Stock Up on Meeses and Gippers

The CBO, which Democrats frequently tell us to pay close attention to only when it is giving them the answers they want, is not particularly sanguine about the US budget deficit:

President Obama's fiscal 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years, $1.2 trillion more than the administration projected, and raise the federal debt to 90 percent of the nation's economic output by 2020, the Congressional Budget Office reported Thursday.

In its 2011 budget, which the White House Office of Management and Budget (OMB) released Feb. 1, the administration projected a 10-year deficit total of $8.53 trillion. After looking it over, CBO said in its final analysis, released Thursday, that the president's budget would generate a combined $9.75 trillion in deficits over the next decade.

Bruce McQuain, as always, has some good analysis.

States, apparently, are not in much better shape:

Pension plans for state government employees today report they are underfunded by $450 billion, according to a recent report from the Pew Charitable Trusts. But this vastly underestimates the true shortfall, because public pension accounting wrongly assumes that plans can earn high investment returns without risk. My research indicates that overall underfunding tops $3 trillion.

The problem is fundamental: According to accounting rules adopted by the states, a public sector pension plan may call itself "fully funded" even if there is a better-than-even chance it will be unable to meet its obligations. When that happens, the taxpayer is on the hook. Yet public pension plans ignore market risk even as they shift into risky foreign investments, hedge funds and private equity....

In a recent AEI working paper I've shown that the typical state employee public pension plan has only a 16% chance of solvency. More public pensions have a zero probability of solvency than have a probability in excess of 50%. When public pension assets fall short, taxpayers are legally obligated to make up the difference. The market value of this contingent liability exceeds $3 trillion.

Productive people in this country are about to get plastered with huge new taxes.  Hang on.


  1. Tim:

    I don't get the reference in the title, what are meeses and gippers?

  2. Evil Red Scandi:

    @Tim - From Neal Stephenson's exceptional novel, "Snow Crash." His work has been getting, shall we say, a bit ... excessively loquacious ... lately, but his earlier novels are all "must-reads."

  3. Evil Red Scandi:

    Oh, and I almost forgot what my original comment was going to be: "Snow Crash reference FTW."

  4. Another guy named Dan:

    And they refer to Trillion and Quadrillion dollar bills after a long bout of hyperinflation in the US

  5. Chris:


  6. IgotBupkis:

    > Productive people in this country are about to get plastered with huge new taxes. Hang on.

    I don't think that it's even possible to tax our way out of this mess. I think the only alternative to collapse is inflating our way out of it. Hopefully, someone competent can manage to do that without the tiger running loose. That, historically, has tended towards a rather fascist result most times -- Revolutionary France, The Wiemar Republic...

    "We live in interesting times", indeed.

  7. LoneSnark:

    I'm not convinced. I think the anti-tax movement is pretty solid. No one wins elections promising to raise taxes, for whatever reason. Not even California managed to raise taxes very much. As such, I am not too worried. The various principalities will feign or declare insolvency, and the union labor contracts will get turned over. The only hick-up is, as always, a federal bailout, due to their ability to print money. Maybe what we need is a currency crisis?

  8. Elliot:

    With Social Security going bankrupt six years earlier than predicted, it's a great time for all these massive social programs to hit the "rich" where it hurts.

    "The beatings will continue until morale improves!"

  9. ElamBend:

    The health care bill and iraq invasion weren't popular either and they still happened. Taxes will get raised. I always assumed that this administration viewed the Cap & Trade bill, which is an indirect tax, as a way to fund the health care plans they have. But I've been seeing more and more talk of a VAT, which would also do the trick.
    We likely would get more balanced budgets(for a while), but expect low growth, forever.

  10. anon:

    I, too, think there's a pretty good chance of a VAT.

    On the plus side, it doesn't punish success...

  11. Bob Smith:

    Now that we've established it's ok to apply payroll taxes to non-wage income, it's only a short matter of time before the entire 15.3% SS tax is levied on non-wage income. I've also heard talk of taxing withdrawals from Roth accounts, because "they're only for the rich".

    The pension confiscation plan that's making the rounds as a trial balloon is another tax source. If your IRA or 401k could earn 8-10% annually, the government stealing your assets, replacing them with Treasuries, and paying you 3% is an implicit 60-70% tax on earnings. Then when you withdraw you'll pay another 20-30% in income tax plus possibly FICA. The total implicit+explicit tax burden easily exceeds 80%.

  12. morganovich:

    not going to defend the war, but you are wrong about it not being supported.

    it was VERY popular when it started. it passed both houses with wide bipartisan support. the public was clamoring for it.

    there's been an awful lot of revisionist storytelling about how no one was asking for it.

    that's simply not true.

    this does not mean it was a good idea or good policy, but nothing about majority rule guarantees either of those.

  13. ElamBend:

    I concede, you're right. The surge wasn't as popular, though perhaps the right course. But, your point stands, they don't make good analogies together.

  14. IgotBupkis:

    > I, too, think there’s a pretty good chance of a VAT. On the plus side, it doesn’t punish success…

    It does if you structure it right.

    What makes you such an idealist about the policies the Dems support that you actually, foolishly imagine they'd NOT structure it to punish the wealthy?

    > there’s been an awful lot of revisionist storytelling about how no one was asking for it.

    Party Newspeak Untruth? No, Unhappen Neverful!?!?

  15. I like stuff:

    Liar liar, pants on….

    Not even close.

    Orszag is a shitbag,


    Fuck you Obamalini. Und Orszag.

  16. ilovebenefits:

    So much for deficit reducing... If we don't take real action in November to send a message on deficits, taxes and healthcare...shame on us.

  17. Elliot:

    Son of Morgan, you're right that a lot of revisionist history has been written about the war. Before the surge, Democrats wanted to disavow supporting it. Afterwards, not so much.

    I did not support the wars, on the principles that the wars in Afghanistan and Iraq were being waged with stolen money, purportedly in the name of all of us regardless of our actual support or opposition, that innocents were dying unnecessarily, and (worst of all) that Americans, Brits, and approved locals were imposing a replacement government (even if not yet quite as murderous as Hussein or the Taliban) on innocent people, regardless of their will (ridiculous paeans to democracy being the "will of the people" aside).

    But I was mostly silent at the outset, partly because I hoped the bad guys would be taken out, that others like Iran, North Korea, and China would see the might and effectiveness of the US military would heed the warnings, and because the obnoxious 60s-style "Bushitler" protesters were generally leftists. Well, the bad guys are still there (more so in Afghanistan) and other countries have learned how to bog down American military forces in wasteful, endless conflicts.

    I now wish I'd been more vocal in opposition. But as with elections, people get tunnel vision and anyone who speaks out against their "side" is instantly regarded with vengeful suspicion.

  18. Ken:

    Karl Denninger, proprietor of The Market Ticker, has some pretty interesting things to say about debt financing and the deficit. If his math is accurate -- I haven't had time to check it myself -- he lays out what appears to be a case for someone to run for high office on a populist platform of repudiation.

  19. Roby Setiawan:

    Interest costs on short-term debt and TIPS rise quickly in an inflationary environment and act as a constraint on the Fed