America’s Hidden Credit Card Bill

The federal government should have to report all its liabilities, like Social Security — not just the official debts.

Comments: 214

  1. Kotlikoff is a space cadet, a novice or more likely a deliberate deceiver. The future liability of the US govt to Social Security recipients isn't money down a black hole. It's shopping money for seniors, paychecks for the stores and other recipients of that spending, sales and income tax revenue from the spending done by seniors, property taxes paid by seniors that go to local govt units, etc. MONEY CIRCULATES. Kotlikoff apparently hasn't heard that it does. The chief reason why people promote this sophistry is that they are trying to defend affluent people from paying higher taxes, resulting for example from removing the income cap on income subject to SS and Medicare tax. He's concerned about other parts of the deficit as well, but can't admit that Bush's tax cuts were a terrible mistake or that the govt services he would propose cutting might be needed for present and future national wellbeing. He's not trying to protect future generations; he's trying to serve the interests of current millionaires and billionairs who have gotten most of the financial gains of the past 5 and 30 years.


    A large part of that money will circulate into foreign economies.

    "but can't admit that Bush's tax cuts were a terrible mistake"
    Do you mean the Bush/Obama tax cuts? Just let the tax cuts lapse to where the Tax Code was before W took office. Does everyone agree?

  3. G.T.,


    The Trustees for S.S. And Medicare calculate that the taxes will need to double with no cap to pay just what is promised today. You can read it on the Offical Government web site. The link is in the article. Believe or not the money is gone so rase the taxes, borrow more as we are currently doing or cut benefits.

  4. "The future liability of the US govt to Social Security recipients isn't money down a black hole. It's shopping money for seniors"

    Its a liability that far outstrips the ability of the economy to supply it. Simply put, there is no money to put down a "black hole" or provide "shopping money for seniors". It seems to me people don't even understand the problem. The money for this will NOT EXIST which is why there is such a huge problem.

  5. An excellent discussion of the deficit and Social Security was given in a Times article
    by Bruce Bartlett
    “To be sure, some restraint is needed in federal entitlement programs. But the idea that we are facing a crisis is complete nonsense. Spending for Social Security, in particular, is very stable. Relatively modest changes, such as raising the taxable earnings base slightly, would be sufficient to put the program on a sound footing virtually forever.
    As a Nov. 28 Congressional Research Service report explains, historically 90 percent of covered earnings was subject to the Social Security tax. In recent years, this percentage has fallen to 84 percent, as the bulk of wage gains has gone to those making more than the maximum taxable income, currently $110,100. Raising the share of covered earnings back to 90 percent would be sufficient to eliminate almost half of Social Security’s long-run actuarial deficit, according to the Social Security actuaries."
    My comment:
    instead of cutting SS benefits, tax all dividends, cap gains and carried interest as ordinary income and tax unrealized cap gains at death yielding over 200 B /year.
    Collect at least some of the 400 B /year in income tax due under present code that is not now collected.

  6. Great - you've covered 12%-15% of the gap. Now for the other 85%.

  7. Yes, its funny that we never see these kind of solutions in these type of articles. Not to mention, closing the inversion income loophole. There was just a fascinating article in the NYT I think yesterday or the day before on that. Its the provision that allows companies to create virtually a proxy set-up where all their income is passed to a foreign corporation and as "foreign" is not taxable income in the U.S. Its a BIG amount of money and the practice, according to the article is only expanding.

  8. Social Security deficit projections are done for a 75 year period.
    Even the most pessimistic projections for the long range deficit in SS are less than 15 T..
    Collecting just the 200 B /year for 75 years would yield 15 T in additional revenue.
    If the additional 400 B from uncollected income tax due were collected the total increase in revenue over 75 years would be 45 T.
    But you are correct. The best way to increase revenue is to stimulate the economy. Put people to work. Income taxes and SS and M payroll tax revenues increase.
    But conservatives do not want to stimulate the economy. They oppose the New Deal measures that reduced Hoover's 25% unemployment rate to under 15% by 1937.
    Conservatives want high unemployment for partisan advantage in 2014-2016.
    Employers want high unemployment to restrain wages.

  9. So we should start an austerity budget? That's what this reads like: raise taxes and cut spending. Stop Social Security payments and any aid to citizens. What about requiring our huge and rich corporations to pay their share of the taxes to the country and the states where they do business rather than trying to lure them with tax breaks? How about eliminating the cap on paying into Social Security so that everyone pays in? What about closing the loopholes on unearned income?

    What Mr. Kotlikoff is suggesting or proposing would hurt the middle and working classes and leave many of us in poverty before we retire, if we can ever retire. This problem started with Ronald Reagan and trickle down economics. The Republicans loved it then and want to do more of it now. The government needs to spend money to upgrade our roads, our telecommunications, our ports, to advance scientific research that corporations will not do, and, unfortunately, to pay our lackluster elected officials in DC.

    As a member of the latter part of the baby boomers, I will not have decent pension, or a decent IRA to draw from if I retire. I was born at the wrong time. I came of age when the economy was bad and it hasn't improved for me or for many others. We're struggling and this proposed course of action would add to our struggle. Come up with something that helps the economy and the people who need jobs and I might listen.

  10. I'm in the middle between the two baby boom segments. Personally, I think it's wrong for the older baby boomers and the so-called "silent generation" that preceded the baby boomers to "stick it" to the younger baby boomers, much less the poor GenX people. Most of these people benefited from massive amounts of home equity run-up during the 1960s and 1970s; it's fair that their benefits also be trimmed. Unfortunately, they don't feel that way, even though they stood by while Reagan cut taxes and Congress never cut spending.
    But, my friend, some modest trims now make more sense than austerity later. This guy is projecting a worse case with his 59 percent tax hike. Not all of those liabilities are going to come due. But we know that the retirement entitlements are going to swamp the boat sufficiently to cause major problems, and we should elect politicians with the political courage to do something about it now rather than acting like ostriches with their heads in the sand.

  11. You will not have a decent pension or IRA to draw from if you retire solely because you were born at the wrong time?! Is that the government's fault? Does the world owe you something? Aren't >youyour< life? Perhaps you can learn to do a better job of managing it.

    My friends and I are also "latter" baby boomers. Half of my friends have done well and half have not. The ones who have done well have all worked hard and saved. The ones who have not blame the world for their problems and lack of planning.

  12. I'm with you, hen3ry. I think what we are finding out is that elderly persons on Social Security and young refugees at the border are easy targets for conservatives.

  13. If we really want to be informative and not misleading, shouldn't the CBO be required to report our debt-to-GDP instead of the simple debt? I mean, who cares what the headline number is? We're bequeathing future generations less of a debt burden if we give them more debt with a healthy economy than we are if we send them into the world with modest debt and lower GDP.

    But if you think about it that way, then why aren't we under just as much of a moral obligation to raise the GDP (at least relative to the tax base) as we are to shrink the deficit? If that seems silly, then we might start to wonder about the platitude that we're somehow harming future generations by carrying over deficits. If it doesn't sound silly, then maybe we should question austerity programs that are burdening economic growth.

  14. Taxes and regulations are burdening economic growth. What "austerity" has there been in the USA? NONE. Second, austerity involves raising taxes and cutting spending. No wonder it doesn't work. You need to cut spending and cut taxes.

  15. Well, we've had the sequester and an overall decrease of government jobs since 2008. Both are part of spooky fears of debt as inherently bad, as opposed to reasonable concerns about the debt-to-GDP ratio. Why didn't we have tons of hearings about the overall health of the economy in 2010, instead of hearings about the debt?

    Also, tax cuts have a lower multiplier than most forms of government aid, while both cost money. So your proposal is unlikely to help the economy very much.

  16. Exactly. We only have a budget 'problem' or a deficit 'problem' to the extent we are not spending money to secure our future. And that means spending that isn't just private sector spending, that means regulations that aren't just self-regulations. It means things, people, government, that require thinking and requires effort. Taxes too high? Maybe the real reason is our wages aren't keeping up with the cost of running our communities. So why are we talking about dismantling our communities in the form of tax cuts, instead of what's necessary to raise wages without destroying profits? Its not an impossible problem, it just requires effort, thought, and foresight.

    Those who continue to believe in the fairytale of self-perpetuating economies, and self-perpetuating communities, and still expect the benefits of a modern post-industrial, interconnected society are deluding themselves. You cannot remove the means of reaching a goal and still expect to keep reaching that goal...without replacing it with something equally valid and useful. Don't like our 'fiscal gap'? Don't fudge the numbers around to scare people, start investing capital in the things that generate guaranteed long-term capital gains. Lets start by investing in our human capital. We've done it before, and we've succeeded before. There's no good reason why it wouldn't work again. And then watch your 'fiscal gap' disappear all by itself.

  17. This is a lie, a way of lying. Reporting liabilities without assets is a lie. Reporting future obligations without future income is a lie. Reporting future obligations without discount to present value is a lie. Reporting future income stream without discount to present value is a lie. Reporting contingent obligations or contingent income without discount for the contingency is even more of a lie.

    This article calls for an accounting system that is a lie. It seeks to make it look as if we have a very different situation than we really do.

    This is exactly what was done to the Post Office to render it conveniently broke. It is required to fund many of its future obligations from current income, not income when the obligation comes due.

    It is a deliberate distortion, it has been done before, and this is a proposal to do it again on a bigger scale.

    It is a scheme to lie to us, to panic us, to sell us snake oil for a cure. It would benefit only the calculating liar.

  18. Mark,

    You too would benefit from reading the Trustees Report linked in the article. The Trustees are the ones who are "panicked"! Perhaps they know something!

  19. When interest rates are essentially zero, there is no need for discounting future inflows and outflows.

    If interest rates go up and discounting is necessary, it only means the existing debt burden becomes more costly requiring more taxpayer dollars.

  20. Some lie. If the US government had to report its balance sheet like private companies do, the US would be in default like Argentina.

  21. After briefly acknowledging that national deficits are of concern in the long run though not necessarily in the short run, this piece becomes little more than the typical Republican rant seeking to scare everyone into immediate austerity even though that is failing everywhere it's being tried. This just isn't what we need right now. I'll bet this guy's home isn't in foreclosure! Right now and for the past several years Federal borrowing has been at negative interest when adjusted for inflation. We need investments in education and infrastructure so our children will jobs in the future and the skills to fill them. They will reap the benefits of our investments and it's fair for them to pay their share. We pay for the investments our parents made on our behalf, don't we?

  22. Mr. Kay do you run your household with 2-3x as much debt as you have in income? Do you try to spend your way out of financial problems? What holds for households does hold for nations. You can only print funny money for so long.

  23. The Kotlikoff Kure, starve the Beast,
    Slash Soc Security at least,
    Don't raise the tax cap,
    Inequality's pap,
    The Poor fast, the one percent feast!

  24. Professor Kootlikoff,

    I pity your students. This kind of dishonest intellectual exercise has been harmful to the nation. It only serves those in power and is to the detriment to millions.

    Austerity doesn't fix the problems that were brought on by the Great Recession. Europe is full of countries that are economically distressed as a direct result of austerity measures.

    The moral issue we must confront is the ethical corruption of too many among our academics. Too many of our top schools are endowed with funds from parties that have an interest in changing the very nature of economics curricula. Too many of our top schools have professors who, like you, pop up with op-eds that are orchestrated to appear at the same time as some legislative offensive on the part of the GOP.

    Not infusing our economy with the oxygen it needs now, Professor, will ensure that our children will not only be unable to pay their bills, but will have to take in their parents due to the lack of jobs. The Keynesian model is a proven one. You know how it works and why. You teach it, don't you?

    It's on your head and your colleagues'. Rethink your positions. Come back soon to tell us you repent.

  25. Here's some vintage Krugman, from July 2011.

    "“Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.”

    That’s three of the right’s favorite economic fallacies in just two sentences. No, the government shouldn’t budget the way families do; on the contrary, trying to balance the budget in times of economic distress is a recipe for deepening the slump. Spending cuts right now wouldn’t “put the economy on sounder footing.” They would reduce growth and raise unemployment. And last but not least, businesses aren’t holding back because they lack confidence in government policies; they’re holding back because they don’t have enough customers — a problem that would be made worse, not better, by short-term spending cuts."

    It's been three years since the op-ed I just quoted, people. What of the things Professor Krugman explained here didn't turn out to be right? Whose doing is it?

  26. Rima, your reply-to-yourself is a bit confusing because you don't explain who who made the opening quote. That quote was made by our President!

    Dr Krugman is a bit distressed that Mr Obama seems to be spouting right-wing hogwash. So he then goes on (in this next paragraph) to try to turn the discussion to what he (Krugman) believes to be correct.

  27. JPG

    You are correct. I figured people would click through and re-read Krugman's op-ed. What Kotlikoff is proposing is nothing new. We've had these arguments before and what's more, we have the experience of the last four years of forced austerity to inform us on what happens when we make severe cuts and treat our economy as we would a household budget.

  28. We should start with what we want to do about old people with meager savings, and nonaffluent people with health problems, and work back from there. Budgets and their balancing have something to do with these matters, which is why they are important. But if balancing the budget means leaving many old people to the support of their relatives or charity or encouraging them to go off somewhere and die, then it must be discussed in that context. Stiffing our creditors might be morally preferable.

    If there is a credit card bill to be paid, then most of the benefit from the increasing productivity of our workforce should go to pay it rather than continuing to go to the top of the top. This means higher taxes on investment income, levied by governments with the power and desire to shut down tax dodges and havens.

  29. Agree with this 100%. Rawls himself couldn't have put it better. Makes sense to look for ways to take care of the sick and elderly first, and maybe hold off on the handouts to tax dodgers and one-percenters for a little while until that's sorted.

    But why are none of these remedies on the menu in today's op-ed? Social Security and health care are presented as the cause of the fiscal problem--so presumably the author thinks those are the unaffordable luxuries that should be first on the chopping block--but to me these safety net programs seem like a pretty noble attempt to avoid the alternative: leaving people to "the support of their relatives or charity or encouraging them to go off somewhere and die."

  30. Just giving a big number doesn't mean anything, because what's relevant is how it compares to another, even bigger number. The present-value of all future spending and the present deficit needs to be divided by the present value of GDP over the same period. The Opinion does this only in a complicated way, talking about the percentage of the increase in taxes or decrease in spending, which needs to be put into effect. But these particular projections may hide additional assumptions which are dubious, so the simpler ratio (present value of spending divided by present value of GDP) is to be prefered. What, according to the professor, is it?

  31. I sez to myself, self, I bet this is the usual clown show. Sure nuff, google leads to a link to Bloomberg Businessweek magazine February. 2010, sez his 2004 book was for replacing SS with personal retirement accounts, he wanted to replace income tax with a sales tax, and runs a software company for retirement saving. I stops the googling. Yada Yada Yada.

    I wonders. How's about a disclosure of the history of the reformer, and, the chain that leads the NYT editors to offer up this clown nonsense? That would allow the reader to make an informed decision dontchathink? Dream on.

    I want to bet in Vegas that whoever it is who is part of this ongoing propaganda campaign is very proud of themselves for being so high minded about ending social security now, to save those fourty years from now getting eighty percent of what is promised, by taking it all away right now and letting Dr. Kotlifoff and his crowd getting their hands on it now just to save America. And that they will continue to run this propaganda without full disclosure. The rubes can't be trusted with full disclosure.

    The key fact going forward, Trash is trash. Same as it ever was.

  32. Well said! Plus, I like your dialect. There are folks in our small town who dream of rolling back the New Deal and replacing it Christian-driven charity. Charles Dickens could write the script.

  33. Slash pensions in excess of $25,000 per year down to size. The taxpayer should NOT be on the hook for those. $25,000 per year for 30 years = $750,000 payout PER EMPLOYEE. Plenty of cash coming out the taxpayer's bank account. Now do the math on 6 digit pensions for the police and fire “chiefs” that retire at under age 50.

  34. Before we get out of shape about the debt consider that individual U.S. wealth increased from $56 trillion in 2010 and is now about $82 trillion. Most of this astonishing increase has not been taxed because it consists of unrealized capital gains. In any event the four year gain of the wealthiest 10% of the population is much more than the trillion dollars a year that we spend on Social Security.

    Rather than taxing wealth we tax the workers to pay for Social Security. The typical American family lost 36% of their wealth over the last 10 years. The payroll taxes destroy jobs and keep salaries low.

    On March 13, 2014, Bill Gates said, “I do think tax structures will have to move away from taxing payroll because society has a desire to have employment. … And that’s going to force us to rethink how these tax structures work in order to maximize employment … capitalism in general, over time, will create more inequality; and technology, over time, will reduce demand for jobs particularly at the lower end of the skill set.” The AEI website has video highlights of Mr. Gates speaking on different topics but this payroll tax replacement is omitted.

  35. It is interesting to read this immediately after Krugman's column in todays's Opinion section. I wonder how long Professor Kotlikoff has been predicting economic disaster that refuses to happen, unless we adopt the draconian austerity measures - against economic consensus, the lessons of the great depression and the experience of the past six years.

  36. The day of reckoning is nigh.

  37. Funny how the defense budget or the intelligence community budget or tax preferences for corporations and many other gov't expenditures that grow reliably year after year making ever increasing demands on tax revenue are never considered part of the "fiscal gap" in the minds of those who believe that you can't spend more than you collect in taxes, even though that has been the case for most of the 70+ years I've been alive. Just because there is an identified, dedicated source of revenue--TAX!--for some programs, they are the cause of fiscal gaps imagined on an infinite time horizon for these budgetary scolds. It's a shame these long discredited arguments get valuable space on the nation's paper of record.

  38. Another Stealth attack on the lives of the 99%.

    Send this guy back to the Propaganda Channel.

  39. The big problem is not Social Security, but Medicare.
    The Social Security portion of the payroll tax comes close to paying for the costs of the program. If the economy continues to improve, more money will be taken in than what goes out in benefits, at least for the next 10 years. With a modest hike in the tax and some cost of living trims, Social Security should be fine.
    The big problem is Medicaid. Medicaid currently pays out almost double what it takes in from the payroll tax. Medicare will never again take in more money from its portion of the payroll tax than it pays out in benefits, and this problem is going to continue to get worse and worse.
    Most of the public don't know that there is no tax monies at all which are dedicated to Medicaid and the new Obamacare premium subsidy. Congress "assumed" that the Medicare payroll tax would cover these programs. States pay for most of Medicaid but there is also a Federal share. Although that may have been a reasonable assumption in 1972 when Medicaid was enacted, it was a blatant falsehood to do so in 2010 when Medicare was paying out more than twice what the taxes took in. In reality, half of all Medicare/Medicaid/Obamacare benefits have to be paid by money which is borrowed right now, today.
    We are in a bind today because Democrats don't want to cut the programs and Republicans don't want to raise taxes; both parties have "punted" the ball by borrowing money.

  40. I submitted another comment in which I typed Medicaid but meant to type Medicare in the initial sentence of the second paragraph. Medicare is currently paying out twice what it takes in under the Medicare payroll tax.

  41. This is the dumbest column I've read in a long time. Obviously Mr. Kotlikoff knows nothing about economics.

  42. As soon as I read a comment about the "inflationary, easy-money policies of the Federal Reserve since 2007" I know that the author is biased.

    Inflation since 2007 has been the lowest in my lifetime. And his. (He and I are fairly close in age.) He's just throwing mud. Or to be more precise, making up facts to indict existing policymakers, hoping to carry over the criticism to other policy area.

  43. hiding the fiscal gap is essentially the same "magic" of hiding that only the middle class is, and has been for decades, the only ones fully funding the SS Trust Fund with 12 months of contributions. everyone should contribute into the Fund for 12 months on all wages & salary that will draw benefits.

  44. @ Citizen 60 who says only the middle class funds SSI -
    - Am I mistaken? I thought everyone had to pay SSI at every wage level from minimum wage upwards. SSI and Medicaid/Medicare are automatically deducted from everyone's paycheck, no? That is the general rebuttal to the Mitt Romneys of the world when they say 47% of our country don't pay "any" taxes.

    Where did you obtain this information?

    Regarding the "upper classes", I would certainly be fine with paying SSI and Medicaid/Medicare taxes over $101,000. Thats where the cutoff is - ie once you hit this top income threshold, you are not required to pay anymore SSI or Medicare tax as you've "paid in enough". I am fortunate enough to make over $100K and I do not think I would feel the bite as much now as I will if benefits are cut by 25%, which is one of the proposed solutions to "save" social security. If the market collapses and hits my savings, as happened to my parents in 2008, a few hundred extra dependable bucks might really help.

  45. The Federal Government should observe the same Generally Accepted Accounting Principles as ther rest of us. Oh! Wait! The Government can print as much money as it needs, whenever it needs it. Silly me.

  46. I have a hard time wondering why the New York Times is trotting out this nonsense as informed opinion.

    To start with, to do a present value calculation beyond thirty years is a fools' errand. The time frames he uses are nonsensical. They are also irrelevant to evaluating Social Security as a pension system.

    Social Security is a pay-as-your go system, not an actuarial system. This is so fundamental that why this lame argument keeps coming up other than the establishment Billionaires for Tax Cuts who fund this "research" and these "informed" opinion pieces really like this argument as a Bogey Man because they seem to think that they can scare the public with this Chicken Little argument.

    As a CPA I actually have some understanding of how the Social Security Administration handles payments to beneficiaries. Mr Kotlikoff's assertion that his mother is double dipping on Social Security as both a beneficiary in her own right and then getting something additional as a widow is bogus. That is not how the Social Security Administration calculates these payments (a widow would get either her benefit based on her account, or a survivor's benefit based on her deceased spouse's account, but not the sum of both; someone's fact checking here is very dubious).

    Medicare and the medicaid programs represent much larger future spending obligations that may be hard to finance; Social Security much less so. Job one, Congress should make the Affordable Care Act work.

  47. Laurence does not make the assertion that you claim, You ( a CPA) and I and he knows that the SSA calculates the benefit for surviving spouses differently if they chose to be paid under their record versus one who never worked, after the death of the larger earning spouse. Subtle but not duplicitous.

  48. Mr. CPA is absolutely right. The Professor even sells a "social security maximizer" program to financial professionals. Did he really write that sentence about "double dipping"?

    Social Security is an easy fix, by lifting (or at least raising) the income cap. Medicare, at 3 times the size of Social Security, is the gorilla with no easy fix.

  49. Job 0.1: Remove the salary cap on FICA contributions.

  50. I guess John Maynard Keynes meant to say that through the infinite horizon we're all dead.

  51. The author has an implicit POV that a government should be run like a for-profit business; that operational cash flow should be always positive, and that everyone’s individual account should be balanced.

    What he forgets is that
    - our infrastructure is a depreciating asset, not just an expense.
    - educational and other human ‘costs’ are an investment, not an expense.
    - human beings are not disposable; we do not have ‘useful lives’ and can then be discarded or written off.
    - there exists a greater intrinsic value in a society of ‘we’ than the sum of the individual values of the many ‘I’s’

    He should take a course in governmental accounting. There are reasons that we don’t have a line-item balance sheet. How do you put a value on our assets of clean air and water? How do you put a value on the richness of our physical resources, or the diversity, creativity and cultural depth of our citizenry? How do you put a value on the stability of our society, where contracts are honored, where we don’t fear insurrections or coups, where the daily routine of life is generally taken for granted? In so many respects, we are the envy of the rest of the world.

    I have absolutely no issue with a dissertation regarding economics, and generally we should fully fund our government programs. However, the goal of the discussion should be how to better disburse our bounty of wealth to all our our citizens, not a rationalization as to how to cut the needy.

  52. Your input should be required reading for all Americans, especially those of conservative bent that see everything as an either or situation, a moral imperative, or a false comparison.

  53. Dear Kg,

    We agree on most issues you raise. But one column can't discuss everything.

    best, Larry

  54. LK, re kg. " We agree on most issues you raise."

    How can you say such a thing, when the central point referenced in his last line " However, the goal of the discussion should be how to better disburse our bounty of wealth to all our our citizens, not a rationalization as to how to cut the needy." is what your article reveals you to be dead set against? And you are far-right -- far
    enough, anyway. Don't think the reader is deceived by your disclaimer. Of course, centrist these days means on the right, anyway.

  55. The US government is a borrower who hides from lenders (bond holders) its true unfunded liabilities.

    Unsophisticated individual investors continue to over invest in these extremely low yielding US long-term gvmt bonds, that are very likely to be inflated away.

    It is shocking that the US gvmt can perpetrate this on its least sophisticated citizens. Shameful.

    The true unfunded liability report by the US, state and municipal governments, may, just may, help educate the public against holding such debt.

  56. But isn't this the same person who is always telling us how to get the absolute most out of our social security benefits like the start and stop strategy (how one spouse can start collecting SS so the other spouse can be eligible to start collecting and then the first one stops and continues to build out his/her payout amount while the second one continues to get paid SS benefits, etc. etc.)?? So Mr. Kotlikoff's argument that SS is full of hidden debt seems a bit like talking out of both sides of your mouth when it serves your particular purpose at the moment.
    But yes, I agree that we should permanently increase taxes on the top, say 10% in an amount of about 25%, eliminate the earnings cap on SS contributions, then throw in a 25% permanent reduction in military spending and I would be comfortable that the overwhelming number of Americans would have a fighting chance at a secure future in this country.

  57. I thought "at least here in the rarified discussion pages of the nation's newspaper of record I would get away from all that conservative trolling about unfunded mandates."

    New York Times, my friend, you let one slip through.

    ALL insurance companies have unfunded mandates that they could not possibly cover with their current assets, yet there are insurance companies today that have been in existence 3 times longer than social security.

    How did they manage to do it. Simple, unfunded mandates is what the conservatives pivot to when we are getting our deficits under control. Since this president has presided over the biggest drop in the deficit in half a century (from the 1.1 trillion Bush left him to 560 billion today) someone needs to gin up the MSM to report, Pavlovian style, on another make believe crisis.

    Only if EVERY social security recipient or future recipient demanded every dime he would be due and all at the same time would unfunded mandates be a problem.

    And, for every mom or grandma who is still collecting at 97 there are many more who have died before reaching age 62 and who will never see a penny.

    So, let's stop this quadrennial dog and pony show meant to scare independent voters and youth voters into thinking privatizing social security would make more sense.

    Oh, and one more thing professor: The average SS check is about $1200 per month. Would you mind telling me how you think that is a "hefty" benefit?

  58. Do you read the NYT regularly? If so, you will know that this is not the first time they let one of these "sky is falling!" pieces slip through.

  59. Dear Paul,

    President Obama, who I voted for twice and deeply respect, and Congress have, together, added massively to the fiscal gap over the last 6 years. But the real culprit in terms of its growth is Present Bush (II). His was the most fiscally profligate administration the country has yet seen.

    best, Larry

  60. Please spare us the nonsense about Social Security running out of money.

    Remove the income cap currently at $117k and the problem would be solved.

    But then you would have to pay more in taxes, right Professor Kotlikoff?

  61. Really, this from a professor of economics? He confuses spending with outlays and limits income to recognized income. Mr. Kotlikoff must thing that I am an idiot, I "spent" $85,000 in 1974 buying some farm land and what with depreciation and business deductions I have never show a profit on it. I continue to borrow against it and spend the money, Why in 1994 I borrowed against it and bought $50,000 of Microsoft stock and in 2002 borrowed more against the land and foolishly just spent another 50k buying Apple stock. In 2006 borrowed against the farm and my stock holding and land and like a drunken sailor or the federal government willy-nilly SPENT the money buying more another $500,000 in farm land.

    I mean over the last 40 years I have spent two or three times my income and am sitting on nearly $1,000,000 in debt. Since according to Mr. Kotlikoff we don't look at my $5 million in assets, I must be an idiot.

  62. "Households can't spend, on a continuing basis, more than they earn. Countries can't either, at least not over the long run." These so-called principles of economics are either vague enough to be trivially true, but then completely uninformative, or just plain false. Either way, they are worthless and should be seen for what they are: political propaganda. The only real mystery is how this hokum found its way into the Times.

  63. I don't appreciate your unfair swipe at the FED's "inflationary, easy-money policies" of the last 7 years. Given that inflation has averaged 2.0% during this period the Federal Reserve acted wisely by responding to slack in the market with lower interest rates.

    Your piece insinuates that the FED will abuse its power to inflate away our debt given a 7 year "easy-money" track record of inflation holding steady at 2%. One day, hopefully not to long from now, you and the rest of the American people will learn to appreciate this independent, non-political body for saving our country from another great depression.

  64. The Times should know better than to publish drivel like this. Does it read it's own contributors such as Paul Krugman and Bruce Bartlett? The paper readers don't have the benefit of the comments, which have astutely pointed out all the problems with this piece.

  65. You lost me the minute you tried to compare a national budget to a household one. Most readers of the New York Times know by now that this is disingenuous at best.

    Does a household live forever, and have effectively forever to pay off its debts? Can a household print its own money and force the lenders to accept that for payment? No and no. We already know this.

    But most importantly, when it comes to Social Security specifically, it represents an obligation which is payable to American seniors. In other words, sure, Social Security is putting our children into debt. But not to us. To their own future selves. Social Security isn't so much an IOU as it is a forced savings plan. A group old-age-and-disability insurance program that is set up with ourselves as beneficiaries. The only people who see it as a pure waste of money are the filthy rich, who foresee no future need of measly $1600 monthly checks, not for themselves, and certainly not for anybody else's 94 year old mom.

  66. This is one of the worst piece of misinformation I have ever read. It's hard to know where to start.

    Let's take the first 2 sentences. LK cannot tell the difference between his household's economics and that of a country that can print its own money and lasts much longer.

    Tell me, LK, when did we pay off or even down the huge WWII debt? What happened was we actually increased the debt 75% from 1946 to 1973 and enjoyed great prosperity. As the economy grew, the debt simply became insignificant.

    Tell me, LK, when will the USA run out of money? I'll tell you this one. The day after the NFL runs out of points. The only thing that limits our printing of money is inflation which is caused by not being able to produce enough stuff to soak up the new money, or in other words shortages like of oil.

    Tell me, LK, when did too much federal debt EVER have a negative effect on the US economy?

    Tell me LK, what has happened ALL 6 times we have eliminated deficits for more than 3 years thus significantly paying down the debt? I give you this one. too. We have suffered a depression. In fact, ALL of our 6 depressions followed paying down the debt.

    Tell me. LK, how you compute the present value out to infinity? To do this you need to know things like interest rates FOREVER!! This is truly impossible even out to 2088. These "unfunded liability" figures only serve to frighten the ignorant.

    Tell me LK, do you how needed money is added to a growing economy? I guess you do not.

  67. Is the Federal government also allowed to count the value of all their assets. such as the 28% of US land owned by the government, and all those buildings and other improvements?

  68. Can't count unless they are genuinely up for sale

  69. People refusing to see that money comes from someplace and the US is in the hole are selfish. They care about the here and now, yet, profess to care about the future.
    In a few years we are expected to pay, close to, a trillion dollars in interest on our debt with no hope of it decreasing if we don't start cutting spending now.
    A trillion dollars that could repair rods, bridges, dams. Build schools, help hire teachers. Feed people, increase science research, help fix the environment.
    Selfish, selfish people.

  70. Revenue? Investment in infrastructure at historically low levels of interest rate?

  71. Cutting spending is the solution? The selfish here are the wealthy who manipulate politicians to keep their taxes low.

  72. Let me see if I have this correct. We selfish, selfish people who no longer work and are trying to live on that (average) $1200 per month, you think we should be happy to accept less so your taxes, you who are still able to earn a living, won't go up. You selfish, selfish person.

  73. "HOUSEHOLDS can’t spend, on a continuing basis, more than they earn. Countries can’t either, at least not over the long run." -- that statement is false. Governments do not retire, their income will be growing forever. Hence they can send more than they earn, on a continuing basis, forever -- as long as their debt grows slower, in the long run, than their income.

    Everyone should know that. Investors certainly do -- which is why the US government can borrow at close to zero interest, despite the record breaking deficits and "the inflationary, easy-money policies of the Federal Reserve since 2007". Which is why Japan borrows at even lower interest rates, while being more in debt than the US.

    So why a professor of economics doesn't quite get a simple idea that when you are talking about one's debt, you should talk about one's income as well?

  74. Both Japan and the U.S will face a day of reckoning. If you examine the balance sheet as well as the income statement, one gets the full picture. You cannot earn your way out of insolvency. Debt is not a substitute for income.
    Ask Post WWI Germany or Soviet Union before the break up.
    Consequences can be postponed, but never wholly avoided.

  75. Hi Yuri,

    Fiscal gap accounting incorporates the income side. It takes full account of all future projected taxes. It's a net figure and it takes full account that governments continue forever. It's standard in economics. This is why the entire economics profession, more or less, has endorsed The Inform Act.

    best, Larry

  76. You might want to reread paragraph 8 of this article, which makes the point that our national income is not only already lower than our national expenditures, but that it is growing more slowly. Therefore we are clearly in trouble according to your own logic that as long as our debts grown no faster than our income in the long run, we are fine.

  77. It's fine to think of future generations and the debt we'll be bequeathing. But where were all the deficit hawks when war profiteers like Dick Cheney were lying us into Iraq?

    Might we dispense with the simplistic and disingenuous arguments that the economics of banks and governments are anything like those of an average household or a mom-and-pop grocery store? After all, the former actually have the power to create money -- one, even, constitutionally.

    So, why should future generations be saddled with paying for this generation's bogus wars? And why should current and soon-to-be retirees have to worry that any social security surpluses might again be raided to pay for more jingoistic Republican fiascos?

    These not-so-unintentional misadventures have resulted in enormous transfers of wealth from working taxpayers to the military-industrial complex. And now, I'll infer, the beneficiaries of this immoral largess are getting ready to come after the retirement benefits of those of us no longer working, notwithstanding the fact that social security has always been funded from 'current' revenues (and today's retirees, therefore, have already worked and paid to fund benefits for their parents' and grandparents' generations).

    Reneging on promised pension benefits and social security payouts would be worse than "a different way to borrow." Even for Wall Street, it'd be a smarmier way to steal.


  78. I am very pleased the NYT allowed an editorial go through that advocates more realistic accounting rules and disclosure for our nation's balance sheet. The other perspective should be cash flows. From the report:

    "Beginning in 2020, annual cost exceeds total income, and therefore the combined reserves begin to decline, reaching $2,698 billion at the end of 2023. The ratio of reserves at the beginning of a year to cost for that year declines to 187 percent as of the beginning of 2023. For last year’s report, the Trustees projected that combined reserves would be 315 percent of annual cost at the beginning of 2014 and 189 percent at the beginning of 2023."

    Reserve assets are wholly treasury securities, so to draw down reserves the Social Security Administration has to sell the treasury securities, which the federal government buys. That money comes from somewhere else, and will certainly crowd out other spending.

    While social security is fully funded for many more years, the cash flows reveal a more burdensome picture and we should be able to recognize when we have a problem. The solutions are better than inaction and no solution. We should be smart about this, but time will tell if we are.

  79. What garbage, 2088? Seriously? 210 trillion? Since when has anyone felt they could budget that far in advance and assuming all trends like healthcare costs will increase -indefinitely - at rate higher than GDP - of course if that happened everything would be consumed by that exponential growth - but it can't it is impossible - more fear mongering garbage from our lackeys of the 1%

  80. "Step right up, this elixir will cure cancer, hangovers and gout."
    The pitch - a shameless turn at selling the author's catchy titled bill "The Intergenerational Financial Obligations Reform Act" is flawed in so many ways. For one, "generational accounting doesn't make a distinction between spending and investment," Michael Hiltzik said in an LA Times article in 2013. "An appropriation to send a congressional committee on a junket to the Bahamas carries the same weight as building a schoolhouse or a bridge."
    Reading opinions requires critical thinking. This fact makes the education imperative quite a bit more urgent than Kotlikoff's little plan.

  81. If the government should list all its liabilities, the rules of double-entry bookkeeping require that it also list all its assets--from the national parks to the strategic missiles. The most fanciful estimate of its debt will, you can be sure, be tiny in comparison!

  82. Professor, aren't you a Social Security expert? Your mother is either collecting $1600 monthly based on her own earnings, or receiving the "survivor's benefit" based on your father's, whichever is higher. Not both.

  83. Tony, SSA formally describes this as the sum of her own retirement benefit plus her excess widow's benefit. best, Larry

  84. Professor Kotlikoff,
    Please share the spreadsheet with these analyses so we can see how you arrived at your conclusions.

  85. By this logic, almost any activity of the government can be made to look like a sinkhole of debt. The military, for example, will require huge expenditures over the forseeable future. Unlike Social Security which actually has income from payroll taxes, the military is a dead loss in the accounting sense. As Mark Thomason pointed out, proper accounting requires you to put in other numbers that you are ignoring. And running a government is not like running a household or a business. The military doesn't have a "product" that it sells for a profit; its benefits are indirect, and it goes beyond mere accounting to determine whether it is a good deal. All in all, the article seems to be a deliberate distortion.

  86. Mr. Kotlikoff wants to push us old folks out on an ice floe, so that the corporations won't have to pay more taxes. My late and sainted mother told me not to have such evil thoughts, but I'd like to do as much to Mr. Kotlikoff.

  87. Generational accounting is a series of well known lies to pretend that a class war is actually a generational war, to swindle recipients of social insurance to benefit recipients of corporate subsidies, military spending, health care spending, etc.

    Kotlikoff also uses debunked rates to predict our taxes will rise 70% (or spending must fall 43%), inflating his tax rate prediction by almost 50% by doubling the industry standard real discount rate.

    Kotlikoff would call shutting down public schools, and handing 21-year olds a check for half what we'd have spent, a reduction of their net tax burden. Kotlikoff omits how reducing healthcare costs instead of cutting health care spending would work.

    Kotlikoff, like other corporate deficit hawksters, doesn't actually demonstrate any concern to save our economy, as they claim. Full employment policy, for example, would increase future per capita income and real wages so much more than faking tax rate rise predictions.

    News media regularly presents Kotlikoff's zombie ideas without properly debunking them. Here's a review of the last time some of Kotlikoff's claims fooled a Bloomberg reporter:

  88. Per Dr. Kotlikoff: "Informal default via the inflationary, easy-money policies of the Federal Reserve since 2007, is more likely." Although my formal training in economics pales in comparison, I do wonder how the Fed's monetary policy can be inflationary without producing actual inflation. I'm afraid that the good professor is just another deficit scold whose grasp of economic theory is uncontaminated by reality.

  89. If you don't think inflation exists, compare the current costs of food, energy, and housing to 20 years ago.

  90. Tom " compare the current costs of food, energy, and housing to 20 years ago." Or even 5 years ago. But this is not old-fashioned inflation. It is the result of the new corporate policy of impoverishing your market for a quick quarterly profit instead of matching your prices to the market's average income.
    Maybe not with food, but everything else.

  91. Mr. Kotlikoff seems to be beating the austerity drum here: cut big programs like Social Security, for instance, because we can no longer afford them. What he doesn't mention is that relatively minor measures, like increasing the amount of income subject to the FICA tax, will make Social Security 100 percent solvent for the rest of the century. What he also doesn't mention is that the effective tax rate paid by the wealthy has fallen markedly over the last 30 or so years. And finally, he doesn't mention our bloated military expenditures that have been a principal driver of our deficits over the years. There wouldn't be a "fiscal gap" of consequence if our spending priorities were reordered and our tax structure reformed.

  92. Umm. By "Nobel laureate" I assume you're referring to recipients of the Sveriges Riksbank Prize ??? Sorry but there's a BIG difference.

  93. OMG another baloney meister selling the tube steak as if it were the real thing. Quick, someone, get the hook and take this failed philosophy off the world stage before it completely kills our democracy as well as our middle class. Governments have at their disposal all kinds of ways to deal with debt and money that individuals do not. Stop peddling this mishegoss. All the nations that swallow it are doing worse than we are. What part of that do you not get? An educated dumbbell.

  94. So you take care of your mom so she won't be a "burden" on the rest of us. We have no community sense in this country. All the propaganda supports the greed of the one percent. Your promotion of the inter-generational warfare is part of the apparatus of obscuring the obscene and growing inequality. I have no problem with bringing the true obligations being assumed out from the shadows. I have a big problem with our priorities and the hidden means as well as the brainwashing by which the interests of corporations and the one percent are sustained.

  95. I do take care of my mom, thank you, and have done so for years.


  96. The Social Security trust fund is money we owe ourselves. It can't be considered as debt because the concept of going into debt to ourselves is absurd. When distributed to retirees and spent in local stores and businesses, benefit checks are a critically important form of reinvestment in our people and our communities, and as such are vitally important to the economic health of the nation as a whole.

    The real hidden debt we should be concerned about is the trillion or so dollars of neglected infrastructure upgrades and repairs we are leaving for our kids to take care of. Many Americans seem not to be aware of how far behind other advanced nations we are in maintaining our roads and bridges, public utilities, public transportation, electrical grid, broadband access, etc. Fixing any shortfalls that might occur in the Social Security trust fund will be easy. All it will take is a President's signature on a well-thought out tax bill. Fixing the nation's infrastructure deficiencies will literally require decades of hard choices, planning and sacrifice. It's a terrible burden to leave to our kids. I don't know how they will manage.

  97. You cannot save a loaf of bread today to eat when you retire. It is always the generation of current workers who must provide goods and services to their children and their retired parents and this has been so since we were cave dwellers and will be so forever. The savings that we make today are a measure of our moral claim to future bread from the workers of the future and Social Security is one means by which we transfer bread from current workers to retirees. Is the moral claim of savings too small or too great for the relative size of retirees to future workers? The real question is will our economy and productivity growth be too small to allow for bread for all or will it all work out?

    We have price stability. Our deficit is 3% of GDP which is about the size of the economy's growth this year. Our deficit is like mining more gold if we were on a gold standard. If the supply of gold did not increase at the same rate as the growth of the economy there would be deflation. Yes, over the last 40 years or so there has been a larger than ideal growth in money. The answer is raise taxes on the wealthy (remember that 1% have 40% of the wealth and the bottom 50% have 1% of the wealth) rather than borrowing from the wealthy (which converts their rightful tax liability into an income stream from interest payments).

  98. Very interesting Scott. BUT you write, "If the supply of gold did not increase at the same rate as the growth of the economy there would be deflation. Yes, over the last 40 years or so there has been a larger than ideal growth in money."

    So why have we not had inflation in recent years?

  99. It's impressive that the Times would publish this piece as a featured op-ed, and not somewhere in the basement, along with where they often relegate the fluff. Impressive because of the received wisdom here, evangelized by Paul Krugman and his myriad defenders, that debt doesn't matter because the feds can print money and therefore can't ever go bankrupt ... and besides, we'll just inflate it all away, anyhoo. Welcome to the rip in space-time from which free lunches forever spontaneously generate.

    But it's a trenchant argument that Prof. Kotlikoff makes. Debt should be recognized as such, so the implications to future generations can be assessed honestly. Without such honesty, new debt is a hidden yet open-ended commitment of other people's money in the form of higher taxes to redeem that debt, and the promises it represents -- and many of those people haven't even been born yet.

    Yet those promises also could be the undoing of living generations, as well. If interest rates EVER return to historical norms, we will be spending an immense amount of money on debt-service, to roll over all that debt and finance our current deficits -- money that we can't spend on education or infrastructure or even new entitlements.

    And the biggest threat isn't to the feds but to our states, counties and cities, that CAN go bankrupt and do below the state level ... so far. They mask their true debt just as the feds do.

    Honestly evaluate debt: it's the first step to reducing it.

  100. "Honestly" evaluating debt based upon, e.g., determining how much medical care will cost in the United States in 50 years is the modern secular equivalent of medieval scholars wondering how many angels can dance on the head of a pin. You can't estimate that number, not even roughly. We have enough trouble estimate LAST month's economic numbers shortly after its end, when we pretty much understand what the economy looked like then. We have only the vaguest idea what medical care will look like 50 years from now, much less what it will cost. The suggested "infinite expense estimate" balance sheet isn't an exercise in honesty.

  101. Look, Richard, the country's economy is very different from that of a person or a business, but since you only seem to understand personal economy, let me try to explain the facts in that framework.

    Suppose as a young person making, say, $30,000 you borrow $300,000 from your parents at no interest or little interest. Paying it back may be very difficult then. But suppose in the fullness of time, your income goes to $3,000,000. Then that debt is really insignificant. What was important was the growth of your income. Even if you had to increase the debt to, say, $500,000 to grow your income, you were still better off than paying back the debt when you were young and causing a disastrous period of little or no money to live on and to grow your income.

    The second policy, paying the debt down, was what we followed after WWI which led straight to the Great Depression. The first policy, going further into debt, was what we followed after WWII which led to the Great Prosperity of 1946 - 1973.

    Is that clear?

  102. "Honestly evaluate debt: it's the first step to reducing it."

    "Honestly" evaluate the need: CIA, NSA, Military, MIC - its the first step to reducing .......the source of all deficit problems.

    SS is self funding anytime they want!

  103. If Prof. Kotlikoff is truly interested in what we leave to our children and grandchildren, he has bigger things to worry about than the debt we leave them.

    A decayed, obsolete infrastructure and a changed climate will be much of much greater interest to them than the national debt. I'm sure they will not care a whit about whether billionaires in the early 21st century had to pay some extra tax.

  104. Since this guy is so concerned about future generations, and somehow I'm guessing he's a Republican, I wonder what his position is on climate change.

  105. Kotlikoff may be entirely wrong on the numbers (or he may not be), but the importance of reporting all future government obligations should be beyond dispute.

    And it may be right to continue incurring public deficits until economic times improve, but those who argue for such a tactic should at least name the conditions when they would revert to public saving (or they should disclose that they would never favor paying down our debts, and they should tell us why they think this is a viable strategy).

    But discounting Kotlikoff without countervailing evidence, not just partisan attacks, is unhelpful, to be kind about it.

  106. "But discounting Kotlikoff without countervailing evidence, not just partisan attacks, is unhelpful, to be kind about it."

    In other words, sombody can make stuff up, and if we don't take it seriously, we are at fault. Thanks.

  107. All 6 times we tried to pay down the debt and had a surplus for more than 3 years, we got a major depression. Depending on your definition of depression, this could account for ALL of our depressions.

    Are you in favor of a 7th depression?

    When do you think we paid down the huge debt from WWII? The US does not have to pay down debt; we can just wait until the growth of the economy renders them insignificant.

    The definition of insanity is doing the same thing over and over and expecting a different result.

  108. Mentioning Argentia gives the author away, and his scare tactics. According to him, we only have a $24 trillion dollars in liabilities. The existing SS tax base and the ability to raise or extend it as required, and the ability of the US to generate economic growth to fund taxes, has a present value of $0, apparently.

    Try again, Mr Kotlikoff, this time with less intellectual dishonesty.

  109. So, in order to get some scary sounding numbers for Social Security Mr Kotlikoff goes forward to 2088 and then to infinity.
    Really Mr K, that is your best shot?

  110. Why is Mr. Kotlkoff not complaining how social security current surpluses are subsidizing the entire tax revenues, allowing the rich and corporate America not to pay their share of taxes. So right now the tax burden is so heavenly burdened on the middle class, while the rich basically pay minimal social security on a percent of total income.

  111. Why would the rich have to pay more towards social security if they don't get more benefits in return?

  112. Cause billions of social security surplus dollars are going to the general budget. So middle class is paying more than there share of taxes.

  113. @Brian - sorry, but your argument doesn't hold water. That money is now being back as SS is in deficit.

  114. Goodness. Basis Econ 101 teaches us that a national budget cannot be compared to a family's budget. Unlike some of the other comments so far, I don't necessarily believe that Mr. Kotlikoff is actually prescribing austerity measures. However, given the current political climate, austerity budgets are the only possible outcomes to playing fantasy actuarial games regarding future government obligations. As to the Social Security funding crisis - the only solution is to change the funding method from payroll tax to a tax on production output. Private industry should not be allowed to convert the savings from replacing workers with technology into dividends and pay raises for upper management. Big business not only has been eliminating jobs and saving the cost of matching payroll taxes, but has thrown a horrendous burden onto small service industry businesses.

  115. Comparing our national budget to a family's budget is not invalid if you're simply pointing out that in both situations there is a need for accurate accounting, as well as a level at which spending becomes dangerous. He refers to some of the unique characteristics of the federal budget (some ability to influence inflation, for example) later on in his essay.

  116. Hey David,

    What I'm prescribing can be found at

    Econ 101 gets a lot of things wrong. Don't ask me, ask the 17 Nobel Laureates who endorsed The Inform Act.

    best, Larry

    best, Larry

  117. @ David D - There is an upper threshold on payroll taxes as well - you don't pay any payroll taxes on income above 101,000. Between losing that threshold and maybe doing that .0003% transaction tax Obama proposed on stock purchasing transactions on exchanges . . . we might be able to cover the trust fund shortfall and the people who it would affect would barely notice the bite. But you know, like your comment, why listen to common sense.

  118. How did honesty on the debt make it onto the Editorial page?

    Somebody slipped up - tsk tsk.

    Do let it happen again.

  119. Actually, this is a very dishonest piece of writing, and very much in service of the rentier class which believes fear of poverty and insecurity should keep people working until death. Social Security is social insurance. We pay FICA in case the following happens: becoming disabled or growing old. Just like term life insurance payable on death, unless the events happen, you don't get any benefit. Professor K's mother may have been a winner, but lots of working folks die before they reach retirement age. And I hate to tell the Professor, but his Mom's life expectancy at this point is only 3.5 years (e.g. half of people currently 94 will be dead within 3.5 years) By the way, Social Security taxes over the last 35 years overpaid into the system which meant U.S. Treasury notes were deposited into the trust funds. The obligation to pay those notes is the same as her privately held treasuries. In the currently depressed U.S. economy, in which the U.S. is paying less than 3% on 30 year Treasury notes, it is madness to talk about cutting social security and medicare and/or raising taxes to fill this imaginary "Fiscal gap."

  120. "Countries can't [spend more than they earn], at least not over the long run." Sure they can, as long as debt/GDP remains stable and manageable. People must settle up before or when they die, but countries hopefully do not die.

  121. But our problem is that the debt/GPD ratio is not remaining stable. It's increasing rapidly, and now stands at virtually the same level as in 1945. We know what we got for that expenditure level during WWII--saving western civilization. Not so clear what we've gotten for the return to that debt/GDP level.

  122. Jeremy, you are correct, but the debt ratio has little to do with it. It was 16% in 1929 followed by some of the worst economy we have ever seen. It was 121% in 1946 followed by 27 years of great prosperity.

  123. JPE " Not so clear what we've gotten for the return to that debt/GDP level." We got two wars and millions of underpaid workers and corporations offshoring production and profit. That's what.

  124. This is an important message that nobody wants to hear--i.e., an Inconvenient Truth. Best to dismiss Kotlikoff--our grandchildren will have the problem, not us.

  125. Are you aware that human beings still die? The boomers will all die off, but you want to steal their EARNED survival benefits so you can impose misery on them. You really want cruelty, nothing more.

  126. How gimmicky contrite one can be! This gentleman never talks of raising taxes, nor about the removal of the tax-loopholes that are draining the income that the United States should receive. Writers of op-ed pieces should be honest and courageous enough to speak out about their "agenda." US will never run out of money, so long as the Dollar remains strong and people pay their taxes.

  127. Better go back and reread the piece: he clearly indicates how much tax increase it will take to deal with the issue. Burying your head in the sand won't help--it just presents a big fat target.

  128. He did talk about raising taxes. he said we need an immediate and permanent 59% tax increase of a 38% cut in spending (including, presumably Social Security). I agree with you about the rest, and he should read Paul Krugman's column right next to his.

  129. "US will never run out of money, so long as the Dollar remains strong and people pay their taxes."

    This statement is delusional. The real problem in the US is that most people don't have much fiscal sense. When Social Security started there were 5 or 6 people paying in for every 1 that was receiving benefits. That ratio is now 2 to 1 and with longer life expectancies the math just doesn't work.

  130. The other side of the equation is that Congress uses the Social Security fund like its own private piggy bank. Excess Social Security funds (a lot of money right now) are invested at below market rates in government bonds to support the US debt. All sorts of welfare programs for people who haven't contributed to the fund have been thrown into the equation by Congress. Dependent children. Spousal benefits are a real racket. It was fine when it was just destitute widows. But now women with job histories are collecting spousal benefits while they rack up extra benefits of their own by waiting longer to take them. Next thing is spousal benefits are going to be expanded to same sex partners. Do away with all the extra welfare programs that Congress has added and the Social Security deficit won't be nearly as big.

  131. Again we hear the trite canard about Congress using the SS trust fund as its piggy bank. The fact is that if these special securities didn't exist, the Treasury would sell that much more in plain old T-securities and the interest would go elsewhere rather than to the SSTF. Yes, it is a relatively low interest rate, but this -- the planet's safest investment -- is preferable to risking the SSTF principal or not investing it at all.

  132. People retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. The "problem" seems to be solving itself. It is certainly not equitable to tell "people retiring today" that they should receiving even less.

  133. Q: What do social security and global warming have in common?
    A: Swarms of deniers (of inconvenient truths).

    To all those who want to shoot the messenger, wishful thinking does not make reality happen.

  134. Here we go again; - some rich Fat cat wants to put Social Security into the budget. President Roosevelt deliberately had Social security left off the budget because it was designed to be self-supporting by way of FICA tax. I worked hard all my life and paid my FICA tax gladly, because my parents and grand parents told me what it was like before Social Security, and my generation paid the benefits for our parents' generation. this is what a country is; - we care for each other, protect each other, and watch over each other. I am personally weary of hearing some blathering Fat Cat trying to find ways to destroy this invaluable program, this c4rown jewel of American social policy. If the Trust is truly in difficulty, the actuaries in the Social Security Administration (who, contrary to GOP patently false statements) are not idiots, can take a number of steps to correct the "problem." 1. Raise or eliminate the ceiling on FICA wages and salaries. 2. Increase the FICA tax rate. 3. Lower the retirement age. All of these items were outlined in a speech given by President Roosevelt's grandson on the 75th anniversary of the Social Security Act.

    Countries do not become or remain great by allowing the rich and super-advantaged ride roughshod over other, less fortunate countrymen.

  135. So you simultaneously say that (1) you are owed social security because you paid your dues and (2) if there is not enough money in the trust fund, others should make up the difference.

    And you don't see the hypocrisy? How about we cut your maximum benefits to what you paid in plus a reasonable return?

  136. All sounds good, but the essence of the comment is when programs don't work as expected, hoped for or because the use of funds is compromised, then don't correct the problem (reduce use of funds for unintended programs) but rather take from others to keep the promised benefit. That is the mantra of many on the left and when they don't have the merits, all they can do is demonize (i.e. "fat cats") those who don't agree with them.

  137. For the pittance that SS actually provides (nobody gets rich on it; it just helps - a lot). And yes, we all owe each other care, security and the things that we all need. That's what a country is; it not a political entity, but a social body. The political part of our lived is meant to answer the Aristotelian question;- How shall we order our lives together for our mutual benefit? If you think otherwise, I suggest you read the pre-amble to the Constitution, where it says " promote the GENERAL welfare..."

    As far as demonizing the rich, they've done that all by their own avaricious selves, living lives where the love of money and power and unbridled ambition have replace the love and care for their fellow man.

  138. Make sure Paul Krugman gets this one directly from the Laurence Kotlikoff. I remember voting for President Regan when he said in the debates that he would lower the deficit. It didn't happen. Having been raised by a bookkeper, I learned early on about assests and liabilities. Both my children have been hearing that our government is going broke since they were twelve. One is now 41 and the other is 42. They have believed that social security will not be there in the same form if at all since they were in their early twenties. I was always telling people real truths years before it would happen. Actually, I have not wanted to vote for any elected official at any level of government for the last 25 years as they don't understand simple math. Voting for conservatives, democrats, republicans, tea party, independents will not matter as most math does not add up whether or not you are looking at pensions at either the state or federal government level or all government programs and services. The numbers do not add up. It is no longer considered politically correct, and in some circles it is considered dangerous to say we are all living way above our means for the last 50 years, and the only thing keeping us going is the
    Chinese government buying a significant amount of our debt and allowing us to run a huge trade deficit with them. Stay tuned! The sad thing is that so much of the money we borrow is going to fund corrupt governments, and, or war and death.

  139. "Both my children have been hearing that the government has been going broke since they were twelve."

    And yet it hasn't.

    "They have believed that Social Security will not be there in the same form, if at all, since they were in their early twenties."

    And yet it is. What else do your kids (and you) know that just isn't so?

    The doomsday patter about China holding our debt is similarly overheated. You apparently aren't aware that several grades of T-bill trade at negative interest rates, and the rest pay something like 1 percent or less. Institutions are still buying US debt even when they have to pay for the privilege. You need to get better information about the strength of the US economy.

  140. Our government is really run by the Federal Reserve. Keeping interest rates at 0% for banks is the only thing keeping our economy afloat. When you smoke cigarettes, you don't get lung cancer overnight or in the first few years or even the first ten, it usually takes 20 or 30 years. Most however, start getting emphysema. Debt is similar to smoking in that the default and bankruptcy is a long time coming. Look at Chicago, Detroit, Illinois, and any number of cities and states across America who are experiencing this on a weekly basis. Maybe, there should be no taxes, no state taxes, no county taxes, no federal taxes, no sales tax. We could all live in la la land, and then there would be no government transfers what so ever to anyone rich, middle class, poor, seniors, etc.

  141. Q: What do government spending and global warming have in common?
    A: Let the burden fall on someone else's shoulders.

  142. This is the kind of outright propaganda that Nobel winning economist has thoroughly debunked, time and time and time again.

  143. Yeah! Go tell it to John Boehner and Mitch McConnell. If we are in such dire straits they'd raise taxes on the Mitt Romney's of the world (and the corporate tax evaders) and all would be well with America. But if John Boehner and Mitch McConnell don't care about what is best for America and the coming generations, why should I?

  144. "Money circulates"...usually, but we should not forget that one sort of expenditure does't: weapons systems are destroyed themselves, on both sides of the conflict, and destroy lives and resources. In a perverse sense, destruction stimulates reconstruction (and, post WWII, a baby boom), but there are better stimulus strategies. War is the least sustainable activity human do, and investment in alternatives to conflict are vital.

  145. I have never understood the scare-mongers line about "households can't spend, on a continuing basis, more than they earn." I took out a huge mortgage on my house (infrastructure). I borrow for college for my kids (education). These are investments. Why argue that countries should not do the same?

  146. Supporting layabouts and favored industrialists is considered an "investment" only if you are a Democrat voter.

  147. In your example, only you are directly affected by your debt decisions. Extending this debt example to a country, spreads the risk and consequences to others whom neither share in your benefits nor have the option to say no.

  148. It's simple, really. Because making investments in America might require raising the absurdly low taxes on the 0.1%. And we can't have that, or they'll stop creating jobs or something. This is really what this article is about, just carrying water for a tiny percentage of amazingly wealthy people who think that they are Gods' Own Chosen and so nobody should ever ask them to contribute to the system that made their wealth possible.

  149. Actually, the real question is do we want to continue to fund the military at a pace which is several times greater than any current competitor, or do we want to provide benefits to our citizens. I believe that providing health care, education, scientific development, infrastructure improvement are all things that will pay off in more ways than just a balance sheet, and, in fact, I believe looking at comparable situations, our future budgetary problems will be much much worse, if we listen to the advice given in this article. Debt is not necessarily evil, like ultra-conservative think tank economist would have you believe, as long as you get value.
    Unlike the author, who sounds like he is quite willing, like so many individuals in the top 1%, to kick his mom to the curb, Don't forget, the social security system is not just a government benefit handed out to undeserving old folk. Instead it is a trust fund that creates an entitlement (yes that dirty word) based on years of paying into the system. Demographics are working to create a bulge in the system, but it will correct itself and according to most believable economist, including noble prize winners such as Dr. Krugman, is not in deep danger and will be fine with slight adjustments, not facing problems for the next 35 years or so. The 2088 date by the author is so far in the future that it becomes only meaningless. Yes, debt will be passed on to future generations, but so will benefits.

  150. Seems the real issue you see is that the arguments offered don't support the objective of turning a program that is a defacto savings account with workers paying into their own account (SS) into a redistribution program to workers who do not pay as much into their accounts.

  151. Wow talk about a bunch of people who stick their head in the sand to avoid a problem. It may not be possible to get current all at once, but at least stop making the problem worse. For those who think deficit spending is not a problem, I have two examples for you, one local and one international: Detroit & Greece.

    We may set the international monetary standard, but we are not immune to gravity; all balloons come to earth sooner or later. The choice is will it be a soft landing or a crash?

  152. Where to begin! The US is not Greece (the US dollar is not the Euro, etc.), and what... Detroit?.....Where do you get this stuff?......Fox Business?

  153. Bruce, neither Detroit nor Greece has its own sovereign currency.

  154. Detroit and Greece cannot print their own money which is something that our Federal government can, through the Federal Reserve.

  155. I find it fascinating -so to speak- that next to the column of one of the top economists in the world, namely Paul Krugman, we are served this old rancid dish of the Teaparty menu.

    I see 2 possibilities from here:

    A) - Either we meet the challenge of said "teacher" and we mobilize to start getting A.S.A.P. ONE THIRD of the money the 0.1% have in their accounts, since they have 3 TIMES the federal debt ... And yes, this is called TAXES.


    B) - Either we slash 38%, OVER ONE THIRD of the Federal Budget, thus allowing the 0.1% to play the lyra and sing songs while our country sinks.

    There you have it. The good thing about kids and fools is that they can tell the naked truth sometimes.

    It was certainly not Mr. Kotlikoff´s purpose, but he has nevertheless made crystal clear again that Mr. Thomas Piketty is right:


  156. A is exactly what Greenspan promised us in 1983!

    He recommended (and got) tax cuts on investment income to stimulate the economy, which was in the worst recession since the Great Depression up to that time.

    Congress also passed Social Security reforms recommended by the Greenspan Commission, raising payroll tax rates among other things.

    Greenspan said the investment tax cuts would not cause deficits because the workers' taxes would cover any temporary revenue shortfalls. In other words, SS would be "on-budget" for purposes of calculating the annual deficit/surplus. More on this later.

    Here's what Greenspan's cronies want us to forget:

    He said the investment tax rates would have to be raised when Trust Fund bond redemptions were required to pay Boomer benefits!

    And, by the way, Greenspan recommended that the Trust Fund be restricted to investment in the Special Purpose Treasury bonds. Before 1983 our savings account could be invested in the market.

    It was also Greenspan's idea to take Social Security accounting "off budget" in 1990, so SS taxes aren't to be counted when calculating the annual deficit/surplus.

    No secrets here, except the one Kotlikoff fails to mention:

    Those who have benefited from tax cuts covered by our SS taxes need to pay up.

    In full. In cash. Starting now.

  157. It is astonishing that someone with so much education and a lifetime of exposure to sound economic theories should devote his life to spreading such nonsense. The one salient point raised (indirectly and perhaps inadvertently) by Mr. Kotlikoff is this: if we don't raise taxes on ourselves in the very near future, we will either have to raise them by disastrous amounts later or our society will fall into decline. If we had been paying realistic tax rates for the past 30 years, we would be in much better shape and the vast majority of us would have more money - not less.

  158. Or we could have required everyone to work in order to get welfare. So, in one case Democrat-voting welfare recipients have to work and in the other case working people have to support the Democrat-voting welfare recipients. I wonder which plan the liberals favor?

  159. It would be helpful for the Times to be clear about the business interests of OpEd opinion writers, particularly in case like this.

    Here is part of the Wikipedia entry for Mr. Kolikoff:

    ''Kotlikoff is the President of Economic Security Planning, Inc., a company that markets ESPlanner, an economics-based personal financial planning software program,[2] a simplified version of which is available on-line for free use by the public,[3] and "Maximize My Social Security", a software program that his company advertises as helping Americans decide which Social Security benefits to take and when, to get the highest lifetime benefits.''

    I am having trouble reconciling the concerns he expresses in this OpEd and the software his company is peddling.

  160. Liberals always seem to think that people who criticize giveaways (and who are funding them with their taxes) should refuse to take the few bucks they personally get from the giveaways. And of course, it is better to ignore economic realities exposed in "Maximize My Social Security," in order to ensure their is plenty left for those who don't bother to think or plan ahead. Liberals constantly caricature themselves.

  161. How silly is that? Laurence helps people understand the folly of lawmakers who don't even recognize the mess they created in the SS benefits plan and you call him "self-serving?' What do you do for a living? That is such a cheap shot.
    For the record, Laurence helped my family, identifying a complex part of the law, which even the Social Security local office got wrong. Guess what/ He refused to accept payment from me for the advice which saved us not just money, but heartbreak in ever hoping of reversing a bad decision. Laurence actually cares about the country and his fellow citizens.

  162. Seems the real trouble Clear Eye is having is reconciling intellect with wants and wishes. There is generally a correlation between financial success and economic intelligence and the fact that Mr. Kotlikoff is commercializing his work product in no way discredits his findings. The fact that Mr. Kotlikoff demonstrates an economic cause/effect and then sells other work product successfully is not diminished by the fact that the benefits received by Clear Eye and supporters of greater benefits are not what they want them to be.

  163. Your Mom? You're kidding, right? The "inconvenient truth" about these liabilities is that lengthening life spans are tied to the wealthier class. Middle class folks, working themselves to the bone as their real incomes fall, have steady shorter life spans. There are simple fixes such as Means-testing payments based on wealth or eliminating the cap on the payroll tax on high-income earners.

    The debt is a problem because we are growing too slowly. We are growing slowly because the top 1% has figured out the tax loopholes and off shoring practices it takes to drain the lifeblood out of the middle class to their own benefit. A massive redistribution program that restores the dignity of our working people is what is needed to restore balance and growth. What comes across here is nothing except contempt for the middle class and the democratic process.

    And, really, the Times is back publishing Romneyesque drivel about the makers and takers? What there's a party this weekend at Pete Peterson's house in the Hamptons the editors are invited to?

  164. If you're a liberal it doesn't make any difference what the questions is: The answer is always "more welfare."
    But eliminating all tax loopholes (e.g., including the earned income tax credit, as well as the giveaways to the rich) is a good idea.

  165. Please do not propose means testing SS. This turns it into a welfare program which would make it easier to kill ( the true goal of GOP), and foments class warfare. When at 16 you begin paying into it, you do not know where you will end up in life ( well unless you are part of the ever-growing aristocracy) and thus you are entitled to collect, and would deeply resent someone saying that you cannot due to your other retirement income. This lack of means-testing is part of its appeal-- it is an equalizer.

  166. This guy is a professor of economics and he's making mickey mouse comparisons between domestic budgets and public finance. That alone has to tell you he's not to be taken too seriously. Then we have the mickey mouse debt extrapolations to the infinite horizon which produces all sorts of flesh creeping BIG numbers. This is a 17 trillion economy. Extrapolate it to 2088 and that is 1258 trillion without taking in account real growth which conservatively is going to average 2% a year over this period. Do the math. We need to modestly increase the tax take to around about 20% of GDP to take account of the obligations mentioned. Remember, at the end of WW the debt was about 130% of GDP. Obviously FDR should never have fought the war.

  167. Laurence is a brilliant guy, precisely because he can strip away and simplify economic issues. He also has a knack in the political realm for telling it like it is. His math is quite correct. Accounting "magic" works until it doesn't.
    His call is for "recognition" of the problem. If you can take the response you gave to this do-nothing Congress and get a result, we'll make you King.

  168. Yes, let's do the math. That $17 trillion economy (tabulated by rigged accounting methods) is also $17 trillion in debt. 2% growth (conjured up) is countered by ~10% inflation (source: Social Security benefit checks averaged ~$321 in 1980; today they average ~$1170. If adjusted for inflation, SS checks should be ~ $3000 today. You pay in with valued dollars and get paid back with devalued dollars. What you need is more younger workers contributing to the FICA pool. Maybe that is why the young refugees from South America are being allowed to cross the border. And for those who don't want Social Security melded into the government's general fund, it already has been. While the SS fund won't be completely insolvent till years from now, they are pulling money out of the general fund to make up for shortfalls today. The US pulls in something like $2.4 trillion in tax revenues and spends ~$6.6 trillion, for a shortfall of ~$4 trillion that is being borrowed or printed. The SS fund has a current shortfall that is being paid by expanding debt.

  169. Paul Krugman’s column of March 4, 2005
    gives perspective on Republican con game to slash Social Security

    "Until the 1970's conservatives tended to be open about their disdain for Social Security and Medicare. But honesty was bad politics, because voters value those programs.

    So conservative intellectuals proposed a bait-and-switch strategy: First, advocate tax cuts, using whatever tactics you think may work - supply-side economics, inflated budget projections, whatever. Then use the resulting deficits to argue for slashing government spending.

    But Mr. Bush's advisers knew that the tax cuts would probably cause budget problems, and welcomed the prospect.

    In fact, Mr. Bush celebrated the budget's initial slide into deficit. In the summer of 2001 he called plunging federal revenue 'incredibly positive news''because it would "put a straitjacket' on federal spending…."

  170. Although prior commenters have more than adequately exposed this inanity for what it is, I have to add this - any discussion of future debts without the slightest consideration of potential economic growth is worthless. I expect better than this from NYT.

  171. This is outrageous. Social Security payments are transfer payments from current workers to retired persons, not a tax levied upon the general population like other taxes. To suggest otherwise is an act of intellectual and factual dishonesty that boggles the mind. If there are shortfalls for future retirees, just raise the limit at which incomes are taxed. I suppose this guy is tenured and cannot be fired, but the Times should not be printing lies. Shame on you.

  172. Oh great, another attack on Social Security and the evils of national debt.

    This is a profoundly dishonest column by a fringe economist hoping perhaps to slop at the trough of the oligarchy. He is precisely of the ilk that Paul Krugman addresses in his column today embracing ideological economic policies as opposed to those that are actually functional in today's economic climate.

    Professor Kotlikoff will now appear on Fox News and will be quoted on the Wall Street Journal editorial page as an "expert" for the immediate future, because this column does precisely what the Kochs and ALEC and all the rst want--namely to give credence to their policies to rob the poor to serve the rich.

    The attack on Social Security is immoral. Professor Kotlikoff's 94 year old mother (bless her!) is receiving an annual income of $24,000. This is not luxury wages. In an earlier age before Social Security she would receive nothing. I hope she reads this column and realizes that her son is subtly suggesting that she is undeserving of this pittance of retirement because she has had the audacity to do her yoga and live as long as she has. Yes, that is the solution to the Social Security "debt" problem: make sure that seniors die sooner.

  173. The overarching theme of the article is that the government must find money to spend, and that if it continues to spend like it has in the past, that soon it will run out. The government is like a household, the government uses a credit card, the government has to encumber future generations to pay back its debts, on and on.

    Too bad for those BU students, but Kotlikoff is completely wrong. The USG is sovereign and issues dollars. It will never run out of money. The transactions are straightforward:

    Treasury spends money. If they spend more in a period than they take in taxes, they will sell bonds to the private sector, and immediately spend the cash back into the economy. If the interest rate demanded by the private sector to accept these bonds is higher (or lower) than the interest rate desired by the Federal Reserve, then the FR - an independent agent of the USG - will buy (or sell) bonds to place interest rates the FR target policy rate.

    That's it. The USG can spend as much as desired.

    This is not to say that the government can spend without limit. Any spending by the government added to spending by the private sector, might push demand beyond the productive capacity of the economy, and create inflation. However, a prudent government can use tax and spending policies to minimize inflation and maximize employment.

    The real limits are real - how will we use our productive capacity to benefit our citizens. The limits are not the bogus fiscal claims of this editorial.

  174. Who is this guy repeating the same mantra that has failed us for years? He reminds me of a company I once worked for that made several bad management decisions that caused us to not meet our goals a couple of quarters, instead of looking at what we did wrong and correcting our mistakes, the same management decided we needed to implement an austerity program which we really never got off. What followed was a death spiral where we lost half of our profits, resources, and people over a period of time. And the same people stayed in top
    management! 'Course, they made more money at the top so I figured that was really what it was all about. The people that built the company were real leaders who knew how to make something thrive. There are few people like that today. We need to ignore this tired argument and the people that espouse it. Tell them to step aside because there is real work to be done to help the average people of this country. Give us someone who can help. The austerity gangs time has come and gone.

  175. Kotlikoff cites a $10.6 trillion shortfall from now to 2088. Here's another big fat number for him to consider: Joseph Stiglitz published a book a few years ago that estimates the total cost of the most recent Iraq war at $3 trillion.

    So if we can just manage to avoid 3.5 stupid wars over the next 74 years and spend those resources more wisely at home, problem solved.

    I'll take that deal in a heartbeat, but instead the options this op-ed proposes are immediate drastic tax hikes, draconian austerity budgets forever and ever, or (implicitly, but loudly-and-clearly) dismantling Social Security for everyone after the baby boomers. Does anyone else suspect that there might be an excluded middle between doing nothing and the disastrous fixes being proposed here as the only alternatives?

    I gather that Koltikoff's book outlines and intergenerational conflict of young vs. old. I do have a beef with the boomers, but it's not the one he thinks. I would seriously appreciate it if people of Kotlikoff's generation would stop sending people from my generation off to die in unfunded, pointless wars that only stir up bigger, longer conflicts and then use those huge military bills as an excuse to dismantle the safety nets that boomers near retirement will enjoy but later generations supposedly won't be able to afford. Surely those are the costs that our government is most guilty of hiding through budget trickery.

  176. Yet the gov't can borrow money for 30 yrs. out at 3.3 %. Doesn't sound like much of a crisis to me. Do you think The banks and other investors are naive about the debt of the US gov't ?

  177. Kotlikoff's article, and readers' responses to it, remind me of Arabs and Israelis, two parties talking right past each other. Kotlikoff's logic is deficient; he cites various reports future projections without discussing their underlying assumptions, which are critical. By citing only Social Security and ignoring other expenditures, e.g. F-35 cost overruns, defects in our tax system which result in significant undertaxation, he opens himself to readers' charges that he is a wolf in sheep's clothing, out to end Social Security. His equating taxation with borrowing is intellectually dishonest because Social Security is a pay as you go system. And he lacks perspective; these days, neither the $1600/month his mother receives nor the amounts most other recipients receive are "hefty", as he describes them.

    Meanwhile, Kotlikoff's critics fail to note the obvious - that Kotlikoff's argument is based on his allegation of a gap between annual spending and annual revenue. He doesn't say much about how to cut that gap,only to insist that cutting it is necessary. Nor do reader arguments that current spending on aging infrastructure and on education, both of which pay future benefits, rebut Kotlikoff's argument.

    Both sides ignore the grossly partisan accounting that continues in Washington, despite previous attempts to avoid it. I fail to see how Kotlikoff's proposed legislation would do what previous proposals hadn't.

  178. So the author is expecting U.S. Congressman and Senators to admit publicly they are cooking the books. Where is the upside in that? How will they get reelected? The GOP spends money on wars we cannot afford and the Democrats offer even richer benefits to folks that need them but cannot afford them. And a Bush will be running against a Clinton (odds are) and we expect things to change for the better. Where are the real leaders who make tough decisions and not the circus clowns we have had in DC?

  179. Guess what's missing in the gigantic so-called unreported liability of $10 trillion over the next 75 years?? The author slyly puts the $10T against the $12T current debt but doesn't put it against the GDP over the next 75 years which is ...$1,000 Trillion! So the nature of the unfunded problem is about 1 percent of GDP, a big problem no doubt, but not insurmountable, and NOT something that will overwhelm US.

  180. Doom is coming. I can't tell from reading this column exactly what form it will take, but doom is coming. The only question is whose benefits do we cut (we know it will be somebody's benefits -- it always is when people talk about the budget using Scary Numbers), and whose taxes will we raise. I can't tell that from the column, either. What I can tell, by looking at the scary numbers, is that doom is coming. And Washington won't do anything about it. And we should publicize the scary numbers Mr. Kotlikoff (who, to his credit, does superb work with Social Security, when he isn't trying to scare people into dirtying their diapers), has adduced. Because doom is coming. Even though we don't know what it will look like. Because those numbers are scaaaaaary.

    The Law of Scary Numbers (LSN): the bigger the projected deficit in a given column, the more the author wants to cut social spending, even when he or she doesn't come out and specifically propose it.

  181. Oh dear... an America is facing financial doom column. And, of course, the solution to the doom is to reduce or eliminate Social Security and cut other terrible programs like Medicare, food stamps, & unemployment insurance. That would be awesome. But, did you say that? No? I'm sure you will once you've convinced us that we are all DOOMED.

    Of course, convincing us is going to be hard when you make basic flubs like citing the "inflationary, easy-money policies of the Federal Reserve since 2007..." In fact, inflation is at historic lows. Or is it secret inflation? And your concern about interest rates... sure, people do ask for greater interest when they are concerned about a debtor defaulting... so don't the historically low rates on T-bills mean that the market doesn't see the US as being in any danger of default? Or is the market unreliable?

    Don't get me wrong. I'm all for fiscal responsibility. The tax cut and spend GOP has been driving me up a wall since Reagan, with Cheney's "deficits don't matter crack" driving me up a wall. Bush's squandering of the Clinton surplus was a crime.

    But it was only a decade and change ago that we had a surplus- without absurd program cuts. We could have a surplus tomorrow if we busted the Social Security cap, raised taxes on Mitt's friends to equal what actual workers pay, and perhaps cut our absurd defense spending. Invest in our infrastructure, both human and otherwise, to stimulate growth.

    We don't face doom. Just choices.

  182. Mr. Kotlikoff, there is no way to calculate the present value of all projected future tax and other receipts, absent a crystal ball. As an economist you surely know this. Therefore, I can only conclude that you are being deliberately misleading. You should be cited for malpractice.

  183. The Federal Government has a set of accounting standards that all publicly traded companies must abide by which are pretty good. It's own accounting mechanisms are a complex mess often affected by congressional meddling. If anything, having a consistent standard for all entities, public and private, would make it easier for people to understand what's going on.

    I don't see how requiring the Government to show liabilities like SS the way say, a corporate pension fund does, should be an issue.

  184. Mark Twain would love this column. It's full of "lies, damn lies, and statistics".

    When Social Security was established It was deliberately set apart from the ordinary budget, its funds were and are held in a "trust fund" that can invest only in government securities and it is dedicated to Social Security and nothing else. Those securities are, as you say, supported by the "full faith and credit" of the US government. Social Security buys and sells these government securities with the funds it has already collected, to earn money that it will later pay out to your mother. How is this bad or inflationary?

    Your article shows that there is plenty of information readily available about Social Security. Your column is part of the pressure campaign to remove the special status Social Security has so the Right can cut, eliminate or privatize it more easily.

    The Inform Act is nothing more than an attempt to make it easier to disrupt programs you want to privatize or destroy, as is being done with the US Post Office, and to make it even more difficult, if that were possible in today's Congress, to enact meaningful legislation.

    Your column bears out what Paul Krugman has been saying for years about fear-mongering by the Right about inflation. You complain about the "inflationary, easy-money policies of the Federal Reserve since 2007" but why? where is this dreaded inflation that has been threatening for 7 years? Yet another misleading Republican myth.

  185. You first sentence, about households and debt, makes you come across like Mr Potter in "it's a good life". Sadly, that was the high point of your essay.

  186. When the country elects a new President, it "hires" him for four years. Would the professor seriously claim we ought to book the future three years of pay to that President as debt? What about the money we will pay the President who follows? When the country commits to potential lifetime service, and salaries, for the Justices of the Supreme Court should those future payments be booked as debt too? What about the military? Should we get all morally indignant about the future debt we will pay to soldiers and veterans? And how far out into the future would the learned professor suggest we "project" these predictable and necessary, but (to him) obviously crushing, future obligations? A hundred years? Two hundred? A thousand perhaps?

    This fear-monging proposal to report the "Fiscal Gap" reveals a very large gap indeed: the gap between Kotlikoff's understanding of fiat currency operations and the reality.

  187. You mean funny money will no longer be standard operating procedure?

  188. You mean like the currency they used to pay for the Iraq and Afghanistan wars.

  189. This makes for some strange accounting.

    Suppose I take out a 30-year mortgage for $250,000 at 5%. My total obligation to the bank is actually $483,139.46 when you consider all the interest I promise to pay. On top of that, I might have another $1000 per year in casualty insurance bills that I am required to pay, $30,000 in all. Should I record a $250,000 liability on my personal balance sheet? Or $513,139.46?

    You might argue that I should use the lower number, because I can always sell my house. Then again, Congress can always repeal entitlement and other spending programs as well.

    The simple fact is that accounting, whether personal, business, or government, just simply doesn't work the way the author suggests it should. To apply this unusual method of accounting to the government sector only is suspicious at best.

  190. Um...from your description of her, your mom sounds like a social parasite.

    One solution would be to get rid of your mom…and all 94-year old, treacherous, conniving, blood-sucking geriatrics like her.

    Or maybe not.

    While entitlement programs are the biggest drain on the federal budget:
    1. Reforming a tax code riddled with loop holes might be a possible economic reform. But it will never happen, since there are too many interests that will block any reform.

    2. Knowing that defense spending is nowhere near entitlement spending, we might still come to the realization that playing the role of “super power” is becoming pure delusion. Military spending is unproductive activity. But once again too many vested interests would block change.

    3. Profit-making health insurance companies mean we have the most expensive health care system in the world, yet one that is substandard. As a sub-economy, health care costs always far exceed the national inflation rate, but do not provide better health care. These companies no longer act as instruments of economic expansion. They have become institutionalized, and will continue to act as a drag on the economy. Yet, they will never be changed because they’re too powerful.

    Often instruments of economic growth later become detrimental, sacrosanct, ossified, and unchangeable. Successful societies think they are separate from history, and will last forever. But in the end, an inability to adapt to changing times means they disappear.

  191. This article is extremely misleading about Social Security. Social Security is funded by a specially dedicated tax, as we all should know. Accordingly, Social Security does not contribute a nickel to the budget deficit. There is a Social Security Trust Fund which was built up over the years intentionally in anticipation of the greater number of retirees from the Baby Boom generation. We have now started gradually depleting the trust fund, but that's by design. As the system currently stands it will pay full benefits through about 2037, last time I checked. That's more than 20 years into the future. After that, the system will continue paying about 75% of the benefits without any changes whatsoever. The future shortfall is easily remedied in any number of ways. Interest rates are low and will continue to be low. There's no reason for our government not to borrow at historically low rates in order to fund much needed infrastructure construction and repair and many other essential things. The budget deficit has been dropping precipitously over the last couple of years. This author isn't funded by the Pete Peterson Institute for the Destruction of Social Security, is he?

  192. And once again, we see that in Economics, political prejudice passes for reasoned analysis. And the media, including the NYT, continues to glorify many of the charlatans (for this is how they would be viewed in a field like Chemistry, say) as winners of the so-called Nobel prize (as opposed to the real Nobel prize in Chemistry).

  193. Nice editorial but very incomplete.As Steven Ratner has pointed out the real story is Medicare.My wife became eligible last December after having a pancreatic condition in November.She is fine but is required to have a visit with MRI every six months with her surgeon.These visits are billed at about $4,000(not that Medicare will pay that amount).As my people would say, "Oy, what a deal for $104.00 premium per month". If explained properly, it would not be hard for most seniors to understand that premiums under Medicare have to be increased.

  194. SIr: This editorial is absolutely false and should be rescinded by the New York Times editors. Households live off wages, capital income and/or savings, sums of which are finite. Countries print their own currency, set their own rates of interest on lending that currency and therefore control their economic destinies. It's the difference between micro- and macroeconomics!

  195. Disingenuous scholars deal in half truths to please whatever constituencies that fund them or whomever might have a position for them in future administrations.

    The GOP and its philosophical economic support group have systematically permitted corporations and the wealthy to avoid sensible systems of taxation. The result are people like the professor and his band of rugged supply side wranglers who spin tales of woe unless we disassemble government and turn the whole thing over to the very people who pay politicians to reduce their taxes.

    Northern Europe is a beacon of success and avoids the fairy tales foretold by compromised doomsayers.

  196. Honesty in government? Give me a break, will never happen.

  197. The elephant in the room is the fact the government has been printing unsupported money for decades.

    But hoards of foreigners lapped up the excess ink and paper with gusto as US power brokered International relations. So in recent decades inflation has remained manageable.

    Our aircraft carriers, and other vast military power, were, in fact, the big stick spokespersons for the full faith and credit of the US.

    As the current Administration continues its retreat from the world's bully pulpit, and lesser powers like Russia, Iran, and lets not forget China, continue to stretch their international muscles, expect a concomitant retreat from the dollar as the international currency of choice, and the accompanying vast, crippling inflation that, for example, the Time's own Professor Krugman insists current left leaning government policies won't incur.

  198. I'll never understand including in "unfunded obligations" the future cost of entitlement payments to generations yet unborn. If indeed those are "unfunded obligations" then so are the costs of future roads, bridges, science endeavors, and wars we choose to fight.

    And what about the cost of housing and caring for the millions of refugees from our drowning coastal cities? What about the property loss associated with climate change? Most scientists believe, conservatively, tht those costs will reach into the hundreds of trillions of dollars.

    Always beware someone whose argument states it's "for . . . the children." You are being sold some serious snake oil.

  199. Mr Kotlikoff is wrong to compare a government with a household. A household cannot issue Treasury bonds which the central bank will buy up even if no one else will (on the secondary market). Fact is that the US government, as long as it has no foreign currency denominated debts, cannot 'go bankrupt'. The idea that the fiscal gap is 'our nations credit card bill' is far out. Government does not use a credit card. The farming of Kotlikoff is misleading. One problem with government bonds is that it allows high inequality, because future tax payers transfer money to future bond holders. (Yes, future generations both inherit the government debt and the treasury bonds!)

  200. If you are serious about making our national accounts reflect reality, why not include changes to reflect the differences between investments (in infrastructure, capital goods, perhaps education, etc.) and consumption (Social Security, food stamps, most defense, etc.)? You only seem to want to show the liability side more accurately, without bothering to show the asset side at all. No wonder you think we are spending too much. Since when is building a mass transit system with a life expectancy of 100 years a current expenditure?

  201. I don't think most people would regard social security benefits as "hefty" except in aggregate. And for this, much depends on how you project the future obligations. As the recent bending down of the medical care cost curve shows. Certainly minor adjustments now would improve the outlook for long-term solvency. Given the mis-matched desires of the Democrats and Republicans, these changes are unlikely to take place anytime soon. I think it would be easier if solving this problem were not linked to certain ideologically motivated solutions (eg. privatization) and supported by the hue and cry of the allegedly sensible.

    Would you require corporations to account for their under-funded pension obligations on their balance sheets too?

  202. Kotlikoff has distorted vision. He can see problems with Social Security where there are none. It is probably the best-run, long-term program the federal government has ever had.

    Meanwhile people like Kotlikoff are utterly blind to the actually out of control costs of our military and defense. With his accounting, where is the bill, in the trillions, for the long term care of veterans? Where is his bill for presumed continuation of warfare, given the last 10 years and our government's commitment to a forever war on the tactic of terrorism??

  203. How is his mom collecting Social Security on both her own AND her deceased husband's accounts? It is my understanding that you get one or the other, whichever is higher, but not both.

  204. His mother isn't collecting social security twice. She's collecting social security and his private pension.

  205. There is and never has ever been any such a thing as a Social Security fund. It is and always has been a bookkeeping mirage. What the government takes in, as Social Security payroll tax, in any year, ends up going into the Treasury to be spent. It always has. The difference is that for many years more was collected in payroll taxes than was spent on Social Security payouts. That could remain true if we did away with the cap on Social Security payroll taxes, or applied that tax to unearned as well as earned income. Much ado about nothing! Minus our many and pointless Asian military adventures, we likely would be running a surplus.

  206. It's not a "mirage". It's a retirement investment account.

    Its express purpose is to pay Boomer benefits not funded by current tax revenue - nobody wanted huge payroll tax increases when the demographic bulge hit. The Trust Fund is meant to be spent on SS benefits!

    Just ask Alan Greenspan, who recommended in 1983 all the changes Kotlikoff complains about.

    Yes, Treasury is forced (by law Greenspan recommended) to borrow all excess SS tax revenue not paid out in benefits immediately. They issue Special Purpose Treasury Bonds earning market interest to the Trust Fund (Greenspan took Trust Funds out of market investments for the first time).

    What's wrong with keeping the investment return in the family? If Papa's got cash in a low-interest CD and Junior's shopping for a car loan, why not let Papa take a lien on the car in exchange for a loan that earns higher interest, but gives Junior a little better deal than the bank?

    Folks like Kotlikoff want us to forget what Greenspan said about redeeming these bonds:

    Because SS revenue lowered deficits resulting from investment income tax rate cuts in the 80s, investment tax rates would have to rise again so we could pay cash for the TF bonds.

    The only debt problem we have is a deadbeat investor class that won't pay its bills!

  207. I've got a better idea, why don't we just go back to the individual tax rates of the Clinton era? Then we would would have the money to actually pay for the services people want. Finally, anyone, including someone with many credentials, who compares household economics to federal governments should be ignored.

  208. Why does the NY Times continue to give a voice to rightwing ideologists like this one here, the very kind of Chicken Little economist Paul Krugman keeps mocking, and not open its pages to serious leftwing thought?

  209. Or we could just raise taxes. Americans want their medicare, SS, Medicaid, education, roads, airports, a superpower military, veterans benefits, NASA, the FDA, the FAA... Maybe we should just pay for it.

  210. Professor Kotlikoff provides us with a balanced Op-Ed. Thank you. It's good to know that there is someone in the economics academy warning Americans about the financial trouble we may be eating to future generations.

    As a step toward addressing the problem, let us hope that the Congress passes the Inform Act.

  211. The comments here are terrifying, smugly ignorant "progressives" chiding an economist who himself leans somewhat left, for supposedly being ignorant and right-wing. People, do you understand that the labor force is aging, and that social security benefits are indexed to average wages? For these reasons, neither economic growth nor inflation can fix the social security deficit. Kotlikoff is not ignorant, and not a shill for austerity. If you disagree with him, it is you who are ignorant.

  212. And do you know that people like Warren Buffet and many hedge fund managers have incomes in billions so they pay their entire obligation to SS within minutes to days of entering their office every year? I'll leave to Prof. Krugman to make the precise calculation, but I bet that raising the income limit subject to FDIC to a reasonable $2 million would solve any Social Security worries until the next Ice Age.

  213. Dear Amanda,

    Thank you so much for coming to my defense. I think people get very emotional and don't read as carefully as they might. That's a big problem in our country -- we can't talk calmly with one another. If we did, we'd see we generally agree.

    All best and thanks!