USA: IMPORTANT: The USA is bankrupt - actual U.S. government debt - its not $13 trillion - its really: $200 trillion!!!
Date Posted: Wednesday 03-Nov-2010
[Here are some hardcore facts - really scary ones from an economist of note. Jan]
OTTAWA— From Wednesday's Globe and Mail
Boston University
economist Laurence Kotlikoff says U.S. government debt is not
$13.5-trillion (U.S.), which is 60 per cent of current gross domestic
product, as global investors and American taxpayers think, but rather
14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get
real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”
Writing in the
September issue of Finance and Development, a journal of the
International Monetary Fund, Prof. Kotlikoff says the IMF itself has
quietly confirmed that the U.S. is in terrible fiscal trouble – far
worse than the Washington-based lender of last resort has previously
acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June
report. “Closing the fiscal gap requires a permanent annual fiscal
adjustment equal to about 14 per cent of U.S. GDP.”
This sum is equal
to all current U.S. federal taxes combined. The consequences of the
IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be
appalling – and possibly worse than appalling.
Prof. Kotlikoff
says: “The IMF is saying that, to close this fiscal gap [by taxation],
would require an immediate and permanent doubling of our personal
income taxes, our corporate taxes and all other federal taxes.
“America’s fiscal
gap is enormous – so massive that closing it appears impossible
without immediate and radical reforms to its health care, tax and
Social Security systems – as well as military and other discretionary
spending cuts.”
He cites earlier
calculations by the Congressional Budget Office (CBO) that concluded
that the United States would need to increase tax revenue by 12
percentage points of GDP to bring revenue into line with spending
commitments. But the CBO calculations assumed that the growth of
government programs (including Medicare) would be cut by one-third in
the short term and by two-thirds in the long term. This assumption,
Prof. Kotlikoff notes, is politically implausible – if not politically
impossible.
One way or
another, the fiscal gap must be closed. If not, the country’s spending
will forever exceed its revenue growth, and no one’s real debt can
increase faster than his real income forever.
Prof. Kotlikoff
uses “fiscal gap,” not the accumulation of deficits, to define public
debt. The fiscal gap is the difference between a government’s projected
revenue (expressed in today’s dollar value) and its projected spending
(also expressed in today’s dollar value). By this measure, the United
States is in worse shape than Greece.
Prof. Kotlikoff
is a noted economist. He is a research associate at the U.S. National
Bureau of Economic Research. He is a former senior economist with
then-president Ronald Reagan’s Council of Economic Advisers. He has
served as a consultant with governments around the world. He is the
author (or co-author) of 14 books: Jimmy Stewart Is Dead (2010), his
most recent book, explains his recommendations for reform.
He says the U.S.
cannot end its fiscal crisis by increasing taxes. He opposes further
stimulus spending because it will simply increase the debt. But he does
suggest reforms that would help – most of which would require a
significant withering away of the state. He proposes that the
government give every person an annual voucher for health care,
provided that the total cost not exceed 10 per cent of GDP. (U.S.
health care now consumes 16 per cent of GDP.) He suggests the
replacement of all current federal taxes with a single consumption tax
of 18 per cent. He calls for government-sponsored personal retirement
accounts, with the government making contributions only for the poor,
the unemployed and people with disabilities.
Without drastic
reform, Prof. Kotlikoff says, the only alternative would be a massive
printing of money by the U.S. Treasury – and hyperinflation.
As former
president Bill Clinton once prematurely said, the era of big government
is over. In the coming years, the U.S. will almost certainly be
compelled to deconstruct its welfare state.
Prof. Kotlikoff
doesn’t trust government accounting, or government regulation. The
official vocabulary (deficit, debt, transfer payment, tax, borrowing),
he says, is vulnerable to official manipulation and off-the-books
deceit. He calls it “Enron accounting.” He also calls it a lie. Here is
an economist who speaks plainly, as the legendary straight-shooting
film star Jimmy Stewart did for an earlier generation.
But Prof.
Kotlikoff’s economic genre isn’t the Western. It’s the horror story –
“and scarier,” one reviewer of his book suggests, than Stephen King.
Source Url: http://www.theglobeandmail.com/report-on-business/commentary/neil-r...
Posted By: Jan
Webmaster
Author of: Government by Deception
“Political
language is designed to make lies sound truthful and murder
respectable, and to give an appearance of solidity to pure wind.”
(George Orwell)
My favourite poem:
"Roses are RED... and so is the Whitehouse"
LINK: http://www.americancrisis.us/Article.php?ID=77336&
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