In Prosperity in the Age of Decline, the authors are predicting that 2030 will be the opening year of the greatest depression since 1930. Dr. Kotlikoff believes that it might not wait until 2030.
China is already beginning to overtake the US in terms of GDP. By the end of the century, the US will no longer be the dominant economic superpower.
It’s not looking good in terms of projection. For a depression to occur, there would usually have to be an event or collapse beforehand, which is definitely possible.
There are too many examples of hyperinflation over the course of history for the proposition that we can just print our way out of our problems to be true.
There is still time to correct our mistakes. We need an independent party to run and expose Americans to the truth of the fiscal condition of the country.
One of the problems we are dealing with right now is the marginal taxation of the poorest Americans. Roughly 25% of the poor are facing marginal taxes of .70 on the dollar. We need an incentive system that helps people instead of punishing them.
There isn’t much political will to change things. Dr. Kotlikoff wrote a bill to force the CBO to do fiscal gap accounting each year and it only garnered the support of eight senators.
To right the ship of state, we need to broaden the tax base. Dr. Kotlikoff suggests putting everybody into a 30% marginal tax bracket while incorporating a progressive system so that the poor are differentially helped. With a few other tax structures and some reform of the welfare programs, it would be possible to get the fiscal gap under control.
Reforming healthcare should be a major focus. If we could reduce the spending on healthcare to only 14% of GDP, the US would still have a very good healthcare system and be able to reduce spending considerably.
Politicians need to be honest about the fiscal condition of the country if there is ever going to be momentum to change.
There are a number of ideas being floated that can help reform healthcare and other social programs, but as the years go on, the options become slimmer. Politicians need to get out of the way and let economists propose solutions that can actually help people.
Economics brings an entirely different way to bring financial planning to the table when compared with the industry, which is heavily focused on selling more products. Dr. Kotlikoff has a financial planning software tool you can access at maxify.com to help ensure a smooth retirement.