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America’s Fiscal War Against Children

Laurence Kotlikoff, an economic professor at Boston University begins an essay posted yesterday at Bloomberg saying, “Our war in Afghanistan may be ending, but our war against our children continues in full force.” He adds:

“Our fiscal position is so dire that it’s showing up even in our phony official deficit accounting. Last year the CBO projected that official U.S. federal debt would first exceed 90 percent of annual economic output in 2021. This year it projects 2018 as that critical date. That’s a three-year deterioration in just 12 months. Including the debts of federal agencies to one another, such as those of the Treasury to the Federal Reserve, the number has already passed 90 percent.”

And how big is the "fiscal gap?" According to Kotlikoff:

"By my own calculations using the CBO data, it now stands at $211 trillion -- a huge sum equaling 14 times the country’s economic output . . . ."

He concludes by writing of what it would take to “get our fiscal house in order” with the answer:

“. . . One answer is to raise all federal taxes -- personal income taxes, corporate income taxes, payroll taxes, and estate and gift taxes -- immediately and permanently by 64 percent. Another option is to cut all noninterest spending by 40 percent.

Alternatively, if we wait 20 years to change policy, these two figures become 77 percent and 46 percent, respectively. If we wait 40 years, until all the baby boomers have safely taken their leave, the requisite permanent tax increases and spending cuts are 93 percent and 53 percent.

“Thus, the longer we wait to address the problem, the larger the bill our children must pay either in higher taxes or lower benefits. This is the awful zero-sum nature of our generational dilemma and the moral challenge of our day.

“The growing fiscal gap leaves no doubt. Intentionally or not, we have placed our children in grave economic danger. Their protection must be our highest priority. Our leaders, if they actually care about their children and ours, need to stop playing word games. They need to forget about the “official” debt, forget about the “official” deficit, forget about the “official” debt ceiling, start seeing the economic forest for the trees, and set in place policies -- policies that go far beyond what’s being considered -- to eliminate the fiscal gap.”

Well said, Mr. Kotlikoff!

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