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Boone PVA Cindy Rich Counters False "Compensating Tax Rate before KY Legislature!"
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from the "Mad Hatter's Pity Party"
ReplyDeleteJagadeesh Gokhale and Kent Smetters, “Fiscal and Generational Inbalances: New
Budget Measures for New Budget Priorities.” Federal Reserve Bank of Cleveland
Policy Discussion Paper. March 2002.
Gokhale and Smetters asked this question concerning the Federal Debt:
If the government could get all of the future income that it can expect to get today,
and use it to pay off all the future expenditures to which it is committed, today; would
there be enough to cover all of the debts?
The answer, of course, is no; there would be a shortfall of $45 trillion dollars.
That is twelve times the official national debt, and about four times the national output.
They suggest four alternative ways the government could make up this shortfall:
(1) Cut Federal discretionary spending to zero.
(2) Cut Social Security and Medicare by 56%
(3) Increase the Federal income tax by 69%
(4) Increase payroll taxes by 95%
My question is: What do you think the government will do? (Hint: Pick any two.)
The real problem with these figures, as Niall Ferguson points out, is not in the
calculations, or the final figures, which are very conservative, or even optimistic. In fact
the shortfall would be a good deal more than $45 trillion, and the longer it goes without
anything being done about it the worse it gets. Gokhale and Smetters calculated that by
2008 the income tax would have to go up by 74% just to break even. As Ferguson says:
“To put it bluntly, this news is so bad that scarcely anyone believes it.”
Data cited from Niall Ferguson, Colossus: The Price of America's Empire (New
York: Penguin, 2004), p. 269-272.