U.S. Going Bankrupt?

Tuesday, July 18th, 2006 | Social Security |

That’s according to an article in the Telegraph which quotes Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, “a leading constituent of the US Federal Reserve.”

xperts have calculated that the country’s long-term “fiscal gap” between all future government spending and all future receipts will widen immensely as the Baby Boomer generation retires, and as the amount the state will have to spend on healthcare and pensions soars. The total fiscal gap could be an almost incomprehensible $65.9 trillion, according to a study by Professors Gokhale and Smetters.

The figure is massive because President George W Bush has made major tax cuts in recent years, and because the bill for Medicare, which provides health insurance for the elderly, and Medicaid, which does likewise for the poor, will increase greatly due to demographics.

The article doesn’t break the problem down enough to say how much of the problem is deficits and how much is entitlements. I suspect it’s mostly the latter, based on the European experience in which social program liabilities dwarf debts. Of course running up deficits as Bush has been doing doesn’t help. Also not helping: Bush’s Medicare prescription program, which increased entitlements without increasing revenues.

Social Security’s problems are relatively easy to fix, since SS is a fixed payout and the program is expected to run in the black until 2018. Medicare costs on the other hand just keep rising.

3 Comments to U.S. Going Bankrupt?

Heartless Libertarian
July 19, 2006

Actually, that last bit shows a good bit of ignorance on how our tax system works-since Social Security and Medicaid taxes haven’t been cut, and those are what finances those programs, not the other tax revenues.

Les Jones
July 19, 2006

I’m not sure I’m following you.

I’m aware that SS and Medicare/Medicaid/FICA are separate from Federal withholding taxes, capital gains taxes, and all the rest, and that it’s the latter set of taxes that have been cut. But ultimately, if there’s a shortfall in SS and FICA, then it’s going to be made up with the money raised by those other taxes.

steve lapotsky
January 9, 2007

The Fed is not the solution to our economic crisis- it is the problem - It controls credit, rates, interest rates and supply of money and it charges the govt. interest for borrowing its own money - It is a scam - Abolish the FED and place the money under the treasury dept. and we will have debt free and interest free money and an economic renaissance - FED is not Federal and has no reserves - It is a quasi monopolistic international banking cartel - It is not audited, its meetings are held in private, its workers are not under civil service, it pays property tax and it pays its own postage - Since the inception of the Fed what we have had is not the absence of war and economic instability but just the opposite, economic instability and war. This ponzi scheme must end - I care not who makes the laws, let me control the money and I will be able to make the laws- You are a den of thieves and by the almighty you shall be routed out.God Bless America and Our Constitutional Republic.