U.S. Is Bankrupt and We Don't Even Know It: Laurence Kotlikoff

[danarhea]

Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”

But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”

This section of the article is key to the crisis that we are now facing. It is no longer a question of when bankruptcy will occur, because we ARE bankrupt. We need a solution:

1) We either double ALL of our taxes, or we repudiate our national debt, and start over. Personally, I like starting over better.

2) We pass an amendment to the Constitution that the Federal government can NOT, under any circumstance whatsoever, spend more than it takes in.

3) Lobbyists are forever barred from running for public office, and those who have served in public office are forever barred from becoming lobbyists.

4) Start over with our money supply, tying it to the value of precious metals, or actual goods and services, or even some other FUNGIBLE commodity. Absolutely NO money may be created from debt. PERIOD!!

5) Absolutely no bailouts for ANY business or sector. If it goes under, then it is because it deserved to go under. Never again will corporations be given welfare.

This is for starters. Anybody disagree with these 5 points? Also, does anybody want to add other points?

Article is here.

 

[MaggieD]

This section of the article is key to the crisis that we are now facing. It is no longer a question of when bankruptcy will occur, because we ARE bankrupt. We need a solution:

1) We either double ALL of our taxes, or we repudiate our national debt, and start over. Personally, I like starting over better.

Are you kidding? Surely you are. Who do you think we owe that money to?

2) We pass an amendment to the Constitution that the Federal government can NOT, under any circumstance whatsoever, spend more than it takes in.

Nope. **** happens. I'd go for amendment that we could only borrow up to a certain percentage of our yearly tax revenues, and that this "loan" would have to be continually amortized for payback in 30 years.

3) Lobbyists are forever barred from running for public office, and those who have served in public office are forever barred from becoming lobbyists.

I'd go for that, if it'd ever happen. Which it won't.

4) Start over with our money supply, tying it to the value of precious metals, or actual goods and services, or even some other FUNGIBLE commodity. Absolutely NO money may be created from debt. PERIOD!!

I can't speak to going back on a precious commodity standard. Don't know enough about it. But I do know that no household, town, city, county, state, or nation can run without the ability to create debt.

5) Absolutely no bailouts for ANY business or sector. If it goes under, then it is because it deserved to go under. Never again will corporations be given welfare.

Hmmmmmm....well, I guess could never say never. But I like it in principle.

I also don't believe we've bankrupt. But we're getting close.

 

[Opteron]

This section of the article is key to the crisis that we are now facing. It is no longer a question of when bankruptcy will occur, because we ARE bankrupt. We need a solution:

1) We either double ALL of our taxes, or we repudiate our national debt, and start over. Personally, I like starting over better.

2) We pass an amendment to the Constitution that the Federal government can NOT, under any circumstance whatsoever, spend more than it takes in.

3) Lobbyists are forever barred from running for public office, and those who have served in public office are forever barred from becoming lobbyists.

4) Start over with our money supply, tying it to the value of precious metals, or actual goods and services, or even some other FUNGIBLE commodity. Absolutely NO money may be created from debt. PERIOD!!

5) Absolutely no bailouts for ANY business or sector. If it goes under, then it is because it deserved to go under. Never again will corporations be given welfare.

This is for starters. Anybody disagree with these 5 points? Also, does anybody want to add other points?

Article is here.

Pretty good points.

I actually think repudiating the national debt could be a good idea, because it will do two things: first it will wipe away the debt, and second it will ensure future borrowing will be very difficult to do because people will not trust that they will get their money back. Realistically though, I don't think wiping out the debt will solve the problem, because unless we have responsible people in Congress, they find some way to borrow and spend again, maybe just by printing money.

Bailouts for Wall Street/housing industry should not have been done. The car industry bailouts did not turn out so bad, but no more should be done.

A constitutional amendment to balance the budget would be interesting. Barring natural disaster or major war, not planned military action, the budget must be balanced. For all other purposes, a rainy day fund could be setup. But I think what might happen is that Congress would become deadlocked and just not pass a budget at all.

An interesting idea would be to pass a law or constitutional amendment saying for every fiscal year the budget is not balanced, Congress and the President lose their pay or reduce their pay, exempting national emergency. And you could combine it with the previous amendment and add that automatic taxes kick in for the shortfall.

 

[dontworrybehappy]

Pretty good points.

I actually think repudiating the national debt could be a good idea, because it will do two things: first it will wipe away the debt, and second it will ensure future borrowing will be very difficult to do because people will not trust that they will get their money back. Realistically though, I don't think wiping out the debt will solve the problem, because unless we have responsible people in Congress, they find some way to borrow and spend again, maybe just by printing money.

Bailouts for Wall Street/housing industry should not have been done. The car industry bailouts did not turn out so bad, but no more should be done.

A constitutional amendment to balance the budget would be interesting. Barring natural disaster or major war, not planned military action, the budget must be balanced. For all other purposes, a rainy day fund could be setup. But I think what might happen is that Congress would become deadlocked and just not pass a budget at all.

An interesting idea would be to pass a law or constitutional amendment saying for every fiscal year the budget is not balanced, Congress and the President lose their pay or reduce their pay, exempting national emergency. And you could combine it with the previous amendment and add that automatic taxes kick in for the shortfall.

To the people against point number 2.....that is VERY similar to the point given to an individual after they declare bankruptcy. If citizens MUST manage by rules such as that, or close to that, why can't the gov't?