Tennessee Ernie Ford

  • 02 Aug 2011 at 12:41 PM

Bill Gross Will Never Laugh Again

This much he promises you:

The debt ceiling may have been raised and the palpable sighs of relief heard across global financial markets, but the fun times are over. They’ll be no jokes from Bill Gross today, nor across this land for years to come I suspect. Even though the U.S. has managed to avert a debt crisis and perhaps a ratings downgrade, there remains a stain on our reputation, a scarlet “A” for budgetary “Abuse,” that will not disappear.

Not only is he unhappy about the fact that the debt deal makes no real cuts; he’s also concerned about the people who think they’ll be getting Medicare some day:

The press and most professional investors are accustomed to measuring “paper” debt as opposed to walking/living liabilities in the form of people. I call these liabilities “debt men walking” because as long as 330 million living Americans require promised entitlements – the $66 trillion that wear shoes are as much of a liability as the $10 trillion on paper.

The $66 trillion comes from the Mary Meeker “USA Inc.” study from earlier this year, which finds that unfunded Social Security/Medicare/Medicaid liabilities total $66 trillion at net present value.* BusinessWeek this week used a perpetuity estimate and got an even more alarming $211 trillion for our total fiscal gap. The difference in those figures might give you pause about how real either of them is – as might the fact that BW’s estimate is about $640,000 for every man woman and child alive in America today – and Gross acknowledges that even Meeker’s lower $66 trillion is likely to turn out to be lower if we take steps to rein in costs. Still, those shoe-wearing liabilities look to be a multiple of the public debt that politicians have spent the last oh forever fighting about. Read more »