The $44 trillion hole?

CNN Money ^ | 5/29/2003 | Mark Gongloff

[Recovering Republican]

NEW YORK (CNN/Money) - Many economists worry that the U.S. federal budget deficit could approach a record $500 billion this year.

Few, however, have grasped that the fiscal problems facing the United States could make an itty bitty $500 billion deficit look like pocket change.

[Recovering Republican]

Gokhale's and Smetters' papers can be downloaded from: http://www.aei.org/events/eventID.301/event_detail.asp Gokhale worked at the Federal Reserve and Smetters at the US Treasury. Clearly they have access to meaningful data and have credible backgrounds. For comparison, the current total estimated liabilities for all US businesses, individuals, and governments of every level are $32-34 trillion depending on the source. It is especially noteworthy to review the rapid escalation of the unfunded liabilities that would be caused by delaying the time until we effectively deal with the problem. Waiting just five years could add 25% or one full year of GDP.

Does anybody believe that politicians are going to deal with this problem in a meaningful way? Or even within a meaningful time frame, since there is always an election coming up?

No one can predict the ultimate magnitude of these unfunded liabilities. But I am willing to predict that it is not politically or economically possible to fund these unfunded liabilities. Is anyone willing to project the financial, economical, and political consequences of not dealing with this problem?

I will make these two predictions: the dollar will depreciate until nobody in their right mind will want their wealth denominated in dollars. And two that the United States will be able to sell bonds, but at interest rates that taxpayers will not be willing to honor. When the United States does not have a viable currency and the full faith and credit of the United States are worthless, the United States will be bankrupt or the economic equivalent of Argentina.

How do you plan to ensure that you have a financially secure retirement? Are your children going to better off than you or your parents were? Do you believe that your children and grandchildren will sacrifice their own security and retirement to support yours?

[Mr. K]

guess we should STOP SPENDING HUH?????????????????

[JohnGalt]

I wish the Feds would bankrupt themselves, but the debt bomb is a myth. The government owns 33% of the land and need only sell its assets or put it to work. No, even the debt will not bring an end to a corrupt ruling elite.

[ctlpdad]

zot alert aisle 44 trillion

[Paul Atreides]

They are busy little boogers today, aren't they?

[ctlpdad]

i just got back from lunch and saw 2 right off the bat. where is the new zotmeister zavien doombringer?

[Libertarianize the GOP]

http://www.freerepublic.com/perl/bump-list

[Psycho_Bunny]

I understand the article but, what's your point?

[Steven W.]

I will make these two predictions: the dollar will depreciate until nobody in their right mind will want their wealth denominated in dollars

Since the dollar started rallying back a couple days ago, you're already wrong from the get-go & you're obviously amongst those gloom & doomers so absurdly foolish it's not even worth taking the time to lead you through Econ 101 because, obviously, you FAILED!

[finnman69]

cutting non-Social Security and non-Medicare spending 56 percent

AND

prviate Social Security Accounts.

[Mr. Bird]

Welcome to Free Republic. The problem isn't so difficult to solve if everyone would just turn their attention to the elephant over there: Social Security itself. You can't just stop that gravy train on a dime, but you can certainly phase it out. I'm in for starting right now.

[davisfh]

"guess we should STOP SPENDING HUH?????????????????"

Geez! I just had the same radical thought. Do you think I should do some sort of penance?

[arete]

Good post. No politican will deal with the problem if he wants to stay in office. All they do is buy votes, stuff their own pockets and the pockets of their friends with the money they are looting, and try to keep the can kicked down the road for someone else to deal with. By the time the political games end, it will be too late for us all. Some kind of "leadship" isn't it?

Richard W.

[Recovering Republican]

No question that the land has value. The problem with the government selling assets is that the government never does anything well. Governments always get things backwards, like central banks selling gold while the price of gold is declining. And as the price of gold continues to rise, central banks will become progressively tempted to become buyers of gold. So it would be with land sales. When, not if, the government begins to sell the land, it will drive the price of land progressively lower with the result that government will sell even more land to realize progressively smaller returns. At the same time, government will be destroying the net worth of any citizen who has acquired real estate. Only foreigners holding our debts that were used for consumption will benefit. In effect, government would tranfer America to foreigners while impoverishing its own citizens.

As for putting the land to work, government can't do anything right. The results would be the same.

Social Security can be fixed by the voluntary total complete privatization plan using the Cato format. It is not possible to fix Medicare which must be abolished completely. Since I do not expect politicians to be up to the tasks at hand, I expect the United States to follow in the foot steps that all democracies have and will always follow. When the public learns to raid the treasury, all democracies end in bankruptcy. Ours will be no exception and it will happen before the 2016 presidential elections.

[arete]

Geez! I just had the same radical thought. Do you think I should do some sort of penance?

Shhhhh, you don't want to wake up the bots. Any hint of responsible political leadership or anything that might be thought of as the least critical of this administration will not be tolerated. Free speech and thought are so old fashioned these days.

Richard W.

[JohnGalt]

I was hardly suggesting that it's a good thing; I'm not a socialist. My point is that while I would like to see the end of the DC government by 2016, it won't happen, this country will decline for at least another hundred years.

You mention a couple good ideas, the I agree with in principal, but none of them will ever be implemented and the American people will be fed a false dichotimy: higher taxes or reduced benefits. My point is that the debt is bogus and could be solved tomorrow by selling off assets and issuing bonds for what is owed to every American.

[Steven W.]

Free speech and thought are so old fashioned these days.

coming from a true Puplava goldbug that is absolutely hilarious!

[balrog666]

-- meaning that if the federal government wants to meet its Medicare and Social Security obligations

Oopsie! A basic error in their analysis - the liabiities are not "obligations" as the Supreme Court has already ruled and they may be arbitrarily changed or cancelled at the whim of Congress.

[Toddsterpatriot]

Try $44.2 trillion on for size.

Over 75 or more years? If GDP is currently $10 trillion and doesn't grow, that's 44.2/750= 5.8% of GDP. Government currently spends about 30% of GDP. Sounds like cutting spending by 20% would fix us right up.

If GDP grew 2% a year we'd be talking about 44.2/1655= 2.7% of GDP, looks like a 10% spending cut fixes this problem.

Please, show me where I'm wrong.

[Centurion2000]

With 44 trillion in future debt we can see WHY the government would prefer to have an unarmed populace.

Peasants can't overthrow the king when he defaults on promises.