We are quickly going broke according to economist Larry Kotlikoff. Kotlikoff
concludes that countries can go broke, that the United States is going
broke, that remaining open to foreign investment can help stave off bankruptcy, but that radical
reform of U.S. fiscal institutions is essential to secure the nation’s economic future. The paper
offers three policies to eliminate the nation’s enormous fiscal gap and avert bankruptcy: a retail
sales tax, personalized Social Security, and a globally budgeted universal healthcare system.
Neither major party has shown much interest in the radical reform of fiscal institutions that Kotlikoff recommends. Closer to home, Governor Richardson is counterproductively trying to exacerbate our long-term Medicaid budget problems.
I do wonder about Kotlikoff’s proposed retail sales tax rate of 33 percent. Combined with state sales tax rates the large (40 percent or more) tax wedge between buyer and seller would encourage tax avoidance. Maybe the proposal should be somewhat less vast. That is my feeling about Charles Murray’s recent welfare reform proposal too. But at least these reform ideas are on the right track.
BTW, I find our bankruptcy problem to be orders of magnitude more important than global warming. Yet global warming seems to be getting orders of magnitude more attention.