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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (21615)	1/17/2005 11:43:15 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Social Security is just the tip of a very large iceberg By Charles Stein \| January 16, 2005 ... Economists describe the fiscal mess with a more neutral term -- the fiscal gap. What it refers to is the mismatch going forward between tax collections and government obligations. Berkeley economist Alan Auerbach and two colleagues estimated the gap at $36 trillion over the next 75 years. To put that number in some perspective, think about this: If we wanted to fix the problem today, we would have to cut government spending by about 27 percent or raise taxes by about 37 percent and hold at those new levels indefinitely. "The nation faces a massive and growing fiscal gap," wrote Auerbach and his coauthors in an article published in Tax Notes last year. What accounts for such a big hole? Social Security is a contributing factor. Between now and 2030, Social Security payments are expected to grow to 6.3 percent of gross domestic product from 4.3 percent. Comparing a program to the size of the whole economy is a simple way of illustrating its true cost to society. So Social Security will grow. But the government's two big health programs, Medicare and Medicaid, will grow much faster. Today they represent about 3.8 percent of GDP. By 2030 they will be up to 8.3 percent. By 2080, 16.7 percent. Social Security, by contrast, essentially levels off as a share of the economy after 2030. Rising expenses enlarge the fiscal gap. But so do falling taxes. Economists figure the Bush tax cuts account for about 15 percent of the total gap. Federal taxes today are at their lowest level in about 45 years. The less money the government collects, the less it will have on hand to pay its bills in the future. Another Bush achievement -- the Medicare drug benefit -- further exacerbated the fiscal situation because no money was set aside to pay for it." boston.com