“The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” ― Alexis de Tocqueville
And that is exactly what has happened in the U.S. and Europe. Politicians give away more and more entitlements in order to get elected to office … and what candidate is going to suggest CUTTING entitlements?
Brookings published a nice opinion piece entitled “The federal debt is worse than you think.” The opinion piece is based largely on Professor Laurence Kotlikoff’s U.S. Senate Testimony on the grossly misleading health of our economy.
The reaction in “The Millionaires’ Club” (aka, the US Senate)?
In a nutshell, the U.S. has a $210 trillion “fiscal gap” and “may well be in worse fiscal shape than any developed country, including Greece,” according to Kotlikoff.
“The first point I want to get across is that our nation is broke,” Kotlikoff testified. “Our nation’s broke, and it’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today.”
“Indeed, it may well be in worse fiscal shape than any developed country, including Greece,” he said. PDF.Kotlikoff—Testimony-to-Senate-Budget-Committe
Using the Congressional Budget Office’s July 2014 75-year Alternate Fiscal Scenario projection, Kotlikoff calculated that the U.S.’ “fiscal gap” –which he defines as “the difference between our government’s projected financial obligations and the present value of all projected future tax and other receipts” – is actually much higher than those of either Italy or Greece.
The U.S. has a $210 trillion fiscal gap at this point which amounts to 211 percent of the U.S. GDP, making it higher than Greece’s 175 percent debt-to-GDP ratio.
The fiscal gap is “16 times larger than official U.S. debt. As a consequence, the federal government is 58 percent under-financed.
Worse than Greece? The other PIGS aren’t faring so well either (Portugal, Italy, Ireland and Spain). Thrown Belgium, France, and Cyprus on the debt pyre as well. The US is almost as bad as Japan!!!
Yes, the U.S., like Europe and Japan, has promised entitlements in exchange for votes. Just like some Professors offer easy grades in exchange for good evaluations (or pretend to be Mr. Goodbar until AFTER the teaching evaluations are filled out and THEN give an extremely difficult final exam to lower the class grade point average).
Unlike Greece, the U.S. has its own printing press and ability to borrow (as long as The Federal Reserve buys the debt, that is). As former Obama economic adviser Austan Goolsbee said last week, “It just doesn’t matter.”
The notion that the US can print, borrow and grow entitlement spending without ramifications is the same as believing in Santa Claus, The Easter Bunny and Big Foot.