The U.S. economic meltdown: fiscal gap' paving the road to meltdown - by Derek Decloet
The U.S. fiscal crisis is the issue that dares not raise its head in this election, pushed off the front page by the foreclosure crisis, rising unemployment, gasoline prices and a meaningless debate about whether Mr. Obama's a snob. People are sufficiently preoccupied with the state of the U.S. economy and the U.S. financial system (see: Fannie Mae and Freddie Mac) that it's easier to ignore, for the moment, the busted balance sheet of the U.S. government. Plus, there are few votes to be had for a politician who runs on a platform of financial pain. But raising taxes - a lot - and cutting benefits may be just what the next U.S. president, whether it's Mr. Obama or John McCain, will have to do, whether he wants to or not. Investors, take note.
Prof. Kotlikoff calculates the American "fiscal gap" has grown to $70-trillion (U.S.), and estimates that the current President is responsible for one-quarter of that amount. Nice legacy. But what does the number even mean? Seventy trillion dollars is an impossible sum to fathom, which may be another reason the issue gets little political air time. Big, chronic problems aren't sexy. And this one is big. To earn $70-trillion in profit, you'd need 1,723 companies the size of ExxonMobil; $70-trillion would be equal to the annual sales at 1.35 million Wal-Mart stores. That's not the size of the U.S. government's debt, though. It's the shortfall between its projected future revenues and what it plans to spend (in today's dollars).
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