The United States is so deep in debt, the interest payment alone is now costing more than $1 trillion a year, according to a Bloomberg analysis. Experts say the soaring debt is an alarm bell for the nation, but some economists have been ringing this bell for decades.
“I’m kind of outraged, morally outraged,” said Laurence “Larry” Kotlikoff, a bestselling author and professor of economics at Boston University.
Younger generations may also be outraged after hearing what Kotlikoff has to say. Kotlikoff is known in economic circles as a pioneer behind generational accounting, which examines the sustainability of fiscal policies, like Social Security, and the financial burden it places on different generations.
Kotlikoff also ran for president in 2012 and 2016 on the basis that existing politicians wouldn’t do what it takes to save the nation’s economic future.
The following interview has been edited for length and clarity.
Larry Kotlikoff: A lot of economists have used a model for the last 25 years, 30 years, that has this assumption that people actually care about their kids to the point where if they know their kids are going to be in trouble, they save for them. It’s not the case, our older people don’t give a damn. As a group, they don’t give a damn – and I could use stronger language – about you folks. It’s all take as you go. You give and we take.
Simone Del Rosario: There’s this profound moment from President Biden’s State of the Union address where he appears to get all of Congress to agree that they’re not going to touch Social Security or Medicare. And he says, ‘Let’s stand up for seniors.’ Now, I’m not advocating for pulling out the rug from under this entire group of people. But this protect-seniors-at-all-cost scenario that we live in, what is that going to cost the next generation?
Larry Kotlikoff: He’s said that, unfortunately, because maybe he wasn’t too aware of the facts. The reality is that we’re taking from the young, expropriating the young, and giving to the old through so many channels, not just Social Security.
We’re having tax cuts that are primarily aimed to help older people, because when the taxes are raised in the future, they’re not paying for themselves. We won’t be around, we’ll get to spend more, you guys will be around.
We’re changing the tax structure, just shifted more towards taxing younger people, who have labor income, and reducing the taxes on asset income, capital gains breaks and dividend tax breaks. We are expanding Medicare and Medicaid. Most of Medicaid, you know, which is health care for the elderly, 70% of those dollars go to the elderly, who are in nursing homes.
So through all the expansion of these programs and changes in them, we are expropriating younger people every way possible. Does this mean I don’t like older people? Some of my best friends are older. We obviously shouldn’t be pulling the rug out from under any poor older people and even lower-middle-class older people. But to not recognize that we have a massive imbalance, that we’re kind of Argentina in the making.
Argentina, in 1920, had 85% of our per-capita GDP, they were almost as rich as we are. Today, they have 14%. It’s all due to running these policies over a century. So this is a slow train wreck.
You asked the question, ‘When exactly will things hit the fan?’ Did Argentina ever have a single crisis that put it down, produced a great depression, or led everybody to leave the country? No, it’s been a series of many crises through the years. But it doesn’t mean there couldn’t be a default on U.S. debt or a default on Social Security, because we are really on a rapid pace over the cliff.
Simone Del Rosario: You said that you are outraged. Are you surprised that younger generations aren’t more outraged and more outspoken about this system, about how much we’re going to be left holding the bag?
Larry Kotlikoff: Well, I’m not all that surprised because nobody’s talking to them about this in these terms. Nobody’s saying that, compared to me and my generation, your generation is going to have 50% higher taxes.
We need some people that know what they’re talking about here and know the truth. But we have clowns like Trump, and President Biden is also taking Social Security off the table. So what’s all that about? Does he really understand what he’s doing here?
I think he would get more votes if he were educated about the problem and then he actually came out and said: ‘This has to be fixed.’ People would respect him. They’d say, ‘This guy is old enough to tell the truth.’ As opposed to, ‘This guy is old enough to know how the game is played.’ We don’t need to get to play the game again, the game we’re playing is suicide, economic suicide.
Simone Del Rosario: If politicians were to come forward, pragmatically, and say, ‘We need to come together and solve this problem. We are in a lot of debt and we can’t fund the promises that we made to the American people,’ they would get eviscerated, right?
Larry Kotlikoff: You have to appeal to what may not really exist, which is altruism. You have to say to older generations, look, I’m actually looking out for your kids, I want you to look out for your kids. I want you to vote for me, I want you to take a sacrifice.
We’re in this together. These are all our kids. And they’re going to be working together in teams. We want them to be able to survive, we want the country to survive. We have enough crazies out there trying to kill freedom, democracy, and we need to be strong. This is our future.
We were able to get people together when it was World War II, when we were attacked. Well, we’re being attacked by politicians, and so somebody needs to stand up and say, ‘The enemy is actually in the halls of Congress. They’re the ones who are putting our kids at risk. And vote with me, not with them.’
I don’t know, maybe that pitch won’t work. But it’s better to go down losing telling the truth than winning telling a lie and making your life an economic disaster.