Thursday, August 12, 2010

Larry says 2 + 2 = 3

“U.S. Is Bankrupt and We Don't Even Know It“ according to Laurence Kotlikoff in a Bloomberg commentary.

“Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.” says Kotlikoff

He goes on, “What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.”

He justifies his analysis by, “Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”

“But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”

“The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.” and his solution?  “Double our taxes” and slash spending especially Social Security.

There is more that you can read from the link at but that really is it in a nutshell. The IMF takes the current deficit run up by the Republicans and continues it out forever at that rate assuming nothing is done about it.

The solution that the IMF always proposes for any country that they can get their claws into, is to eliminate of the middle class and the forbid the holding of the least bit of wealth by anybody but transnational corporations.

Doubling taxes across the board would accomplish that goal and you'll see calls for selling off the commons to eliminate "costs". They don't mention that you could dramatically increase GDP by increasing the income of the working poor, and the trade deficit is subtracted from the GDP and besides imports create a negative multiplier throughout the economy. Then there is the interest on the debt, Obama is budgeting 500 billion a year to pay that but if interest goes up that could easily balloon to a trillion or more.

The debt comes from the fact they have done away with production and they are buying the production from the transnational corporations on credit who use that system to dodge trillions in taxes. The only reason anybody has trillions of dollars to lend the US is that the government has not been collecting the money in taxes. It's that nonsense that has to stop.

The 200 trillion dollar long term deficit is not a real number but a pointless extrapolation, but they are going to use it to get what they want, the end of the middle class. The money supply can be restructured to fix this problem but it has to be done hand in hand with rebuilding America and the elimination of these transnational monopoly corporations and the traitorous politicians that they own.

It's all just a paper game to hide the real damage from 30 years of Reaganomics. No manufacturing means no middle class but you can have a hell of an upper class. The people who run the IMF happen to be from the upper class.

And by the way, a Professor of Economics cannot possibly be so stupid as to not see this. It’s simple math and he has made 2 + 2 = 3.


SanMigMike said...

Another Republican that seems to be wondering what happened...Duh!

The US seems to be trying to become a Fourth World country, a Third World country that doesn't think it is a Third World country and keeps policies in place that will keep the country going down.

Most real Third World countries at least try to improve their infrastructure, education and other things. We instead are trying to destroy our infrastructure (this week this road will become a gravel road and next week a dirt road and then soon enough a path since few of use will be able to drive a car and what kind of path does a bike or a mule need anyway?...), make education impossible for most people and make health care a dream for all but a few.

SanMigMike said...

Oh, and I think it is indeed obvious that one can trust the IMF to do what is right for the rich and the multinational corporations that the rich control. Never mind that the IMF believes in ruining economies so that the rich can get richer...are there not a few examples of countries that did go their own way and lived to tell the tale?

It will be interesting to see how the Hungarians do with their thumbing of their noses at the IMF.