[A-List] US is Bankrupt and We Don't Even Know It

Sun Aug 22 12:36:30 MDT 2010

lol...Okay Bill, sentence is postponed. Mr. Kotlikoff is remanded at the 
court's discretion..

Tony

----- Original Message ----- 
From: "Bill Totten" <shimogamo at ashisuto.co.jp>
To: "The A-List" <a-list at lists.econ.utah.edu>
Sent: Sunday, August 22, 2010 10:49 AM
Subject: Re: [A-List] US is Bankrupt and We Don't Even Know It

> Tony, Mr Kotlikoff is not continuing the myth that it is the average
> taxpayer that is to blame for the US crisis. He's just pointing out that
> the US is bankrupt. This is just one short article in which space does
> not allow him to go into all of the causes of the US bankruptcy including,
> as you point out, the Empire's military expenditure and the thirty-year
> tax give-away to the rich. Before decapitating him, see some of his other
> articles at http://www.kotlikoff.net. I particularly like his advocacy
> of Limited-Purpose Banking. Bill
>
>
>
>
> On Sat, 21 Aug 2010 14:16:32
> -0400 "Tony B." <tal1 at cogeco.ca> wrote:
>
>> Notice how Mr. Kotlikoff neatly avoids any mention of the Empire's
>> military expenditure...or the 30 year tax give-away to the rich..both of
>> which suggest immediate alternative solutions to the deficit problem.
>> And which is why it is not surprising that the author also continues the
>> myth that it is the average taxpayer that is to blame for the crisis.
>>
>> ...Off with his head!...
>>
>>
>> ----- Original Message ----- 
>> From: "Bill Totten" <shimogamo at ashisuto.co.jp>
>> To: <a-list at lists.econ.utah.edu>
>> Sent: Friday, August 20, 2010 8:41 PM
>> Subject: [A-List] US is Bankrupt and We Don't Even Know It
>>
>>
>> > by Laurence Kotlikoff
>> >
>> > bloomberg.com/news (August 10 2010)
>> >
>> >
>> > Let's get real. The US is bankrupt. Neither spending more nor taxing
>> > less will help the country pay its bills.
>> >
>> > What it can and must do is radically simplify its tax, health-care,
>> > retirement and financial systems, each of which is a complete mess. But
>> > this is the good news. It means they can each be redesigned to achieve
>> > their legitimate purposes at much lower cost and, in the process,
>> > revitalize the economy.
>> >
>> > Last month, the International Monetary Fund released its annual review
>> > of US economic policy. Its summary contained these bland words about US
>> > fiscal policy: "Directors welcomed the authorities' commitment to
>> > fiscal stabilization, but noted that a larger than budgeted adjustment
>> > would be required to stabilize debt-to-GDP".
>> >
>> > But delve deeper, and you will find that the IMF has effectively
>> > pronounced the US bankrupt. Section Six of the July 2010 Selected
>> > Issues Paper says: "The US 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 fourteen percent of US GDP".
>> >
>> > The fiscal gap is the value today (the present value) of the difference
>> > between projected spending (including servicing official debt) and
>> > projected revenue in all future years.
>> >
>> > Double Our Taxes
>> >
>> > To put fourteen percent of gross domestic product in perspective,
>> > current federal revenue totals 14.9 percent of GDP. So the IMF is
>> > saying that closing the US fiscal gap, from the revenue side,
>> > requires, roughly speaking, an immediate and permanent doubling of our
>> > personal-income, corporate and federal taxes as well as the payroll
>> > levy set down in the Federal Insurance Contribution Act.
>> >
>> > Such a tax hike would leave the US running a surplus equal to five
>> > percent of GDP this year, rather than a nine percent deficit. So the
>> > IMF is really saying the US needs to run a huge surplus now and for
>> > many years to come to pay for the spending that is scheduled. It's
>> > also saying the longer the country waits to make tough fiscal
>> > adjustments, the more painful they will be.
>> >
>> > Is the IMF bonkers?
>> >
>> > No. It has done its homework. So has the Congressional Budget Office
>> > whose Long-Term Budget Outlook, released in June, shows an even larger
>> > problem.
>> >
>> > 'Unofficial' Liabilities
>> >
>> > Based on the CBO's data, I calculate a fiscal gap of $202 trillion,
>> > which is more than fifteen times the official debt. This gargantuan
>> > discrepancy between our "official" debt and our actual net
>> > indebtedness isn't surprising. It reflects what economists call the
>> > labeling problem. Congress has been very careful over the years to
>> > label most of its liabilities "unofficial" to keep them off the books
>> > and far in the future.
>> >
>> > For example, our Social Security FICA contributions are called taxes
>> > and our future Social Security benefits are called transfer payments.
>> > The government could equally well have labeled our contributions
>> > "loans" and called our future benefits "repayment of these loans less
>> > an old age tax", with the old age tax making up for any difference
>> > between the benefits promised and principal plus interest on the
>> > contributions.
>> >
>> > The fiscal gap isn't affected by fiscal labeling. It's the only
>> > theoretically correct measure of our long-run fiscal condition because
>> > it considers all spending, no matter how labeled, and incorporates
>> > long-term and short-term policy.
>> >
>> > $4 Trillion Bill
>> >
>> > How can the fiscal gap be so enormous?
>> >
>> > Simple. We have 78 million baby boomers who, when fully retired, will
>> > collect benefits from Social Security, Medicare, and Medicaid that, on
>> > average, exceed per-capita GDP. The annual costs of these entitlements
>> > will total about $4 trillion in today's dollars. Yes, our economy will
>> > be bigger in twenty years, but not big enough to handle this size load
>> > year after year.
>> >
>> > This is what happens when you run a massive Ponzi scheme for six
>> > decades straight, taking ever larger resources from the young and
>> > giving them to the old while promising the young their eventual turn
>> > at passing the generational buck.
>> >
>> > Herb Stein, chairman of the Council of Economic Advisers under US
>> > President Richard Nixon, coined an oft-repeated phrase: "Something that
>> > can't go on, will stop". True enough. Uncle Sam's Ponzi scheme will
>> > stop. But it will stop too late.
>> >
>> > 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.
>> >
>> > Worse Than Greece
>> >
>> > Most likely we will see a combination of all three responses with
>> > dramatic increases in poverty, tax, interest rates and consumer
>> > prices. This is an awful, downhill road to follow, but it's the one we
>> > are on. And bond traders will kick us miles down our road once they
>> > wake up and realize the US is in worse fiscal shape than Greece.
>> >
>> > Some doctrinaire Keynesian economists would say any stimulus over the
>> > next few years won't affect our ability to deal with deficits in the
>> > long run.
>> >
>> > This is wrong as a simple matter of arithmetic. The fiscal gap is the
>> > government's credit-card bill and each year's fourteen percent of GDP
>> > is the interest on that bill. If it doesn't pay this year's interest,
>> > it will be added to the balance.
>> >
>> > Demand-siders say forgoing this year's fourteen percent fiscal
>> > tightening, and spending even more, will pay for itself, in present
>> > value, by expanding the economy and tax revenue.
>> >
>> > 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".
>> >
>> > _____
>> >
>> > Laurence J Kotlikoff is a professor of economics at Boston University
>> > and author of Jimmy Stewart Is Dead: Ending the World's Ongoing
>> > Financial Plague with Limited Purpose Banking (2010). The opinions
>> > expressed are his own.
>> >
>> > To contact the writer of this column: Laurence Kotlikoff at
>> > kotlikoff at bu.edu
>> >
>> > (R) 2010 Bloomberg LP. All Rights Reserved.
>> >
>> > http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and-we-don-t-even-know-commentary-by-laurence-kotlikoff.html
>> >
>> >
>> > http://www.billtotten.blogspot.com
>> > http://www.ashisuto.co.jp
>> >
>> >
>>
>>
>>
>
> 