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July/August 2006, 
Vol. 88, No. 4
Posted 2006-07-01

Is the United States Bankrupt?

by Laurence J. Kotlikoff

Is the United States bankrupt? Many would scoff at this notion. Others would argue that financial implosion is just around the corner. This article explores these views from both partial and general equilibrium perspectives. It concludes that countries can go broke, that the United States is going broke, that remaining open to foreign investment can help stave off bankruptcy, but that radical reform of U.S. fiscal institutions is essential to secure the nation’s economic future. The article also offers three policies to eliminate the nation’s enormous fiscal gap and avert bankruptcy: a retail sales tax, personalized Social Security, and a globally budgeted universal healthcare system.