Friday, August 10, 2012

US Fiscal Gap Jumps $11 Trillion to $222 Trillion

The term 'unsustainable' does not do it justice. We are running head long into a fiscal brick wall and instead of pumping the breaks we are figuring out new and better ways to speed up. We will stop eventually, hopefully before we slam into the wall.

"Forget the trillion-dollar deficits for a moment. Forget today’s $15 trillion in national debt. The real fiscal disaster isn’t our present — it’s our future, and it just got significantly worse. Bloomberg economists Laurence Kotlikoff and Scott Burns report that our “fiscal gap,” the measure of future liabilities to future revenue, grew by the same amount as our present public debt to reach $222 trillion. That’s trillion with a T:

Republicans and Democrats spent last summer battling how best to save $2.1 trillion over the next decade. They are spending this summer battling how best to not save $2.1 trillion over the next decade.

In the course of that year, the U.S. government’s fiscal gap — the true measure of the nation’s indebtedness – rose by $11 trillion.

The fiscal gap is the present value difference between projected future spending and revenue. It captures all government liabilities, whether they are official obligations to service Treasury bonds or unofficial commitments, such as paying for food stamps or buying drones. …

The U.S. fiscal gap, calculated (by us) using the Congressional Budget Office’s realistic long-term budget forecast — the Alternative Fiscal Scenario — is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference — this year’s true federal deficit — is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.

What is the main driver of this fiscal gap? Mainly, it’s the entitlement liabilities that we have been multiplying for the last eighty years. When 78 million Americans in the Baby Boomer generation retire, the resulting liabilities will take a whopping 85% of per-capita GDP to satisfy. Trillion-dollar deficits are unsustainable; this is flat-out unattainable. There is simply no way that the US can or will meet those obligations, even if we have another population boom, which seems unlikely. It’s practically the textbook definition of an empty promise.

No comments:

Post a Comment

Related Posts with Thumbnails

Like what you read; Subscribe/Fan/Follow