Bob Murphy @ TAC: We Already Went Over the Fiscal Cliff

[Occam's Banana]

Nice article by Bob Murphy - everyone's favorite karaoke-economist - at The American Conservative (wherein he exposes yet another Krugman Kontradiction):

We Already Went Over the Fiscal Cliff
The U.S. government is insolvent, and Paul Krugman's remedy means inflation.

By Robert P. Murphy • November 29, 2012

The hemming and hawing over the looming “fiscal cliff” is akin to passengers fighting over who gets to sit in the first class seats in a jumbo jet that just ran out of fuel. The U.S. government already sent the country over the cliff years ago; it’s just taken this long to (possibly) acknowledge reality. Legislators may strike a “compromise deal” that will postpone the crisis yet again, but soon enough it will return and with greater vengeance.

When people speak of “the national debt,” they usually have in mind the official Treasury securities held by the public. This figure is currently about $11.45 trillion (72% of GDP). However, this is just a small portion of the total indebtedness of the federal government, once we include all of the implicit obligations in the current benefit schemes for Medicare, Social Security, and other social insurance programs. Using GAAP procedures the way they would be applied to a corporation that had pension obligations for its employees, the federal government could be in the hole more than $70 trillion. Even the government-approved Social Security Trustees reported earlier in 2012 that the “unfunded liabilities” (i.e. benefit payments that will exceed incoming payroll tax receipts) of the major federal social insurance programs over the next 75 years have a present-discounted value of $38.6 trillion.

Another way of assessing our current, unsustainable trajectory is to look at the Congressional Budget Office (CBO) forecasts of the official Treasury debt/GDP ratio. As time passes, the unofficial indebtedness of Social Security and Medicare will show up as “official” debt when Uncle Sam has to enter the bond markets to cover the shortfall between beneficiary payments and incoming payroll taxes. When CBO plugged into its model the assumptions that the federal government would continue with its recent behavior in terms of maintaining tax rates, continually exempting large groups of Americans from the Alternative Minimum Tax, postponing reductions in reimbursement rates for doctors, and so on, then the federal debt held by the public exceeds 200% of GDP in the year 2038.

[...]

More at link: http://www.theamericanconservative.c...-fiscal-cliff/

[tod evans]

70T sounds more realistic than the mid-teen number bleated by "The-Newz"..

What us minions need to DO instead of focusing on the idiots in suits is plan how we're going to start over once all these obligations come due...All the smoke-n-mirrors and slick hair-do's are a distraction.....We still have farm land and a remnant of a manufacturing base........If we can feed ourselves and make "stuff" we'll get through the mess...........

[Occam's Banana]

Daylight bump.