U.S. GOING BROKE; GUESS WHO WILL PAY?
April 24, 2007
Whatever you paid in taxes this year, get ready to pay lots more, conclude two economists, Jagadeesh Gokhale and Kent Smetters at the Cato Institute and Wharton School, respectively.
- Our government has promised $63.675 trillion more in benefits than it will collect in taxes.
- If the federal government confiscated all the land in the United States along with all of its improvements -- buildings, highways, plants and equipment, and other durable assets built on it -- and sold them at auction to foreign investors, it would still fall more than $20 trillion short in present value of the monies required to satisfy its future budget.
- The true federal deficit isn't the $200 billion-odd a year discussed in newspapers but nearly 10 times more, $2.4 trillion.
- Without Social Security and Medicare, we'd be running a surplus; the entire problem is the $72.9 trillion in unfunded liabilities of Social Security and Medicare.
- Eliminating all military spending, forever, would only cover about half of the unfunded liabilities of Medicare.
- Just paying for promised benefits would require an immediate new 14.4 percent tax on all payroll; a tax increase that large probably wouldn't be collectible because work would go underground.
- The vast majority of the problem can be traced to Medicare; its unfunded liabilities are 8.5 times larger than the unfunded liabilities of Social Security.
To put these figures in perspective, the total output of the U.S. economy is now about $12.5 trillion. The Federal Reserve recently estimated the net worth of all U.S. consumers at $55.6 trillion.
Source: Scott Burns, "U.S. going broke; guess who will pay?" Dallas Morning News, April 22, 2007.
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