Glenn posts this:
WHO WILL BAIL OUT UNCLE SAM? “The United States of America is bankrupt. Don’t believe it? Consider this: Federal obligations now exceed the collective net worth of all Americans, according to the New York-based Peter G. Peterson Foundation. Washington politicians and bureaucrats have essentially mortgaged everything We the People own so they can keep spending our tax dollars like there’s no tomorrow.” If these numbers are accurate, it’s very bad news.
They’re not accurate:
The foundation’s grim calculations are based on Sept. 30 consolidated federal statements, which showed that Americans’ total household net worth, diminished by falling stock prices and home equity, is $56.5 trillion. But rising costs for unfunded social programs like Medicare, Medicaid and Social Security increased to $56.4 trillion – and that was before the more recent stock market crash, $700 billion bank bailout, and monster federal deficits chalked up in October and November.
They palmed a card, actually two cards: the first one is they’re using household net worth … but that leaves out corporate net worth, so they’re ignoring, eg, Exxon. The second is that they’re comparing future obligations to pay with current assets, so it’s like saying you’re “bankrupt” because the total of your expected future living expenses exceeds your net worth.
I wrote about the same comparison in PJM early in the year — can’t link it usefully, PJM has hosed something — making the correct comparison of total US assets per person versus total US obligations per person, and it was about $300K assets vs $160K obligations, or over the whole population, about $90 trillion versus $48 trillion. Most of that wealth is real stuff — land, houses, factories, etc — and hasn’t gone away in the last year.
The point is, we’re not bankrupt — we’re more like a homeowner with a mortgage. We have to keep working to make the payments.
Then, note that a lot of the actual bailout is being done with *new* money, instead of debt, and the comparison gets even more silly. But the monetary model for inflation says that when you’re deflating, money supply is too small — and we’re deflating at about an annualized 18 percent per year, there’s room for new money.
Update: Thanks for the link, Glenn. Whole new audience here, so let me “revise and extend” a touch. This isn’t me claiming that there aren’t problems — hell, I’m out of work myself. But “bankrupt” has a meaning, and this argument abused the terminology dreadfully. But everyone with a horse to beat will be beating it, from announcements of the US devolving to complete socialism, to assertions that this is finally the dempnstration of the complete collapse of capitalism. A lot of them will include misleading arguments about how bad things really are, because after all you can’t get a really radical solution unless there are really radical problems. So this is a really good time to read even more carefully and critically than usual.
Except, of course, me: I’ll always be just right.