What would you do?

Hi All,

The Galactic Confederation provided itself on having escaped the blight and evils of capitalism. It wasn't exactly a socialist state, more like somewhere between California and France. The state controlled vast swathes of industry and people had automatic right to free houses, food, healthcare and subsidised public transport.  There was officially  no wealth accumulation  as such, given that this was an ultra capitalist concept and thus there was no money. Instead the 'money' or currency of the state was in the Merit of 100 Credits.  Everyone got a basic amount of allocated Credits as pocket money, with Merits being allocated along the lines of merit to society (as decided by the government). Thus government employees from doctors to teachers and starship captains to professors were given Merits according to government fiat and supposed worth.  These merits and credits were used as units of account and a means of exchange for goods and services that were not included in the automatic rights, albeit the government had outlawed inflation and officially controlled prices.  In reality this simply meant that some products, especially imported ones,  were not available to most people, except on the black market at inflated cost. 

Externally the Confederation, without a  monetary or convertible currency, controlled the import/export trade &  used barter, hard currencies that other powers would use, precious metals or liquids and equivalent exchange of products (e.g. Vodka and Mullary Wine).  Even so and despite its best efforts to clamp down , impose bureaucratic and other obstacles to what the government civil servants  thought were unnecessary imports , the trade balance was frequently in the red and therefore the government was forced to borrow, but not from its own citizens who didn't possess any hard currency, but from outside banks and other governments.  The largest imports was the materials used in energy consumption and primary metals and materials that could not be replicated.  This was confusing to outside observes as the Confederation was a resource and energy rich state and was constantly expanding to include new members, but in order to maintain the huge welfare state at home and provide what the government thought was necessary for the defences for its equally  huge, scattered & expanding realm, required more resources than the state could produce.

The Confederation analysts  had the following options to avoid almost certain bankrupting themselves  and the response to each is given by the President's National Security Adviser :

1. Cut the welfare state and reform itself into a capitalist state . Impossible because that's the whole point of our self proclaimed utopia in which we smugly state that we've 'evolved' from the chaos and greed of capitalism to better ourselves and the universe .Oh and the plebs might revolt if we take away what they consider to be basic rights.

2. Cut the military budget. Impossible. We've been at war with almost half the warp capable  civilisations- the pre warp ones are always left to die as per our primary social Darwinian  directive-  we've encountered and they hate us now. We're in a cold war with the three other major powers. We can't cut it or even freeze it.

3. Cut both of the above in a equal fashion and try and muddle through. No good. See one and two above.

4. Keep going on until it reaches a crisis point and hope something will turn up. Which will make things ten times as bad when it happens.

5.  Launch a pre-emptive strike at one of the lesser powers and get their resources, to kick this problem can down the road. But we're not supposed to do that. Our space fleet is supposed to be a peaceful, exploring , diplomatic affair. The weapons we put on our ships, despite being able to destroy a planet's surface , are simply there for self defence. We're to boldly go etc...

6. Continue exploring and hope we meet a richer nation and get them to bail us out. Worked for the Greeks in the EU... didn't it?

Which option, though, will they decide upon?