Boston University economist Laurence Kotlikoff says the U.S. is broke. He said so before the financial crisis and now he warns we’re nearing the broke as a proverbial “joke” status.
In the September issue of Finance and Development he claims:
” [The] 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 percent of current GDP.”
That sounds bad.
“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.”
Indeed, John Williams at ShadowStats.com, has been saying the same type of thing for years. And no, there is no one big enough to bail us out. Both Williams and Kotlikoff agree that the first step to solving this mess is to stop trusting the government’s accounting:
“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.”
Amen brother. His recommendations are quite sensible given our predicament as well:
“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.”
Hopefully we pay attention to him before the joke is on us.