'The Sharks Will Soon Be Swimming Our Way'

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While I’m not sure Professor Laurence J. Kotlikoff’s solution to the mess we are in, which involves a fundamental restructuring of the tax system along with other fixes collectively known as The Purple Plans, has any chance of being adopted in the absence of a full-blown crisis — which has historically been the only real impetus to fixing broken economic and political systems — the grim assessment of where things stand he offers in a CNN op-ed, “America’s Debt Woe Is Worse than Greece’s,” suggests the day reckoning is not far off.

Our government is utterly broke. There are signs everywhere one looks. Social Security can no longer afford to send us our annual benefit statements. The House can no longer afford its congressional pages. The Pentagon can no longer afford the pension and health care benefits of retired service members. NASA is no longer planning a manned mission to Mars.

We’re broke for a reason. We’ve spent six decades accumulating a huge official debt (U.S. Treasury bills and bonds) and vastly larger unofficial debts to pay for Social Security, Medicare, and Medicaid benefits to today’s and tomorrow’s 100 million-plus retirees.

The government’s total indebtedness — its fiscal gap — now stands at $211 trillion, by my arithmetic. The fiscal gap is the difference, measured in present value, between all projected future spending obligations — including our huge defense expenditures and massive entitlement programs, as well as making interest and principal payments on the official debt — and all projected future taxes.

The data underlying this figure come straight from the horse’s mouth — the Congressional Budget Office. The CBO’s June 22 Alternative Fiscal Scenario presents nothing less than a Greek tragedy. It’s actually worse than the Greek tragedy now playing in Athens. Our fiscal gap is 14 times our GDP. Greece’s fiscal gap is 12 times its GDP, according to Professor Bernd Raffelhüschen of the University of Freiburg.

In other words, the U.S. is in worse long-term fiscal shape than Greece. The financial sharks are circling Greece because Greece is small and defenseless, but they’ll soon be swimming our way.

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