BOX?:

The $45 Trillion Problem: Carefree spending, huge tax cuts, and—above all—unalterable demographic facts have put us all in a box. And there's no easy way out (Nathan Littlefield, January/February 2004, Atlantic Monthly)

Even if you think government budget numbers are generally not very interesting (and they do tend to blur together into an eye-glazing morass), here's a number to quicken the pulse: $45.5 trillion. That's the size of the long-term gap between the federal government's projected outlays (future spending plus current debt) and its projected revenues. Most government budget projections look only a brief distance into the future—a year, perhaps, or ten at the most. But Jagadeesh Gokhale and Kent Smetters, economists working at the Federal Reserve Bank of Cleveland and the University of Pennsylvania, respectively, have looked further into the future and determined that, in effect, if the U.S. government were a company its owner would have to pay a rational investor $45.5 trillion to take it off his hands. To put this figure in perspective: the entire U.S. economy generated only about $10.4 trillion last year, and total household wealth is currently only about $39 trillion.

Perhaps one of the economists among us can explain why someone who had $45 trillion would not leap at the opportunity to buy an enterprise that had $39 trillion (it actually topped $42 Trillion by the end of the Third Quarter last year) in capital and was generating $11 Trillion in revenues a year?

Posted by Orrin Judd at February 14, 2004 6:23 PM