Brent Colton is a retired CIA operations officer now in the employ of the Creighton Corporation, a privately owned think tank that advocates various opinions on world issues, but it’s his clandestine job to solve the dirty problems for their private clients for a million dollar fee with no questions asked. When recovering stolen technology from a Vietnamese industrialist, Colton obtains evidence that he secretly partnered with a U.S. Senatorto rig the recent presidential election and elect him to the nation’s highest office.

FEDERAL RESERVE ECONOMIST STATES NATION FACING INSOLVENCY!
by Terry Heath, 2006

You have to actually feel sorry for the individual who becomes president in 2009. Why would that be? Because that newly elected chief executive takes over the reigns of government just when the first of this nation’s 77 million baby boomers (those born between 1946 to 1964) begin retiring and expect to get plenty of Social Security benefits, Medicare and all other federal government pay outs due those new senior citizens which, if such programs stay at current funding with guaranteed automatic cost of living increases, will lead to Uncle Sam’s impending bankruptcy.

The next president should worry about this potential catastrophe because a professor of economics and researcher for the Federal Reserve Bank of St. Louis is warning that these baby boomers who intend to retire in the next twenty years and expect to receive full Social Security and Medicare funding are in for a rude shock because he believes the nation faces a potential 66 trillion dollar liability shortfall to pay for those endeavors. And, according to this esteemed economist, that potential liability is currently twice the amount of today’s national wealth and almost five times the U.S. gross domestic product which is the amount of money being spent in today’s economy. So it seems unlikely we can pay for those incoming seniors without dramatic tax increases for everyone else or should give serious consideration to scrapping the complete entitlement program to avoid a potential future economic apocalypse.

Laurence J. Kotlikoff is a professor of economics at Boston University and a research associate at the National Bureau of Economic Research. He has written a provocative article for the July, 2006 Federal Reserve Bank of St. Louis Review, which is a trade magazine for those in the banking industry, and in the article he asks one shocking question that affects all of us.

Is the United States bankrupt?

He then cites the Oxford English Dictionary in his question in asking if the United States is at the end of its resources, exhausted, stripped bare, destitute, bereft, wanting in property, or wrecked in consequences of failure to pay its creditors.

Kotlikoff took a look at presumed federal government expenditures for these future retirees versus expected tax revenues from those currently working and paying into the Social Security system over the next twenty years and based on his examination he’s projecting that our nation has a potential 65.9 trillion dollar gap in payments to retirees over these next two decades as those who’ve paid in the system their entire lives want their money while those presently working may start balking at the presumed hefty increases in taxes on their future earnings to cover all of these new retirees who presumably would still be the best well off generation of Americans in our nation’s history as they reach their golden years of leisure.

So how much is 66 trillion dollars? The U.S. national debt is now approaching nine trillion and that’s after we’ve been around for 230 years as a country with a dozen or so wars to pay for. Bill Gates, America’s richest person, is worth 50 billion dollars. We would need him and 1320 other willing individuals worth the same amount to donate their entire fortunes to cover these liabilities but he’d rather donate his accumulation of wealth to private charities once he’s gone.

So what does Kotlikoff suggest from his examination of our potential future liabilities? He writes that ‘one way to wrap one’s head around $65.9 trillion (in potential expenditures to one segment of our population) is to ask what fiscal adjustments are needed to eliminate this red hole. The answers are terrifying. One solution is an immediate and permanent doubling of personal and corporate income taxes. Another is an immediate and permanent two-thirds cut in Social Security and Medicare benefits. A third alternative, were it feasible, would be to immediately and permanently cut all federal discretionary spending by 143 percent.’

That’s not a very positive outlook that would indicate that it’s still morning in America unless you are one of those at the head of the receiving line with your hand out for the goodies!

He adds that ‘a policy that looks sustainable based on current conditions may drive a country broke and do so on a permanent basis. Of course, policymakers may adjust their policies as they see their country’s output decline. But they may adjust too little or too late and either continue to lose ground or stabilize their economies at very unpleasant steady states. Think of Argentina, which has existed in a state of actual or near-bankruptcy for well neigh a century. Argentina remains in this sorry state for a good reason. Its creditors, primarily each successive generation of elderly citizens, force the government to retain precisely those policies that perpetuate the country’s destitution.’

Kotlikoff’s cure for this impending crisis involves a national retail sales tax to replace our current tax structure, a curtailment of Social Security payments to future retirees and a healthcare reform that puts all Americans into one health care system that rations medical care on a need to have basis.

How did we get into this entitlement mess? Because we discovered we could reward ourselves today through the U.S. Treasury by borrowing money and putting off paying for it onto the next generation of citizens. But here’s the problem we now face. The rate of births in America is declining and we’re becoming an older society. And there’s going to be no one in the next generation willing to work at their peak efficiency and earnings potential when they realize the vast percentage of their income will go to current retirees whom they perceive as already being well off.

Can the system be kept going with an infusion of new payers into the system by those workers from other countries that we can make into U.S. citizens and won’t realize until it’s too late that the money they will be donating to Uncle Sam actually doesn’t come back to them in the future but is instead going to those already retired and they’re to hope a future generation wants to pay for their retirement?

Kotlikoff doesn’t think so. He writes ‘it is a mistake to think that immigration can significantly alleviate the nation’s fiscal problems. The reality is that immigrants aren’t cheap. They require public goods and services. And they become eligible for transfer payments. While most immigrants pay taxes, these taxes barely cover the extra costs they engender.’

At the present time the Social Security trust fund still has a yearly surplus of revenues that is taken from today’s working taxpayers versus expenditures being made to current retirees. But the government transfers that extra money to its regular account and then spends it on its other priorities the Washington politicians determine, such as the Iraq War or to pay for medical coverage of illegal aliens, only to leave an IOU to Social Security with a promise to re-pay when that money is needed in future years. That’s analogous to you spending your child’s future college tuition money to buy next week’s groceries with a note saying you’ll eventually pay it back. But, at some point in the near future, the money for that item will be needed and must be provided or that long promised expenditure has to be reneged.

When that starts happening to the government they only have four choices in this next decade to pursue to solve this impending crisis with as little inconvenience to us as possible.

1) Dramatically raise Social Security taxes on those now working and risk recession since there will be so little money left over to consume on products for daily survival and comfort.

2) Drastically reduce payments to current and future retirees who, ironically to all the politicians who would have to explain those detrimental actions, are the largest segment of voters with the longest memory of perceived wrongs.

3) Fire up the printing presses at the Treasury Department and flood the economy with soon to be worthless dollars to cover their Social Security/Medicare liability yet risk the wrath of younger consumers with runaway inflation that will destroy their life savings and home equity accumulations.

4) Scrap all entitlement programs, refund all specific moneys paid into the system by each American and risk a firestorm by America’s lower class never seen before by politicians when that group of people discover that their safety net has been discontinued.

So which politician and aspiring presidential candidate has the guts to tell the people that we’re about to be broke?

Terry Heath California E-Mail readermail@terryheathbooks.com