Our country is bankrupt. It’s not bankrupt in 30 years or five years. It’s bankrupt today.
Want proof? Look at President Barack Obama’s 2010 budget. It showed a massive fiscal gap over the next 75 years, the closure of which requires immediate tax increases, spending cuts, or some combination totaling 8 percent of gross domestic product. To put 8 percent of GDP in perspective, this year’s employee and employer payroll taxes for Social Security and Medicare will amount to just 5 percent of GDP.
Actually, the picture is much worse. Nothing in economics says we should look out just 75 years when considering the present-value difference between future spending and future taxes. Over the full long-term, we need an extra 12 percent, not 8 percent, of GDP annually.
Seventy-five years seems like a long enough time to plan. It’s not. Had the Greenspan Commission, which “fixed” Social Security back in 1983, focused on the true long term we wouldn’t be sitting here now with Social Security 26 percent underfunded. The Social Security trustees, at least, have learned a lesson. The 26 percent figure is based on their infinite horizon fiscal- gap calculation.