Tags: Kotlikoff | US | Debt | Greece

Kotlikoff: US Has Worse Debt Problem Than Greece

By    |   Tuesday, 20 Sep 2011 01:01 PM

The United States has a worse debt problem than Greece, writes Boston University economics professor Laurence J. Kotlikoff.

America's fiscal gap, the difference between projected future spending and future taxes, is 14 times its gross domestic product, or GDP, he writes in an editorial for CNN. By comparison, Greece's fiscal gap is just 12 times its GDP.

America's fiscal gap is now $211 trillion, he asserts.

"The financial sharks are circling Greece because Greece is small and defenseless, but they'll soon be swimming our way," Kotlikoff writes.

Eliminating America's fiscal shortfall would require an immediate and permanent 64 percent increase in federal revenues or an immediate and permanent 40 percent cut in federal spending not counting interest payments.

Congress has focused on controlling the increasing official debt and has ignored the ballooning unofficial debt that is many times larger, he says.

The government's official debt grew by $1 trillion last year, while its unofficial debt increased by $6 trillion last year.

The budget ceiling agreement calls for reducing spending by $2.5 trillion over the next 10 years, and President Barack Obama is proposing $3 in savings, Kotlikoff notes. "Both of these are peanuts compared to what's needed to start eliminating the fiscal gap."

The economist agrees with Obama's proposal in to increase taxes on the rich. "The rich have been getting off far too easy for far too long," he writes, noting that federal revenues as measured by share of GDP are at a post-war low.

The country needs a radical solution, not Band-Aid fixes, to solve is fiscal problem, Kotlikoff argues.

His radical solution entails implementing a 17.5 percent federal sales tax and eliminating the personal income tax, corporate income tax, and the estate and gift tax. The sales tax would come with a demogrant, a monthly payment to households to reimburse the poor the sales taxes they've paid.

His proposal, which he dubs the Purple Tax Plan, is progressive and should appeal to both Democrats and Republicans. If neither major party adopts them, a third-party candidate will, he predicts.

At least some commentators have criticized Kotlikoff's math.

Dean Baker, co-director of the Center for Economic and Policy Research, took issue with Kotlikoff's $211 trillion national debt figure.

"The methodology used for the calculation is obscure and used by almost no one except Laurence Kotlikoff, the economist who developed it, and a few of his former students," Baker states in an article for Business Insider.

Baker criticized NPR for recently interviewing Kotlikoff without questioning his math, calling it "cesspool journalism."

"The reason," he says, "is that it's only purpose could be to frighten people about the deficit."

The commonly cited debt figure is $14.3 trillion, Baker says.

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
StreetTalk
The United States has a worse debt problem than Greece, writes Boston University economics professor Laurence J. Kotlikoff. America's fiscal gap, the difference between projected future spending and future taxes, is 14 times its gross domestic product, or GDP, he writes in...
Kotlikoff,US,Debt,Greece
448
2011-01-20
Tuesday, 20 Sep 2011 01:01 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved