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Economist Argues US Is Bankrupt

Laurence Kotlikoff says the US is bankrutpt and shows how the federal government uses changing definitions to hide the fact. To us, this is an accounting issue because it does not consistently apply terms,keeping them from being comparable.

Our country is bankrupt. Itís not bankrupt in 30 years or five years. Itís bankrupt today.

Want proof? Look at President Barack Obamaís 2010 budget. It showed a massive fiscal gap over the next 75 years, the closure of which requires immediate tax increases, spending cuts, or some combination totaling 8 percent of gross domestic product. To put 8 percent of GDP in perspective, this yearís employee and employer payroll taxes for Social Security and Medicare will amount to just 5 percent of GDP.

Actually, the picture is much worse. Nothing in economics says we should look out just 75 years when considering the present-value difference between future spending and future taxes. Over the full long-term, we need an extra 12 percent, not 8 percent, of GDP annually.† More bad news here.

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