jasongpeirce
03-13-2015, 04:40 PM
(First published at Voices of Liberty: http://www.voicesofliberty.com/article/the-fiscal-gap-why-were-the-most-insolvent-of-developed-nations/)
Esteemed economist Larry Kotlikoff warned the Senate Budget Committee last month that Greece is more solvent than the United States.
Kotlikoff identified the “fiscal gap” as the most important and telling measurement for gauging the health of an economy. The fiscal gap is “the difference between our government’s projected financial obligations and the present value of all projected future tax and other receipts.” The projected financial obligations are also known as “unfunded liabilities” such as future Social Security payouts. At $210 trillion, the U.S.’s fiscal gap is higher than many of the world’s economic basket cases.
Kotlikoff furthered: “The first point I want to get across is that our nation is broke. Our nation’s broke, and it’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today. Indeed, it may well be in worse fiscal shape than any developed country, including Greece…”
Broke? Well, how did the U.S. essentially bankrupt itself? In short, politics and normalcy bias.
Explains economist Gary North (covering Kotlikoff’s address):
“I suspect, most Congressmen really don’t understand it (the fiscal gap). They have been able to kick the can, decade after decade, and they assume that they will be able to do this in the future. Nothing bad has happened so far, so they assume that nothing bad will ever happen… Congress doesn’t care. The President doesn’t care. The AARP doesn’t care. The voters don’t care. Investors in Treasury bonds don’t care. It is all distant. Anything that is beyond two years out is not considered an important factor. The attention span of the public is short. The attention span of the media is short. Anything longer than the next Congressional election is considered long-term. Politicians don’t care about the long-term. They care about getting reelected. A budgetary strategy of hiking taxes and reducing benefits is a sure-fire way not to get re-elected.”
Thinking the implications through, the point must be made that the reason the U.S.’s essential bankruptcy is not yet as visible as Detroit’s – or Greece’s — is because the Federal Reserve “prints” dollars out of thin air, which allows the federal government to keep borrowing and spending. This cannot go on in perpetuity.
The rest of the world has been waking up to this fact. China has been making a push to replace the dollar as the world’s reserve currency for some time. And even “allies” like the UK are beginning to comprehend which way the wind is blowing. According to Financial Times, the UK has decided to become the first G7 nation to join China’s new Asian Infrastructure Investment Bank. This has riled the U.S.: “The Obama administration accused the UK of a ‘constant accommodation’ of China after Britain decided to join a new China-led financial institution that could rival the World Bank.”
http://www.voicesofliberty.com/article/the-fiscal-gap-why-were-the-most-insolvent-of-developed-nations/
Esteemed economist Larry Kotlikoff warned the Senate Budget Committee last month that Greece is more solvent than the United States.
Kotlikoff identified the “fiscal gap” as the most important and telling measurement for gauging the health of an economy. The fiscal gap is “the difference between our government’s projected financial obligations and the present value of all projected future tax and other receipts.” The projected financial obligations are also known as “unfunded liabilities” such as future Social Security payouts. At $210 trillion, the U.S.’s fiscal gap is higher than many of the world’s economic basket cases.
Kotlikoff furthered: “The first point I want to get across is that our nation is broke. Our nation’s broke, and it’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today. Indeed, it may well be in worse fiscal shape than any developed country, including Greece…”
Broke? Well, how did the U.S. essentially bankrupt itself? In short, politics and normalcy bias.
Explains economist Gary North (covering Kotlikoff’s address):
“I suspect, most Congressmen really don’t understand it (the fiscal gap). They have been able to kick the can, decade after decade, and they assume that they will be able to do this in the future. Nothing bad has happened so far, so they assume that nothing bad will ever happen… Congress doesn’t care. The President doesn’t care. The AARP doesn’t care. The voters don’t care. Investors in Treasury bonds don’t care. It is all distant. Anything that is beyond two years out is not considered an important factor. The attention span of the public is short. The attention span of the media is short. Anything longer than the next Congressional election is considered long-term. Politicians don’t care about the long-term. They care about getting reelected. A budgetary strategy of hiking taxes and reducing benefits is a sure-fire way not to get re-elected.”
Thinking the implications through, the point must be made that the reason the U.S.’s essential bankruptcy is not yet as visible as Detroit’s – or Greece’s — is because the Federal Reserve “prints” dollars out of thin air, which allows the federal government to keep borrowing and spending. This cannot go on in perpetuity.
The rest of the world has been waking up to this fact. China has been making a push to replace the dollar as the world’s reserve currency for some time. And even “allies” like the UK are beginning to comprehend which way the wind is blowing. According to Financial Times, the UK has decided to become the first G7 nation to join China’s new Asian Infrastructure Investment Bank. This has riled the U.S.: “The Obama administration accused the UK of a ‘constant accommodation’ of China after Britain decided to join a new China-led financial institution that could rival the World Bank.”
http://www.voicesofliberty.com/article/the-fiscal-gap-why-were-the-most-insolvent-of-developed-nations/