$205 Trillion in Unfunded Liabilities

Daily Reckoning ^ | 02/12/2014 | Gary North

[Rusty0604]

The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.

There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information should not get out to the American people, namely, that the present value of the United States government’s off-budget liabilities is over $200 trillion.

The CBO has two sets of books. This is what any Ponzi scheme requires. It releases one set of books to the rubes in the financial media, who are perfectly content to quote from it, when they are even aware of it.

In past years, the CBO simultaneously released what it calls its Alternative Fiscal Scenario. This forecast is what CBO actually projects future taxes and spending to be ...But this year, the CBO’s long-term forecast included only the EBF. The AFS was nowhere to be seen.

The CBO did not get away with this, at least not to the extent that it had hoped. There were complaints...The CBO posted this information, but it did not alert the financial media to the update. Using the AFS figures, the unfunded liability is $205 trillion. This is the figure that the CBO does not want the general public, meaning the financial media, to be aware of.

There is no way out, other than default. This will have profound consequences politically, economically, and socially. It will be the end of the Keynesian welfare state. The Keynesians will be left holding the empty bag.

This is how all Ponzi schemes end. But those deluded souls who buy into them refuse to face statistical reality until the scheme blows up, leaving them empty-handed.

[Rusty0604]

From the article:
“Alternative Fiscal Scenario. This forecast is what CBO actually projects future taxes and spending to be given not just the laws in place, but also how Congress and the Administration have been bending and changing the laws through time. In short, the Alternative Fiscal Scenario (AFS) is what the CBO thinks we’re facing absent a truly dramatic and sustained shift in fiscal policy.”

[FreedomNotSafety]

Like I said what a politician promises another can unpromise. These are not “liabilities” they are politcal promises which are more like wishes.

If I borrow money (or my company) from you, or make a promise to you, I am obligated to pay it. I can have assets seized, my check garnished, or even go to jail if I engaged in fraudulent behavior towards you.

None of that applies to our governments. That is why it is called sovereign debt. It is debt issued by the sovereign and and is secured by the sovereign. Should the sovereign decide not pay there is no recourse.

CBO can say what they wish but their projections do not turn promises into liabilities in any normal sense of the word.

[Dr. Sivana]

How much inflation would you like today? Say “Pengo” - (No, not the game).”

Thank youfor remembering the game, Pengo. I enjoyed the Sega arcade version 30 years ago.

Unfortunately, Mr. North has a bad track record with his Y2K melt-down writings, though he did perform a useful service by getting people to prepare.

The problem with saying $200 Trillion in unfunded liabilities is that a lot of those liabilities (e.g. pensions and SocSec) might be 50 years down the line. If you told a 20 year old man in 1963 making $75/week that in 2013 he would be pulling well over $1,000 a month in social security, his jaw would have dropped. The main part of the problem is that the money itself does not have a fixed value, as we already have real inflation.

As we pay current liabilities, we continue to contract more unfunded liabilities. As long as we have a national debt, however, ALL new debt is unfunded, even if we have a general idea where the money is coming from.

We have a 50 trillion dollar economy, in current dollars. If we had a Reagan style boom, that could be 60 or 70 trillion, easily. A lot is made of the fact that we have the lowest levelof participation in the workforce that we have had in 35 years . . . or 1978 ... Jimmy Carter. We recovered from Jimmy Carter.

This does not mean I am optimistic. I'm not. There are no more boll weevil Democrats. The commie-hippies took over the Dem Party, and we have exchanged William Proxmire and Scoop Jackson for Patty Murray and Tammy Baldwin.

I can even see Nancy Pelosi playing that lady who burned down the mansion in Rebecca, rather than letting a new woman take over, laughing maniacally as flames engulf everything. (Great movie for those who haven't seen it.)

[OneWingedShark]

A deluge of consequences to ensue if the voters don’t get it right in the next two elections.

How much do you want to bet we'll be presented with another Obama/Romney-style choice? (That is to say, no choice at all: Romney is Obama's political clone.) Heads we win, tails you lose.

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[xp38]

I have 100, 50, 20 and 10 trillion dollar Zimbabwe banknotes for a grand total of 180 trillion dollars. I think I can cover most of it. You’re on your own for the other 25 trillion though. :)

[Vaduz]

Obama/Romney-style choice?
Not so sure Soros may not be in the act this time the danger point is the low informed voter.

[Thom Pain]

"It will be the end of the Keynesian welfare state."

Only until the next time. If Keynesianism was not invincible it would have expired in the 1940s.

[fhayek]

You have heard the term, ‘all the money in the world’. $200 trillion is more than all the money in the world.

[1010RD]

All in due time. The debt increase will bury the Dems.

[TsonicTsunami08]

No ... it will bury us all! A life boat has been sent, get in!

[taxcontrol]

Lets put this in more reasonable numbers. (dividing by 100 million)

You make about 28,000 per year
You spend about 37,000 per year
You have been doing this for so long by borrowing against your house and now owe a total of 2 million on the house.

Assuming that you did not have to pay a single dime to keep the government running. Assuming that you could devote the ENTIRE tax revenue and pay it towards the unfunded liabilities, it would take you 70+ years to pay it off.