"USA bankrupt." - US central bank

[Grimmlok]

Filed: 14/07/2006)

The United States is heading for bankruptcy, according to an extraordinary paper published by one of the key members of the country's central bank.

A ballooning budget deficit and a pensions and welfare timebomb could send the economic superpower into insolvency, according to research by Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve.

Prof Kotlikoff said that, by some measures, the US is already bankrupt. "To paraphrase the Oxford English Dictionary, is the United States at the end of its resources, exhausted, stripped bare, destitute, bereft, wanting in property, or wrecked in consequence of failure to pay its creditors," he asked.

According to his central analysis, "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''.

The budget deficit in the US is not massive. The Bush administration this week cut its forecasts for the fiscal shortfall this year by almost a third, saying it will come in at 2.3pc of gross domestic product. This is smaller than most European countries - including the UK - which have deficits north of 3pc of GDP.

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.

The figure is massive because President George W Bush has made major tax cuts in recent years, and because the bill for Medicare, which provides health insurance for the elderly, and Medicaid, which does likewise for the poor, will increase greatly due to demographics.

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 143pc."

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.

Prof Kotlikoff said: "The United States has experienced high rates of inflation in the past and appears to be running the same type of fiscal policies that engendered hyperinflations in 20 countries over the past century."

Paul Ashworth, of Capital Economics, was more sanguine about the coming retirement of the Baby Boomer generation. "For a start, the expected deterioration in the Federal budget owes more to rising per capita spending on health care than to changing demographics," he said.

"This can be contained if the political will is there. Similarly, the expected increase in social security spending can be controlled by reducing the growth rate of benefits. Expecting a fix now is probably asking too much of short-sighted politicians who have no incentives to do so. But a fix, or at least a succession of patches, will come when the problem becomes more pressing."

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

I hope everyone south of the border has learned to speak cantonese and mandarin, cuz who do you think owns most of your nation?

[Delphinium]

So sad. They need to cut most of the foreign aid and ALL aid to illegals NOW!

Then they need to give a 5 year wake up call to all welfare receipients that in 5 years time, they better have a job and a place to live cuz the free ride is over. no more welfare.

Then they need to tax the heck out of the rich, and give them NO loopholes. Straight up 10%.

Flat tax is an idea whose time has come.

[UndercoverGator]

So sad. They need to cut most of the foreign aid and ALL aid to illegals NOW!

Then they need to give a 5 year wake up call to all welfare receipients that in 5 years time, they better have a job and a place to live cuz the free ride is over. no more welfare.

Then they need to tax the heck out of the rich, and give them NO loopholes. Straight up 10%.

Flat tax is an idea whose time has come.

*Cautiously peeks outside to see if it's raining cats and dogs or if the sun has exploded, expecting to see people ice skating in hell...*

I actually agree with you on these points... the welfare one will be the trickiest though on a practical level.

[Grimmlok]

Uh, here's an idea:

1) Stop waging wars of convenience. It's reached 400 billion.

2) Stop using trickle-down economics, IT DOESNT WORK.

3) Stop cutting taxes for rich screwballs.

4) Stop spending ridiculous amounts of money for shiny new guns and self guided, gold plated nuclear drones that smell like pine trees.

[ediebrooks]

So sad. They need to cut most of the foreign aid and ALL aid to illegals NOW!

Then they need to give a 5 year wake up call to all welfare receipients that in 5 years time, they better have a job and a place to live cuz the free ride is over. no more welfare.

Then they need to tax the heck out of the rich, and give them NO loopholes. Straight up 10%.

Flat tax is an idea whose time has come.

I agree with you. Makes a lot of sense!

[Grimmlok]

You cant just end welfare, any civilized society needs a safety net. What you CAN do, is actually police the thing. It's too easy to take advantage of it.

[Delphinium]

You cant just end welfare, any civilized society needs a safety net. What you CAN do, is actually police the thing. It's too easy to take advantage of it.

I think the current welfare system/idea is a bloated,monstrous mess. It does nothing to teach/encourage/empower it's recipients.

I have no problem giving people who need it assistance, BUT in exchange for the weekly or monthly check, they should be required to get up out of bed, off the couch, and either go to work doing some type of public service (plenty of graveyards that need mowing, streets/sidewalks need trash picked up, highway roadsides need tending) for 8 hours 5 days a week like most people (how else do you learn to work? and get the self-discipline to show up for work?) OR they should have to attend school FULL TIME 5 days a week, pass their classes and show progress!

Also, it should be tied directly to drug testing. If you are an alcoholic, drug addict, etc. you should immediately lose all benefits.

Why should society pay for your crack?

Anyhow, public housing should be maintained NOT by paid personnel but by the tenants themselves. A tenant should be legally required to mow the lawn, do painting, clean-up etc. in order to continue to receive benefits. And of course, they should sign a waiver against "job injury" in order to live there. *you play you pay*.

And a person who becomes pregnant should not be rewarded with more money. Instead that should start the clock ticking on the end of the benefit. you got 3 years, you better figure it out.

And the 5 year benefit period should be once in a lifetime. no do-overs.

[SVZ]

Tax in Canada is 25% for the rich It goes from like.. 22% to 25%

[Grimmlok]

Um, if people are spending all day, 9-5 picking up trash.. how will they LOOK for work or go to interviews?

They should spend a couple days a week doing that, then spend a couple days getting resume's out.. have a little workstation center set up so they can fax and e-mail and such and make it mandatory.. check in with their case worker and such.

As for people getting pregnant, if accidents happen they happen. Not much you can do about that, and once the kid comes along a modest increase should be allowed so the thing can survive. However, there are a number of months before the mother is physically inable to trek her ass around town and in those moths, bitch oughta be able to find SOME kind of job.

[UndercoverGator]

Um, if people are spending all day, 9-5 picking up trash.. how will they LOOK for work or go to interviews?

They should spend a couple days a week doing that, then spend a couple days getting resume's out.. have a little workstation center set up so they can fax and e-mail and such and make it mandatory.. check in with their case worker and such.

As for people getting pregnant, if accidents happen they happen. Not much you can do about that, and once the kid comes along a modest increase should be allowed so the thing can survive. However, there are a number of months before the mother is physically inable to trek her ass around town and in those moths, bitch oughta be able to find SOME kind of job.

There needs to be mandatory parenting classes and classes on life skills as well. I was always appalled when I was a DSS worker at the number of folks without any real idea how to parent or do simple every day things you and I take for granted.

[ohmygoodness]

Tax in Canada is 25% for the rich It goes from like.. 22% to 25%

It's 29% federally for the very rich, but you also have to pay income tax provincially too, at least in BC. So in BC, the rich end up paying 43.7% on income. At least from what I understand at taxtips.ca! I don't make enough to have to pay taxes, so I don't have to understand it yet!

[Delphinium]

Um, if people are spending all day, 9-5 picking up trash.. how will they LOOK for work or go to interviews?

They should spend a couple days a week doing that, then spend a couple days getting resume's out.. have a little workstation center set up so they can fax and e-mail and such and make it mandatory.. check in with their case worker and such.

As for people getting pregnant, if accidents happen they happen. Not much you can do about that, and once the kid comes along a modest increase should be allowed so the thing can survive. However, there are a number of months before the mother is physically inable to trek her ass around town and in those moths, bitch oughta be able to find SOME kind of job.

okay, maybe 6 hours of work a day, and 2 hours to life-skills classes, interview training, etc. maybe a college track and a vocational track, for training of some sort during those 5 years.

If they don't make progress, or can't get it together, off the rolls early.

I figured I'm being generous giving the pregnant/baby 3 years before mama has to go get a job.

that way the kid is old enough for daycare/weaned/potty trained etc.

There needs to be mandatory parenting classes and classes on life skills as well. I was always appalled when I was a DSS worker at the number of folks without any real idea how to parent or do simple every day things you and I take for granted.

yep. life-skills. and weed out the posers who only pretend to be stupid. there is an aspect of learned helplessness...

[WickedHo]

It is time for a revolution. After that, MAJOR cleaning of house. After that, an overhaul of the entire system, particularly that fat bloated bitch called Welfare.

But we need a revolution first. I'll settle for a flat tax of 10% (for everybody) to get the ball rolling.

[AliceInWonderland]

this is old news unfort.


thanks bushie!

[ediebrooks]

Illegal aliens should get limited assistance from the government. It makes me mad that they come here and use all our services and then half the time they have no long-range plans to stay here, anyway. The ones who have been here for a while and have established themselves should be made citizens, but we have got to put an end to this influx. I know I am not sourcing or anything, just jumping on my soapbox.

this is old news unfort.


thanks bushie!

You got that right. When Clinton left, we actually had a surplus;now thanks to Bush and company we're knock knockin' on bankrupcty's door. I read a book written by the former Treasury Secretary where he states he tried to reason with the junta about their outrageous financial policies, but of course nobody listened to the guy and he got the boot.