If you are getting queasy about our “official” debt numbers and what they are and aren’t telling us, you are in good company. If we add it to official debt, our current debt-to-GDP ratio rises from 77 percent to 252 percent of GDP! Do this for all off-the-book net obligations, and we arrive at our nation’s $200-trillion fiscal gap, which is not 77 percent of GDP, but 1,025 percent of GDP! It’s $34.2 trillion! That net unfunded liability, intentionally buried deep in the appendix ( table VIF1) of the 2017 Social Security Trustees Report, is over twice the CBO’s measure of official debt. Take Social Security’s off-the-books net debt (the present value of its projected future benefits less the present value of its projected future taxes less the system’s trust fund). Yet, whether the government’s future payment promises are labeled “official” or “unofficial,” they are all real economic commitments. Unlike future “repayment of borrowing,” “transfer payments” aren’t official obligations, so they don’t get counted as part of government debt. Rather than take $X from workers and promise to pay them $Y when they retire, using the words “official borrowing” for X and “promised repayment of borrowing” for Y, our leaders have called X “taxes” and Y “promised future transfer payments.” They spent the past six decades accumulating massive liabilities that they kept off the books via clever use of language.
Here’s how: Successive Congresses and administrations have been systematically lying about our fiscal condition. But even if he cuts all forms of spending (defense spending, entitlement spending, infrastructure spending, gassing up Air Force One, you name it), the needed permanent percentage cut is 47 percent!Ī 60-percent permanent tax hike or a 47-percent permanent spending cut? These are our options the day after the (“magnificent” to some) tax bill was passed? How can things possibly be this bad? But this means reneging on his spending promises. Yes, Uncle Sam can avoid permanently raising all federal taxes by almost 60 percent.
#I AM DEAD BROKE SERIAL#
This serial generational expropriation is all nicely organized and kept out of sight by Uncle Sam. Each older generation takes money from the young that they’d otherwise be able save, telling them they should follow suit and take from their children when they get old. That’s the nature of our decades-long “take-as-you-go” Ponzi scheme. We’ve had to fork over roughly 15 percent of our pay to cover benefits promised to our parents. Unfortunately, most Baby Boomers haven’t saved enough and are sorely dependent on Uncle Sam’s old-age support. If we need expensive nursing, we sign up for Medicaid once our savings are exhausted. When we Boomers retire, we head straight for the local Social Security office to start collecting our monthly checks and sign up for Medicare.
Ten thousand of my fellow Baby Boomers are retiring every day. Why so much? The answer, in large part, is the need to pay retirement and healthcare benefits to the massive Baby Boomer generation. Unless we want to sharply cut Social Security, Medicare, Medicaid and all other government spending, we have no option but to raise taxes. We needed a tax bill that raised federal revenues dramatically - by roughly 60 percent!
Given the projections, we didn’t need a tax bill that was revenue neutral, at best, or one that grew the economy as fast as the debt, at worst. Thus, our long, acrimonious debate about the size of the extra deficit associated with the tax bill missed the point. Doubling debt to GDP over three decades is certainly better than doubling it over one (which we’ve just done), but it still augurs economic doom. The bad news is the tax bill did nothing to control the projected - by the Congressional Budget Office (CBO) - explosion of debt relative to GDP, from 77 percent of GDP now to 150 percent in 2050. The economy’s response will, my co-authored research suggests, likely keep pace with the bill’s additional deficits, leaving the debt-to-GDP ratio no higher, or not much higher, than would otherwise be the case. It will likely expand the economy and real wages by up to 5 percent.
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