Thursday, January 31, 2013
Austrian-inspired hard money advocates (Ron Paul, Peter Schiff) see excessive borrowing as even worse for governments than it is for individuals and families. On the other hand, Keynesians (Paul Krugman, President Obama) think debt is no big deal if that’s what it takes to sustain “aggregate demand.”
Rubino presents the argument for both sides, and notes that those who don’t like debt see everything as debt, while those who like debt find reasons not to worry about any kind of obligation, whatever it’s called.
Generally accepted accounting principles (GAAP) require America’s corporate and state/local pension plans to calculate their liabilities to the best of their ability, and then fund the resulting guestimate. Over time adjustments will be made, but it’s rare to hear that costs are dramatically lower than expected. Almost without exception the opposite is true.
So sure, health care could cost less than expected, but in the meantime a wave of boomers is retiring who won’t take kindly to any scaling back of medical coverage.
Rubino finds it difficult to understand and give respectful hearing to the “debt doesn’t matter” argument. It’s one of those things where one side seems to get it so completely that it’s hard to credit the other side with honest intentions. These obligations will go to Americans’ kids and grandkids, or their own investment portfolios. So either their kids are impoverished in 2025, or boomers are bankrupted in 2015.
The coming decade, when current law is etched in stone and technology and demographics will raise rather than lower costs, looks pretty grim. The boomers are retiring now, and their benefits have to be paid now. So the big cost spike is coming soon, when America is already accumulating a trillion dollars per year of real, official debt.
Posted by Unknown at 1:16 PM