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The U.S. Is Broke

According to Laurence Kotlikoff, the US is broke. To be more precise, it's broke today! While stuff like this has moved down a little on the current wall of worries (it used to be much more popular) it still gets remarkable traction. Kotlikoff really should know better. Here he is:

"Our country is broke. It's not broke in 75 years or 50 years or 25 years or 10 years. It's broke today," he told the Senate Budget Committee. "Indeed, it may well be in worse fiscal shape than any developed country, including Greece."

Worse than any developed country? Worse than Greece? How's that? Well, here is his explanation of sorts:

"Instead, the federal debt and its annual change, the deficit, are purely linguistic constructs that reflect how members of Congress choose to label government receipts and payments." For example, that figure omits the almost $750 billion the government is collecting this year in Social Security payroll taxes from workers and the future Social Security transfer payments these FICA contributions secure, he explains. "Were we to go back in time and re-label all past Social Security taxes as borrowing, official federal debt held by the public would not be $13 trillion, but $38 trillion, which is 211 percent of U.S. GDP." In reality we're facing a fiscal gap of $210 trillion, Kotlikoff proclaimed. That's 16 times larger than official U.S. debt.

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