Economist Talks to SC Leaders About the Implications of President-elect Trump for the U.S Economy
Wednesday, December 21st, 2016
A Boston University economist says the United States is “dead broke” and President-elect Donald Trump’s proposed economic policies would only make things worse.
Laurence Kotlikoff, who received his PhD. in economics from Harvard and has twice run as a write-in candidate or president, spoke on “The Implications of President-elect Trump for the U.S Economy” at the recent 36th Annual Economic Outlook Conference at the University of South Carolina’s Darla Moore School of Business.
Kotlikoff, a leading expert on the long-run fiscal health of the United States and Social Security, is a professor of economics at Boston University and president of Economic Security Planning, Inc., a company specializing in financial planning software. He was formerly on President Ronald Reagan’s Council of Economic Advisors, and is also a New York Times Best Selling author and an active columnist. In 2014 he was named by The Economist magazine as one of the world’s 25 most influential economists and in 2015 was named one of the 50 most influential people by in aging by Next Avenue.
Doug Woodward, director of research at the Moore School, called Kotlikoff, “the nation’s leading expert on our national debt and our fiscal situation.”
While the official U.S. debt is pegged about $20 trillion dollars – that is a 20 followed by 12 zeros – Kotlikoff says the number officials should be talking about is the $206 trillion fiscal gap. The fiscal gap, he explains, is difference between all of the obligations the government has including future Social Security and Medicare obligations as well as payments on treasury bonds and other obligations less the present value of all projected future tax and other receipts, including income from government financial assets.
Closing that gap would require immediately raising taxes by 53 percent, he said.
Unless the country takes steps to close that gap its size will just continue to increase and the obligation will have to be borne by future generations. If we don’t raise taxes now and intelligently cut spending then we will have raise taxes by 65 percent or more in 15-20 years. Kotlikoff calls it an “issue of generational mortality.” The country, he said, has been engaging in a Ponzi scheme for decades taking from young people and giving to old people, and he held up Social Security as an example.
Kotlikoff said none of the presidential candidates talked about the fiscal gap issue during what he termed a “content free primary season and an even more content-free election season.” And President-elect Trump’s proposed economic policies will do nothing to help and actually could further harm the U.S. economy.
What he terms “Trump Economics” could, he said, result in:
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Massive deficits
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High Inflation
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High interest rates
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An even worsening fiscal gap
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No Social Security reform
Healthcare reform, which includes the repeal of the Affordable Care Act known as "Obamacare," would drastically increase the number of uninsured. Banking reform would leave the United States at worse risk for another financial meltdown and the proposed tax reform is fiscally irresponsible and highly regressive, he said.
A President Clinton, Kotlikoff said, would have been dangerous fiscally in a different way than a President Trump , he said.
Kotlikoff has made his own proposals in “You’re Hired! A Trump Playbook for Fixing America’s Economy,” an e-book on his website www.kotlikoff.net. Among his proposals are:
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Eliminating many taxes -- including corporate and personal income, estate and gift and the ceiling on the FICA tax – and adopting a 20 percent valued added tax and a 20 percent tax on inheritances above $5 million. He also advocates a progressive personal consumption tax and a carbon tax on Co2 emissions.
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Replacing Medicare, Medicaid, Obamacare and employer-based healthcare with an individual-specific voucher system to buy uniform basic policy.
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Freezing the existing Social Security system and creating a personal security account system that would require a 10 percent contribution. The government would match contributions on behalf of the poor, disabled and unemployed.
All these proposals and more are detailed on his website.
Kotlikoff said not only is he concerned about the impact of the president-elect’s proposals, but also is concerned about how Trump is conducting himself. “The uncertainty that Trump is presenting in terms of his evening tweets on trade policy is very likely to be very dangerous for the economy,” Kotlikoff said and could start a trade war with China. “If you start having a president publicly insulting another country, they are going to insult back and the whole thing will melt down,” he said.