A National Debt Of $14 Trillion? Try $211 Trillion
August 6, 2011
When Standard & Poor's reduced the nation's credit rating from AAA to AA-plus, the United States suffered the first downgrade to its credit rating ever. S&P took this action despite the plan Congress passed this past week to raise the debt limit.
The downgrade, S&P said, "reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."
It's those medium- and long-term debt problems that also worry economics professor Laurence J. Kotlikoff, who served as a senior economist on President Reagan's Council of Economic Advisers. He says the national debt, which the U.S. Treasury has accounted at about $14 trillion, is just the tip of the iceberg.
"We have all these unofficial debts that are massive compared to the official debt," Kotlikoff tells David Greene, guest host of weekends on All Things Considered. "We're focused just on the official debt, so we're trying to balance the wrong books."
Kotlikoff explains that America's "unofficial" payment obligations ? like Social Security, Medicare and Medicaid benefits ? jack up the debt figure substantially.
Laurence J. Kotlikoff served as a senior economist on President Ronald Reagan's Council of Economic Advisers and is a professor of economics at Boston University.
Courtesy of Boston University
Laurence J. Kotlikoff served as a senior economist on President Ronald Reagan's Council of Economic Advisers and is a professor of economics at Boston University.
"If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's the fiscal gap," he says. "That's our true indebtedness."
We don't hear more about this enormous number, Kotlikoff says, because politicians have chosen their language carefully to keep most of the problem off the books.
"Why are these guys thinking about balancing the budget?" he says. "They should try and think about our long-term fiscal problems."
According to Kotlikoff, one of the biggest fiscal problems Congress should focus on is America's obligation to make Social Security payments to future generations of the elderly.
"We've got 78 million baby boomers who are poised to collect, in about 15 to 20 years, about $40,000 per person. Multiply 78 million by $40,000 ? you're talking about more than $3 trillion a year just to give to a portion of the population," he says. "That's an enormous bill that's overhanging our heads, and Congress isn't focused on it."
"We've consistently done too little too late, looked too short-term, said the future would take care of itself, we'll deal with that tomorrow," he says. "Well, guess what? You can't keep putting off these problems."
To eliminate the fiscal gap, Kotlikoff says, the U.S. would have to have tax increases and spending reductions far beyond what's being negotiated right now in Washington.
"What you have to do is either immediately and permanently raise taxes by about two-thirds, or immediately and permanently cut every dollar of spending by 40 percent forever. The [Congressional Budget Office's] numbers say we have an absolutely enormous problem facing us."
yes and we can't even roll back the bush tax cuts for millionaires, the lowest tax rates for the rich in over 60 years has brought wonders to our economy and increased income disparity to where it worse then in the age of robber barons....
yes and we can't even roll back the bush tax cuts for millionaires, the lowest tax rates for the rich in over 60 years has brought wonders to our economy and increased income disparity to where it worse then in the age of robber barons....
Debt ceiling, "supercommittee", tax cut extension - I could find a few dozen other examples. The GOP in general and John Boehner in particular have a habit of screwing off to the last minute and either failing to act entirely or forcing a half-assed solution just to avoid catastrophe.
__________________
We work together every damn day. --Jon Stewart
Financial legislation normally originates in the House as it did in this case. The Senate instead of going to conference wrote their own bill and created the dare. The Senate left town and Obama and the water-boy media blamed the House. Strange politics, but Boehner and the House caved so the can was kicked down the road for just two months. It will be interesting to see if they waste that two months trying to find agreement. I wonder what will happen when everyone finally realizes the SS Ponzi kitty is not being adequately paid and an attempt is made to restore the payroll tax? I suspect it will be ugly.
Financial legislation normally originates in the House as it did in this case. The Senate instead of going to conference wrote their own bill and created the dare.
The white house and the senate have been after Boehner and house repugnicans to act since at least September, if not earlier. Boehner had his chance to craft the appropriate legislation months ago; he refused.
Boehner and the GOP/Tea party have been ****ing around at every turn, trying to extend the recession, trying to maintain financial uncertainty and for no reason other than to be able to point at a poor economy and say "Obama did it"
Boehner has been extorting concessions from the White House since he became speaker. This time, it backfired. The American public, by and large, is fed up with his obstructionist antics.
__________________
__________________
We work together every damn day. --Jon Stewart
... note to self, buy some spray paint.....
Linear Mode
