Incomprehensible liabilities

A recent conversation about the US Federal Government's unfunded liabilities caused me to reexamine a statistic that I absorbed several years ago.  Boston University economics professor Laurence Kotlikoff stated that the US Federal Government's unfunded liabilities exceed 200 trillion dollars.  This number is quoted many times, and in many places, but I was not able to find any published details that provide the calculations that establish this number.

During my research, I found that there is a publication by the US Treasury each year titled “Financial Report of the United States Government” which provides financial statements for the Federal Government in a format like an annual report for a public corporation.  When reading this report, it is important to note that some of the amounts are listed in trillions and some in billions.  Also, note that trillions and billions are sometimes commingled in the same table or chart.

I am not accustomed to working with numbers this large and I was having trouble keeping the decimal places straight, so I created a chart:

The interesting details of the “Financial Report of the United States Government” are in the notes.  You will find a frank opinion in Note 24 on page 157 (pdf page 166) under the heading:

Sustainability and the Fiscal Gap

“This report presents data, including debt, as a percent of GDP to help readers assess whether current fiscal policy is sustainable. The debt-to-GDP ratio reached 100 percent at the end of FY 2020” ….  “As discussed further in the unaudited RSI, the projections based on this report’s assumptions indicate that current policy is not sustainable. If current policy is left unchanged, the projections show the debt-to-GDP ratio will rise to 200 percent by 2042 and reach 623 percent in 2095. Moreover, if the trends that underlie the 75-year projections were to continue, the debt to-GDP ratio would continue to rise beyond the 75-year window.”

https://www.justfacts.com/nationaldebt#_ftn26

If you are not a fan of tables and charts you can read the highlight of the “Financial Report of the United States Government” in plain English and in 1 sentence on page ii (pdf page 9):

An Unsustainable Fiscal Path

 

“The continuous rise of the debt-to-GDP ratio projections based on the assumptions in this Financial Report indicates that current policy is not sustainable.”

A recent report from Truth in Accounting titled Financial State of the Union 2020 calculates the Federal Government's unfunded liabilities as $123.11 trillion ($123,110,000,000,000).

Also, there is the US debt clock website that displays a real-time calculation of US Unfunded Liabilities.  This calculation is the sum of unfunded liabilities in Social Security, Medicare Part A, B, and D, Federal Debt held by the public, Federal Employee Benefits, and Veteran Benefits.  The total at the time of writing this blog post is $147.684 trillion ($147,684,000,000,000).  Note that this number is increasing by 12 million dollars every minute so when you visit the US Debt Clock webpage the number will be larger.

 The current estimate of US GDP from the Bureau of Economic Analysis is $22.05 trillion.  Therefore, if total unfunded liabilities (UL) are $147.684 trillion then the UL to GDP ratio is 670%.  This means that if the total economic production of the USA were dedicated to paying down the unfunded liabilities it would take 6.7 years to achieve 100% funding.

The current estimate of world GDP is $30.191.   Therefore, if US total unfunded liabilities are $147.684 trillion then the UL to world GDP ratio is 490%.  This means that if the total production of the world were dedicated to paying down the US unfunded liabilities it would take 4.9 years to achieve 100% funding.

The current population of the USA is 330,246,485.  Therefore, if US total unfunded liabilities are $147.684 trillion then the total UL per person living in the USA is $447,193.  You might be inclined to think that such a level of unfunded liabilities for each man, woman and child is not possible, but if the Federal Government continues deficit spending and continues to increase future obligations, there is no upper limit to how high this number can go until there is a complete collapse of the monetary system.

Since the financial crisis of 2008 interest rates have been lower than historical averages.  If (when) interest rates rise to historical averages the increase in US total unfunded liabilities will accelerate due to larger interest payments on the outstanding national debt.

I could not find proof that supports 220 trillion dollars as the US total unfunded liabilities.  Based on the sources listed above, I am confident that the Federal Government's unfunded liabilities are rapidly approaching $150 trillion.

Please use the comment button below to provide questions, comments, or clarifications on this topic.

Worshiping at the altar of Covid

I received the following essay in a newsletter from Tom Woods.

This is a Twitter thread by journalist John Hayward (@Doc_0).

It is about the Covid religion.

He puts it better than I could, so today's Woods dispatch simply reproduces it for you. Enjoy:

Every crisis becomes a religion if it lasts long enough.

One factor in that transformation is the Beautiful Theory phenomenon: the power elite insists its remedies are logical and politically correct so they must work, even if the actual evidence shows they obviously don't.

When Beautiful Theories crash into hard, cold reality and shatter, faith is the glue used by the elites to put their precious ideas back together. They need militant faith to get the job done: true believers eager to crush doubt and compel obedience by making war on the infidels.

Some are swept into the faith because they desperately crave a sense of control over the crisis. They need to believe Something Can Be Done, and they'd rather invest their faith in debunked Beautiful Theories than have no faith at all. Faith is a coin that demands to be spent.

Some crave social approval, and the purveyors of Beautiful Theories have immense political, economic, and cultural power to make their faith seem fashionable. Virtue signaling is such a plague in modern society because the signals are pre-packaged and made very easy to send.

Some aren't even hoping they can assert control over a crisis by converting to its religion. They'll settle for just having some meaning, some simplicity, a sense that the righteous will fare better than the unbelievers, that virtue will be rewarded while sin is punished.

That's a very common impulse with the Church of Covid, since the Beautiful Theories were so very obviously wrong. There isn't much left of the faith except the visceral communal satisfaction of hoping unbelievers will be punished for their blasphemies with sickness and death.

That sort of thing happens with all of the crisis religions, although not usually as quickly and obviously as with the Church of Covid. Look at the endless stream of movies about how the world became an apocalyptic hellscape because people didn't believe in global warming.

The last resort of every crisis religion, the last thing that puts asses in the pews, is that addiction to misery porn, the collective hope that unbelievers will suffer someday, and everyone will admit the True Faith was right all along as Judgment Day crashes down upon them.

The elite will never have the humility to admit they were wrong, and they'll never give up on politically or financially profitable "solutions" even when they obviously don't solve the problem. Founding a crisis religion means they never have to say they're sorry.

That applies to some very longstanding crises, like the War on Poverty, whose nostrums long ago transformed into fantastically expensive articles of religious faith even as mountains of data accumulated that proved they were utter failures, and often made the problems worse.

You can look for some telltale signs of a crisis transforming into a religion. The most obvious one is when the high priests tell you the "war" you've been drafted into will never end. They become very angry when asked to define success or failure, or layout exit strategies.

Watch for the moment when you're told "science" means not asking questions, defying dogma, or challenging "consensus." That is the literal definition of faith, not science.

Always keep an eye out for Moving Goalposts, which are the signature miracle of crisis religions, their version of parting the waters or loaves and fishes. Crisis religions work very hard to make their faith unfalsifiable by constantly changing the standards of evidence.

Check to see if certain people are accumulating huge amounts of money and power from a crisis. That's a pretty good sign it's turning into a religion. A crisis should be solved as quickly and efficiently as possible. Don't let it fester long enough to become a special interest.

Above all, look for the whiff of arrogance to develop around a crisis. Wise religions and effective crisis managers have something in common: a sense of humility. Crisis religions are militant faiths that quickly become arrogant, smug, and totalitarian.

Dedicated people who truly want to solve a problem will look for evidence their analysis is wrong, or their policies aren't working, and make adjustments as quickly as possible, no matter the cost or embarrassment to themselves. This is humility.

Crisis religions are arrogant. They reject criticism, insist their Beautiful Theories must be right because they're ideologically pure - they fit snugly into a worldview that must not be challenged. Their plans only fail because their commands were disobeyed or sabotaged.

The high priests of a crisis religion see devils everywhere, leering at them from the rubble of every failure. Only sin can explain why their Beautiful Theories are tarnished. Failure is never their fault, so it must be yours. They find your lack of faith disturbing.

And you know what? A lot of people want to see the world that way, including a great many self-described atheists. They hunger for the comfort of faith and the vibrant energy of militancy. They want to be right, and they want the wrong to suffer for their folly.

Conservatives think religious faith in the State is terrifying and wonder why so many embrace it. It's because uncertainty is much more frightening. A simple false story is better than a complex true one, and with enough faith, maybe we can force the simple story to be true.

To exorcise these demons from your life,

click here:

Tom Woods Liberty Classroom

Elementary insights of the social sciences

 A recent speech by Hans-Hermann Hoppe includes the following insights:

Apodictic or quasi-apodictic statements regarding elementary insights of the social sciences.

·        It is impossible to increase social prosperity by increasing the money supply. How else should one explain that despite the existing possibility of any amount of increase in paper money, poverty continues to exist in some places, unchanged. An increase in the amount of money can only ever lead to a redistribution of a given stock of welfare goods. It favors the first and early recipients of the new, additional money at the expense of the last and late users.

 ·         Human action is the conscious pursuit with scarce resources of goals regarded as valuable.

 ·         No one can deliberately not act.

 ·         Every action strives to increase the subjective well-being of the actor.

 ·         A larger quantity of a good is always preferred to a smaller quantity of the same good.

 ·         The earlier attainment of a given goal by given means is preferred to its later attainment.

 ·         Production must always precede consumption.

 ·         Only those who save – spend less than they earn – can increase their prosperity permanently (unless they steal).

 ·         What is consumed today cannot be consumed again tomorrow.

 ·         Price fixings above the market price, such as minimum wages, lead to unsalable surpluses, i.e. to forced unemployment.

 ·         Price-fixing below the market price, such as rent ceilings leads to shortages and a persistent shortage of rented housing.

 ·         Without private ownership of production factors (as in classical socialism) there can be no factor prices and without factor prices an economic calculation is impossible.

 ·         Taxes – compulsory charges – are a burden on income producers and/or property owners and reduce production and capital formation.

 ·         No form of taxation is compatible with the principle of equality before the law because any taxation involves the creation of two unequal classes of persons with conflicting interests: those of the (net) taxpayer on the one hand, for whom taxes are a burden one seeks to reduce, and on the other hand the class of recipients or rather (net) consumers of tax, for whom taxes are a source of income and a delight that one seeks instead to increase as much as possible.

  ·         Democracy – majority rule – is incompatible with private property – individual property and self-determination – and leads to creeping socialism, i.e. to ongoing redistribution and the progressive erosion of all private property rights.

 ·         Whatever is subsidized by taxes, such as lounging about or doing things for which there is no profitable customer demand is further encouraged and strengthened by the subsidy.

 ·         Whoever is not personally liable for the repayment and redemption of so-called public debts incurred by him or with his participation, as is the case today with all politicians and parliamentarians, will frivolously and without hesitation take up debts for his own present advantage and to the detriment of an impersonal future public.

 ·         Whoever controls a territorial money printing monopoly enforced by state power, like all so-called central banks, will also make use of this privilege and, even if an increase in the amount of money can never increase social prosperity as a whole, but can only redistribute it, will still print more and more new money for his own benefit and that of his direct affiliates and closest business partners.

 ·         And finally, there is this: Whoever or whichever institution has a territorial monopoly on the use of force and jurisdiction, as actually claimed by all states, will also make use of it. I.e., he will not only exert violence himself, but he will also declare his exertion of violence to be lawful by virtue of his ultimate legal representative. In all conflicts and disputes of a private person with representatives of this institution (the state) no independent, neutral third party decides on good and evil, or about the guilt and innocence of the opponents, but always and invariably an employee, i.e., a dependent representative, one of the two conflict parties (the state) itself, with a corresponding, reliably predictable partisan, "state-supporting" result.

 

Obviously, these insights are in blatant conflict with social reality. In this reality there are monopolies of violence, monopolies of money printing, taxes, taxpayers and tax consumers, tax-subsidized idleness and uselessness, majority rule (democracy), public debt, politicians and parliamentarians exempt from liability, capital consumption (consumption without saving), redistribution of property, minimum wages, and maximum rents. And what's more, all these acts and institutions are not subject to constant criticism. On the contrary, they are, almost monotonously and from all quarters, presented and praised as self-evident, correct, good, and wise.

The entire speech has been published by the Mises Institute is available at this link:   My Path to the Austrian School of Economics

A legacy of liberty

The liberty movement recently lost an enthusiastic supporter.  In November of 2020, Richard (Dick) Rowland died at the age of 90.  Dick dedicated himself to promoting individual liberty.  At the age of 70, he founded the Grassroot Institute of Hawaii to educate people about the values of individual liberty, economic freedom, and accountable government.

There is much to be learned from Dick’s vast knowledge and passion for liberty.  Here are 8 of Dick’s favorite sayings:

1.  Hold onto your principles, because values change, but principles do not.

2.  The Declaration of Independence is the origin of our liberty.  It is both aspirational and inspirational.

3.  There are only 2 paths that we can travel: upward to liberty or downward to tyranny.

4.  As government gets bigger the individual gets smaller.

5.  Politics is downstream from culture.  If we can persuade 10% of the population to follow a path upward toward liberty, we can change the political trajectory of Hawaii.

6.  We persuade our friends, neighbors, and colleagues by planting seeds of thought.

7.  Assemble new supporters and build little platoons.

8.  Provide a voice to the forgotten man.

The following short video provides an excellent tribute to Dick, his philosophies, and his message:

 A tribute to Dick Rowland

There is no pandemic exception to the Constitution

A recent article by Judge Andrew P. Napolitano discusses the pandemic response in terms of natural rights and the US Constitution.  The following are some highlights:

This understanding of natural rights was wedded to the United States at its birth in 1776 when Jefferson wrote in the Declaration of Independence that we are endowed by our Creator with certain inalienable rights, and again in 1791 when Madison wrote in the Ninth Amendment that because human liberty is so expansive the government must protect even unstated, unenumerated rights.

To protect our rights from whom?

The framers could easily answer that question, yet the folks who run the government today do not want it asked because the answer implicates them. In the revolutionary era, colonists could protect themselves from evildoers attempting to steal their property or take their lives. But the foe they most feared was the government. They fought a bloody war against the government of King George III because it assaulted their economic rights and their right to self-government.

History is repeating itself, without the courageous revolutionaries. It is not my neighbor, or even a thief in the night, who impairs my personal liberty — it is the government. It does so, just as King George did, under the guise of safety. Yet, the Constitution and the Bill of Rights were written precisely to prevent governments in America — state or federal — from interfering with our liberty, absent a jury trial at which they must prove fault.

Under federal law, when a government employee employs government tools to impair these enumerated rights — and does so without due process — that person commits a felony.
Thus, when governors use police powers to interfere with personal liberty — liberty that is expressly guaranteed by the Constitution — and do so without a trial at which the government proves fault, they have violated both state and federal law, no matter their reasoning. Thus, all these executive orders regulating private personal behavior are profoundly unconstitutional and even criminal.

There is no pandemic exception to the Constitution. It is liberty that flows in our veins, not false promises of government safety.

Read the entire article at this link:

Here We Go Again

Lessons from a birthday party

 

This news story:

 https://apnews.com/article/birthdays-coronavirus-pandemic-california-napa-gavin-newsom-9426bc09f958ae9865309dd71a04aa97

 Inspired the following spirited 5-minute speech:

 https://www.c-span.org/video/?c4924484/user-clip-tom-mcclintock-defense-newsome

Faith in government is the source of the pandemic

 Tom Woods just published the following observation in his newsletter:

Three reasons why progressives revere lockdowns:

(1) They hold a superstitious belief in the powers of the state -- so if the state says it can wipe out a virus, who is to say it cannot?

(2) It involves "experts" dictating to the stupid rubes, which is their preferred model of governance.

(3) It allows them to ridicule the working-class people they despise -- why, if only these backward hicks would "follow the science," we would be out of this thing already!

Tom's recent speech about the pandemic response can be viewed at this link:

The Fact-Free COVID Dystopia

Good news is used to scare you

"Our current best estimates tell us that about ten percent of the global population may have been infected by this virus." -- Dr. Michael Ryan, Executive Director, WHO Health Emergencies Programme, October 5, 2020.

You will hear this statement at 2:57 in the following video:

You will also hear Dr. Ryan say this:

"What it does mean is that the vast majority of the world remains at risk."

Dr. Ryan does not tell you this:

The global population is approximately 7.8 billion, if 10% have been infected that is 780 million cases. The global death toll currently attributed to COVID-19 infections is 1,061,539.

That’s an infection fatality rate of roughly or 0.14%. Right in line with seasonal flu and the predictions of many experts from all around the world.

0.14% is over 24 times LOWER than the WHO’s “provisional figure” of 3.4% back in March. This figure was used in the models which were used to justify lockdowns and other draconian policies.

In fact, given the over-reporting of alleged COVID-19 deaths, the infection fatality rate is likely even lower than 0.14% and could show COVID-19 to be much less dangerous than flu.

More details are available at this link:

WHO admits COVID-19 is no more dangerous than flu

All government health organizations have a vested interest in keeping the pandemic mania alive.  This is a glaring example.  The Executive Director of the World Health Organization does not discuss the good news that his statistics provide he instead says that the vast majority of the world remains at risk.  The media is complicit in this subterfuge.  The following news article is an example:

Daily Mail Article

The second paragraph of the Daily Mail article correctly states that COVID-19’s death rate is comparable to the seasonal flu.  The article then goes on to say:

More than 5,400 people are dying around the world every 24 hours, according to calculations based on averages in September.

That equates to about 226 people an hour, or one person every 16 seconds. It means that, in the time it takes to watch a 90-minute football match, 340 people die on average.

 This news article then reaches the following conclusion:

Until a vaccine - expected for the vulnerable early next year and to be rolled out en masse by the end of 2021 - arrives, draconian social restrictions and increased testing are the only ways to curb the virus's spread.

Economies destroyed worldwide, hundreds of thousands on the brink of starvation, and all of this to combat a virus that is no deadlier than the seasonal flu.

The medieval strategy of lockdown

The article linked below is a discussion of the COVID-19 policies and enforcement in New Zealand written by Phillip W. Magness and published by the American Institute for Economic Research:

 https://www.aier.org/article/how-the-virus-penetrated-fortress-new-zealand/

Phillip brilliantly (and disturbingly) weaves into his discussion a short story by Edgar Allan Poe, Masque of the Red Death.

The fact that the lockdown policies were imposed without legislative participation should be familiar to all by now:

On March 22, the nation’s government announced a month of sheltering in place. The order came from on high with the stroke of a pen, without legislative deliberation or even the process of law. Enforcement persisted for nine days despite having no legal justification – just an illegal executive decree by Prime Minister Jacinda Ardern. Months would pass before the country’s high court censured this abrogation of democratic governance. It did not matter. Ardern’s actions were “unlawful, but justified” to halt the pandemic, the bold actions of a “hero” who knew better than her own people.

The economic  damage will also sound familiar:

Like much of the world, the lockdowns left New Zealand’s economy in tatters. The country posted its largest GDP contraction in three decades for the first quarter of 2020. Much of the contraction likely stems from the country’s tourism-heavy economy, which seems unlikely to recover anytime soon as it is effectively proscribed for an indefinite term by government mandate. 

The strategy to eliminate the virus includes the use of detention facilities: 

You see, Ardern’s strategy for lifting the internal lockdowns rested upon maintaining one of the world’s most restrictive border entry policies. The New Zealand border remains closed for all intents and purposes for foreign visitors prohibited save for a tiny number of exceptions. New Zealand residents who were stranded abroad at the start of the pandemic – likely numbering in the tens of thousands – may only return after going through a mandatory 14-day quarantine under strict guard at a designated border facility. 

Persons who do not qualify for a handful of exemptions must also foot the bill themselves – a total of $4,000 (NZ) for the privilege of being cooped up in a government-managed hotel room.

For all intents and purposes, Ardern created Fortress New Zealand – a bubble strategy in which the internal reopening rests entirely upon the government’s ability to erect and maintain a nearly impermeable barrier to entry from the rest of the world. Furthermore, such a strategy must continue indefinitely until there is a coronavirus vaccine or cure.

After 100 days of zero new cases, the virus reappeared:

It happened on the 102nd day, and it took the world by surprise. The festivities of the milestone and the associated electoral campaign had yet to dissipate, but COVID-19 was back in New Zealand. A family of four tested positive in Auckland, triggering a panicked government plan to contain its spread.

Within 24 hours the country’s largest city was back under lockdown. Police checkpoints, internal travel restrictions, police and military in the streets, arrests for violating lockdowns, runs on supermarkets, appeals to snitch on violators – a mad rush to contain the spread by any means necessary.

Far from a paragon of science-guided policy, the New Zealand approach hearkens back to the time of medieval plagues and associated superstitions – of walling oneself off in a castellated abbey in the countryside for the duration, of hoping, praying the crisis will pass by your fortress as it ravages the outside world, and of inevitably letting one’s guard down at a moment of frivolity and celebration.

The Ardern government’s current low case count only conceals a much greater and self-inflicted vulnerability that arises from the lockdown strategy. The policy of eliminating COVID-19 by shutting out the rest of the world only “works” if one assumes that they can perfectly maintain the bubble until somebody on the outside discovers a vaccine, or the virus dissipates globally from external herd immunity.

But the medieval strategy of lockdown-imposed isolation is inherently fragile – so fragile, in fact, that it can collapse into chaos at any moment, precipitating a mad rush to regain the illusions of control over the situation.

Far from adopting this strategy as a model, the world must avoid the corner of perpetual recurring lockdowns in which New Zealand now finds itself. And New Zealand’s government would be wise to drop the hubristic pretensions of commanding and controlling a virus through medieval self-isolation, seeking instead an alternative strategy that is robust to unexpected setbacks and equipped for long-run recovery.

Is New Zealand being used as a role model for Hawaii and other island nations/states?  If so it is time to revise the government imposed strategy of lockdown and isolation.

A glimpse into the future of health care

The link below is for a Mises Institute article about rationing of health care in Pennsylvania during the current Coronavirus pandemic:

Pennsylvania Is Playing Politics with Drug Rationing

The future of healthcare is described by these paragraphs from the above article:

Just as a reminder of the kind of central planners we are dealing with, this is the same Pennsylvania Department of Health that decreed on May 12 that nursing homes "must continue to take new admissions, if appropriate beds are available, and a suspected or confirmed positive for COVID-19 is not a reason to deny admission." Months later, nearly 70 percent of coronavirus fatalities in the state have occurred in nursing homes.

Not being content with causing such a disaster, the state health department has issued guidance on how healthcare facilities should ration the limited supply of the new drug Remdesivir in the event that there are not enough doses to go around, but notes that the guidelines should apply to any scarce form of treatment. While certainly an unpleasant subject to address, it is true that in the face of scarcity the limited supply of Remdesivir or any other treatment will need to be rationed and that some kind of method of choosing will be needed. Scarcity is simply a fact of life that must be dealt with. However, because the distribution of Remdisivir has been taken over by the federal government, which distributes it to state governments, which in turn distribute it to healthcare providers, the process has unavoidably become political.

Putting all the jargon aside, the guideline is very clear about several points. First, it is not considered acceptable to distribute care via a random lottery, or on a first-come-first-served basis. Rather, healthcare providers must take into consideration "community-benefit" when rationing care and the department recommends the use of a weighted lottery system.

As you can see, the example lottery that the health department provides uses three different criteria to determine how a patient’s lottery chance is weighted: membership in a disadvantaged community, being an essential worker, and likelihood of death in the next year.

This is just the beginning.  As healthcare becomes more controlled by the State the more politics will be involved in decisions.  Scarcity is a fact of economic reality that can not be eliminated.  There will always be a need to ration drugs, procedures, equipment, and practitioners.  The rationing should be accomplished based on medical necessity and the attempt to provide the highest quality care to the largest number of patients at the lowest possible cost.  When the State makes the rationing decisions the results will always be subject to politics.  Pennsylvania is providing us with a glimpse into the practices that we will be subjected to under "Medicare for All".