EconTalk brings Laurence Kotlikoff from Boston University to discuss the fiscal health of the United States Federal Government. Kotlikoff feels that future taxes will fall many trillions short of expected expenditures, pushing us further in debt and towards bankruptcy. However, Kotlikoff discusses a potential fix to this problem by redesigning the tax code because without this change, he warns that large reductions in spending or large increases in tax rates will be absolutely necessary.
He discusses the large number of Baby Boomers who will be exiting the work force and expect their social security payments from their years of paying into the system. He mentions that these transfer payments are not reported as government debt, and so warns that the true debt is much higher than the "official" debt of $12 trillion, in fact, about $193 trillion more than the reported debt. He goes on to clarify that the "true" debt that he's named is the net number of the debt ("The net of all the future taxes to pay it") and that the Federal Reserve has been printing $0.29 for every dollar of government spending right now. He emphasizes the importance of getting the economy going very quickly.
Listen to the entire podcast episode here
I would have to agree on much of what Kotlikoff has to say on the national debt. The main issue with our economy is that our debt is growing exponentially and does not look to stop. You can take a look at how our government has recently been doing on this issue. During the bush administration, the national debt increased by 4.9 trillion. But with a new president, the debt issue should be fixed right? Nope. During Obama's tenure as president, the national debt has increased by over 6 trillion, and he still has a few years left on this term. The debt doesn't seem to be slowing down either, especially with a spending happy government that will go to war with just about anyone.
ReplyDeleteWhat about the fact that the US went into a major recession at the beginning of the Obama administration that would continue to expand into a global recession? Wouldn't the US government's efforts to combat the recession and boost the economy affect the debt, as well as reaching what seems like the tail end of a war? So comparing pre-recession to during recession debt may not be the best method, what about looking at the figures from the early days of the recession to now when the outlook seems to be improving?
DeleteThe economy of U.S is a crutucak situation. I wouldn't be surprised to see that U.S go bankrupt any day now. If U.S go bankrupt now, th world is seized with global panic. Also, Japan and China have the most goverment bonds of U.S. If those two countries sell it, the economy of U.S. go out of business. The problem is complex. However,U.S. goverment have to attempt to put the finance on a healthy footing. The situation is worse than that of euro.
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