Home Forums Hunting & Shooting Hunter's Campfire USA deficit is really 202 Trillion

According to this report;

http://finance.yahoo.com/tech-ticker/%22enron-accounting%22-has-bankrupted-america-u.s.-deficit-really-202-trillion-kotlikoff-says-535354.html?tickers=udn,tlt,tbt,uup,TIP,%5Egspc,GLD&sec=topStories&pos=9&asset=&ccode=

Can't confirm nor deny the actual numbers, but I do believe that he is correct in theory and analysis:


Link


U.S. Is Bankrupt and We Don't Even Know It: Laurence Kotlikoff
By Laurence Kotlikoff - Aug 10, 2010 9:00 PM ET


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.

Double Our Taxes

To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. 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 U.S. running a surplus equal to 5 percent of GDP this year, rather than a 9 percent deficit. So the IMF is really saying the U.S. 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 15 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 20 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 U.S. 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 U.S. 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 14 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 14 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.� The opinions expressed are his own.)

Well as long as I have some A-1 sauce and the neighbors have cats, I ain't a'gonna starve.

Fiscal gap, not deficit.

Claiming that the deficit is $202T would be the same as saying that the national debt was increasing at the rate of $202T per year. Neither Baby Bush nor Obama could manage that.

The point, of course, is that regardless of how big or small it is, it is never going to be paid off.

In other words, eventually it will be either repudiated or hyperinflated into nonexistence, either of which makes the US government a very bad risk for lenders.

Sooner or later said lenders will begin to understand this, and they will either stop lending to the US government (that is, buying bonds) or they will demand significantly larger yields for doing so.

At that point, not only will the US government not be able to pay off the debt, it will no longer even be able to service it--that is, pay the interest on all its loans.

There lies the singularity. Nobody knows what will happen then.

Most likely millions of people will die.

Repudiate the debt, tomorrow. Go back to the gold standard, or some standard involving some real and tangible commodity or mix thereof. And so on and so on.

It would be a very rough decade to follow. However, at the end, we would emerge stronger, better, with the problem fixed.

Not the gold standard. Not any standard. Private currencies competing in a free market.

Any proof that such as EVER worked? Anywhere?

Fine, but those currencies will be based on something. Gold most likely.

What is actually going to happen here in this country is that unlike lots of countries, we have semi-independent states. And, of course, we have regional economies that vary greatly. Where I live, the enconomy is relatively good. Oh, it isn't great, but things are moving along.

At some point, the states are going to have to make decisions. Do they want to go down the toilet with the national government, or do they wish to go their own ways?

There are some small towns, and communities in Germany that have been doing something similar, so far so good.

Sure--everywhere. There were no legal tender laws in the Garden of Eden, or for quite awhile afterward.

Take a look at Bitcoin, if you haven't already. It's interesting: a private currency based not on gold, but on...well, essentially CPU time. I have no idea whether it's feasible or not, but at the very least it's certainly innovative.


If they want to go their own way, they'll have to secede; if the feds understand what that means for them--and they will--they'll do the whole Lincoln shtick again, and lots of people will die.

Yes, yes, Oathkeepers, blah blah blah. They'll be cursorily court-martialed and shot, then replaced with gangbangers from the inner cities who've never heard of the Constitution and will be only too happy to shoot whomever they're told to shoot.

So, yet again, you have no proof. Go figure.

Your contention, then, is that there were legal tender laws in the Garden of Eden?

Sure there were. God wanted to give Adam someone that was loving, caring, kind, logical, and the same mood all of the time. It was going to cost Adam an arm and a leg.

He said to God "What could I get for a rib?"

Ha ha, but it doesn't address the legal tender issue. For most of history, nobody had ever heard of legal tender.

Hey Barak,

Do you know what was the very first store in the Garden of Eden?



Are you ready for this?



An Apple store.

Pretty good.

Who was the second-shortest man in the Bible?

Bildad the Shuhite.

The opening of the Apple store created a moving sale. Oh well.

I am denser than normal. Splain the joke you posted.

Bildad the Shuhite was one of Job's three friends, along with Eliphaz the Temanite and Zophar the Naamathite.

But the shortest man in the Bible was the Roman guard posted at the tomb of Joseph of Arimathea: he went to sleep on his watch.

I get the shortest man analogy.