Federal Reserve Says: "US Is Bankrupt"

[zynner]

http://www.telegraph.co.uk/money/mai...14/ixcity.html

...Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve ... said that, by some measures, the US is already bankrupt ... ... "the US government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds'' ... Prof Kotlikoff, who teaches at Boston University, says: "The proper way to consider a country's solvency is to examine the lifetime fiscal burdens facing current and future generations. If these burdens exceed the resources of those generations, get close to doing so, or simply get so high as to preclude their full collection, the country's policy will be unsustainable and can constitute or lead to national bankruptcy. "Does the United States fit this bill? No one knows for sure, but there are strong reasons to believe the United States may be going broke." Experts 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. Prof Kotlikoff said: "This figure is more than five times US GDP and almost twice the size of national wealth. One way to wrap one's head around $65.9trillion is to ask what fiscal adjustments are needed to eliminate this red hole. The answers are terrifying. One solution is an immediate and permanent doubling of personal and corporate income taxes. Another is an immediate and permanent two-thirds cut in Social Security and Medicare benefits. A third alternative, were it feasible, would be to immediately and permanently cut all federal discretionary spending by 143[%]." The scenario has serious implications for the dollar. If investors lose confidence in the US's future, and suspect the country may at some point allow inflation to erode away its debts, they may reduce their holdings of US Treasury bonds.

That's what you get when you go down the road of the welfare state.

It may take time, but the US welfare state will collapse just as surely as the Soviet one did.

~ zynner

[GodBlessAmerica]

Cut back government employee welfare to the point they are payed no more than what the private sector pays for wages and benefits and you will get lots of it back quick.

Yep, welfare should be temporary unless you are massivly crippled.

[RVonse]

1. Cut welfare.
2. Cut military for defense to our own boarders only. No more unilateral crap.
3. Raise taxes for the very wealthy only.
4. Create incentives for manufacturing to locate in the U.S.
5. Lock box for social security and cut it out for the weathy.
6. Get rid of government corporate lobby's, they are not in the nations interests anymore.

[GodBlessAmerica]

Quote by: RVonse 1. Cut welfare. 2. Cut military for defense to our own boarders only. No more unilateral crap. 3. Raise taxes for the very wealthy only. 4. Create incentives for manufacturing to locate in the U.S. 5. Lock box for social security and cut it out for the weathy. 6. Get rid of government corporate lobby's, they are not in the nations interests anymore.

Balance is needed, not class warfare or a limited view of what we need to do.

Limit welfare.

Isolationism with the military regarding our interest in the long term is more like a suicide pact.

Pass a fair tax where everyone pays something.
It isn't fair that the upper half of America pays for most everything and that the upper 3% pays something like 50% of the taxes. That is class warfare and in the end those employers get fed up, retire and shed jobs.

Cut taxes, laws restricting what businesses can do and remove the stupid lawsuits and much of the manufacturing could come back.

SS needs to be more restricted like you say, and considering the top 3% pay most of the taxes in the country, I think they can have their darn 2k a month. They earned it.

Get rid of union lobbies and all the government employee welfare by not allowing tax payer dollars to pay more for government work for a job or retirement than is the average in the private sector. If anything, because they are being paid with our tax dollars, they should get less than the private sector, not more.

[PatrickHenry]

Slash military spending. If there is any debate over the need to spend tax revenues, fund higher education.

[Mia]

Quote by: GodBlessAmerica Cut back government employee welfare to the point they are payed no more than what the private sector pays for wages and benefits and you will get lots of it back quick. Yep, welfare should be temporary unless you are massivly crippled.

It IS temporary unless you are disabled. And if you worked enough, a disabled person gets disability insurance, which is different fom welfare.

In TX at least, the only recipients for non-disabled welfare are mothers with children.

There is a new program (I forget where now) that will not raise your benefits per child if you have any while already on welfare. I think that's a good idea.

Anyway, there are not able-bodied people out there raking in welfare to do nothing. Even food stamps, the only thing anyone can get, only lasts three months without employment.

I do not think it is social services making us bankrupt.

[Mia]

Quote by: GodBlessAmerica SS needs to be more restricted like you say, and considering the top 3% pay most of the taxes in the country, I think they can have their darn 2k a month. They earned it.

Your wages stopped getting taxed for ss at 80K each year. The wealthiest don't pay more than anyone with an 80K income. Income taxes, they do, of course, but not ss.

The wealthy find ways to cut their tax bills anyway. My ex managed to pay the same amount as me even though he earned twice as much.

[Mia]

Quote by: PatrickHenry Slash military spending. If there is any debate over the need to spend tax revenues, fund higher education.

And lower. Catching kids when they are young is important. Like those programs for kids in inner cities.

[Samildanach]

Or, you could just move countries until its all over with then move back again. Besides which, I am not all that sure your economy is going to bankrupt itself. I dont think the Saudis or Japan will let that happen in the short to medium term as they have too many US dollars in their reserves. They will keep buying US treasuries at the moment because they have no other choice, so you have some time yet. However saying that UAE just converted 10% of its reserves into euros and this is probably going to be a long term trend with a lot of countries.

[tivodan1116]

Quote by: Mia Your wages stopped getting taxed for ss at 80K each year. The wealthiest don't pay more than anyone with an 80K income. Income taxes, they do, of course, but not ss. The wealthy find ways to cut their tax bills anyway. My ex managed to pay the same amount as me even though he earned twice as much.

Your post here is based on anecdotes and myths. The FACT is, the wealthiest 5% of Americans pay almost 75% of the total income tax bill.

I do not think it is social services making us bankrupt.

If I spent over 50% of my personal budget standing on the street handing money to passers-by, and as a result I could not pay my basic essential bills, what do you think a financial advisor would suggest I cut back on? Well, the government spends more than half of the budget in "entitlements"

Anyway, there are not able-bodied people out there raking in welfare to do nothing.

Oh, of course there are. The problem is, we are pissing ourselves to be politically correct, so just about ANYTHING can be regarded as a disability. There are people right now in my city (I know because I work with indigent clients in legal services - they all have social services of some kind) who are getting disability for being OBESE. There are all kinds of non-disabilities that qualify for social services because we're afraid of what "the national association for people with ________ " will say if we tell them it's not a disability all of a sudden.

Going back to the original post, this guy isn't saying anything new. What he's saying is that the U.S. government is bankrupt, "insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds..."

All he is saying in a nutshell is that "future generations" won't collect Social Security or other "entitlements". We knew that all along (at least I, a 28 year old man did). That's why responsible adults do what they are supposed to do, meaning plan for their own retirement.

There is a very simple solution to this problem: Change the retirement age to a floating number. The Census Bureau already has the data we need. You see, the average retiree uses up all of the money they personally put into Social Security over their lifetime, plus any interest it might have earned, in about 2 years. So, fix the retirement age so that at every census the retirement age becomes "Avg lifespan of Americans according to the Census minus 2 years". That would mean the average person only takes out of Social Security what they put in.

But, my personal cause here: None of this will ever change so long as young people don't vote in mass numbers in every election (read: not just the ones Bono and P.Diddy tell you to). As long as senile old coots can remember to get out and vote every time, they will have politicians doing whatever they want.

[Scribbler1]

Quote by: tivodan1116 Your post here is based on anecdotes and myths. The FACT is, the wealthiest 5% of Americans pay almost 75% of the total income tax bill.

And despite being taxed, they STILL get to be the wealthiest 5% of Americans! Pretty sweet deal.
Not sweet enough for Bush and the GOP though, apparently.

Tivo, thanks for reinforcing my belief that the wealthy should stop whining about taxes and be happy they live in a country that ALLOWS them to become so wealthy.

Now, if we could make the government spend that tax money efficiently there would probably be no reason for all the rest of the whining about taxing the rich.

[Samildanach]

If they are so rich that they can foot 75% of the bill, why not just tax them the whole 100% and let the poor off completely. Sounds like good sense to me.

[bishop]

gotta love how some people want to eliminate all social spending, while maintaining the current growth levels of military/empire spending..

the fastest growing line item in the federal budget is not social spending, it isn't military spending - it's debt service.

where i'll break with many people on this site, i DO want to see taxes increased - specifically on the top income earners who do not need these debt-financed "tax cuts".. the ONLY instance where i will accept tax cuts is when we've first balanced the budget. anyone advocating "tax cuts" financed by government debt is a complete idiot as far as i'm concerned. and as it currently stands, the rejects in power have absolutely no interest in cutting spending, but they are political opportunists promising "tax cuts" financed by foreign debt. talk about selling your country out.

and while i want to see taxes increased, i also want to see spending drastically reduced. all too often, there are these simplistic solutions offered to our debt crisis (yes, it is a crisis).. either people talk about cutting spending, or they talk about raising taxes.. the debt, and our debt service is far too large to be eliminated with this either/or approach - we need to do both, and fast. we need do as much as possible NOW because in a very short time, our entitlement programs are going to begin running into massive deficits.

[Samildanach]

anyone advocating "tax cuts" financed by government debt is a complete idiot as far as i'm concerned.

Or one of the five percent :)

[Samildanach]

and I'm pretty sure they aren't idiots....

[bishop]

no, if you're in the top 5%, you definitely aren't an idiot..

but, those on the lower rungs (including everyone in the middle class and below) who advocate "tax cuts" financed by foreign debt are idiots as far as i'm concerned.. all they're doing is pushing future tax burdens on their children/grandchildren so that they can live la vida loca right now.