|LAURENCE J. KOTLIKOFF, Laurence J. Kotlikoff is a professor of economics at Boston University and the co-author of ''The Clash of Generations: Saving Ourselves, Our Kids, and Our Economy.''|
So there's a different way to borrow — one that's more subtle, harder to see and, therefore, cheaper to do. You still take in money, pledge to return it, and leave future generations on the hook. But you call the money you take in ''taxes,'' not ''borrowing.'' And you promise repayment in the form of pension, health care and other benefits, but you don't record the present value of those promises as official debt.
My 94-year-old mom is in this demographic. She's collecting
Every month, my mom receives a yellow and green benefit check for
Even worse, the budget office raised what's called the alternative fiscal scenario, the most realistic projection of fiscal outcomes absent major policy changes. Based on these estimates, I calculate that the ''fiscal gap'' — a yardstick of total government indebtedness that I've worked on with the economists
The fiscal gap — the difference between our government's projected financial obligations and the present value of all projected future tax and other receipts — is, effectively, our nation's credit card bill. Eliminating it, would require an immediate, permanent 59 percent increase in federal tax revenue. An immediate, permanent 38 percent cut in federal spending would also suffice. The longer we wait, the worse the pain. If, for example, we do nothing for 20 years, the requisite federal tax increase would be 70 percent, or the requisite spending cut, 43 percent.
Even if we do nothing — which, given
Former government officials from both parties, and more than 1,200 economists, including 17 Nobel laureates, have endorsed the legislation, known as the Inform Act. It would keep our government honest, and sound an alarm.
What we confront is not just an economics problem. It's a moral issue. Will we continue to hide most of the bills we are bequeathing our children? Or will we, at long last, systematically measure all the bills and set about reducing them?
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