The US is Bankrupt - Kotlikoff
August 11, 2010
– Comments (7)
Interesting piece in Bloomberg.
Kotlikoff references the International Money Fund on paper that says:
“The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
And then he goes on that current taxes are about 14% of GDP, so basically to fill the gap taxes have to double.
How it ends in his view:
"And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills."
And finally:
"My reaction? Get real, or go hang out with equally deluded supply-siders. Our country is broke and can no longer afford no- pain, all-gain “solutions.” "
My thoughts, government is not and never has been the magic black box that people so consistently treat it as. Media does a horrible job when you read how often they report someone saying the government should pay for it, they never come back and say how should tax payers pay for it, should taxes go up and what should be cut. It is just always magic black box reporting. Media could do so much to change perceptions by instead pushing the question towards "so what you are saying is we should raise taxes to pay for this" kind of thing and report it like that.
As a youngster I was taught that government was a magic black box. My teacher would say that developing countries have large families because they don't have social programs and people depend on their children as they age. Here, we have social programs that pay a pension so we don't have to depend on families. And duh, instead you have a black box that has a small number of children paying into it to support an aging population.
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