From the National Center for Policy Analysis America's True Debt -- The Fiscal Gap Our country is in far worse fiscal shape than its $14 trillion -- and rapidly growing -- official debt suggests. Indeed, that figure measures just a small portion of the government's total liabilities. Why is that? The answer is there is no answer, and because there is no answer, the deficit is not well defined, says Laurence Kotlikoff, a senior fellow with the National Center for Policy Analysis. Generational accounting is a well-established methodology to measure the burden of government on specific generations. A generational account for any given generation measures the generation's remaining lifetime net tax bill as a present value -- what the generation will pay net of what it will receive, all valued as of today. This amount has to cover the government's official debt plus the present value of all future government purchases of goods and services (discretionary spending). If it doesn't, the difference that's not covered is called the fiscal gap. This means that Congress and the president have been focusing on the molehill, not the mountain, in their recent contretemps over the debt ceiling. With the retirement of the baby boomer generation, millions will turn to Uncle Sam for Social Security, Medicare and Medicaid benefits -- roughly $40,000, on average, per beneficiary per year. This means the fiscal gap will increase exponentially in the coming years. The fiscal gap needs to be zero for the United States' fiscal policy to be sustainable, says Kotlikoff. Source: Laurence J. Kotlikoff, "America's True Debt -- The Fiscal Gap," National Center for Policy Analysis, September 7, 2011. For text: http://www.ncpa.org/pdfs/ib101.pdf
Thursday, September 8, 2011
Kotlikoff: America’s true debt: $211 trillion…
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Does CBOs Alternative Fiscal Scenario have an authority beyond the arbitrary decision of CBO to include it along their Extended Baseline itself based on current law?
Yes it is convenient for some purposes, particularly if those purposes are in promoting Entitlements Crisis, but really it is not CBOs charter to be political prognosticators and reporting AFS as if it had some official standing is not playing cricket.
It reminds me of nothing more than CBOs previous decision that a 90% MLR for insurers under the Exchanges would score as 'nationalization' and so move all US health care costs onto federal spending ledgers, but in the end accepted an 85%/80% group/individual market MLR as not. Exactly where was the flip point? 86.725%? What?
As you know I am not a friend of Intergenerational Accounting to start with and still less such accounting that allows scorekeepers to peer into crystal balls to predict future political behavior. And then turning around and reporting "even non-partisan CBO says" or "even non-partisan GAO says" when political judgement has been allowed to override current law projections is a bridge to far.
Under current law Social Security has no 'unfunded liability'. It is by this point a time honored term, at least as measured over the standard long-range 75 year window, which doesn't remove the fact that it remains a political and not actuarial judgement. Doubly ironic in that promoters of it have policy solutions that make it moot.
There is a collision between numbers based on inevitability also being used to argue for contingency. Either we find a solution for 2037 or we don't, it is not like the issue will be allowed to hang fire for centuries. Either the funding will be supplied or the liability eliminated by action of law at latest by that year which makes continued cumulative totals a little silly. Except to those of us committed to make up the difference on the revenue sides. The positions are not symmetrical.
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