America Going Bust -- Prof. Kotlikoff

"Partial equilibrium analysis strongly suggests that the US government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds." , Is The United States Bankrupt? Laurence J. Kotlikoff, Federal Reserve Bank of St. Louis Review, July/August, 2006

Before you back out of what you're guessing is a crank's opinion, Prof. Laurence Kotlikoff was President Reagan's Senior Economist for two years before he went on to advising Fortune 500 companies, the World Bank, and many other institutions. The analysis he offers shouldn't be shocking. Democrats and Republicans alike have been acting as though accounting is just another political issue for decades. But generational accounting is real. And, as this article, in its accountant's prose to be certain, makes clear, we're facing a nightmare, one that's the basis for attempts at three principal changes in federal policy:

A) the flat tax (or national sales tax) as a direct, complete substitute for federal taxes
B) augmenting Social Security with a mandatory savings account
C) replacing Medicare, Medicaid with a universal health care voucher system

If these sound familiar, they're issues raised by serious Republicans, i.e., those not acting like Lyndon Johnson era Democrats, issues raised again and again and most spectacularly (and disastrously) by the President after the 2004 election.

Check out the complete text of Kotlikoff's article. It's dry (it wasn't written for People magazine). It requires a little math. Kotlikoff's big point is that it's better to fix fiscal problems with policy before the markets correct them for us. Argentina chose the latter path, as did Britain in the 1950s, both to catastrophes Argentina has yet to recover from, and which took eleven years of internicine fighting to recover from in Britain.

One of his most startling conclusions from analysis is that "cheap" immigrants only make things worse, because -- here's the big surprise for Democrats and corporate executives alike -- immigrants are expensive. Another is that investment capital from China may be the only salvation for Europe and the United States.

Luther