Laurence Kotlikoff: U.S. Is Bankrupt and We Don’t Even Know It

[marmar]

Commentary by Laurence Kotlikoff


Aug. 11 (Bloomberg) -- Let’s get real. The U.S. 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 U.S. economic policy. Its summary contained these bland words about U.S. 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 U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper 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.”

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. .........(more)

The complete piece is at: http://noir.bloomberg.com/apps/news?pid=20601010&sid=aiFjnanrDWVk

[xchrom]

1. Recommend

[Kindigger]

2. I knew my inherent frugality would come in handy someda...now.

"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."

[rfranklin]

3. This is a Republican talking point....

The deficit could be erased in a few years if we were not involved in numerous military occupations. We are spending on the military as if we were involved in a World War. It is not necessary.

Social Security has been funded in respect to the Baby Boomers since the time of Reagan's doubling of the withholding. The fact that the Republicans don't want to pay back what they borrowed for the military-industrial complex and its misadventures isn't my fault or your fault, yet they want us to believe that meme so they can reduce benefits and maybe even privatize the system so their
Wall Street financiers can skim off huge fees for "investing" our Social Security funds.

Buying into this is basically capitulating to the Republicans and the oligarchs. Don't do it!

[disidoro01]

5. ok then

We have a Democratic majority and a Democrat as President. It isn't about parties, it's about the Culture of Washington more than anything else.

[leveymg]

4. US GDP - $14.6T, Federal Budget - $3.5T - IMF wants $2T in yearly cuts = 57% cut in fed budget

That's a big chunk to cut - what can we eliminate that's that big?

[n2doc]

6. IMF can take a flying leap off a cliff

They have no, none, power over us. Hell we could kick them out of their fancy building in DC is we so desired. At gunpoint.

[rfranklin]

7. They are definitely an agency used by bankers to ravage economies...

Screw 'em!