possibility of just rugging the entire lost cause of politics. However, I am an economist and I do think about hypothetical reforms.

This one is a statutory combination of spending cuts, tax cuts, and basic income guarantee. The purpose is to make cutting government spending politically beneficial.

One of the fundamental incentive problems in politics is pandering to special interest groups. Benefits are concentrated, while costs are dispersed. By taking a small amount away from many people, a large amount can be given to a few people. This is significant enough to gain support from the special interest, but not significant enough to lose support from the larger group.

The problem is that these transfers are not neutral, zero-sum operations. They are impoverishing to the whole economy, by distorting it away from optimal allocations, as well as whatever is lost in administering the transfer or lobbying for it.

Also, special interest groups proliferate, because nothing about this logic restricts the number of such groups. No particular case of concentrated benefits is worth anyone's time to object to, but in aggregate they form a serious problem.

One way out of this mess is to bundle cuts to those various special interest groups into meaningfully large quantities and refunding the public. The more widely dispersed the benefits the better.

This idea is to pass a law that any reduction in government spending will automatically trigger corresponding tax cuts and a dividend to all citizens. The tax cut and dividend would each be half as large as the spending cut, which would make this neutral to a first approximation from an accounting standpoint (economic adjustments would likely make it more than breakeven). The other essential component would be requiring new spending to first come from these tax cuts and dividend payments.

Now the constituency for cutting spending is literally everyone. Because special interest handouts are impoverishing, even many of those who receive such benefits will be better off by reducing all the others.

Why not just tax cuts? Because not everyone pays taxes and the point is to get everyone on the side of reducing government. There are also other victims of the state beyond tax payers and this can be seen as partial restitution to them.

Why not just the dividend? Because reducing the power of the state requires reducing its revenue. Also, people really hate paying taxes, so this is a powerful constituency.

Removing special interest distortions will allow the economy to move towards a more efficient state. That means tax revenue will fall by less than the tax rates were cut. The extra revenue will go towards paying down the debt, or at least reducing the rate of debt accrual.

Households having more savings will also put downward pressure on interest rates, which will make servicing government debt cheaper. Also, and more importantly, things like small business loans and mortgages will be cheaper, making life even easier for the average person.

Increased household budgets will also mean more local tax revenue for funding local services (for people who value such things).

Imagine bundling the current transfer payments (Social Security, Welfare, Food Stamps, Financial Aid, etc) with a 50% cut to the administrative programs (about what is commonly identified as the magnitude of waste, fraud, and abuse), and radically reducing the military presence. You can also factor in how many people would be lifted out of eligibility for poverty programs (not reducing the benefits, just accounting for lower demand).

That would be in the ballpark of a 75% budget cut, or about $5.5T. The triggered tax reduction would be a quartering of all federal tax rates. The dividend (which should have a name like Peace and Freedom Dividend for political reasons) would be about $8k per person. That's $32k for a family of four, plus only a quarter of the tax burden.