Monday, 11 Feb 2013 09:31 PM

By John Bachman and Dan Weil

Social Security and Medicare are bankrupting the economy, and the payroll tax needs to be raised four percentage points to keep Social Security solvent, says Boston University economics professor and author Laurence Kotlikoff.

“The entire country is probably broke,” he tells Newsmax TV in an exclusive interview. “It’s in much worse long-term fiscal shape than any politician is revealing to the public. I’m not even sure they understand the truth. Certainly the president doesn’t sound like he understands.”

Social Security is 31 percent underfinanced, and Medicare “by itself can probably run the country broke,” Kotlikoff says.

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“We need to do really radical things immediately and keep doing them pretty much forever,” he maintains. One of them is to raise the payroll tax for Social Security.

“When you run a Ponzi scheme for six decades and you don’t deal with the problems, you end up in this boat,” Kotlikoff says. If payroll taxes aren’t increased now, they’ll simply have to be hiked further for our children.

“Generationally this is a zero-sum game,” he says. “The president doesn’t seem to understand that.”

And what of the call for higher eligibility ages for Social Security and Medicare?

“Raising the retirement age gradually won’t generate anywhere near the fiscal savings needed to keep from bankrupting our kids to pay for our retirement,” Kotlikoff says.

Asked his reaction to President Barack Obama’s opposition to an increase in the Medicare eligibility age, Kotlikoff says, “I think he’s a person who doesn’t care about the future of the country.”

Kotlikoff hastens to add that he voted for Obama. But, “I can’t think a responsible adult who gives a damn about his children would look at this situation and come up with that kind of a statement,” he says.

“This is absolutely irresponsible behavior. . . . Who does he expect to pay for this bill, [liberal New York Times columnist] Paul Krugman?”

The United States is turning itself into a Third World country, Kotlikoff says. “This is like a credit-card bill that we’re facing that’s growing with interest. If you don’t pay interest today, you look tomorrow, and it’s a bigger bill.”

So what happens if we continue to do nothing about these problems?

As the budget deficit remains huge and the Federal Reserve keeps printing money, inflation “takes off,” Kotlikoff says. China and others sell our bonds, and interest rates go up.

“Then we become like Greece,” he says. “We have to cut benefits or raise taxes dramatically.”

And it’s young people who will suffer the worst of that, Kotlikoff says. “This is fiscal child abuse. The president is the country’s leading fiscal child abuser.”

Kotlikoff doesn’t know what it will take to get Washington to act. “Politicians are driving the economy down the tubes. It’s no different than Argentina,” he says.

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