'U.S. Is In Worse Shape Than Greece': Is This True?

[Mimosa]

The statistics in this article sound convincing. But is this correct?

http://www.foxnews.com/opinion/2010/08/19/john-lott-imf-obama-government-greece-debt-fiscal-gap-debt-gdp/

Excerpt:

Well, a new IMF report on the United States issued on July 12th estimates that the U.S. fiscal gap is about 14 percent of GDP. The estimate tries to get around the accounting gimmickry politicians hide behind and crunch the numbers using the same requirements that businesses must abide by. And that leads us to this question: if the Greek fiscal gap is "staggering," how are we supposed to describe the U.S. fiscal gap?

This year's federal budget is spending about 25.4 percent of GDP. To stop the slide toward catastrophe that spending would have to be cut to 11.4 percent. Alternatively, all federal government tax revenue would have to double from its current 14.8 percent of GDP. Or there could be some changes in both spending and tax revenue that would sum to 14 percent.

Where is this huge fiscal gap for the U.S. coming from? The IMF mentions the massive unfunded promises that have been made with Social Security and Medicare. But on page 54 of the report they specifically mention Obama's new health care law:

The main drivers of the fiscal gap are rising health care costs that under current law will boost mandatory spending to above 18 percent of GDP by 2050. Since the federal government has historically collected about 18.4 percent of GDP in tax revenues, this means that mandatory programs may absorb all federal revenues sometime around 2050, or as early as 2026 when the cost of servicing the debt is added.

[ixion]

1. We're in bad shape because we've been gaming the system for decades

with things like CDS's and CDO's and other hoodoo derivatives.

And of course, you have the MIC and that massive revenue stream.

And then you have Law Enforcement, Privatized Prisons and Security, also with their snouts in the trough.

And then you have the latest daylight robbery, er 'bailout'

And on and on.

[Turbineguy]

2. If we get all our news from Fox....

yes. Otherwise, no.

[econoclast]

3. Sadly, from what I can see using other sources, the IMF numbers look right

And the major source of the increasing fiscal gap is mandatory spending. As a percent of GDP, Medicare Medicaid and social security together has risen from about 2.5% of GDP in 1965 to 9.9% of GDP today. Defense spending, by contrast, has gone from about 7.5% of GDP in 1965 peaked at almost 10% of GDP in 1968 1969 and has declined to about 4.5% of GDP today. Defense spending bottomed in the late 1990's at about 3% of GDP. Somewhere in the late 1970's SS Medicare Medicaid spending surpassed defense spending as a % of GDP.

And according to government projections SS M&M will get to 18 19% of GDP in about 2040.

Stanford economist John Taylor's blog Economicsone has a nice chart.

Expiring ALL the Bush tax cuts would add about 250billion in revenues a year. Only letting the tax cuts on the over 250,000 group only raises revenues about 40 billion a year. I think the numbers in Taylor's charts assume that the over 250,000 tax cuts expire.

Face it. We spend a lot of money.

[northernlights]

4. official defense spending may have declined

but they don't include the wars in that figure, do they? Aren't the 2 wars figured "off the books" so to speak?

[disidoro01]

5. much of it.

Much but not all of the spending is put forth in supplemental bills which are not part of the defense budget. It's a shell game with the DoD.

[Selatius]

6. There are parts of Greece that are suffering 70% unemployment.

This recession is tremendous, but we're not yet looking at the prospect of the majority of the workforce without jobs. That kind of environment is fertile ground for violent revolutions like the October Revolution or the French Revolution.

[n2doc]

7. Yeah , right

Given the dollar's rise against the Euro, and the fact that bond rates are the lowest in modern history, I don't see any evidence that we are having a fiscal crisis. Sorry, but the world cannot get enough of our money.

That said, we should use this data and others like it to end the Shrub tax cuts for the rich, and raise rates on capital gains and other sources of income that don't generate jobs in this country.

[jschurchin]

8. Take a closer look, because this is false.

Sorry, but the world cannot get enough of our money.

The largest purchaser of our debt has been the Federal Reserve, by a wide margin.

The degree of intermediation by the Federal Reserve in the issuance of US Treasuries hit a record in Q2, accounting for just under 50% of all net UST issuance absorption.

And to be honest, the world central banks are dumping our debt as quickly as they can without causing a global depression.

while Foreign purchasers, which many speculate are in a game of Mutual Assured Destruction regarding UST purchases, have in fact been aggressively lowering their purchases of Treasuries (from $159 billion in Q1 to $101 billion in Q2, an almost 40% decline in appetite!).

The day of reckoning is coming quickly. Sooner, more so than later, we will have to address our nations debt. $13 Trillion and climbing daily is, without question, unsustainable. The Fed is playing a game here. And all of us are the pawns. If we don't drastically cut spending and raise taxes, we are, in a word, FUCKED.

link to excerpts: http://www.zerohedge.com/article/federal-reserve-accounts-50-q2-treasury-purchases

[AtheistCrusader]

9. "Given the dollar's rise against the Euro"

Actually, the Euro floated down towards the dollar. A not-so-subtle difference.

[mackerel]

11. The dollar is rising against the Euro?

I just got back from there, I must have been ripped off!

[AtheistCrusader]

12. 'toward', not 'to'

:)

It was quite a bit higher than 1.28

[AdHocSolver]

10. The IMF is a corporatist outfit like the WTO, the World Bank, and the Fed.

The fiscal gap is due to the excessive military spending and the low taxation of the corporations and the wealthy.

The Social Security fund will remain solvent if jobs are returned to the U.S. as working people pay into the fund through the employment tax.

If the government had created a single payer health insurance system based on Medicare, then the money paid to for-profit health insurance companies for their huge profits, would instead go to Medicare for health insurance for all.

The biggest cause of the U.S. fiscal problem is the loss of jobs, since unemployed people don't pay taxes. In other words, the fiscal problem is due to loss of revenue, rather than the falsely labeled "unfunded promises" of Social Security and Medicare.

The largest chunk of unnecessary spending that is based on "borrowed" money is military spending, and as conservative economist Kevin Phillips has pointed out, excessive military spending has been the downfall of all previous empires.