Posner lays out clearly many of the present and future solvency and default risks to the United States federal government. He bases some of the analysis on a valuable recent Morgan Stanley report with the provocative title “Ask Not Whether Governments Will Default, but How”. Default on some of their debt by countries like Greece and Italy are real possibilities, and default by leading countries like the US and Germany is surely possible. But I do not believe their default is at all inevitable. The report first presents the usual measure of default risk- the ratio of government debt (not... | Continue »

Although I do not place any weight on long-term economic forecasts, there is no doubt that we face a growing burden of federal and state entitlement spending—“entitlement” signifying that expenditure levels are automatically financed, rather than having to be reauthorized every year as defense expenditures (and indeed all nonentitlement government expenditures) are. Government entitlement spending is concentrated on pensions and elder health care. Both forms of spending increase as a function of the growing percentage of elderly people in the population, and healthcare spending grows additionally because of increases in cost caused by new technologies plus the normal upward-sloping supply... | Continue »