Friday, July 21, 2006

Deep in the future red

From Bloomberg: “U.S. is bankrupt in one way that counts”:

[Economist Laurence] Kotlikoff's comparison of the U.S. to a failing company is too interesting to dismiss out of hand. The place to start is with the books, beginning with the liabilities.

Here the case is strong. As Kotlikoff, a professor at Boston University, points out, the ancient entitlement of Social Security is only the start of the problem. Medicare, Medicaid and President George W. Bush's new prescription drug plan make matters worse. Economists used to hope that economic growth would keep up with future increases.

The data suggest the opposite. In the past four years, Kotlikoff notes, real Medicare benefits have increased at an annual average of 3.5 percent per beneficiary, whereas real wages grew .002 percent. By Kotlikoff's math, the U.S. confronts a $65.9 trillion fiscal gap over the long term.
This is probably my thousandth post on this issue. In the wise words of Herbert Stein: “If something cannot go on forever, it will stop.” (Hat tip: Real Clear Politics)

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