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The Coming Government Debt Explosion — and How to Deal with It

in Business and Economy, Liberator Online Archives by James W. Harris Comments are off

(From the Activist Ammunition section in Volume 20, No. 6 of the Liberator Online. Subscribe here!)

The U.S. ship of state is sailing full steam ahead — straight toward a massive debt iceberg. Debt Iceberg

Here are some genuinely shocking figures from “Medicare and Social Security Tabs Coming Due,” an article by Michael Tanner, senior fellow at the Cato Institute, in the March 2015 issue of Reason magazine:

  • The national debt recently reached $18 trillion — approximately 101 percent of the United States’ GDP.
  • The Congressional Budget Office projects the debt will rise to $27.3 trillion within the next decade. 
  • But those numbers are actually far too low — because they ignore Social Security and Medicare’s unfunded liabilities. Add those in, and the national debt hits $90.6 trillion.
  • Social Security, Medicare and Medicaid are responsible for fully 47 percent — nearly half — of federal spending, and they continue to grow. 
  • Social Security has a $24.9 trillion shortfall, while Medicare has $48 trillion in unfunded liabilities. Should healthcare costs rise, the Medicare figure could soar to $88 trillion. 
  • Just this year, Social Security will have a $69 billion cash-flow deficit. Every year after, that shortfall will worsen. And Medicare is in even worse financial shape than Social Security.

In an article at Vice News last January, Tanner described the difficult choices we face:

“To pay all the benefits promised in the future, Social Security would have to increase the payroll tax by as much as half, or find that revenue elsewhere. The government can always cut benefits, but without a tax increase those benefits would have to eventually be slashed by 23 percent. That would be very hard for seniors who depend on the program to get by.”

What to do about these problems? You can read Cato’s proposals for reforming Social Security at their Social Security reform website.

Cato’s research and proposals for health care and welfare reform (including Medicare and Medicaid and Obamacare) can be found here.

Libertarian Party presidential candidate Harry Browne offered his plan for replacing Social Security with consumer-based choices in his 1996 book The Great Libertarian Offer. Though the numbers are a bit dated, his explanation of Social Security’s problems, and his solution, remain very relevant, elegant, and easy to read and understand.

For a quick overview of genuine market-based health care reform, see this short 2015 article “What True Health Care Reform Would Look Like“ by Matt Battaglioli, published by the Mises Institute.

Finally, see “How to Eliminate Social Security and Medicare“ by George Reisman (Mises Institute, 2011) for more reasons why these programs should be eliminated, and a plan to accomplish this.

Major Study: U.S. and World Economic Liberty is Fading

in Liberator Online Archives by James W. Harris Comments are off

Economic Freedom of the WorldEconomic liberty — essential for human progress and well-being — has dropped significantly worldwide. And the United States — once the very symbol of economic freedom — has fallen behind many other countries in this crucial area.

That’s the disturbing finding of the 18th annual Economic Freedom of the World Annual Report, a highly-regarded measuring of economic freedom around the world.

The annual study is prepared by the Economic Freedom Network, a group of independent research and educational institutes in nearly 90 nations and territories worldwide. The group describes their report as “the world’s premier measurement of economic freedom.”

The report defines the cornerstones of economic freedom as: personal choice, voluntary exchange, freedom to compete, and security of private property.

The report measures economic freedom in five different areas: (1) size of government, (2) legal structure and security of property rights, (3) access to sound money, (4) freedom to trade internationally, and (5) regulation of credit, labor, and business.

Each year’s report ranks the nation of the world in relation to one another, and assigns a score from zero to ten on the amount of liberty in each nation.

This year’s study covers the year 2012, the most recent year for which the data is available.

It reports that the United States, “long considered the standard bearer for economic freedom among large industrial nations, has experienced a substantial decline in economic freedom during the past decade.”

The fall has been fast. From 1980 to 2000, the U.S. was generally rated the third-freest economy in the world, ranking behind only Hong Kong and Singapore.

However, in this year’s study the United States now ranks 12th in the world, tied with the United Kingdom and behind countries including Canada, Jordan and the United Arab Emirates.

More disturbing than the rankings is the U.S. score of 7.81, which shows a continuing pattern of losing economic freedom. After generally rising from 1980 to reach second place and a score of 8.55 in 2000, the U.S. has now fallen considerably lower.

The reasons? According to the study: “Due to a weakening rule of law, increasing regulation, and the ramifications of wars on terrorism and drugs, the United States has seen its economic freedom score plummet in recent years, compared to 2000 when it ranked second globally.”

Worldwide economic freedom dropped slightly in this year’s report, and it remains well below its peak level of 6.92 in 2007. The average score fell to 6.84.

Hong Kong retained the highest rating for economic freedom, 8.98 out of 10. The rest of this year’s top scores are Singapore, 8.54; New Zealand, 8.25; Switzerland, 8.19; Mauritius, 8.09; United Arab Emirates, 8.05; Canada, 8.00; Australia, 7.87; Jordan, 7.86; and, tied for 10th at 7.84, Chile and Finland.

These scores are extraordinarily important, because, as the report shows, economic liberty is literally a matter of life and death. Extensive research shows that people living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer life spans.

As the report notes: “Nations in the top quartile of economic freedom had an average per capita GDP of $39,899 in 2012, compared to $6,253 for bottom quartile nations. Moreover, life expectancy is 79.9 years in the top quartile compared to 63.2 years in the bottom quartile, and political and civil liberties are considerably higher in economically free nations than in unfree nations.”

Further, the poorest 10 per cent of people in the freest nations are nearly twice as prosperous as the average population of the countries with the least economic freedom.

The 10 lowest-rated countries for economic freedom are: Myanmar, Democratic Republic of Congo, Burundi, Chad, Iran, Algeria, Argentina, Zimbabwe, Republic of Congo, and, lastly, Venezuela. (North Korea and Cuba could not be included because data was unavailable.)

“The link between economic freedom and prosperity is undeniable,” said Fred McMahon of the Fraser Institute, one of the institutes involved in producing the report. “The most economically free countries offer the highest quality of life and personal freedoms, while the lowest-ranked countries are usually burdened by oppressive regimes that limit the freedom and opportunity of their citizens.”

The report is available free online.

Cost of Government Day: July 6

in Economic Liberty, Liberator Online Archives, Taxes by James W. Harris Comments are off

(From the Intellectual Ammunition section in Volume 19, No. 10 of the Liberator Online. Subscribe here!)

While Americans celebrated Independence Day on July 4, we are far from being able to celebrate fiscal independence.

Indeed, according to Americans for Tax Reform (ATR), this year Cost of Government Day fell on… July 6. Ouch!

Cost of Government Day — calculated each year by ATR — marks the point during the year when the average American has finally earned enough income to pay for his or her share of the spending and regulatory burdens imposed by government at the federal, state and local levels.

2014 is the sixth consecutive year that Cost of Government Day arrived in July; prior to President Obama taking office, Cost of Government Day had never fallen after June 27.

All told, the full costs of government amount to a staggering 51 percent of GDP. Workers toil 121 days to pay for government spending alone, and 65 days to pay for regulatory costs. Americans labor in tax slavery 186 days — more than half the year — to pay off the full burden of government.

Some states like Connecticut and New Jersey must work even longer than that to pay for the costs of high spending and taxes in their states. The latest state Cost of Government Day once again occurs in Connecticut, falling on July 26 for 2014. The earliest Cost of Government Day goes to Louisiana, occurring on June 12 this year.

The days worked to pay for federal spending decreased since last year. However, federal regulatory costs have increased since 2013. While Americans worked 65 days to pay for the costs imposed by regulation in 2014, if the regulatory regime grows larger it will almost certainly mean much later Cost of Government Days in the future.