Last December, economist Laurence Kotlikoff was interviewed by RealClearPolicy;
Cox and Archer argue that the U.S.’s underlying debt is much higher than the officially stated debt of $16 trillion. They argue that if you add up the unfunded obligations the government has — to Social Security, Medicare, federal workers’ pensions, and so on — the real debt is about $87 trillion. Can that be right?
h/t Kevin B
Yes and no.
Hard debt – where someone holds a piece of paper – is around 18 trillion. Promises – aka entitlements – are a soft debt – chAnges in the promise can reduce or eliminate that debt.
Politically the party that is In power when the promises are rescinded or drastically cut will become very unpopular. Thus the can gets kicked further and further down the road.
What Gord said.
The reason they leave future obligations like Social Security, Medicare, federal workers’ pensions, and so on, out of debt calculations is because these programs/obligations will be dropped as part of a yet to be announce austerity plan, when they see that QE-285 has done nothing to alleviate the dollar’s slide or their credit rating.
The plan is to make a loaf of bread cost $15 million dollars, so $87 trillion won’t matter much in the long run. A mere bagatelle.
Inflation: saving Socialist’s bacon since 1932!
This could all be solved if the rich just paid their fair share. /s
Gord Tulk is wrong.
According to GAAP (which I’m required to follow) the present value of these promises must be reflected on the balance sheet.
UNTIL they are revoked presumably in bankruptcy.
As a libertarian I don’t seek much from government beyond upholding the law and enforcing contracts.
AND adhering to minimum accounting standards.
And remember that while medicare and medicaid are entitlements, SS is a contributory plan like our CPP.
Not an entitlement.
Ever the idealist eh?
The talk about Gross is the real takeaway. For the time being at least the only ones that will suffer are those who stray outside the flock, but the number of Judas Goats available for feeding the beast is getting very small. It does not reduce the deadly threat lurking “outside” in any way but it serves to run out the clock as much as possible until your turn in the rotating knives comes. The real trouble starts when cannibalism breaks out inside the bubble. Then it is survival of the fittest. I figger that stage is just around the corner. When that happens you will want to be as strong as possible, which Canada is — for now. Trudeau would render us weak in no time, as would the official socialists, the Bloc/NDP.
Buy gold. Get a gun.
I have always had trouble accepting these future obligations as debt. A household example to make my point:
If I have a mortgage, line of credit and unpaid credit card balances, I fully accept these as my debt. If, on the other hand, I promise to fund my young child’s university education, is that a debt? What about obligations to myself, such as future medical expenses? Can these be construed as debt? Most would not think so. Why does it then become so when collected at a national level.
It is best seen, as Gord Tulk says, as simply a promise that can be broken.
Sounds like Gord Tulk is right.
By the Cox & Carter logic, the day you bring home that baby from the hospital, your debt jumps a couple of hundred thousand dollars.
Puts the sequestration in perspective doesn’t it?
Mike McCormick, good advice but have you tried to buy a gun since last November 6th? My local gunshop can’t get a new Ruger 10/22 for me, nor can Cabela’s or Ellwood Epps. I also want a TruGlo dot sight, they wished me luck, the Canadian distributor doesn’t know when his next shipment will be in. Ammo is just as bad, though I did manage to buy a couple of the last bricks of 22LR. The shopowner tells me that US ammo manufacturers are producing over 1 Billion cartridges per week and still can’t meet demand.
The Feds can postpone the day of reckoning even longer by strong-arming and/or fooling Americans to convert their 401Ks, IRAs, HR-10s, etc into Govt-funded “garr-ron-teed” instruments (ie., IOUs, ie., seizure of assets) This neat little trick will go a long way to maintain the charade. And don’t forget the assets (“inside build-up” to use the jargon) in Cash Value Life Insurance. The Clinton Admin already made a run at those once, but was beaten off by the greater numbers of those insured under such financial vehicles vs those covered by pensions–which is why the Obama Admin is now eying pension assets first..
PS: The way the Ins Industry fought off the Clinton Admin was by sending out notices of the Clinton Admin intent to tax/seize insurance assets with every premium payment notice–cost them almost nothing as mailings had to be made anyway. Similar mailings to those covered by pension-plans would be far more costly as there is no existing mechanism to do so except via annual K-1 statements–by which time it may be too late..
You forgot the best part. Kotlikoff claims the real figure is $222 trillion.
The baby boomers have spent their children’s inheritance several times over, for no better reason than that they had better things to do than honour their fathers and mothers and care for them in their old age (that’s what Medicare’s for), save for their retirement (that’s what Social Security’s for) or bother finding honest trades for their sons and good marriages for their daughters (that’s what student loans are for), if they bothered letting any of their children leave the womb alive, that is.
As liberal baby boomers believe there is no God, not only do they consider everything permitted to them now they have control of the army and police, but they consider that after they die the evil they do will be someone else’s problem. Clearly they will not bat an eye at selling what children they have into debt-slavery to banksters if it will keep them alive for so much as an hour. (As far as the boomers are concerned all the little monsters ever did was get in the way of their parents’ drinking and fornicating to their hearts’ content. The devil take them.)
That was my own parents, proud boomers who spent every penny my father ever made and then some. They neglected their own parents until they died, then showed up at the funerals for their payday. (My father’s mother had the good sense to leave him nothing—the estate was divided among his sisters, who had paid for her nursing home.) Needless to say, they refused to pay for their children’s education. The last straw was when my mother opposed my marriage to my wife—she had counted on divorcing my father, coming to Canada so she could go on OHIP (which she considered a far better scam than US Medicare) and eat me out of house and home for the rest of her life, because she thought I was rich, she had alienated my brother and sister-in-law long since, and it was clear my father would be no further use to her once his employer forced him to retire on God-alone-knows-what, he is so far in debt even now. “For better or for worse” means as little to her as accepting the consequences of her folly.
If by God’s grace I enter the kingdom of heaven, among the delights I expect to enjoy there are the spectacle of the torments my worthless sire and dam will endure in hell. In this life, all they’ll get from me if they dare show up on my doorstep begging for a handout are the words: “I tell you solemnly, I do not know you.”
(Just so it’s clear I am not merely lacking in filial loyalty:
My wife’s grandparents in Romania, where the medical system is a shambles even by Canadian standards, old-age pensions won’t feed a dog and the welfare state is practically non-existent, have had their care paid for by their children, who sent money regularly after they left in the late Nineties—without skimping on the best education for their daughter, my future wife, that they could afford. My mother-in-law’s parents wintered in Montreal every year until they became too old and ill to travel. The hour is rapidly approaching when the issue of the care of my wife’s parents will become a real one. It will be difficult, but my wife and I are prepared, and preparing, for that as best our resources allow.
My wife’s parents, who learned under communist deprivation the difference between necessity and self-indulgence, have earned the honour of their children through the honour they paid their parents. My sire and dam have earned nothing.)
It’s clear that Obama has no plans to salvage the most underfunded entitlement, Medicare. That will eventually disappear and he will eventually get his single-payer system by utilizing Obama-care to drive private insurers out as he expands Medicaid (currently a means-tested State delivered single payer system). As middle class wealth is taxed away or destroyed by the fed, the means-testing will force more participants to dependent on the Government / Democrats for health care. He’s crashing the system and the mindless or apathetic electorate would rather watch reality TV.
Gord:
I listened to an interview with Laurence Kotlicoff on the radio a few weeks ago (CBC I believe). He didn’t describe the $222 trillion as a hard debt but as unfunded liabilities that, if honoured, would require a staggering tax increase or equally staggering cut in spending (i.e. benefits).
Here is the link to the interview:
http://www.cbc.ca/thecurrent/episode/2012/12/07/laurence-kotlikoff-is-the-united-states-broke/
What’s notable about the USA is not that it has enormous future entitlement liabilities. Rather it is the only country that attempts to estimate the present value of these liabilities.
What is the present value of the future cost of health care liabilities in Canada or in other countries with universal taxpayer-funded healthcare? Greece is not unique in its inability to pay for costly government programs. Greece is just further along the path to the inevitable financial collapse all nations face when they legislate unaffordable future spending.
The unfunded liabilities are at the bottom of the debt chart.
http://www.usdebtclock.org/index.html
It’s not pretty.
Dick Slater on March 6, 2013 12:14 PM |
Well said. And good for you in having made yourself a better man when it would have been easy to do otherwise.
In the story The Merchant of Venice a chisling little twerp got off the hook by waiting until the debt was due… then having a friendly weasel attorney and judge declare the collection of the debt he agreed to … to be illegal.
Obugabe and his cohort will be long gone by the time this happens in the US … but you can be sure the weasels of that day are going to try the same thing.
For those of us who have enjoyed the love of our parents or are ourselves loving parents, Dick Slater’s story is beyond sad.
Let’s not slag all baby boomers as being proliferate, unthinking, uncaring sybarites. Perhaps because we were small business owners, my wife and I have been very prudent over the years and thus able to assist my aging parents in owning their own home – they were nearly 70 when we began contributing to their mortgage and are in their early 90’s today. Our children are both successful, perhaps because we were unwilling to fund their education, meaning that they had to work for and thereby appreciate the justifiable successes they have created.
Yet our oldest daughter (40) IS a prolific spender who showers our grandchild with stuff rather than time. She is completely disconnected from political reality, with neither understanding nor concern for policies that affect her or her family.
So why is that? Why are our children often so different from their parents and the values with which they were raised? I’m forced to conclude that it’s neither nature nor nurture, but rather culture that is the prime determinant in many people’s lives.
All you can do is try your very best and leave the rest in God’s hands.
Were we still a technologically optimistic society, I’d consider a future debt of $222 trillion to be no big deal; after all, our power to create wealth would be rising exponentially once we got space settlements going, colonized the moon and began exploiting the immense resources of our solar system.
Given that Obozo is doing his best to transition the US to the stone age, then I forsee no future for the upcoming USSA. While the Chicoms are totalitarian nepotists, they also know the value of technology and are forging ahead in areas where the USSA “green” ideology prohibits it from going. The sooner a civil war comes to the US to overthrow the parasitic regime that currently exists, the better. The damage such a war would cause, while immense, would be just a minute fraction of what devastation will be caused by the deliberate policy of de-industrialization and enslavement that is the goal of the Obozo administration.
Innovation has fled the US for more receptive areas which view a silicon foundry as a means of enriching local citizens rather than an evil polluter of the environment which is the view in such once technologically advanced locations as California. Only shells of the semiconductor companies are left in the US with most production having fled offshore. Texas Instruments seems to be the largest chip producer in the US now with Intel having transferred most of its production overseas. I try to buy made in US electronics as much as possible, but more and more I find the chips I need are Chicom produced. I’ll never buy a Chicom made electrolytic capacitor as I consider their quality control to be abysmal. If the Chicoms decided to invade Taiwan and induced their Nork allies to invade S. Korea, then the only remaining high capacity silicon foundries would be in Japan and China, or under Chinese control. For a society that considers ubiquitous computing to be part of the future, it has put itself in a strategic situation where it can be totally brought to its knees by the Chicoms, or for that matter, a high altitude Iranian nuclear EMP.
Phantom is correct that the only way that the USSA is going to wriggle out of its financial commitments in a “green” economy is hyperinflation. Likely the biggest government projects of that future time will be euthanasea centers for the elimination of elderly useless eaters and which will double as producers of “natural” fertilizer.
Guff;
I as well a boomer. For whatever reason I never took anything for granted and have always saved. Running a small business could not be a better education. I think each generation is faced with different challenges but the fundamental truth cannot be denied, rational or critical thought. So many today do not have that ability.
All well said. EMP’s have the capability to take us back to 1950 in a matter of minutes. All the computer driven programs in the free world would be instant scrap. Very few people seem to realize that the danger is not tin foil hat speculation. The danger is here and now.
http://www.washingtontimes.com/news/2012/dec/19/north-korea-emp-attack-could-destroy-us-now/?page=all
“Texas Instruments seems to be the largest chip producer in the US now with Intel having transferred most of its production overseas.”
I am not sure where this mis-information is coming from. The three largest Intel factories are in New Mexico and in Arizona. How I know this? I worked for them for 18 years. And regarding TI, most of their production IS overseas in foundry factories. Yes, they have a couple of factories here in Dallas producing, but the majority of their products are fabricated by TSMC in Taiwan.
Intel vowed many years ago to keep manufacturing her in the US due to the fact that the quality of the workforce is simply better.
Mikey, thanks for the update. I was aware that Intel moved their chip production out of California, but glad to hear it’s still in N. America. (that’s what happens when you post without first doing a detailed Google search but I’m lazy and will rely on people like you with personal experience in the matter).
Maybe TI is just a lot more up-front with their “Made in the USA” policy than Intel. Either that, or just their development boards are assembled in the USA. Didn’t look closely at the chip markings on my TI ARM evaluation systems to see if the MCU was made in the US.