Okay, this is my basic fiscal plan. Without, of course, being able to predict exactly what future interest rates or tax revenue will be, I would use the following plan to pay off the national debt with annual surpluses without raising taxes (which is counterproductive) or cutting defense spending (which is impossible at this time). First, to prevent the social security fund from becoming a liability, I would raise the retirement age to 70 and privatize it in step with welfare. I would also require that social security be based on past rather than future investment before it was privatized, making it a Ponzi scheme no more. Any surpluses from it would go directly towards paying off the national debt. I would also eliminate direct wealth redistribution programs.
By privatize, I do not mean turning over any programs to for-profit businesses, however. My plan is to turn them over to non-profit organizations- using the strictest definition of the term non-profit. Along with Social Security, I would in that way privatize Medicare and Medicaid incrementally. I would privatize 5% of these programs in 2006, an additional 10% in 2007, 15% more in 2008, 20% more in 2009, 25% more in 2010 and the remaining 25% in 2011. The programs would still be fully subsidized by the government through tax deductions. I am inclined to support this strategy because it would eliminate both the inefficiency inherent in all government programs and the disincentive of the extra taxation that would otherwise be necessary to keep these programs in tact. Moreover, it would, over time, pay off the national debt. I have two questions. First, in how many years would this plan pay off the national debt (with surpluses)? Second, is the plan inherently impracticable?

Many things need further elaboration. I'll attack the welfare part of it since that tends to be my general interest in such threads.
You would need to decide how a "non-profit" can be judged. And keep in mind that taking the profit out of charity can cause there to be less charity. Sounds awful, but it's true. At least the workers, especially considering that many in non-profits are educated, specialized, and hard-working (as much as any white-collar), do need compensation and there has to be some reason for the org to exist in the first place. Wanting to do good is a powerful influence but doesn't pay the bills. Also face the troubles of bureaucracy- the lack of competition.
Instead of slowly moving into private charity, I'd suggest moving asubstantial ammount of funding to block grants. The block grants should be competed for by private orgs, ensuring that they keep their costs down and their utility up. There will be a need for a relatively small bureaucracy, mostly people to research the utility, cost effectiveness, and need for each program. But we can eliminate the need for a huge bureaucracy of direct service (they'd move to private sector jobs created in the new charity market). Charity would become more efficient and useful and would be able to take up less of the budget. Plus niches for diverse charity would form by allowing free market competative elements to come into the equation. A latent effect would be that the research by the government to evaluate each org could be posted for citizens to see which charities are most deserving and responsible for donation.
I advocate that this be a faith-blind system. As long as an org will help people regardless of faith, it is worth supporting even if it is religious (actually I think in a lot of cases, religion will act as an alternative incentive to profit and give religious orgs a deserved advantage... but I think some secular institutions are just as zealous in helping as them). It is the cost-effectiveness (unit spent per unit of utility) and the need (whether the service is taking a new position or new angle, or redundant).
Charity is the only thing that I think should be controlled in this way, simply because efficient charity and profit are incompatible. But this is a method more capitalistic than our current one- and it will test different methods of charity against one another! If run properly such a program could create a charity workforce that creates jobs, adapts to the needs of individuals and different communities, and gets communities more involved in charity than is true in the current system.
That sounds better than simply diverting funds slowly from government to non-profit. For one thing it is important to have checks and balances (standards) to decide which orgs get the funds. And it must be something very innovative to meet the two criteria people want of charitable organizations:
that they actually do help the downtrodden and their families and help to solve social problems
and that they are run efficiently and do not waste tax-payer money on excessive overhead.

How would this eliminate simple hand-outs to those who can work?
Simple. Such programs will fail to secure funds against more innovative "teach to fish" programs and education.

And one more thing. You'll always need some kind of charity for the disabled and elderly that cannot or should not be in the workforce. Likewise there will always be a need for relief for the temporarily unemployed as unemployment will never be zero.
The main strength of this type of system is adaptability. The weakness of the socialist programs we have now is that they were given permanent structure for temporal conditions.

but 1. non profits still have to make a profit to stay open and 2. non-profits are no more moral, honest or upfront than for profits. Actually, it's far easier to scam people at a non-profit.

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I wasn't born with enough middle fingers.

My definition of a non-profit organization is this: Any organization that reinvests all of its potential net profit into charity. The idea of block grants sounds good in theory, but the notion of competition makes me nervous. The bidding process could easily be corrupted and the poor would be the losers. There are two reasons for my incremental approach. First, in an economy as complex as ours, it is impossible to know whether or not an action will be an unqualified success or not without testing it empirically. Second, both private charities and the poor would need time to adjust to the changes in welfare. Again, though, I am far from being an expert in economics.

In response to stekim, a non-profit organization is rightfully defined as one that keeps no net profits.

That's why I advocate a small bureaucracy made up mostly of researchers, to scan and scrutinize the books and to evaluate the overall usefulness of the program.

But then we'd have the same problem that we have now, which is excessive expenditures from government oversight. I also don't trust the government to oversee such a process.

If I understand correctly what you mean by past and future investment, I don’t see why you would have a surplus at all given that you’re requiring that social security be based on past investment. Does the surplus come from people who die and don’t receive their money (i.e. past investment)? That would seem to be at odds with your desire to eliminate wealth redistribution programs.

Why? The argument for privatization is that competition will drive performance. Non-profits suffer from the same problem as government, namely that there is little or no incentive to increase performance. What is it about non-profits that you find attractive?

I would change Social Security only in so far as private organizations cannot, of course, run a Ponzi scheme, though I would allow them to inherit the proceeds of one. As for non-profits, they have three distinct advantages over government welfare. First, they do not create a disincentive, and many people view philanthropy as an incentive to become wealthy. Second, they have to keep expenses down- they cannot get money on demand as the government can do through taxation. Third, they are more efficient at directing money to the proper channels than government welfare, since they lack the bureaucracy and arbitrary decision making inherent in government programs.

Small issue. That's not how we define it. Further, what they do with the "net profits" is the issue. And non-profits have no better record than for profits on the whole. If I wanted to scam people I would choose a non-profit over a profit corporation every time. It's far easier.

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I wasn't born with enough middle fingers.