United States is Bankrupt Right Now - DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate

**Kemapreedasse** · 10-01-2011, 05:01 PM

Bismillah
By Laurence Kotlikoff
Bloomberg
February 26, 2011

Our country is bankrupt. It’s not bankrupt in 30 years or five years. It’s bankrupt today.

Want proof? Look at President Barack Obama’s 2010 budget. It showed a massive fiscal gap over the next 75 years, the closure of which requires immediate tax increases, spending cuts, or some combination totaling 8 percent of gross domestic product. To put 8 percent of GDP in perspective, this year’s employee and employer payroll taxes for Social Security and Medicare will amount to just 5 percent of GDP.

Actually, the picture is much worse. Nothing in economics says we should look out just 75 years when considering the present-value difference between future spending and future taxes. Over the full long-term, we need an extra 12 percent, not 8 percent, of GDP annually.

Seventy-five years seems like a long enough time to plan. It’s not. Had the Greenspan Commission, which “fixed” Social Security back in 1983, focused on the true long term we wouldn’t be sitting here now with Social Security 26 percent underfunded. The Social Security trustees, at least, have learned a lesson. The 26 percent figure is based on their infinite horizon fiscal- gap calculation.

But the real reason we can’t look out just 75 years is that the government’s cash flows (the difference between its annual taxes and non-interest spending) over any period of time, including the next 75 years, aren’t well defined. This reflects economics’ labeling problem. If you use different words to describe the receipts taken in and paid out each year by the government, you produce entirely different cash flows and an entirely different fiscal gap measured over any finite horizon.

Matter of Language

It’s only the value of the infinite horizon fiscal gap that is unaffected by the choice of labels of language. Take this year’s payroll tax contributions. Let’s call these transfers from workers to Uncle Sam “borrowing” by the government, rather than “payroll taxes,” since the money will be paid back as future benefits. If the future payback isn’t in full (equal to principal plus interest), we can call the difference a “retirement tax.” Presto! With this change of words, our 2011 deficit of about 10 percent of GDP is boosted another five points to 15 percent.

With one set of words, taxes are higher now and lower later. With the other set of words, the opposite is true. But neither set of labels makes more economic sense than the other or changes what the government takes, on balance, from any person or business in any given year.

This is no surprise. The math of economics rules out an absolute measure of the deficit, just like the math of physics rules out an absolute measure of time.

Bottom Line

The bottom line, then, is that we need to look at the infinite-horizon fiscal gap not just for Social Security, but for the entire federal government. That analysis, based on the Congressional Budget Office’s long-term alternative fiscal scenario, shows an unfathomable fiscal gap of $202 trillion. And covering this gap requires coming up with the aforementioned 12 percent of GDP, forever.

If this gives you the willies, there’s a ready narcotic — the president’s 2012 budget, which shows that most of our long- term fiscal problem has miraculously disappeared; the fiscal gap isn’t 12 percent of annual GDP. Nor is it 8 percent. It’s now 1.8 percent.

This fantastic improvement in our finances is due, we’re told, primarily to the Independent Payment Advisory Board. This board, to be established in 2014 (after the next election, of course) is charged with recommending cuts to Medicare and Medicaid providers when their costs grow too fast.

Repealing Cuts

We’ve had laws mandating such cuts for years, and they are routinely repealed. Indeed, President Obama signed the latest such repeal last June. But rather than laugh out loud at this cost-control mechanism, the Medicare trustees, three-quarters of whom were appointed by the president, assume in their 2010 report that these cuts will be made — to the dollar. And the 2012 budget cites the report’s fictional forecast as its authoritative source.

No one takes the 2010 Medicare trustee report’s long-run projections seriously, least of all Richard Foster, Medicare’s chief actuary. Foster added this statement to the end of the report: “The financial projections shown in this report for Medicare do not represent a reasonable expectation…in either the short range…or the long range.”

This isn’t the first administration to conceal our long- term fiscal problem. Back in 1993, Alice Rivlin, then deputy director of the Office of Management and Budget, asked me and economists Alan Auerbach and Jagadeesh Gokhale to prepare a long-term fiscal gap/generational accounting for inclusion in President Bill Clinton’s 1994 budget.

Politics Triumphs

We worked for months on the analysis, but two days before the budget’s release, the study was excised from the budget. We were shocked, but, in retrospect, the politics are clear. The Clinton administration wanted to claim it was fiscally prudent and the study, which showed unofficial debt growing at enormous rates, showed the opposite.

The fiscal gap’s next near appearance in a president’s budget was in 2003. Treasury Secretary Paul O’Neill commissioned Gokhale and Kent Smetters to do the study. It showed a massive $45 trillion fiscal gap — not a great basis for pushing tax cuts or introducing the prescription-drug benefit for seniors, known as Medicare Part D. O’Neill was ousted on Dec. 6, 2002, and a couple of days later the fiscal-gap study was discarded.

I’m not sure whether censoring the fiscal gap is more dishonorable than fudging it. What I do know is that we can’t assume our problems away and that I expected far better of this president when I voted for him.

(Laurence Kotlikoff is professor of economics at Boston University, president of Economic Security Planning Inc. and author of “Jimmy Stewart Is Dead.” The opinions expressed are his own.)

http://www.midasletter.com/index.php...upt-right-now/

**Kemapreedasse** · 10-01-2011, 06:01 PM

Bismillah
The Future For Most Americans: Pathetic Jobs, Bad Debts And A Crappy Economy
http://endoftheamericandream.com/arc...crappy-economy

**Kemapreedasse** · 10-01-2011, 06:03 PM

Bismillah
Economist Calls Entitlements A Massive Ponzi Scheme And Says US Is Actually $211 Trillion In Debt
http://www.businessinsider.com/econo...in-debt-2011-8

**amagmasia** · 10-01-2011, 07:41 PM

No empire has ever survived an empty treasury. Roman, Byzantine, Mughal, Ottoman, British.

Will America survive negative $211 trillion?

**indahouweres** · 10-01-2011, 07:56 PM

Us maybe bankrupt or anything. Won't do my any good. Have to worry about my own bankruptcy.

**deackatera** · 10-01-2011, 09:22 PM

The decline of Super Power (so-called) has started. May Allah protect those who want peace whether Muslims or Non-Muslims AAMEEN!

**triarmarm** · 10-01-2011, 09:27 PM

Us maybe bankrupt or anything. Won't do my any good. Have to worry about my own bankruptcy.

Quote Of The Day

**Lypepuddyu** · 10-01-2011, 10:17 PM

The decline of Super Power (so-called) has started. May Allah protect those who want peace whether Muslims or Non-Muslims AAMEEN!

AFGHANISTAN: Graveyard Of Empires
Alexander The Great
Mongol Empire
British Empire
Soviet Union
U.S.A.

Superb signature!!!

**deackatera** · 10-01-2011, 10:48 PM

AFGHANISTAN: Graveyard Of Empires
Alexander The Great
Mongol Empire
British Empire
Soviet Union
U.S.A.

Superb signature!!!

Jazak Allah Kher brother!

Alexander commented that of Afghanistan is "easy to march into, hard to march out of."

Alexander the Great, writes a letter to his mother,
I am Involved in the land of a 'leonina' (lion-like) and brave people, där everythin 'foot of the ground is like a well of steel, confronting my soldier. You Have Brought Only One Son Into the World, But Everyone in this country Can Be Called an Alexander.

**ValdisSeroff** · 10-01-2011, 10:59 PM

As long as US is still protecting Arab regimes it will never be bankrupt

your arguments are not sound at all

**Nesskissabe** · 10-01-2011, 11:22 PM

As long as US is still protecting Arab regimes it will never be bankrupt

your arguments are not sound at all

NO. Your argument is faulty.

"And the disbelievers planned, but Allah planned. And Allah is the best of planners." (Al Imran: 54)

**ValdisSeroff** · 10-01-2011, 11:55 PM

NO. Your argument is faulty.

US popping up Arab regimes?

**Nesskissabe** · 10-02-2011, 12:00 AM

US popping up Arab regimes?

brother
Read more closely, ponder on it for a few minutes.

"And the disbelievers planned, but Allah planned. And Allah is the best of planners." (Al Imran: 54)

**Pynctyncroast** · 10-02-2011, 12:06 AM

Assalamu alaykum

US was bankrupt long time back. It his held together by outside force. Outside means countries who want US to be powerful for THEIR SURVIVAL.

**Lypepuddyu** · 10-02-2011, 12:16 AM

Jazak Allah Kher brother!

Alexander commented that of Afghanistan is "easy to march into, hard to march out of."

Alexander the Great, writes a letter to his mother,
I am Involved in the land of a 'leonina' (lion-like) and brave people, där everythin 'foot of the ground is like a well of steel, confronting my soldier. You Have Brought Only One Son Into the World, But Everyone in this country Can Be Called an Alexander.

wrwb, bro, can you pls give me the source of the Alexander quote?

**Nesskissabe** · 10-02-2011, 12:19 AM

Weren't Afghani Persians in those times?

They were defeated mercilessly by the Arabs right?

**Lypepuddyu** · 10-02-2011, 12:27 AM

and another brilliant signature/signatures by bro amr123 esp. Dangers of Laymen like us trying to play scholar. jazakAllah brother.

and Alexander himself comes across on a video and accepts that Afghanistan is a graveyard of the empires

http://www.youtube.com/watch?v=ium4qUowhQU

**Nesskissabe** · 10-02-2011, 12:35 AM

[COLOR="#000000"]
and Alexander himself comes across on a video and accepts that Afghanistan is a graveyard of the empires

Perhaps a lesson to rest of us that technology and wealth not equal to Victory.

**Lypepuddyu** · 10-02-2011, 12:39 AM

Perhaps a lesson to rest of us that technology and wealth not equal to Victory.

without a doubt. without a doubt.

**Lypepuddyu** · 10-02-2011, 01:44 AM

another very very interesting vid. sorry, i seem to be hogging this thread.

http://www.youtube.com/watch?v=8YB9BxPWX3s&feature=related

10-01-2011, 05:01 PM	#1
Kemapreedasse Join Date Oct 2005 Posts 478 Senior Member	United States is Bankrupt Right Now Bismillah By Laurence Kotlikoff Bloomberg February 26, 2011 Our country is bankrupt. It’s not bankrupt in 30 years or five years. It’s bankrupt today. Want proof? Look at President Barack Obama’s 2010 budget. It showed a massive fiscal gap over the next 75 years, the closure of which requires immediate tax increases, spending cuts, or some combination totaling 8 percent of gross domestic product. To put 8 percent of GDP in perspective, this year’s employee and employer payroll taxes for Social Security and Medicare will amount to just 5 percent of GDP. Actually, the picture is much worse. Nothing in economics says we should look out just 75 years when considering the present-value difference between future spending and future taxes. Over the full long-term, we need an extra 12 percent, not 8 percent, of GDP annually. Seventy-five years seems like a long enough time to plan. It’s not. Had the Greenspan Commission, which “fixed” Social Security back in 1983, focused on the true long term we wouldn’t be sitting here now with Social Security 26 percent underfunded. The Social Security trustees, at least, have learned a lesson. The 26 percent figure is based on their infinite horizon fiscal- gap calculation. But the real reason we can’t look out just 75 years is that the government’s cash flows (the difference between its annual taxes and non-interest spending) over any period of time, including the next 75 years, aren’t well defined. This reflects economics’ labeling problem. If you use different words to describe the receipts taken in and paid out each year by the government, you produce entirely different cash flows and an entirely different fiscal gap measured over any finite horizon. Matter of Language It’s only the value of the infinite horizon fiscal gap that is unaffected by the choice of labels of language. Take this year’s payroll tax contributions. Let’s call these transfers from workers to Uncle Sam “borrowing” by the government, rather than “payroll taxes,” since the money will be paid back as future benefits. If the future payback isn’t in full (equal to principal plus interest), we can call the difference a “retirement tax.” Presto! With this change of words, our 2011 deficit of about 10 percent of GDP is boosted another five points to 15 percent. With one set of words, taxes are higher now and lower later. With the other set of words, the opposite is true. But neither set of labels makes more economic sense than the other or changes what the government takes, on balance, from any person or business in any given year. This is no surprise. The math of economics rules out an absolute measure of the deficit, just like the math of physics rules out an absolute measure of time. Bottom Line The bottom line, then, is that we need to look at the infinite-horizon fiscal gap not just for Social Security, but for the entire federal government. That analysis, based on the Congressional Budget Office’s long-term alternative fiscal scenario, shows an unfathomable fiscal gap of $202 trillion. And covering this gap requires coming up with the aforementioned 12 percent of GDP, forever. If this gives you the willies, there’s a ready narcotic — the president’s 2012 budget, which shows that most of our long- term fiscal problem has miraculously disappeared; the fiscal gap isn’t 12 percent of annual GDP. Nor is it 8 percent. It’s now 1.8 percent. This fantastic improvement in our finances is due, we’re told, primarily to the Independent Payment Advisory Board. This board, to be established in 2014 (after the next election, of course) is charged with recommending cuts to Medicare and Medicaid providers when their costs grow too fast. Repealing Cuts We’ve had laws mandating such cuts for years, and they are routinely repealed. Indeed, President Obama signed the latest such repeal last June. But rather than laugh out loud at this cost-control mechanism, the Medicare trustees, three-quarters of whom were appointed by the president, assume in their 2010 report that these cuts will be made — to the dollar. And the 2012 budget cites the report’s fictional forecast as its authoritative source. No one takes the 2010 Medicare trustee report’s long-run projections seriously, least of all Richard Foster, Medicare’s chief actuary. Foster added this statement to the end of the report: “The financial projections shown in this report for Medicare do not represent a reasonable expectation…in either the short range…or the long range.” This isn’t the first administration to conceal our long- term fiscal problem. Back in 1993, Alice Rivlin, then deputy director of the Office of Management and Budget, asked me and economists Alan Auerbach and Jagadeesh Gokhale to prepare a long-term fiscal gap/generational accounting for inclusion in President Bill Clinton’s 1994 budget. Politics Triumphs We worked for months on the analysis, but two days before the budget’s release, the study was excised from the budget. We were shocked, but, in retrospect, the politics are clear. The Clinton administration wanted to claim it was fiscally prudent and the study, which showed unofficial debt growing at enormous rates, showed the opposite. The fiscal gap’s next near appearance in a president’s budget was in 2003. Treasury Secretary Paul O’Neill commissioned Gokhale and Kent Smetters to do the study. It showed a massive $45 trillion fiscal gap — not a great basis for pushing tax cuts or introducing the prescription-drug benefit for seniors, known as Medicare Part D. O’Neill was ousted on Dec. 6, 2002, and a couple of days later the fiscal-gap study was discarded. I’m not sure whether censoring the fiscal gap is more dishonorable than fudging it. What I do know is that we can’t assume our problems away and that I expected far better of this president when I voted for him. (Laurence Kotlikoff is professor of economics at Boston University, president of Economic Security Planning Inc. and author of “Jimmy Stewart Is Dead.” The opinions expressed are his own.) http://www.midasletter.com/index.php...upt-right-now/ Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 06:01 PM	#2
Kemapreedasse Join Date Oct 2005 Posts 478 Senior Member	Bismillah The Future For Most Americans: Pathetic Jobs, Bad Debts And A Crappy Economy http://endoftheamericandream.com/arc...crappy-economy Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 06:03 PM	#3
Kemapreedasse Join Date Oct 2005 Posts 478 Senior Member	Bismillah Economist Calls Entitlements A Massive Ponzi Scheme And Says US Is Actually $211 Trillion In Debt http://www.businessinsider.com/econo...in-debt-2011-8 Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 07:41 PM	#4
amagmasia Join Date Oct 2005 Posts 429 Senior Member	No empire has ever survived an empty treasury. Roman, Byzantine, Mughal, Ottoman, British. Will America survive negative $211 trillion? Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 07:56 PM	#5
indahouweres Join Date Oct 2005 Posts 448 Senior Member	Us maybe bankrupt or anything. Won't do my any good. Have to worry about my own bankruptcy. Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 09:22 PM	#6
deackatera Join Date Dec 2005 Posts 511 Senior Member	The decline of Super Power (so-called) has started. May Allah protect those who want peace whether Muslims or Non-Muslims AAMEEN! Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 09:27 PM	#7
triarmarm Join Date Oct 2005 Posts 369 Senior Member	Us maybe bankrupt or anything. Won't do my any good. Have to worry about my own bankruptcy. Quote Of The Day Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 10:17 PM	#8
Lypepuddyu Join Date Oct 2005 Posts 613 Senior Member	The decline of Super Power (so-called) has started. May Allah protect those who want peace whether Muslims or Non-Muslims AAMEEN! AFGHANISTAN: Graveyard Of Empires Alexander The Great Mongol Empire British Empire Soviet Union U.S.A. Superb signature!!! Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 10:48 PM	#9
deackatera Join Date Dec 2005 Posts 511 Senior Member	AFGHANISTAN: Graveyard Of Empires Alexander The Great Mongol Empire British Empire Soviet Union U.S.A. Superb signature!!! Jazak Allah Kher brother! Alexander commented that of Afghanistan is "easy to march into, hard to march out of." Alexander the Great, writes a letter to his mother, I am Involved in the land of a 'leonina' (lion-like) and brave people, där everythin 'foot of the ground is like a well of steel, confronting my soldier. You Have Brought Only One Son Into the World, But Everyone in this country Can Be Called an Alexander. Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 10:59 PM	#10
ValdisSeroff Join Date Oct 2005 Posts 566 Senior Member	As long as US is still protecting Arab regimes it will never be bankrupt your arguments are not sound at all Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 11:22 PM	#11
Nesskissabe Join Date Oct 2005 Posts 446 Senior Member	As long as US is still protecting Arab regimes it will never be bankrupt your arguments are not sound at all NO. Your argument is faulty. "And the disbelievers planned, but Allah planned. And Allah is the best of planners." (Al Imran: 54) Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-01-2011, 11:55 PM	#12
ValdisSeroff Join Date Oct 2005 Posts 566 Senior Member	NO. Your argument is faulty. US popping up Arab regimes? Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-02-2011, 12:00 AM	#13
Nesskissabe Join Date Oct 2005 Posts 446 Senior Member	US popping up Arab regimes? brother Read more closely, ponder on it for a few minutes. "And the disbelievers planned, but Allah planned. And Allah is the best of planners." (Al Imran: 54) Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-02-2011, 12:06 AM	#14
Pynctyncroast Join Date Oct 2005 Posts 385 Senior Member	Assalamu alaykum US was bankrupt long time back. It his held together by outside force. Outside means countries who want US to be powerful for THEIR SURVIVAL. Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-02-2011, 12:16 AM	#15
Lypepuddyu Join Date Oct 2005 Posts 613 Senior Member	Jazak Allah Kher brother! Alexander commented that of Afghanistan is "easy to march into, hard to march out of." Alexander the Great, writes a letter to his mother, I am Involved in the land of a 'leonina' (lion-like) and brave people, där everythin 'foot of the ground is like a well of steel, confronting my soldier. You Have Brought Only One Son Into the World, But Everyone in this country Can Be Called an Alexander. wrwb, bro, can you pls give me the source of the Alexander quote? Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)

10-02-2011, 12:19 AM	#16
Nesskissabe Join Date Oct 2005 Posts 446 Senior Member	Weren't Afghani Persians in those times? They were defeated mercilessly by the Arabs right? Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-02-2011, 12:27 AM	#17
Lypepuddyu Join Date Oct 2005 Posts 613 Senior Member	and another brilliant signature/signatures by bro amr123 esp. Dangers of Laymen like us trying to play scholar. jazakAllah brother. and Alexander himself comes across on a video and accepts that Afghanistan is a graveyard of the empires http://www.youtube.com/watch?v=ium4qUowhQU Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-02-2011, 12:35 AM	#18
Nesskissabe Join Date Oct 2005 Posts 446 Senior Member	[COLOR="#000000"] and Alexander himself comes across on a video and accepts that Afghanistan is a graveyard of the empires Perhaps a lesson to rest of us that technology and wealth not equal to Victory. Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-02-2011, 12:39 AM	#19
Lypepuddyu Join Date Oct 2005 Posts 613 Senior Member	Perhaps a lesson to rest of us that technology and wealth not equal to Victory. without a doubt. without a doubt. Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote

10-02-2011, 01:44 AM	#20
Lypepuddyu Join Date Oct 2005 Posts 613 Senior Member	another very very interesting vid. sorry, i seem to be hogging this thread. http://www.youtube.com/watch?v=8YB9BxPWX3s&feature=related Share Share this post on Digg Del.icio.us Technorati Twitter
	Quote